Arbitration Clauses

Should you have an Arbitration Clause in your

Contract?

In today's current economic climate, parties are

increasingly turning away from the courts to resolve contractual

disputes, in favour of alternative dispute resolution procedures

such as arbitration.

To achieve this end it is becoming commonplace to see agreements

with clauses which state that the parties must conduct arbitration,

in place of litigation.

While in theory these arbitration clauses may appear to relieve

parties of the sometimes costly and lengthy litigation process; the

reality is often very different, leaving parties confused.

This leads to the question, what does your arbitration

dispute resolution clause really achieve for you?

What is arbitration?

Arbitration is a process whereby a neutral third party is

assigned the role to make binding decisions in relation to a

dispute between two parties in relation to performance or lack

thereof of parties' contractual obligations.

Arbitration has often been seen as a preferable course over

litigation for the alleged lower costs and greater efficiency in

resolving disputes. Where the arbitration clause is specifically

drafted for disputes it may also require that the arbitrator has

special expertise and require either a single arbitrator or a panel

format for the arbitration. However in recent times these

advantages have been questioned in light of the increased costs of

arbitration.

What is an arbitration clause?

An arbitration clause is in the simplest terms, a contractual

provision that...