AAA Arbitration Clause: Everything You Need to Know
A AAA arbitration clause is a provision in a business contract. Generally, it means that any dispute that arises must be resolved by arbitration.3 min read
An AAA arbitration clause is a provision in a business contract, often a consumer contract. The clause generally means that any dispute that might arise must be resolved by arbitration. Arbitration is an alternative dispute method and is used instead of traditional legal proceedings, which are often regarded as lengthy and costly. In the past few years, there has been a landmark case and a change to the rules regarding AAA Arbitration clauses.
AAA Arbitration Clause in Bose V. Think Construction
- In December 2015, a New York County case emphasized the breadth of the standard AAA arbitration clause.
- In the case of Bose v. Think Construction, et al., (Index Number 154628/2015), the parties concerned signed a conventional AIA construction contract.
- AIA document A201-2007 was included in the contract and referred to as its “general conditions.” The contract stated that arbitration should be used for conflict resolution.
- In this case, the plaintiff was seeking damages for work that was outside the remit of the contract and argued that it should not be subject to the arbitration provision. However, the defendant challenged this and demanded that it be resolved via arbitration.
- The court was asked to consider the following: Who decides if a claim is included within the remit of an arbitration clause? Should it be the court's decision or that of the arbitrator?
- Typically, the issue of whether a claim is subject to arbitration (arbitrability) is a matter for the courts. However, this might differ when the contract specifically includes AAA construction regulations, and this is the effect of 15.4 of A201.
AAA Construction Rules
AAA construction regulations state that an arbitration board has the authority to direct in its own jurisdiction. This authority covers questions regarding the "existence, scope or validity of the arbitration agreement." In simple terms, in a situation where a party commits to arbitration in accordance with the majority of conventional AIA contracts, the question of whether the conflict is within the remit of the contract is to be decided by the arbitrator, rather than by the courts.
When examining AIA paperwork, it is essential to review the general terms. This is important in order to work out the specific features of a particular project. A contractor may want a particular issue to undergo arbitration. However, the contractor might also want to change certain terms to make sure the arbitration will occur:
- At a designated place.
- With a given number of arbitrators.
- With or without the involvement of certain shareholders.
Such shareholders could include the business owner.
The AAA's New Consumer Clause Registry
- Every legal practitioner who practices today has probably communicated with the American Arbitration Association (AAA) to some extent.
- At a minimum, every legal practitioner is aware of the multiple conflict resolution services the AAA offers.
- Historically, in the context of alternative dispute resolution, the AAA directs a case from its first filing and through to its culmination.
- However, in the area of customer arbitration, the AAA has introduced a new regulation that gives the organization a dynamic part in making sure that process compliance is fulfilled during arbitration. This occurs before the filing of the case.
- It is important that dealer lawyers know about this regulation change. This is because big financial organizations that work with dealers are likely candidates for the program.
Due Process Compliance
On September 1, 2014, the AAA introduced Rule 12, known as the Business Notification and Publicly-Accessible Consumer Clause Registry. This rule states that all companies using AAA rules in consumer contracts must adhere to multiple procedural and financial requirements. Once they meet these requirements, the business can then refer to the AAA to arbitrate a disagreement.
The AAA also established the Consumer Clause Registry on September 1, 2014. The Registry includes a list of companies that sent their consumer arbitration provisions into the AAA. The AAA then found these provisions to be in compliance with the Consumer Due Process Protocol.
The Registry is available to the public, and it can be searched easily. It includes:
- Business names
- Business addresses
- Consumer arbitration provision for each of those businesses.
- All relevant paperwork that the AAA considers to be essential.
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