This is a short guide to certain basic resources and models for ADR clauses that can be customized and modified for incorporation into actual documentation, together with a list of some of the major issues to be considered when drafting ADR clauses.
ADR clauses follow numerous patterns. Some provide only for non-binding mediation, some only for binding arbitration, and still others for an elaborate three-step procedure in which the parties agree first to negotiate between themselves in good faith, then to proceed to non-binding mediation and finally to go to binding arbitration. In such cases litigation is either a last resort or barred altogether. Other clauses contain a different combination of the foregoing, such as non-binding mediation followed by binding arbitration. In addition, certain clauses are appropriate for use in specific contexts such as international disputes, employment disputes, construction disputes and intellectual property disputes.
Among the important questions and issues that should be addressed when incorporating an ADR clause are:
- Whether the alternative dispute resolution clause will apply to all disputes between the parties or only a subset of those disputes (e.g., disputes arising out of the particular contract).
- Whether the parties want to designate in advance that the rules of a particular resolution organization will apply and, if so, to what extent.
- Whether the qualifications of the mediator and/or the arbitrators should be set forth in the contract.
- The importance of adding “entry of judgment” language into the contract.
- Whether the general governing law of the contract will also apply to the alternative dispute resolution proceeding.
- The appropriate location for dispute resolution in light of the nationality of the parties and their desire for a particular type of procedure. See, for example, one description of the advantages of choosing New York as the venue for international arbitrations as outlined in Choose New York for International Arbitration.
- What time limits will be included on steps in a multi-step ADR provision.
- Whether remedies such as punitive damages should be excluded.
- How ADR administration costs and fees will be borne by the parties and whether attorneys’ fees can or will be assessed against any party.
- In the case of arbitration clauses, the applicability and impact of the Federal Arbitration Act and how it might preempt — or be preempted by — state law on such issues as punitive damages, whether the court or the arbitrator should determine challenges to the parties’ overall agreement, the extent to which a party’s appearance waives its jurisdictional objection to arbitration, the awarding of attorneys’ fees, the availability of interim appeals and the prerequisites to the entrance of judgments on arbitral awards.
Some Sources for Alternative Dispute Resolution Clauses:
- American Arbitration Association, Drafting Dispute Resolution Clauses: A Practical Guide https://www.adr.org/aaa/ShowPDF?doc=ADRSTG_002540
- JAMS Guide to Dispute Resolution Clauses for Commercial Contracts http://www.jamsadr.com/clauses/
CPR Model Language and Sample Language http://www.cpradr.org/Resources/ALLCPRArticles/tabid/265/ID/635/CPR-Model-Clauses-and-Sample-Language.aspx
- Recommended WIPO Contract Clauses and Submission Agreements http://www.wipo.int/amc/en/clauses/#1