Sample Arbitration Submission Agreement

While arbitration is a recognized dispute resolution process – particularly in the business-to-business context – it is fundamentally a creature of contractual agreement among the parties and a written agreement to arbitrate is required.  See, e.g., RCW 7.04A.060.  The agreement to arbitrate may be entered into pre-dispute or after a dispute has arisen.  The following presumes that the parties did not agree to arbitration in their original dealings but, now that a dispute has arisen, have decided to use arbitration – rather than the courts – to resolve it.  As arbitration is contractual, it is vitally important that all necessary parties sign the agreement to arbitrate, as only parties will be bound by the result.  Either pre-dispute or post-dispute the parties have a choice:  arbitrate using the services of a neutral administering organization that appoints the arbitrator(s) and manages the process, or privately, on an ad hoc basis, with the parties or the arbitrator(s) managing the process.  Both scenarios are addressed in the following materials.  As with drafting pre-dispute dispute resolution clauses, it is vitally important that counsel understand the arbitration process and craft a clause that sets up an appropriate framework for resolving the dispute.

Phil Cutler

 

 

For disputes to be administered by the American Arbitration Association (or another similar provider organization, such as JAMS or – locally — Judicial Dispute Resolution (JDR)) and in accordance with its rules:

 

ARBITRATION SUBMISSION AGREEMENT

1.     We, the undersigned parties, hereby submit the following controversy to arbitration in accordance with the terms of this Agreement:

[here insert a brief description of the dispute or the issues to be submitted to arbitration or, if a lawsuit has been commenced, reference the lawsuit and attach a copy of the operative pleadings; if there are issues that the parties do not want arbitrated, carve them out]

The arbitration shall be administered by the American Arbitration Association under its Commercial [or other] Arbitration Rules [for large/complex disputes: “, . . . as supplemented by the AAA’s Procedures for Large, Complex Commercial Disputes” [or similar supplemental rules of another provider organization] [and, if desired: “. . . and the AAA’s Optional Rules for Emergency Measures of Protection” [or similar supplemental rules of another provider organization].

2.     We further agree that a judgment of any court having jurisdiction may be entered upon the award.

Note 1: The foregoing form is largely in the form proposed by the American Arbitration Association for post-dispute submission agreements.  See www.adr.org; click on “arbitration – more”, then “commercial rules”, then “commercial disputes”, and then (on right side under “important resources”) “drafting dispute resolution clauses” for the AAA’s drafting guide and a variety of sample dispute resolution clauses.  A paper copy is available from the AAA’s Northwest regional office (701 Pike Street, Suite 950, Seattle – telephone 206-622-6435) or any AAA regional office.

Note 2: Federal courts do not have jurisdiction over an arbitration merely because the FAA may be involved.  Unless there is some other basis for federal jurisdiction, confirmation (or vacatur) issues must be brought in state court.

Note 3: “Discovery” in arbitration is ordinarily quite limited and the rules of most arbitration provider organizations place decisions related to discovery in the hands of the arbitrator(s), who ordinarily require that discovery be specifically tailored to the dispute and the parties’ legitimate needs to prepare.  If you desire to  provide at the outset for more wide-ranging discovery, you should make sure that your clause does so.  Bear in mind, however, that the more arbitration takes on the characteristics of litigation, the higher the cost and the greater the likelihood that the parties will not realize the full benefits of arbitration.

Note 4: The beauty of using an administering organization and rules is that the submission agreement can be quite short as the organization has a comprehensive set of rules and procedures that answer and deal with nearly every aspect of the arbitration, from appointment of the arbitrator(s) to . . . challenges to the appointment or continued service of an arbitrator . . . amendment of pleadings . . . discovery . . . motions . . . hearing . . . admissibility of evidence . . . responsibility for and payment of arbitration costs . . . final award.  The administering organization also acts as a buffer between the parties and the arbitrator; especially important when matters such as party concerns about an arbitrator’s neutrality or other sensitive issues (like payment of fees and deposits) arise, which – to protect the arbitrator’s impartiality and neutrality – should be dealt with in a fashion that does not directly involve a party and the arbitrator.  The administering organization will charge a filing fee, and sometimes a fee for case management, but the cost is usually worth it.

 

 

If you want to provide a little more detail, as well as make it crystal clear that the arbitrator(s) have power to determine the scope and interpret the terms of the submission agreement, consider substituting the following for paragraph 2:

 

2.     We further agree that (a) the above-described controversy shall be heard and determined by [a single arbitrator appointed, with input from the parties, by [the administering organization]] [three arbitrators appointed, with input from the parties, by [the administering organization], the chair of which shall be appointed by [the administering organization or the parties jointly or the arbitrators themselves, by majority vote]], (b) the arbitrator [arbitrators] shall, in addition to all other powers, have the power to determine the scope and interpret the terms of this Agreement and (c) a judgment of any court having jurisdiction may be entered upon the award.

 

Note: Most arbitration organizations will honor the parties’ choice of a specific arbitrator or arbitrators, so if all parties agree consider specifying the arbitrator(s).  Check with the organization.

 

 

It is often a good idea to reference the law which will govern the arbitration, as the parties (and the arbitrator) should know what law will govern and the Washington Uniform Arbitration Act specifically gives the arbitrator some powers that are not specifically provided-for in the AAA (or other) rules (like arbitrator subpoenas to third parties for discovery (see RCW 7.04A.170) or dispositive motions, see RCW 7.04A.150(2)).

 

Therefore, consider adding a paragraph 3 –

 

3.     In addition to the rules and procedures of [the administering organization], the . . .

 

For cases involving interstate, foreign or maritime commerce:

 

. . . Federal Arbitration Act (FAA), 9  U.S.C. Chapter 1, et seq., and, to the extent not inconsistent with the FAA, the Washington Uniform Arbitration Act, RCW Chapter 7.04A, shall govern the arbitration.

 

For cases involving only intrastate commerce:

 

. . . Washington Uniform Arbitration Act, RCW Chapter 7.04A, shall govern the arbitration.

 

 

 

If there is no “governing law” clause in any other agreement subject to arbitration:

 

Consider adding another paragraph that specifies what law the arbitrators should apply in determining the issues submitted to arbitration.

 

 

Washington follows the “American Rule” regarding attorneys’ fees (fees are not recoverable unless specifically provided-for by statute or contract).  If you want the prevailing party to be able to potentially recover its reasonable attorneys’ fees and costs and that issue is not addressed in any other agreement subject to arbitration:

 

Add such a clause.

 

 

***************

 

 

For ad hoc (private) arbitrations that are not administered by any organization:

 

 

ARBITRATION SUBMISSION AGREEMENT

 

This Agreement is dated ___________.  The parties acknowledge and agree that a controversy has arisen among them, which they desire to resolve by arbitration rather than litigation.  Accordingly, the parties agree as follows:

 

1.     Arbitration and Judgment

 

The following controversy [here insert a description of the dispute or the issues to be submitted to arbitration] . . .

 

OR

 

The claims, contentions and issues set forth in the attached pleadings [complaint, answer, counterclaim, reply; if there are issues that the parties do not want arbitrated, carve them out] . . .

 

. . . and any dispute regarding the scope or terms of this Agreement, shall be resolved by arbitration under . . .

 

 

 

 

For cases involving interstate, foreign or maritime commerce:

 

. . . the Federal Arbitration Act (FAA), 9  U.S.C. Chapter 1, et seq., and, to the extent not inconsistent with the FAA, the Washington Uniform Arbitration Act, RCW Chapter 7.04A.

 

For cases involving only intrastate commerce:

 

. . . the Washington Uniform Arbitration Act, RCW Chapter 7.04A.

 

A judgment of any court having jurisdiction may be entered upon the award.

 

Note 1: It is often a good idea to reference the law which will govern the arbitration, as the parties (and the arbitrator) should know what law will govern and the Washington Uniform Arbitration Act specifically gives the arbitrator some powers that are not specifically provided-for in the FAA or in the AAA (or other) rules (like arbitrator subpoenas to third parties for discovery (see RCW 7.04A.170) or dispositive motions, see RCW 7.04A.150(2)).

 

Note 2: Federal courts do not have jurisdiction over an arbitration merely because the FAA may be involved.  Unless there is some other basis for federal jurisdiction, confirmation (or vacatur) issues must be brought in state court.

 

 

2.     Administration and Rules

 

The arbitration shall not be administered by any arbitration provider organization but shall be administered by the arbitrator [arbitrators] appointed pursuant to this Agreement; provided, however, that any dispute regarding the appointment or service, or continued service, of an arbitrator shall be resolved by [here insert a court or another dispute resolution method, such as another person who will arbitrate such a dispute; if an individual person is selected to arbitrate issues related to an arbitrator’s service or continued service, be sure to provide who pays that person’s fee and name an alternate in the event the first person cannot serve].  Notwithstanding that this arbitration is not separately administered, the [insert the arbitration rules that will govern the proceeding] (Rules) shall govern the arbitration.  The arbitrator [arbitrators] shall interpret, apply and determine the applicability of the Rules.

 

Note: It is always a good idea to provide a set of rules that will govern the arbitration!  Be sure, however, to familiarize yourself with the rules selected.

 

 

3.     Appointment of Arbitrator [Arbitrators]

 

If the parties have already agreed on an arbitrator or arbitrators:

 

__________ [or, if a 3-arbitrator panel is desired: _________, _________ and _________] shall serve as arbitrator [arbitrators], subject to the parties’ review of disclosures.  If, after reviewing arbitrator disclosures, any party objects to the appointment, the parties may jointly select a replacement or any party may seek resolution of issues related to the arbitrator’s appointment as provided in Section 2.  Any objection must be lodged within ___ calendar days after a party receives an arbitrator’s disclosures. [If a 3-arbitrator panel is to be selected, the Agreement should provide a method of selecting the chair:  by agreement of all parties or by the arbitrators themselves, by majority vote.]  The compensation and expenses of the arbitrator [arbitrators] shall be initially paid by the parties in equal shares, subject to re-allocation in the Final Award [or make some other provision that clearly identifies who pays what].

 

If the parties have not already agreed on an arbitrator or arbitrators:

 

Within ___ calendar days after the date of this Agreement, each party shall submit to each other party the names of three individuals who that party consents, subject to review of their disclosures, to serve as an arbitrator.  Within ___ calendar days thereafter the parties shall jointly select one individual [three individuals], who shall be appointed to serve as arbitrator [arbitrators], subject to approval of their disclosures.  If, after reviewing arbitrator disclosures, any party objects to the appointment, the parties may jointly select a replacement or any party may seek resolution of issues related to the arbitrator’s appointment as provided in Section 2.  Any objection to an arbitrator’s appointment must be lodged within ___ calendar days after a party receives an arbitrator’s disclosures.  [If a 3-arbitrator panel is to be selected, the Agreement should provide a method of selecting the chair:  by agreement of all parties or by the arbitrators themselves, by majority vote]  The compensation and expenses of the arbitrator [arbitrators] shall be initially paid by the parties in equal shares, subject to re-allocation in the Final Award [or make some other provision that clearly identifies who pays what].

 

OR

 

Within ____ calendar days after the date of this Agreement __________ [the claimant; if more than one claimant:  _______ and ________ jointly] and ________ [the respondent; if more than one respondent:  ______ and ________ jointly] shall each appoint one individual to serve as arbitrator.  If, after reviewing the arbitrators’ disclosures, any party objects to the appointment, the appointing party may select a replacement or any party may seek resolution of issues related to the  arbitrator’s appointment as provided in Section 2.  Any objection to an arbitrator’s appointment must be lodged within ___ calendar days after a party receives an arbitrator’s disclosures.  The party-appointed arbitrators shall thereafter select the third arbitrator, who shall serve as chair of the panel.  All arbitrators shall be neutral [or, if the parties desire that their party-appointed arbitrator be non-neutral: The party-appointed arbitrators are not neutral; the third arbitrator shall be neutral].  The compensation and expenses of the party-appointed arbitrators shall be initially paid by the appointing party, subject to re-allocation in the Final Award.  The compensation and expenses of the third arbitrator shall be initially paid in equal shares by each party, subject to re-allocation in the Final Award [or make some other provision that clearly identifies who pays what].

 

 

If there is no “governing law” clause in any other agreement subject to arbitration:

 

Consider adding another paragraph that specifies what law the arbitrators should apply in determining the issues submitted to arbitration.

 

 

Washington follows the “American Rule” regarding attorneys’ fees (fees are not recoverable unless specifically provided-for by statute or contract).  If you want the prevailing party to be able to potentially recover its reasonable attorneys’ fees and costs and that issue is not addressed in any other agreement subject to arbitration:

 

Add such a clause.