If You Want To Arbitrate In Kentucky, You Must Say So

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I recently read an article on the "essential terms" needed in an arbitration clause to achieve cost-effective arbitration. The original article states six "essential terms" for the arbitration clause: 1.) insist on a single arbitrator; 2.) limit the time to the hearing, the length of the hearing, and the time to decision; 3.) adopt a notice pleading standard; 4.) limit discovery; 5.) authorize sanctions; and 6.) ease the confirmation process.

I generally like and agree with five of them but I found a problem with their sixth "essential term." In Kentucky, along with a number of other states operating under a version of the Uniformed Arbitration Act, using the sixth "essential term" could render your arbitration clause unenforceable. The six term seeks "to ease the confirmation process" by "vesting every district court in the United States with the jurisdiction to confirm and enter judgment on the arbitration award." This will not work for a dispute in Kentucky and many other states.

In Kentucky, arbitration clauses must provide that the arbitration proceedings "shall be held in Kentucky." Otherwise, a Kentucky court will not have jurisdiction to compel arbitration or enforce the arbitration award. You cannot "agree" that Kentucky has subject matter jurisdiction over arbitration. You have to follow the Kentucky Arbitration Act, which provides that arbitration must be held in the Commonwealth.

Economizing arbitration with the first five "essential terms" is almost always a good idea. But be careful because the sixth term could ruin the whole arbitration clause.

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