Preventing a Runaway Arbitration with a Well-Drafted Arbitration Clause

To keep legal costs under control in commercial disputes, corporations frequently rely upon binding arbitration as a reputedly faster and less expensive alternative to traditional litigation. Typically, two major factors impacting those potential cost savings are restrictions on pre-hearing discovery in arbitration and restrictions on challenges to arbitration awards in post-hearing proceedings. When enforced, these restrictions offer a significantly streamlined process, finality and a shorter time to ultimate resolution than may exist in the litigation process. Another desirable aspect of arbitration is the parties’ ability to select arbitrators with subject matter expertise relevant to the dispute, which is a quality that the decisionmakers in litigation—jury and/or judge—may not offer.