As an arbitrator of domestic and international commercial cases for over 25 years, I was shocked recently when a colleague in a national law firm responded to my praise of arbitration with a bitter rant about his recent bad experience representing a client in an arbitration. Needless to say, his side had lost. As he put it, the arbitration took too long, involved as much discovery as his court cases, was riddled with motion practice, was too expensive, and was, in all respects, “just like a court action”. His parting shot was that the arbitrators were clueless as to the industry involved, yet all three arbitrators nonetheless sent large bills. Over his shoulder, he said that he couldn’t imagine why people (like me, I suppose) said that arbitration was better and cheaper than litigating in court. He told me that in the future, he was going to advise his clients to avoid arbitrations altogether.
A day or two later, after my shock (and hopefully, his ire) had receded, I called him and asked if I could see the arbitration clause pursuant to which he and his client had participated this “Arbitration from Hell.” In a complex document of over 40 single-spaced pages, the clause said, in its totality: The parties hereby agree to submit every dispute that they may have to binding arbitration.
There was nothing about which arbitral forum the “binding arbitration” would be conducted in; its location city; the rules that would govern it; the type of arbitrators they would have; what disputes were encompassed; how many arbitrators there would be or the scope of their authority, nothing of the sort. Viewing this ridiculous clause, buried in a complex agreement among four corporations for the formation of a complex international joint venture, I was now shocked for the second time. How could experienced business people and sophisticated counsel believe that this clause could have possibly served them in any positive way?