Structured Arbitration: Effective Risk-Management ADR Option for Resolving Bankruptcy Disputes
Unlike the more common pre-dispute arbitration agreement in which the contracting parties agree to arbitrate disputes if and when they occur, a structured arbitration agreement is a negotiated contract created after a dispute arises. It is customized to fit the facts and risks facing the parties and includes dispute-specific procedural rules applicable to both the parties and the arbitrator or arbitration panel.
Pre-dispute arbitration agreements tend to be one or two paragraph inserts in goods or services contracts as an incidental matter to the primary focus of the contract. These agreements sometimes require the parties to arbitrate under the procedural rules of an industry arbitration organization, such as the Financial Industry Regulatory Authority (FINRA) or the American Arbitration Association. In contrast, most structured-arbitration agreements are multi-page negotiated contracts created by the disputing parties, with or without the assistance of a third-party neutral, in which the arbitration process itself is the focus of the contract and the procedures are those to which the parties contractually agree.