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Contract Types:

Type of Dispute Resolution

Number of Arbitrators

Under the AAA Rules, disputes of less than $1,000,000 are generally heard by one arbitrator, and disputes greater than that amount are heard by three arbitrators unless agreed upon otherwise by the parties.

However, regardless of the AAA's default procedures, parties may agree in their clause to have one arbitrator or three regardless of the amount in dispute. Note that some parties prefer to have three arbitrators appointed to their cases because it provides them with a greater comfort level regarding the decision making process. However, appointing three arbitrators increases the cost of the arbitration by more than three times the cost of a single arbitrator. In addition, the appointment of three arbitrators can substantially increase the amount of time it takes to conclude an arbitration. For these reasons, the AAA increasingly recommends that a sole arbitrator be appointed, even for disputes with claims that would normally otherwise be heard by three arbitrators.

Arbitrator Qualifications

When preparing a list of proposed arbitrators for consideration by parties, AAA case managers will search the AAA's database for arbitrators who are experienced in the subject matter of the dispute, and who have a background that appears well suited for the particular dispute. Nevertheless, many parties find it useful to specify that arbitrator(s) have a particular background or expertise. Please be aware, however, that overly specific arbitrator qualifications that are contained in the arbitration clause may substantially decrease the number of arbitrators available for appointment to that case.

Locale Provisions

When an arbitration clause does not specify where the arbitration shall take place, the parties are given an opportunity to agree on the locale. However, to the extent that the parties are unable to agree, the AAA will initially make that determination.

Alternately, the parties can specify in their agreement where the arbitration will take place. The choice of the proper place to arbitrate is most important because the place of arbitration implies generally a choice of the applicable procedural law, which in turn affects questions of procedure, court intervention and enforcement.

In specifying a locale, parties should consider (1) the convenience of the location (e.g., availability of witnesses, local counsel, transportation, hotels, meeting facilities, court reporters, etc.); (2) the available pool of qualified arbitrators within the geographical area; and (3) the applicable procedural and substantive law.

Governing Law

It is common for parties to specify the law that will govern the arbitration proceedings.

Discovery

Discovery is one of the most expensive and time-consuming portions of the arbitration process and it is often desirable to control the amount and scope of discovery through a clause in the contract. In addition, the process can be limited by agreement of the parties at any time up to and including the preliminary hearing. Under the AAA Rules, arbitrators are authorized to direct a pre-hearing exchange of documents and make determinations regarding the scope of and/or additional discovery relevant to the needs of the case.

However, in some instances parties may want to provide for a more tailored discovery program in their arbitration clause. Although the AAA Commercial Rules are silent on the topic of depositions, the AAA's Procedures for Large Complex Cases (which apply to disputes of $500,000 or more) provide for depositions at the discretion of the arbitrator in exceptional cases upon good cause shown.

The following clauses provide various options for regarding the scope of discovery.

E-Discovery

The AAA Commercial Rules were amended in 2013, in part to address electronically stored information (ESI) and to help parties minimize the burden and expense of dealing with ESI in arbitration. Among those changes were the amendments to Rules 22 and 23, which confirmed the authority of the arbitrator to actively manage the scope of information exchange, and established parameters for exchange of documents, including ESI. In particular, Rule 22 (b)(iv) addresses ESI and balances the need for production of electronically stored documents relevant and material to the outcome of disputed issues against the cost of locating and producing those documents.

In some cases parties may want to provide additional guidance on ESI issues to the arbitrators by referencing in their arbitration clause a recognized set of standards that assists with the determination of the appropriate scope of exchange of ESI in a particular case, if any. One widely recognized set of standards is The Sedona Principles, Third Edition: Best Practices, Recommendations & Principles for addressing Electronic Document Production. The Sedona Principles along with the AAA's recommendations for how Arbitrator(s) and parties may adapt them as appropriate in the context of arbitration may be viewed and printed by clicking on the following link:

Sedona Principles with AAA introduction.

To Incorporate The Sedona Principles into your clause:

The full text including the commentary of The Sedona Principles, Third Edition: Best Practices, Recommendations, and Principles for Addressing Electronic Document Production, is available free for individual download from The Sedona Conference website at:

https://thesedonaconference.org/publication/TheSedonaPrinciples

Documents Only Hearing

Parties may agree to waive an oral hearing and have their matter determined based on written submissions. Document submissions would generally include statements of facts, written arguments along with documents or evidence pertaining to the arbitration. Typically, documents only hearings can save considerable amounts of time and money, however they are also more commonly used for smaller dollar value claims

Duration of Arbitration Proceedings

AAA arbitration is known to provide a speedier method of resolving disputes, however some parties underscore their wish for an expedited result by specifying a time period within which the parties and arbitrator(s) must conclude their arbitration. When including timelines for the completion of an arbitration, it is important to impose deadlines that are realistic, since failure to meet specified deadlines could jeopardize the enforceability of the arbitration award. What the parties might consider appropriate deadlines depends on the particular circumstances of a transaction. While a 60 day deadline for the completion of an arbitration with a $10,000 claim is realistic, a six month deadline might be very aggressive for a factually intensive multi-million dollar dispute. Sample language is set forth below. Only one of the 3 options may be selected.

Remedies

Under a broad arbitration clause and most AAA rules, the arbitrator may grant "any remedy or relief that the arbitrator deems just and equitable" within the scope of the parties' agreement. Sometimes parties want to include or exclude certain specific remedies. Any or all of the following options may be selected.

Assessment of Forum Fees and Attorneys’ Fees

The AAA rules generally provide that the administrative fees be borne as incurred but that those fees and the arbitrators' compensation can be allocated by the arbitrators in the award. In addition, attorneys' fees are borne by each of the parties as they are incurred unless a law or some other authority permits the arbitrator(s) to assess those fees for or against a particular party. However, these provisions can be modified by agreement of the parties. Fees and expenses of the arbitration, including attorneys' fees, can be addressed in the arbitration clause. You may select one of the following options dealing with fees and expenses.

Opinion Accompanying the Award

In domestic commercial cases, arbitrators are not required, and do not always write a reasoned opinion explaining their award. To the extent that parties desire such opinions, particularly in large, complex cases, they should specify this requirement in their arbitration clause. Parties should be aware, however, that requiring a reasoned opinion can add to the cost of the arbitration process, and may require additional time to complete as well.

Confidentiality

While the AAA and arbitrators adhere to certain standards concerning the privacy or confidentiality of the hearings, parties might also wish to impose limits on themselves as to how much information regarding the dispute may be disclosed outside the hearing. The following language might help serve this purpose.

Non-Payment of Arbitration Expenses

The Commercial Rules provide parties with certain remedies if arbitrator compensation or administrative charges have not been paid in full by either side. However, parties can agree to certain consequences (i.e.: waiver) if either party fails to pay its share of required deposits for arbitrator compensation or administrative charges by including the following option.

Appeal

The basic objective of arbitration is a fair, fast and expert result, achieved economically. Consistent with this goal, arbitration awards are considered final and binding, and traditionally will be set aside only in very limited circumstances. In rare cases that may involve complex matters or very large claims, however, the parties may desire a more comprehensive appeal. Parties may provide for an appellate arbitration process by including the following clause, however, they should be aware that including an appellate process will increase the time and cost associated with completing an arbitration.

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