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When negotiating the terms of commercial contracts, companies frequently assume they should include standard arbitration clauses — with language about fee-shifting and how arbiters will be chosen — as a matter of course. "After all, what business wants to invite costly, time-consuming litigation in the event it gets into a dispute? This is savings with the stroke of a pen, right? Not always," says Brian H. Corcoran, a litigation partner at Katten Muchin Rosenman LLP (Washington). In fact, arbitration can be every bit as costly and time-consuming as litigation, and comes with its own hidden risks and costs that many companies don't consider when including the standard language in contracts. As Corcoran's article reveals, companies should consider several factors before using arbitration clauses, including the nature of their business, the complexity of likely disputes, the impact of fee-shifting, and whether they can live with an arbiter's binding decision. He also suggests companies consider mediation as an alternative. "In many respects, mediation offers all the benefits of arbitration, such as lower costs and faster results, without the limitations. It provides a less formal opportunity for both sides to present their views, can be performed at any time during a dispute, even in the middle of litigation, and can often be completed in a day." Corcoran's article outlines in "user-friendly" language the issues companies should consider before automatically contemplating arbitration as the means of resolving future disputes.
Channel: Jaffe Legal News Service - Articles for Publication
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