Source: https://iplegalcorner.com/need-for-precise-language-in-drafting-arbitration-clauses/
Timestamp: 2019-04-24 02:22:29+00:00

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Parties elect arbitration but tend not to craft their language in drafting arbitration clauses. This is a common mistake as parties learn from court decision. Case law instructs just how important it is for precise language in arbitration clauses. Applications for court intervention in an arbitration or objection to confirmation frequently succeed or (most likely) fail on the language of the parties’ arbitration clause and their subsequent agreements where the clause is unclear. Parties are free to write into their arbitration clause the arbitrator’s jurisdiction and issues within his or her authority, but in retrospect this calls for a level of prescience difficult to summon at the start of a commercial relationship.
But, who anticipates endings when beginning are so bright with hope?
From the U.S. Supreme Court: “The question whether the parties have submitted a particular dispute to arbitration … is ‘an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise’.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (quoting AT & T Techs., Inc. v. Commc’ns Workers of America, 475 U.S. 643, 649 (1986)). The parties can “clearly and unmistakably provide otherwise” initially in their arbitration clause, or subsequently by agreement. In Oxford Health Plans LLC v. Sutter, 12-135 (U.S. 6-10-2013) because the arbitration clause did not provide for class actions the parties agreed to have the issue determined by the arbitrator. In effect, the parties expanded the arbitration clause by making their agreement “unmistakably clear[er]” (reversing the words in the original quotation, but not changing the sense). The irony in Oxford (particularly in view of American Express Company v. Italian Colors Restaurant, 12-133 (U.S. 6-20-2013)) is noted by Justice Alito when he states that “[t]oday’s result follows directly from petitioner’s concession and the narrow judicial review that federal law allows in arbitration cases.” In American Express the arbitration clause contained a class action waiver which was also “unmistakably [clear]” even if the result of its clarity is “Another Blow to Class Action,” New York Times Editorial, June 22, 2013 at A18.
To bring these thoughts down to a gateway issue under New York law, consider N.J.R. Assoc, v. Tausend, 19 N.Y.3d 597, 602 (2012). CPLR § 7502(b) provides that statute of limitations issues are initially reserved for the court, but they can be waived [CPLR § 7503(b)]. Determination of limitations issues are also affected by the language of the arbitration agreement. “A contract may be governed by the Federal Arbitration Act yet subject to the New York rule if the agreement between the parties so provides.” N.J.R. at 602, citing Matter of Smith Barney, Harris Upham & Co. v.Luckie, 85 NY2d 193 (1995) and Diamond Sys v. 55 Liberty, 4 NY3d 247 (2005). CPLR 7502 (b) provides that “If, at the time that a demand for arbitration was made or a notice of intention to arbitrate was served, the claim sought to be arbitrated would have been barred by limitation of time had it been asserted in a court of the state, a party may assert the limitation as a bar to the arbitration on an application to the court as provided in section 7503. . ..” This procedural rule is reversed under federal law where it is for the arbitrator except where the parties explicitly agree to leave timeliness issues to the court. The “presumption is that the arbitrator should decide ‘allegation[s] of waiver, delay, or a like defense to arbitrability’.” Howsam, supra. at 84 quoting Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 US 1, 25 ).
To cycle back to the two recent arbitration decisions from the U.S. Supreme Court and without dwelling on whether the arbitrator in Oxford and the Court in American Express were wise in their judgments the parties made the beds in which they were to lie. The policy issues are now lobbed to the legislative branch of government.

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