In the wake of businesses losing a fortune to litigation costs, the inclusion of an arbitration clause in contracts and agreements is becoming increasingly common. Law firms repeatedly keep advising corporate clients to opt for this form of Alternate Dispute Resolution (ADR). Quite often, arbitrating disputes leads to a faster resolution of issues. This, in turn, translates into lower legal fees and other allied costs. Therefore, it comes as no surprise that these days almost all contracts and agreements have an arbitration clause.
In Alberta, the major governing bylaw in this aspect is the Arbitration Act. As per the Act, when a contract contains a mandatory arbitration clause, the parties involved are expected to resolve their disputes sans any litigation. The Act provides a framework for the arbitrators to take the right course of action. In most cases, the arbitration lawyer includes the rules and regulations for arbitration in the contract.
Why Include An Arbitration Clause?
- A flexible solution:
In case of litigation, the parties don’t have a say in the scheduling of the hearings. But in case of arbitration, both parties can decide when and where they want to discuss issues. The absence of a legal entity makes, the option of arbitration a flexible one.
- Faster resolution:
As mentioned above, arbitration works faster than litigation. It is much easier to schedule a session with your arbitrator as opposed to trying to get an early hearing date in court.
- Case-specific decision:
The disputes between parties differ from one industry sector to the other. The problems faced by those in the pharmaceutical industry will be different from those in the music industry. And the binding laws are usually generalized. With arbitration, both parties have a chance at arriving at a reasonable consensus that will work in their best interest.
- No stress of court proceedings:
Have you ever seen court proceedings (maybe in the movies, if not in real life)? They always tend to be stressful. Imagine going through all the hassle for potentially years at an end. With arbitration, you get to escape the stress of going through a legal proceeding in court.
With arbitration, parties stand a higher chance of maintaining the confidentiality of their dispute. When there is litigation, things tend to get ugly, and if you are a media-conscious business, then this can lead to some negative publicity.
Things to include in an arbitration clause
- Seat of arbitration
This refers to where you want the arbitration to happen. The seat of arbitration will determine the rules binding the arbitration procedure. If the decided seat is in another country, then the rules of that place will apply to the case.
- Governing law
The arbitration law differs from province to province. However, the crux of all of the provincial laws is the same. You will have to mention the bylaw for arbitration in your province.
- Mandatory rules
These are rules that cannot be broken under any circumstance. It is best to consult an expert from a reputed law firm before you set down the mandatory rules in your arbitration clause.
From drafting the arbitration clause to deciding on the rules to be included, you will need an arbitration lawyer. So be sure to consult with the best law firm in your province before you add an arbitration clause in your contracts and agreements.