Arbitration Agreement Substantive Law: What You Need to Know

Arbitration is a dispute resolution process where a neutral third party, the arbitrator, listens to both sides of the dispute and makes a decision that is binding on the parties involved. It is an alternative to litigation, which can often be time-consuming and expensive.

Before entering into an arbitration agreement, it is important to understand the substantive law that will govern the arbitration. Substantive law refers to the laws and regulations that will be applied to the dispute. It is crucial to understand this law because it will determine the outcome of the arbitration.

Here are some key points to keep in mind when considering arbitration agreement substantive law:

1. Choice of Law: In an arbitration agreement, parties can choose the law that will govern the arbitration. This is important because it can determine which rules and regulations will apply to the dispute. For example, if the parties choose New York law, the arbitrator will have to apply New York law to the dispute, even if the parties are located in a different state.

2. Federal vs. State Law: Depending on the nature of the dispute, federal or state law may apply. It is important to determine which law will apply before entering into an arbitration agreement. For example, if the dispute involves federal securities laws, federal law will apply.

3. Scope of the Agreement: The arbitration agreement should clearly outline the scope of the agreement. It should state which disputes will be subject to arbitration and which disputes will not. It should also state whether the arbitrator will have the power to decide on issues such as the validity of the agreement or the scope of the arbitrator’s jurisdiction.

4. Confidentiality: Some arbitration agreements may include a provision for confidentiality. This means that the proceedings and outcome of the arbitration will be confidential and cannot be disclosed to anyone without the parties’ consent.

5. Enforceability: The arbitration agreement should also be enforceable. This means that it should meet the requirements set forth by the law, such as being in writing and signed by all parties involved.

In conclusion, when entering into an arbitration agreement, it is important to understand the substantive law that will govern the arbitration. This will ensure that the parties are aware of the laws and regulations that will apply to the dispute and can make informed decisions. By considering these key points, parties can ensure that the arbitration process is fair, efficient, and produces a binding result that all parties can accept.