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Most dispute resolution agreements either go too far or don’t go far enough. Some try to load the agreement with unfair advantages for the drafting party, including provisions allowing the drafting party to pick the arbitrator, shortening limitations periods and limiting statutory damages. The courts routinely throw out unfair arbitration agreements, yet organizations keep writing them. Other agreements are so plain vanilla that they fail to take full advantage of the opportunity to mediate and arbitrate disputes fairly. Such agreements avoid the challenge of unfairness but also strip the process of much of its flexibility. They leave no room to maneuver. In drafting arbitration agreements, lawyers have to walk a thin line between tilting the playing field unfairly and making that field so narrow that there’s no room to play. A review of agreements that have failed to meet court challenges�and those that met such challenges�is a logical first step. But that’s just a start. A top-ten list for drafting Here are 10 tips toward drafting better agreements: Make it amicable. If you want to maintain the relationship, pursue the least abrasive approach. In the contract language, you may want to include a dispute resolution process that starts with an agreement to negotiate in good faith for a period of time, followed by mediation, followed by binding arbitration if the parties cannot resolve the dispute. To avoid delays, be sure to specify a time frame for each procedure. The goal is to resolve the dispute as quickly and amicably as possible. State what’s covered. If you want the arbitration agreement to govern all disputes arising between the contracting parties, specify this clearly in the contract. Agreements that state that all disputes will be decided by the arbitrator-including the validity of the arbitration provision itself-provide maximum authority for the arbitrator to decide all issues of the dispute, thereby avoiding a trip to the courthouse to wrangle over legal issues. Invoke the Federal Arbitration Act. Different states have different laws governing arbitration. Therefore, if you want to draft an agreement that can be used in several states, invoke the federal act. It ensures that the arbitration agreement will be enforced uniformly in different states’ courts. Avoid burdensome travel. Courts reject agreements that force a weaker party to travel a long distance needlessly. So specify a location that is convenient for both parties. Consider the other party’s costs. In drafting an agreement that requires customers or employees to arbitrate disputes, don’t be surprised if state law specifies that the financially stronger party cover some or all of the costs of arbitration. The courts see this as a way of maintaining a level playing field. Specify what law applies. Laws vary from jurisdiction to jurisdiction, so if it’s important that the arbitrator or mediator apply the law of a specific jurisdiction, be sure to state that clearly in the agreement. If the language is muddy, you may find your arbitration proceedings subject to a state law that is not favorable to your dispute. Stick to the legal remedies. In most jurisdictions, legal remedies that are available in court must also be available through arbitration. This is especially true when contracting parties do not possess equal bargaining power. Take care in limiting punitive damages. Drafting parties are often tempted to limit an arbitrator’s ability to award punitive damages but, in a recent case ( Pacificare Health Systems Inc. v. Book, 123 S. Ct. 1531 (2003)), the U.S. Supreme Court cast doubt on setting such limits. Select a reputable administrator. The best way to assure that a dispute resolution agreement will be enforced in court, if it comes to that, is to specify that the proceedings will be handled by a reputable administrator with court-tested rules and fees. Doing so makes it unnecessary to draft lengthy provisions addressing discovery, selecting dispute resolution neutrals and dealing with a number of other issues. Specify the award review process. The Federal Arbitration Act and various state laws restrict the right of courts to review arbitration awards. If you want to preserve a greater right to appeal an arbitration award, state this explicitly in the agreement or incorporate, by reference, procedural rules that provide for review by a court to determine whether the arbitrator properly applied the law. Curtis D. Brown is general counsel of the National Arbitration Forum. For more information, contact Brown at [email protected].

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