How to Avoid Drafting a Really Bad Arbitration Agreement: PART 4
A well-constructed dispute resolution clause is the foundation of a cost-effective and efficient dispute resolution process. Yet courts regularly are faced with arbitration clauses that are problematic in some respect.
Common Flaw #4: Unrealistic Deadlines and Customized Procedures
Unintended consequences can derail the dispute resolution process when parties forego an ADR provider’s established set of rules for their own deadlines and customized set of procedures.
An example of elements in a party-generated clause that impose potentially unworkable deadlines and procedures:
- Three arbitrators must be selected by mutual agreement of the parties 30 days following commencement of the arbitration, not to be administratively appointed by the ADR provider.
- Twenty days after arbitrator selection, the parties and the arbitrators shall conduct a preliminary hearing.
- Discovery must be completed 45 days after issuance of the scheduling order by the arbitrators.
- Hearings must begin 30 days after the completion of discovery.
- The award must be issued six months after commencement.
These tight deadlines may or may not be appropriate depending upon the size and complexity of the dispute. Problems can arise when a deadline or a procedure—such as not allowing the ADR provider to administratively appoint—is unrealistic, and a party refuses either to waive an unworkable procedure or to extend a deadline.
In addition, failure of an arbitrator to fully adhere to all the procedures and deadlines as set forth in the arbitration agreement (which may be nearly impossible to do) can result in one party challenging enforcement of the award.
Practice Tip: Failure to meet specified deadlines or to adhere to customized procedures could jeopardize the enforceability of the arbitration award. Parties can use these drafting options:
- Impose no deadlines and allow the parties and the arbitrator to determine timeframes.
- Impose deadlines but grant the arbitrator the authority to extend a deadline for good cause shown or by mutual agreement of the parties.
- Impose binding deadlines and require the arbitrator to agree to the time limits prior to accepting appointment.
- Include a provision that grants an arbitrator the authority to waive a problematic procedure for good cause following a request by a party.
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PREVIOUS POST Common Flaw #3: Vague Conditions Precedent
The four posts on common flaws of arbitration clauses that have appeared in the AAA-ICDR Blog are just half of the common flaws illustrated in the white paper How to Avoid Drafting a Really Bad Arbitration Agreement. To receive the entire paper, please click here.
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