Arbitration is part of the Alternative Dispute Resolution, wherein people can opt for avoiding the legal hassle and solve their conflicts outside the court, the decision of which is with the neutral third party, arbitrator. In arbitration, the settlement of a dispute by arbitral tribunals without resorting to court action consists of procedures governed by the arbitration rules prescribed by the International Chamber of Commerce or by the country;’s arbitration laws. The decision of the arbitral tribunal is final and binding, and they can only be challenged in exceptional situations.
Following are the critical elements of arbitration:
- Types of arbitration.
- Applicable rules and procedure law for the specific arbitration claim.
- The number of arbitrators and the method by which they are selected.
- Place of the arbitration.
Filing an arbitration claim is a complicated process. An arbitration clause is the deciding factor of the claim. A small mistake in formulating the clause can lead to unnecessary court battle on the grounds of interpretation of the clause and wastage of time and money.
Following are some of the common mistakes that one should avoid while drafting arbitration clause:
INCOMPLETE ARBITRATION PROVISION:
Make sure to specify the following provision in your arbitration claim:
- How will a party initiate arbitration: should the request be sent to AAA, other tribunals, etc.?
- Who is going to select the arbitrator and how?
- When an arbitration should be started: after a period from the harm, breach, or within the statute of limitations, etc.
- Where shall the arbitration take place, especially when the parties are of outside states?
- How will the arbitral tribunal be paid?
To avoid wasting money and delaying the arbitration process, the parties should avoid binding words that require the involved parties to negotiate or resolve the conflict amicable before entering the jurisdiction since it can create an issue, of the case, goes further into arbitration.
When parties agree to arbitration, they are legally bound not to raise the same issue in the court. Hence both the parties should review all the clauses of the contract especially the dispute resolution keeping in mind that any dispute arising out of the clause shall be referred to the arbitration and not the court.
For an effective arbitration make sure you don’t use any vague language, and your clauses are inclusive and comprehensive and
NOT DEFINING SCOPE OF ARBITRATION AUTHORITY AND DISCOVERY:
Specify who holds the right to decide about the jurisdiction, enforcing the arbitration clause, Not mentioning these specifications might convert your arbitration claim into a litigation case.
Similarly, if the parties fail to describe the scope and limitations of discovery, they might lose the one significant benefit of arbitration i.s the advantage of efficiency.
Not paying due attention while drafting an arbitration clause can make the clause a source of conflict. Similarly every aspect and stage of arbitration be it legal or formal requires due consideration and hence when filing an arbitration claim, one must seek the help of a legal professional or an adept arbitration law firm that can guide you go about all the proceedings of the arbitration and increase your chances of winning the claim.