The Strategic Use of Arbitration Clauses

Drafting and Leveraging Clauses to Minimize Litigation Risks

When properly drafted, an arbitration clause can serve as a powerful tool to streamline dispute resolution, minimize exposure to prolonged litigation, and provide clarity and control in otherwise unpredictable circumstances. However, poorly written or overly broad clauses can have the opposite effect—leading to enforceability issues, costly challenges, or even backfiring entirely.

At Schreiber ADR, here’s what we believe every lawyer and business decision-maker should consider when strategically drafting and leveraging arbitration clauses.

Tailor the Clause to the Nature of the Relationship

Too often, arbitration clauses are lifted from templates without consideration for the parties’ actual risk profile, contract value, or likely disputes. A strategic arbitration clause reflects the nature, duration, and complexity of the relationship at hand.

For example:

• High-volume, low-value contracts may benefit from streamlined, binding arbitration to avoid clogging the courts.
• Sophisticated commercial transactions may require multi-tiered ADR, with mediation first, followed by arbitration with defined rules.
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🔍 Strategic Tip: Consider a clause that routes different types of disputes to different forums. Not all issues need to go to arbitration.

Specify the Rules, Forum, and Governing Law—Clearly

Ambiguity is the enemy of efficiency. A strong arbitration clause defines:

• What rules apply (AAA, JAMS, ICC, UNCITRAL, or custom procedures)
• Who the administering body is
• Where the arbitration will take place
• Which state’s or country’s law will govern

📌 Bonus Clause: Appoint a method for selecting arbitrators (e.g., “each party selects one, and those two choose a third”) to avoid selection disputes.

Address the Scope of Arbitrability Up Front

One of the most common post-dispute problems is a disagreement about whether a claim is even subject to arbitration. Avoid this by including language that expressly delegates questions of arbitrability to the arbitrator, not the court.

🛡️ Enforceability Boost: Consider a “delegation clause” that makes this intention clear and supported by current U.S. Supreme Court precedent (e.g., Henry Schein, Inc. v. Archer & White Sales, Inc.).

Think Through Procedural Choices

Here’s where strategy really shines. Ask yourself:

• Do you want a single arbitrator or a panel?
• Should discovery be limited or governed by specific rules?
• Will there be a reasoned award or a bare ruling?
• Should proceedings be confidential?

By spelling these out, parties avoid uncertainty—and arbitrators gain clarity about their authority and scope.

Include Provisions that Encourage Resolution

Some arbitration clauses go beyond logistics and aim to incentivize early resolution. Examples include:

• Fee-shifting for frivolous claims
• Mediation-first provisions (cooling-off periods before arbitration)
• Offers of judgment or final-offer (“baseball”) arbitration

These mechanisms reduce the adversarial tone and make arbitration more than just “private litigation.”

Final Thought: Arbitration Is a Tool—Not a Blanket Solution

Arbitration isn’t inherently faster, cheaper, or better than litigation. It can be, when drafted with intentionality and applied to the right context.

At Schreiber ADR, our experienced neutrals are available to consult on clause drafting, serve as arbitrators, or assist in designing dispute resolution programs that minimize legal risk without sacrificing fairness or efficiency.

Let’s make arbitration work smarter—for your clients and your business.