But Soft, What Arbitration Through Yonder Window Breaks?By
I’m not a huge fan of dispute resolution and arbitration clauses, as they often lead to time consuming contract negotiations over settlement discussions that will happen anyway, and can generate arbitration requirements that are often more expensive and time consuming than litigation. But I was pleasantly surprised by this take from a long time lawyer today who told me:
Most companies that I’ve worked for have tried to avoid arbitration clauses. Some felt that with arbitration companies would be too quick to file for arbitration rather than try to resolve the issues internally. Others were concerned that the results wouldn’t be strictly on the facts. If we ever did agree on one, and that was very infrequent, it could only be used after the results of a full escalation failed to reach agreement and it would not exclude the parties ability to litigate it (meaning non-binding arbitration).
This is a compelling idea. Next time you are in a negotiation and don’t have enough bargaining power to excise an arbitration clause, consider adding a dispute resolution clause as a way to inoculate your client against the risks of a bad arbitration decision. Invoking the structured settlement discussion and escalation process in this clause might just be the ticket to avoid an unhappy outcome.
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