Controlling Costs in Commercial Arbitrations

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Originally published in the August 27, 2012 edition of the Texas Lawyer.

In recent years, businesses that use arbitration increasingly have voiced the complaint that arbitration has become like litigation: too costly and protracted. To address these concerns, the parties and attorneys involved must make conscious decisions before and after a dispute arises. They should create an arbitration process that contains procedures best suited to resolve the dispute fairly and meet the parties’ expectations in an expeditious and cost-effective manner.

Long before a dispute occurs, parties should draft a clear arbitration clause. This helps avoid uncertainty and disagreement as to the clause’s meaning and effect. As a general rule, broadform arbitration clauses, under which all disputes between the parties arising out of the agreement are submitted to arbitration, are preferable to narrow-form clauses, which frequently result in extended and expensive disagreement over whether the arbitration clause covers the dispute in question. To avoid later disagreement, lawyers should spell out venue, choice of law and procedure.

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