Originally from Dispute Resolution Journal

The following is a chapter reprinted from the Proceedings of the Twenty-First Annual Energy & Mineral Law Institute, 2001, published by the Energy & Minerals Law Institute. Author Eileen Vernon provides a step-by-step guide to designing an arbitration clause that will incorporate all of the components necessary to establish an ideal “legal system” in the energy and minerals industry.

Environmental, energy and natural resource companies have found themselves involved in increasingly complex disputes, some of which involve multiple parties and require arbitrator expertise. This chapter addresses some of the questions that arise in the drafting of conflict management clauses for such disputes. The reader is encouraged to give careful consideration to the specific insertions needed in the clause in order to customize it, and to consider the best procedures to be followed in a particular instance without alienating the other party or sacrificing expediency in the resolution of disputes.

In recent years, in-house or outside counsel have seen a need to re-examine former conflict management systems and antiquated clauses that were written long ago. Industry counsel will benefit by re-examining current contracts for boiler plate or old clauses and taking additional steps to design and customize rules and clauses so that their clients’ dispute resolution system promotes settlement.

Overview

The Standard Arbitration Clause

The standard arbitration clause should no longer be “one size fits all” or “boiler plate.” The traditional arbitration clause still works, and it is good to use it rather than not have any clause at all. Standard clauses do have the advantage of long-term widespread acceptance and their frequent use has generated helpful guidance from judicial interpretation.1

Using standardized clauses that incorporate the rules of a provider organization give an important advantage: when problems arise, there may be case law to answer questions or support a position. To make this task less onerous, the AAA and Fordham University jointly publish regular updates on the use of ADR and the law.2

Sometimes parties who want to have the option of using ADR, but who may be dealing with less than friendly business associates, will leave the standard AAA arbitration clause alone, preferring not to discuss it rather than have it put to the test and perhaps stricken entirely.