I am celebrating my fifth anniversary of blogging by publishing one listicle per day this week, and today is the last one (sniff, sniff). To recap: Monday’s topic was the five biggest surprises in arbitration law; Tuesday’s was the five states most hostile to arbitration; Wednesday’s was the five arbitration cases lawyers really ought to know; and Thursday’s was the five biggest surprises in the arbitration process. Today’s topic might be the most practical: five things you should have in your arbitration clause.
Five Things That Should Be In Your Arbitration Agreement
- A clear statement of the “scope” of the arbitration agreement — what kinds of disputes the parties are willing to arbitrate.
- The rules that will govern the arbitration. The rules of the arbitration impact every aspect of the proceeding, including the court’s jurisdiction over issues of arbitrability. So, identify the rules. And please make sure they are rules that actually exist somewhere.
- The location of the arbitration hearing. Two reasons for this: first, it avoids haggling over which cities are most convenient after a dispute has arisen; and second, many courts tie court venue (for compelling arbitration, etc.) to the location of the arbitration hearing.
- A limitation period. Many states have held that their general statutes of limitation do not apply to arbitration proceedings. If you want to ensure that there will be some deadline for claims, insert one into the arbitration agreement.
- A severability provision. Under the FAA, courts are supposed to determine whether an arbitration agreement is enforceable without regard to any other terms in the larger contract. Therefore, if you want to give the court latitude to simply strike any unenforceable portions of the arbitration agreement without striking the arbitration agreement altogether, the severability clause needs to be right in the arbitration agreement.