Arbitration Update

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Ninth Circuit Interprets Arbitration Clause to Require Arbitration of Claims and Counterclaims in Separate Fora: In its September 2010 decision in Polimaster Ltd. v. RAE Systems, Inc., 623 F.3d 832 (9th Cir. 2010), the Ninth Circuit grappled with the interpretation of a clause providing for arbitration at the “defendant’s site.” The Ninth Circuit’s holding that the respondent’s counterclaims needed to be arbitrated in a different location than the claimant’s claims is a reminder of the importance of drafting thorough, clear and explicit arbitration clauses.

Polimaster, a designer and manufacturer of radiation monitoring instruments based in Belarus, and Na & Se, a corporation based in Cyprus, had entered into a license and a contract with RAE, a Delaware corporation with its principal place of business in California. The contract stated, “The Parties shall exert the best efforts to settle up any disputes by means of negotiations, and in case of failure to reach an agreement the disputes shall be settled by arbitration at the defendant’s site.” The license contained similar language. Neither agreement specified procedural rules for the arbitration. When Polimaster commenced a JAMS arbitration against RAE in the United States, RAE answered and asserted counterclaims.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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