Your rationale for throwing out shall, that the parties may want to negotiate or settle a dispute instead of arbitrate it, is not convincing. The parties can always (with the possible exception of contracts required for government projects) negotiate and agree to something different. I.e. “X shall deliver Y to Z.” Y can be changed via mutual agreement to Q. This also applies for the use of shall in arbitration. The parties can always resolve disputes through negotiation, but the parties are required under the contract to resolve all disputes via arbitration. This does not mean that if the parties enter into a settlement agreement they are breaching the contract.

If you hate shall, perhaps you could rephrase the clause to be more active and do away with the may. Something like “the AAA has the exclusive jurisdiction over … and each party hereby consents to such jurisdiction.” I don’t like “jurisdiction,” but fix that and you can do away with may.

I like the inclusion of tort and statutory claims. However, a party should determine if it wants these claims arbitrated or not. The amount of damages available may be much different between arbitration and litigation (punitive damages are almost never available to a party in arbitration).

Again, your first point is a variation on the this-is-tested-contract-language argument that’s been used for far too long to give cover to crappy drafting. I’m not buying it, or at least not until I’ve established that in this context there’s some rational reason for that approach. I will of course consult the cases you cite.

Regarding my further thoughts on relating to, see the blog item I’ll be posting tomorrow.

When used in conjunction with “exclusive,” the “may” poses no problems. But I might tinker with this.

Regarding the reference to the rules, all I did was remove the initial capitals! If my wording poses a problem, so does the AAA wording. In fact, I think neither poses a problem.

As I mentioned in my comments, the two-perspectives wording I used tracks wording one sees in jurisdiction provisions. The logic that applies to arbitration provisions should apply also to jurisdiction provisions, but I have yet to determine whether the two-perspectives approach is actually useful.

To sum up, the “magic words” approach, no matter how entrenched, is anathema to clear drafting. But this is a work in progress, assisted by input such as yours. Let’s see where it goes.

Ken

You must keep in mind that Arbitration clauses are highly scrutinized by courts and deviations from standard wording, especially when proposed by an attorney, may be interpreted to be substantive deviations The reason that the AAA’s and ALL OTHER major international arbitration institutions have similar wording is because of how courts interpret arbitration clauses. The parties’ must clearly express their consent to give up remedies in court by settling all disputes via arbitration.
When deviating from a standard clause provided by an arbitration institution, there is a risk that a party will claim the arbitration clause is invalid and/or doesn’t encompass the scope of x claim because of the wording of the clause.

See:
Prima Paint corp v. Conklin Mfg Co 388 US 395 (the reason for the use of “any controversy or claim”)
In Fillite (Runcorn) Ltd. V Aqua-lift (a firm) (1989) 45 B.L.R. 27
Hi-fert v. Kiukiang Maritime carriers (1999) 2 Lloyd;s Rep. 782

Now to your specific changes and their problems:
“As the exclusive means of resolving any disputes arising out of this agreement, including any tort claims”
-“Arising out of” is good but I agree with Mark that this may miss some claims. Including tort claims doesn’t fix this as statutory claims are not necessarily included. The question is, why take the chance? If the parties want all claims, whatever they are to be arbitrated, then it is best to use a shotgun (the modern form of blunderbuss). If they parties want only specific types of claims to be arbitrated, then that requires much more attention.
- Disputes may not cover some “controversies” such as anti-trust claims. Again, why risk this?

“a party may submit any such dispute to arbitration administered by the American Arbitration Association under its commercial arbitration rules, and each party hereby consents to any such dispute being so submitted.”

First, and perhaps the most significant, problem is “may”. May is permissive, meaning that parties can choose NOT TO submit disputes to the AAA. This is a very easy target to indicate that the arbitration clause is not binding and only an option for the parties. Essentially, you risk losing the benefit of the arbitration clause by including “may.” (I know there is case law on this as well)
Second, “its commercial arbitration rules” does have consequences. One claim for invalidity is that the rules of a different institution are mentioned, therefore creating an invalid clause. I.e. if you use LCIA arbitration under “its commercial arbitration rules” and the arbitration is in the US, if a party does not want arbitration they will argue that commercial arbitration rules are the rules of the AAA and not the LCIA Rules, that the parties were confused and reached no agreement on this matter because the wording in the standard LCIA clause is clear, it refers to “LCIA Rules.” As a proponent of arbitration, I sincerely hope any such claim is immediately thrown out as useless, but then again, why risk it? Also, in some jurisdictions (i.e. China) there is a higher level a scrutiny given to arbitration clause and this type of difference may be enough to delay arbitration proceedings. The point is, why risk it, especially if you are an attorney. All the suggested clauses refer to the institution’s rules by name.

“and each party hereby consents to any such dispute being so submitted.”
As regarding a replacement for “shall,” this solution is much wordier and less clear.
Does not overcome the permissive nature of May. The issue is that parties may start litigation in state courts and this “arbitration” clause will be useless to stop it.

“Judgment on the award rendered in any such arbitration may be entered in any court having jurisdiction.”
“the award” is standard in many clauses but it arguably would not include interim awards. My suggestion is to use “any award” instead.

Additional issue:
“exclusive means” and “may” are at odds with each other. Why give a judge this fodder to deal with?

In conclusion, even if the arbitration clause is not invalidated and covers the claim the parties intended it to cover, your changes Ken, make the arbitration clause permissive and not mandatory. A party may not be able to stay litigation in state courts with this clause. At the very least, this clause has a decent chance of surviving summary judgment (even in the US), which increases the costs to the parties.

My “consent” and your notion of submission are analogous. I think that “consent” works better in this context, but I’ll mull it over. In any event, it’s not enough.

Thank you for helping to move things along. I’m hoping that someone who has some skin in this game will wade in.

Ken

My original objection was to how the phrase “parties shall cause” read, which I think you cured in your redraft. I only said I preferred language of consent because that seemed better than the other choice being offered.

Although I don’t usually like “parties agree to”, I used that phrase because it tracked the language of the Arbitration Act 1996. Could this be an honourable exception to the usual rule, or at least a plea in mitigation?

I suppose there is an idea of the parties agreeing which outside body will have jurisdiction over them rather than agreeing to do something. I wonder whether this idea fits neatly into the obligation/consent distinction that you describe? Perhaps it does, I just haven’t thought long enough about it.

When drafting (court) jurisdiction clauses, the wording often includes a reference to the parties “submitting to the jurisdiction” of the relevant court. I think it is something like this when parties agree to arbitration. Is this language of consent? It feels similar but not quite the same.

There is a sense in which such language both binds the parties to one another and binds them to an external legal regime. There is an element of public as well as private law. Does this justify or excuse slightly different language?

I am in deeper than I can swim, so I had better stop there.

Your first optional clause is, I think, unrelated to the current discussion. The utility of your second optional clause depends on where the principal language ends up.

Ken

“The parties agree to submit any dispute arising under or in relation to this Agreement
to arbitration administered by the American Arbitration Association under its commercial arbitration rules. Judgment on the award rendered in any such arbitration may be entered in any court having jurisdiction.”

Plus some optional extras:

* Before commencing any arbitration proceedings, the parties shall seek to resolve their dispute amicably in accordance with the provisions of Clause [ ].

* nothing in this Agreement shall prevent or delay a party from seeking an interim remedy in any court of competent jurisdiction.