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Naming the Neutral in Your Contract Clause - What are your thoughts?

If the parties want to memorialize a dispute resolution mechanism, how advisable is it to name a specific neutral to serve as the mediator or arbitrator in the dispute resolution clause? Would it make a difference if the document (like a Stipulated Protective Order) will eventually be filed in a public court proceeding?

Please provide your thoughts/comments below.

Comments (11)

Denise Presley:

I'd say naming a specific tribunal and its applicable rules is sufficient. Years can pass before the parties have a dispute that requires neutral intervention. What if the named arbitrator or mediator relocates, becomes disabled, or dies? What if one party assigns its interest in the contract to a third party who has a different point of view about the named arbitrator or mediator? Enforcement of arbitration clauses is already under attack. Such a clause would only serve to provide another basis for challenge.

The process Jeff describes is the dispute board or dispute review board process. It is quite common in the construction industry, especially in major projects like Boston's Big Digm. It is very effective in keeping long term, mission critical projects from derailing due to a dispute. This process has many advantages over post-dispute selection and I have been a speaker on the topic advocating its use in IT outsourcing engagement contacts, which have many parallels to construction projects. Concerns such as lack of availability of the nominated arbitrator can be addressed in drafting.

Judge Gerald Harris:

If the clause provides for reaffirmation of the choice at the time a dispute arises and an alternative method for proceeding in the absence of agreement or the unavailability of the neutral,I see no downside.

Naming a specific person works only if there is a short window of time in which to invoke the provision.

steve conover:

For projects of short duration, if the parties agree on a neutral, identifying that neutral in the contract gives the parties an enhanced level of confidence in the dispute-resolution process. For projects which span many years, simply identifying specific ADR tribunal or the applicable ADR rules should be sufficient to instill confidence and minimize the parties' risks.

Federico C. Alvarez:

Unbeknownst to me, I was once identified as a mediator for any disputes regarding an asset between two parties. At the mediation, we had agreed that one party would own a building and the other party would own a small business, of among various other assets. The party with the business would rent the building to house the business. They included me as their mediator in their rental agreement. Of course, a dispute arose. In that case, the parties saved substantial time and money because they activated me and we spent little time getting acquainted to mediate the new dispute.
I think that this would be more complicated in an arbitration, especially if the arbitrator comes into contact with the parties on occasion, and needs to observe the appearances of impartiality at all times.

Micalyn S. Harris:

Expanding on the dispute review board process, in order to facilitate speedy resolution of disputes, reports can be made to the named arbitrator(s) on a regular basis so when disputes arise, the tribunal knows what has been done and has the background needed to resolve the dispute quickly. The mechanism entails some ongoing expense, but when time is of the essence, as in construction contracts or other circumstances, the investment in making reports and having them read on an ongoing basis can save time and money when there are problems, and also encourage communications that result in early focus on incipient problems with a chance for early resolution. Simply identifying a neutral has the problems pointed out above; identifying an individual or board that is kept advised of a project's progress and can therefore see and respond to problems promptly, possibly while they are still small, may have advantages.

No good reasons for naming a specific neutral in an arbitration agreement. The variables at dispute resolution time are unpredictable. Selecting the arbitration administrator and expressly selecting the arbitration rules in the version existent at the time of the dispute provide all the flexibility needed to get a suitable, well-qualified neutral. Even the use of neutral qualificatiions creates a potential new barrier to getting the dispute arbitrated.

Stephen A. Hochman:

Naming the neutral in the agreement is a great idea. In several cases in which I served as the mediator, both parties requested that I serve as the sole arbitrator in the event any disputes under the settlement agreement. That has the dual advantage of getting an arbitrator who is familiar with the dispute and avoiding the additional costs of having a panel of three arbitrators. It also minimizes the risk that you will end up with an unknown arbitrator or panel that, with the benefit of hindsight, you were not happy with.

While contract enforcement often gives rise to disputes, parties might not initially expect to find themselves in court. Planning an effective and efficient path to resolution at the contracting stage can help clients anticipate disputes and manage them constructively. Of course, every situation is different, but the parties’ agreement on dispute resolution techniques, including naming a mediator, is a good first step to collaborative problem solving.

On Tuesday, September 26, my associate, Tim Nolen, and I will be teaching a CLE course on satisfying clients’ interests and understanding their perspective. More information is available here: https://www.nycla.org/NYCLA/Events/Event_Display.aspx?EventKey=CLE092617.

It is fine to list a specific neutral if that's what the parties agree upon, however, I would recommend that a backup plan also be included in the dispute resolution clause, such as other neutrals or a roster. Neutrals do die, retire, move away or could otherwise be unavailable. Having a backup plan will not leave the parties hanging.

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