First Things First: Design the Arbitration Process You Want

Richard Chernick, Esq.

Richard Chernick, Esq.

By Richard Chernick, Esq.

The principles for drafting a pre-dispute arbitration clause are straightforward.  They do require an understanding of the legal relationship, which will be the subject of the clause, some sense of the nature of disputes that are likely to arise and a basic understanding of arbitration process.

Following are the top 10 rules:

  1. Identify the scope of arbitration with precision.  The gold standard is “all disputes arising out of or relating to this Agreement . . .” This is a “broad form” clause that is invariably interpreted by courts to encompass related tort and statutory claims.  Anything less may limit the arbitrators’ power to determining only contractual disputes.
  2. Decide whether determining arbitrability shall be delegated to the arbitrators or left with the court.  Typical delegation language:  “any controversy, claim or dispute arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate…”  Courts will enforce such delegations.
  3. State who will administer the arbitration.  “The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures.”   If neither an institution nor institutional rules are mentioned, the arbitration will be non-administered (ad hoc).
  4.  Choose rules to govern the arbitration in the case of a non-administered clause:  “The arbitration shall be governed by the UNCITRAL Rules.”
  5.  Decide between a sole arbitrator and a tripartite panel and specify the method of selection of the arbitrator(s), mindful of the default process contained in the designated rules in the event of a failure to agree: “Each party shall select an arbitrator (who shall serve as a neutral arbitrator as that term is used in the Revised Code of Ethics for Arbitrators in Commercial Disputes); the party-appointed arbitrators shall jointly select the presiding arbitrator.”
  6.  Specify the governing (substantive) law: “shall be determined by arbitration in Los Angeles, California, in accordance with the laws of the State of California for agreements made in and to be performed in California.”
  7.  Address the scope of discovery unless the (default) rules are acceptable to the parties.
  8.  Choose a venue for the arbitration:  “shall be determined by arbitration in Los Angeles, California…”

For more on Mr. Chernick’s discussion on designing the arbitration process, please read the full article from by clicking here.

Do We Need a New York Convention for Mediation/Conciliation?

Lorraine M. Brennan, Esq.

Lorraine M. Brennan, Esq.

By Lorraine M. Brennan, Esq.

The 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) is viewed by many as one of the most (if not the most) successful commercial treaties to which the United States has become a party.  To date, 154 countries have signed the New York Convention (most recently Bhutan, Burundi, Guyana and the State of Palestine), and the treaty is truly global in its scope.  While the United States did not accede to the New York Convention until 1970, it has since been one of the leaders in promulgating jurisprudence, which is favorable to international arbitration and played a major role in advancing its use to resolve commercial disputes worldwide.  The New York Convention consists of only 16 articles, and the goal of the Convention is two-fold:  to enforce the parties’ agreement to arbitrate on the front end and to enforce any resulting award on the back end.

With this backdrop in mind, in July 2014 the United States submitted a proposal to the United Nations Commission on International Trade Law (UNCITRAL) Working Group II that it develop a convention on the enforcement of conciliated settlement agreements for international commercial disputes.  In February 2015, UNCITRAL Working Group II held meetings in New York, where it considered this proposal with the goal of reporting to UNCITRAL on whether such a project was feasible.

Some of the challenges involved in this undertaking have been reported by observers at the February 2015 meetings.  To begin with, do we need such a convention?  If we do, what should it look like?  Should it model the New York Convention and allow for enforcement at both ends; i.e., enforcement of the agreement to mediate/conciliate and enforcement of the ultimate settlement (if any) reached by the parties?  Or should it focus primarily on the settlement agreement itself, bearing in mind that parties do not necessarily come to mediation via a contractual provision to meditate/conciliate.  Would such a convention give the parties more confidence in agreeing to use mediation/conciliation?  What difficulties would need to be overcome from a procedural standpoint?  For example, Article V(1) of the New York Convention provides grounds on which a court can refuse to enforce an arbitral award, including procedural grounds such as lack of notice or the arbitrators overstepping their authority.  Article V(2) also provides public policy safeguards for the parties and allows an enforcing court to refuse recognition and enforcement if these grounds are violated.  Would these same procedural safeguards need to be included in a convention on mediation/conciliation?

Some of the attendees at the February 2015 Working Group II session put forward the view that mediated/conciliated settlement agreements could be reduced to “consent awards,” thereby reducing the settlement to an arbitral award, which would be enforceable under the New York Convention.  The obvious downside of that approach is the cost and the delay—parties would have to commence an arbitration, appoint an arbitrator and have that arbitrator sign off on the settlement agreement as a consent award, not to mention that arbitrators may not want to be viewed as a “rubber stamp” for an agreement the parties entered into without the assistance of the arbitrator.

For the rest of Do We Need a New York Convention for Mediation/Conciliation, please read the full article from by clicking here.

Make the Most of Your Mediation: Seal the Deal

Hon. Lynn Duryee (Ret.)

Hon. Lynn Duryee (Ret.)

By Hon. Lynn Duryee (Ret.)

It sometimes happens that, despite the best efforts of all participants, negotiations grind to a stubborn halt and disappointment sets in.  Before packing your bags, ask yourself these five questions.  Your answer might be just the spark needed to rekindle talks.

1.  What is my real cost of going forward?  At the beginning of the day, you likely fixed a number against which you would try the case.  By the end of the day, you know your opponent’s best number.  You could reflexively reject it if it doesn’t match your number, or you could (wisely) compare the dollars on the table with the true cost of going forward.  Your calculation should include attorney’s fees, expert and other litigation costs, risks of trial, benefits achievable by settlement but not by litigation (e.g., confidentiality) and—one often-overlooked factor—the investment of time by the client.  A comparison of the actual deal now with the cost of going forward gives you the most accurate way of evaluating the current deal.  You might discover that you are closer than you think.

2.  Have I fully discussed the risks of going forward with my client?  Lawyers specialize in championing their client’s cause.  They see all the strengths in their client’s case and all the weaknesses in their opponent’s, and they will zealously pursue the client’s quest for justice.  These qualities, while admirable, sometimes make it difficult for the lawyer to fully discuss problems in the case for fear of appearing disloyal or doubtful.  If this sounds like you, enlist your neutral’s assistance.  Even sophisticated clients have a hard time understanding how one could lose a (seemingly) slam-dunk case or why a jury could award less than the offer on the table.  Put your neutral to work by having her objectively discuss with your client the weaknesses in the case and the risks of trial.

3. Am I contributing to an impasse?  Litigation is often compared with war, and for good reason.  In an effort to win, each side battles to promote its position and annihilate the other.  Casualties occur in the form of insults exchanged, tempers lost and enemies made.  Lawyers can carry these wounds into settlement negotiations, undervaluing communications from the other side because of a personal sense of injustice.  In the unlikely event that you have lost your professional objectivity, take a few quiet minutes to return to your best self.  Make sure your client understands that it is his decision to settle and that he is in no way letting you down by choosing to end the litigation.

To read on to section 4. What further information might change my evaluation, please read the full article from by clicking here.

Moving from Preparation to Negotiation – How to Cause Failure in Mediation – Part 2

By: Alexander S. Polsky, Esq.

Alexander S. Polsky, Esq.

Alexander S. Polsky, Esq.

A previous post on this topic listed several actions by parties and counsel that can derail even the most straightforward mediation. This post continues that list.

Allowing someone with a separate agenda to influence the client’s decisions: Plaintiff does not speak English. Her bilingual boyfriend attends mediation, obstenibly to translate. However, he has an agenda, which includes controlling the plaintiff’s decisions. He consistently undermines the advice of the counsel and prevents direct communication between plaintiff and the mediator. The plaintiff has lost the opportunity for a meaningful discussion with the neutral. She has lost the ability to participate in the process, and her pre-conceived notions—and those of her boyfriend—remain obstacles to settlement. The only people attending mediation should be those necessary to advance the process.

Personal attacks on the opposing party or counsel:  A sure way to derail negotiations is to begin by insulting the other side in pre-mediation letters, call or briefs.  Gratuitously insensitive remarks in mediation serve only to inflame emotions.  Criticisms may be entirely valid and should be aired, but the manner in which they are raised as well as the person raising them is important.  Sometimes the mediator best delivers an unwelcome message.

Opening the negotiation with ridiculous demands and offers: A ridiculously high demand invites an equally ridiculous offer.  A reasonable demand met by a low-ball offer discourages a counter demand. Participants justify these positions by their desire to communicate resolve. There are other, more effective, means of sending that message.  The amount of movement in the offer or demand as the mediation unfolds communicates the degree to which a party is committed to a position without derailing the mediation at the outset.  A ridiculous offer or demand requires a huge early jump that generally diminishes credibility.  Every case has a range; start within it and you are more likely to settle.

Refusing to disclose information that is driving settlement decisions: Early in the life of a case before discovery is complete, one side has key information which it does not want disclosed.  Yet it is making decisions based on the secret sauce.  Trying to convince the other side, the mediator can only say, “They have evidence that I think will be a real problem for you, but I can’t tell you what it is.”   Attorneys cannot negotiate with a phantom.

Introducing new terms late in the negotiation – lead with the deal points: In a highly emotional wrongful termination suit, counsel and the mediator have worked hard to keep the emotions under control.  The parties are finally getting close to settlement.  Suddenly the defendant adds two terms: confidentiality and return of some equipment the plaintiff possesses.  The plaintiff announces he is leaving.

The mediator has spent hours building trust in the process to overcome the plaintiff’s instinctive distrust of the other side.  By introducing new terms, however minor, the defendant has derailed the process.  If non-monetary terms are important, get them on the table early in the process.

For more on Mr. Polsky’s discussion on Moving from Preparation to Negotiation please read the full article from by clicking here.