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30 August 2010

Arbitration Agreements Should Identify Administering Institution as a Result of New York Appellate Court Ruling

A New York state appellate court has ruled that a contract clause calling for arbitration "in accordance with the commercial rules of the American Arbitration Association" is insufficient to provide that the arbitration will be administered by the AAA. The decision appears questionable as the AAA rules provide that "[w]hen parties agree to arbitrate under these rules … they thereby authorize the AAA to administer the arbitration." Thus, it is likely to be appealed further.

There can be significant practical benefits to the parties from having an organization such as the AAA, JAMS, the ICC, or other organization administer an arbitration. Therefore, if the parties want any arbitration of their disputes to be administered by an arbitration-service provider, it would be good practice to include a specific statement that the arbitration is to be administered by the AAA (or another institution) under that institution’s rules. The case is Nachmani v. By Design, LLC, 901 N.Y.S.2d 838 (1st Dep’t. 2010).

For more information on this topic please contact Jeffrey W. Sarles at +1 312 701 7819, William H. Knull III at +1 713 238 2636, Archis A. Parasharami at +1 202 263 3328, or Philip Allen Lacovara at +1 212 506 2585.

Learn more about our International Arbitration practice.

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