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CCCA_V7No4_Col-McCarthys-FIN_CCCA 13-11-25 1:26 PM Page 48 Legal Update – McCarthy Tétrault LLP Arbitration clauses: Drafting for cost control By Sarah Corman anada is a leader in the arbitration busi- whether they will involve other parties. can streamline the hearing and encourages Cness: The popularity of arbitration has Arbitrators do not have the power to order reasonable positions and settlement. The increased dramatically in recent years, as non-parties to join the arbitration or to con- point is, take advantage of the flexibility! have the number of arbitral institutions solidate multiple arbitrations. As such, it is offering services. But it’s not cheap and it important to have all potential parties sign an Avoid an appeal can be accompanied by unanticipated costs agreement regarding multi-party arbitration. Appeals of any kind are expensive. Parties at a time when in-house counsel are facing Avoidance of multiple proceedings is a crucial can provide for finality at an earlier junc- unprecedented budget pressure and often over-looked cost-control measure. ture: no appeal from the arbitrator’s deci- At its best, arbitration is a flexible proce- sion. This requires guts but has huge cost- dure with real potential for cost savings. Do you really need three arbitrators? saving benefits and is the default arrange- We all know that arbitration clauses in It is common to provide for either one or ment in most international arbitrations. contracts often do not get the attention three arbitrators. Obviously, three cost more There will of course be cases in which they deserve. But by paying a little more than one so think carefully about how parties cannot stomach finality. Where attention to drafting these clauses, you may many you truly require. Arbitrators’ rates appeals to court (domestic arbitrations only) save significant costs down the road. can include their own significant fees, as are desired, this should be stated explicitly as well as fees for their lawyer assistant, their domestic legislation may require additional Be clear and inclusive travel, accommodation and other disburse- procedural steps (e.g. a leave to appeal stage) Poorly drafted arbitration clauses commonly ments. With three arbitrators, the proceed- for those who are silent. cause spiralling costs as parties engage in pre- ings move more slowly, which also increas- Likely the most costly option, and the liminary disputes about their interpretation. es counsel fees, and the deliberation and only one that preserves privacy, is an appeal These battles are often public and thereby writing hours are increased as three people to another arbitrator or panel of arbitrators. also defeat any privacy goals. must collaborate. Think long and hard before requiring a Arbitration clauses should be clear, panel of retired appellate court judges: the inclusive and mandatory so there is no Design an efficient procedure pool is small and they don’t come cheap! room for argument that a dispute falls out- An advantage of arbitration is that the pro- side their scope. If there are specific matters cedure is flexible. Failing to consider how Address costs of the arbitration that must be excluded from arbitration (for to make the procedure cost-effective in the Finally, do not forget to deal squarely with example, certain intellectual property dis- context of your agreement is a missed costs. In some jurisdictions, arbitrators do putes) then they must be specifically iden- opportunity. not have the power to award costs unless tified. An example of an inclusive clause is: Consider minimizing the escalating costs provided by the parties. You may also wish “All claims, disputes or controversies arising of documentary and oral discovery. Many to specify what kinds of costs the arbitrator out of or in connection with this agree- international arbitrations streamline discov- should award and consider adding costs that ment, including any question regarding its ery much more efficiently than domestic are unrecoverable in court, such as the existence, validity or termination, shall be arbitrations (which often import the costly employee time devoted to the arbitration. finally resolved by arbitration.” obligations in domestic rules of civil proce- Overall, take advantage of the flexibility Try to agree on as many pertinent dure). All or some of the efficiency-focused afforded by arbitration by drafting cost- details as possible upfront and do not rely IBA Rules on the Taking of Evidence in conscious clauses. on the negotiation of a detailed supple- International Arbitration are worth consid- mentary arbitration agreement after a dis- ering for both domestic and international Sarah W. Corman is a partner in McCarthy pute has materialized. arbitrations. Or, consider creative proce- Tétrault’s Litigation Group in Toronto. Her prac- dures such as baseball arbitration: each party tice focuses on commercial litigation and arbitration, Avoid multiple proceedings submits a proposed award and the arbitrator with an emphasis on complex contract disputes, and Consider the nature of potential disputes and must select one without modification. This professional liability. 48 CCCA Canadian Corporate Counsel Association WINTER 2013