Confusing Arbitration Clauses
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What a difference a clause makes
Eager to avoid the expenses and delays associated with litigation, an increasing number of businesses are turning to arbitration to resolve their disputes. Some are finding, however, that arbitration is not always the smooth, cohesive process it is designed to be. Arbitration clauses, for instance, can be troublesome; seemingly insignificant word choices can mean the difference between a few months of arbitration and an extended courtroom battle.
What is the difference between these two common commercial arbitration clauses?
Any dispute, claim or controversy arising out of, or relating to, this agreement shall be determined by arbitration in New York City before one arbitrator.
Any dispute, claim or controversy concerning the interpretation or enforcement of this Agreement shall be determined by arbitration in New York City before one arbitrator.
Not only do these clauses appear to be almost identical during a casual reading, they are barely distinguishable with more careful study. When parties are reading lengthy contracts, the difference between them may seem negligible, but that difference may affect the arena in which the dispute is heard, the legal expenses, and even the extent of liability to which a business is exposed.
In the example shown, the statutory claim might be open to arbitration under the first clause, but not the second. Even though the effect of this distinction would typically be noticed in the context of individual employment, it could affect the ability to arbitrate in any area of law where statutory rights and contractual rights cross paths. Such areas include copyright, trademark, and consumer protection.
Obviously, it is not only in New York that such small discrepancies can make enormous differences. For the protection of your company, it is important that you:
- Do not assume all arbitration clauses are alike
- Carefully review the intricate language of arbitration clauses
- Anticipate potential statutory liability that could result from contractual relationships
- Carefully consider how the wording of arbitration clauses can affect claims in terms of being submitted to arbitration or reserved for the courtroom
Even without such tricky clauses, settling business and commercial disputes is complex and confusing. In order to protect your company, when disputes arise, it is essential that you engage the services of a highly competent and knowledgeable business and commercial litigation attorney.