This document is a legal memorandum discussing this issue, "Whether the various arbitration clauses stated in the Rule should be included in commercial contracts." The course most applicable to this document is Alternative Dispute Resolution.
Issue: Whether the various arbitration clauses stated in the Rule should be included in commercial
contracts.
Rule:
1. Basic Arbitration Clause usually says any disputes developing out of or linking to the contract will
be resolved through arbitration rather than litigation and may state the number of arbitrators,
the arbitration rules that will manage the proceedings, and the location of the arbitration.
2. Institutional Arbitration Clause assigns a specific arbitration institution or organization to
administer the arbitration proceedings. Arbitration Institutions include the American Arbitration
Association (AAA), the International Chamber of Commerce (ICC), and the London Court of
International Arbitration (LCIA).
3. Ad Hoc Arbitration Clause allows parties to conduct arbitration proceedings without the
connection of a particular arbitration institution. The parties agree on the rules and procedures
that will manage arbitration and choice of arbitrators.
4. Multi-Tiered Dispute Resolution Clause has a progression of stages that parties must follow
before choosing arbitration. The clause may require the parties to engage in negotiation,
mediation, or other forms of alternative dispute resolution (ADR) before participating in
arbitration.
5. Med-Arb Clause is a combination of mediation and arbitration into one dispute resolution
process. First parties have mediation to attempt to resolve their disputes, and if that was
unsuccessful, parties move to an arbitration process.
6. High-Low Arbitration Clause establishes predetermined high and low settlement amounts that
serve as the upper and lower limits of potential awards in arbitration. This type of clause
provides parties with certainty regarding the financial outcomes of arbitration, regardless of the
final award.
7. Emergency Arbitration Clause means parties pursue urgent interim relief from an emergency
arbitrator before the arbitral tribunal and is frequently in contracts when parties need
immediate remedies to protect their interests while awaiting the resolution.
8. Seat and Governing Law Clause identifies the legal jurisdiction (seat) and the governing law that
will affect the arbitration proceedings and determines procedural matters, enforceability of
arbitration settlements, and the scope of judicial review.
Application: Different clauses have various benefits and detriments in contracts. A Basic Arbitration
Clause is beneficial for basic settlements and efficiency of arbitration. Institutional Clauses are structured
and beneficial for complicated arbitrations that need procedural support. Ad Hoc Clauses are flexible for
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