Desired result

Disagreement over contractual performance doesn’t have to result in a party filing a costly lawsuit. You can agree in the e-resources contract (or after a dispute arises) to pursue what’s called “alternative dispute resolution” (“ADR”) rather than or prior to going to court. The two most common forms of ADR for e-resource license agreements are mediation and arbitration.

Mediation may save time and money

In mediation, a neutral third party assists the parties in reaching a voluntary, negotiated resolution of the matter. This is both informal and flexible, and differs from other forms of dispute resolution in that the mediator is not authorized to make a decision. A mediator can make recommendations, but mediation is “successful” only if the parties consent to the resolution or decision. A successful mediation will lead to settlement of the dispute, and if mediation fails, then the parties are free to pursue filing a claim in the agreed-upon venue.

Arbitration is usually reserved for consortial or cross-border deals

Unlike mediation, a decision by an arbitrator or an arbitration panel is binding and the proceedings leading up to it are relatively formal, though less so than those of a court proceeding. Arbitration clauses are atypical in the majority of e-resource licenses. However, when contracting for larger, consortial-type agreements with considerable amounts at stake, you may be presented with an arbitration clause because:

• Arbitration awards are more easily enforced across borders than court judgments;
• Arbitration may be a more neutral venue;
• Arbitration means foregoing costly disputes over forum; and
• Arbitration tends to be more streamlined and flexible than litigation.

If ADR is attractive, agree to it at the time of negotiation

So, in sum: ADR either in the form of mediation or arbitration is an option to consider when negotiating an e-resource agreement, and you should do so at the time of negotiation rather than when a dispute has arisen. Generally speaking, it’s advisable for your Dispute Resolution clause to at least encourage the parties engage in mediation prior to litigation as a cost-savings tool.

As for arbitration, you’ll typically not encounter an arbitration clause except in the largest of agreements, but it’s good to be prepared. If you do choose arbitration, you’ll want to specify in the arbitration clause exactly where the arbitration will be held and under what general arbitration parameters and rules.

What it means

Mediation

Mediation is an informal method of ADR. A mediator is a neutral third-party agreed-upon by the parties, who aims to facilitate a resolution to the dispute but who has no binding authority. If the parties do not reach agreement or consent to a mediator’s recommendations, no resolution has been achieved and no judgment could be enforced. As such, while a contract may require that the parties engage in mediation prior to litigation being filed, it cannot require that the parties actually reach consensus during any such mediation. Because mediation can be both effective and financially prudent—relative to the much higher costs, time, and labor associated with litigation—it is not uncommon in e-resource agreements to include mediation as either a mandatory or encouraged first step prior to pursuing litigation.

Arbitration

By contrast, arbitration is formal and binding. An arbitration tribunal is usually a panel of unbiased adjudicators affiliated with a professional arbitration organization. Some international commercial arbitration options include the rules of the International Centre for Dispute Resolution (ICDR), Judicial Arbitration and Mediation Services (JAMS), and the International Institute for Conflict Prevention & Resolution (CPR)).

Arbitration clauses are uncommon in e-resource agreements except occasionally with publishers headquartered or domiciled in a foreign country. Why is this?

• If you want to be certain that a decision for damages awarded to you in a foreign jurisdiction is actually enforced in the U.S. or vice versa, then arbitration is a more reliable pathway to recovering your reward. That’s because if you obtain a judgment in a foreign court, you still need to file suit with a U.S. court to have that foreign judgment enforced, and doing so is costly and somewhat unpredictable. By contrast, courts regularly enforce foreign arbitration decisions, and if an arbitration decision goes in your favor you can ensure recovery without added dispute.

• When parties are located in different states or countries, parties to the license may not be able to agree upon a venue for litigation. They may feel that settling upon one party’s jurisdiction over another gives “home field advantage” to one side in terms of costs, familiarity with the legal system, predictability of outcomes, etc. Arbitration can offer what seems to be more neutral ground.

• When parties are located in different states or countries, agreeing to arbitration means not having to partake in efforts to contest the propriety of the forum that the complaining party has chosen. Agreeing in advance that the matter will be arbitrated provides certainty while curtailing costs of legal disputes over forum choice.

• Litigation involves the strict application of rules of procedure and evidence, and can mean protracted “discovery” (the period in which the parties request and exchange information relevant to the case) and motion-writing (to resolve some or all issues of pleading or claims). By contrast, within certain bounds in an arbitration clause the parties can agree to procedures that are more adapted to the scope and needs of their dispute. The parties may also have the opportunity to agree upon limitations of potential damage awards. That said, this kind of flexibility doesn’t appeal to everyone: For instance, arbitrators might admit and consider much broader or less reliable evidence that would not be permitted to be introduced in a court.

In most cases a party cannot be obligated to arbitrate a dispute unless it is signatory to or is otherwise bound by an agreement containing the arbitration clause. If two commercial (i.e. non-consumer) parties include an agreement with an arbitration clause, that clause will almost certainly be enforced. ^[1] The Federal Arbitration Act resolves all doubts in favor of enforcing arbitration, unless there are grounds “as exist at law or in equity for the revocation of any contract.” ^[2]. However, while Federal policy favors honoring arbitration agreements, as the Second Circuit explained in Starke v. SquareTrade, Inc., 913 F.3d 279 (2d Cir. 2019) “arbitration remains a creature of contract. … Thus, courts must still decide whether the parties to a contract have agreed to arbitrate disputes. … That question is governed by state law principles of contract formation.”

And, while there is no guarantee that arbitration will be either swifter or less expensive than litigation, it tends to be both given that: the arbitration discovery phase (in which information supporting or refuting the claims is exchanged between the parties) is more limited; motion practice (in which parties draft arguments to strike, dismiss, resolve, limit, etc. portions of claims) is more limited; and the parties can also prescribe a time frame and framework to expedite results and control costs. ^[3]

Desired Language

Mediation

N.B. This sample clause from California Digital Library indicates that filing suit is appropriate only after other informal efforts at dispute resolution including mediation. If you do not desire to impose informal resolution requirements first, you could omit everything in italics below:

In the event of any dispute or controversy arising out of or relating to this Agreement, the parties agree to exercise good faith efforts to resolve the dispute as soon as possible.  In the event that the parties cannot, by exercise of their good faith efforts, resolve the dispute, they shall submit the dispute to informal mediation, as further described below in this paragraph. The parties shall continue to perform their respective obligations under this Agreement that are not affected by the dispute. The party invoking mediation shall give to the other party written notice of its decision to seek informal mediation, and the notice must include a description of the issues subject to the dispute and a proposed resolution thereof.  Designated representatives of both parties shall attempt to resolve the dispute within five (5) working days after such notice.  If those designated representatives cannot resolve the dispute, the parties shall meet at a mutually agreeable location and describe the dispute and their respective proposals for resolution to responsible executives of the disputing parties, who shall act in good faith to resolve the dispute.  

If the dispute is not resolved within thirty (30) calendar days of the meeting among the parties’ executives, either party may pursue a legal action in court. The exclusive jurisdiction and venue for any and all actions arising out of or brought under the Agreement is in a state court of competent jurisdiction, situated in [COUNTY, STATE] (or, if applicable, the federal court located in the [FEDERAL DISTRICT OR CIRCUIT]).  Licensor agrees to submit to the personal jurisdiction of the state courts in the State of [STATE] (or, if applicable, the federal courts in [STATE]) with respect to any legal proceedings that may arise in connection with this Agreement or from a dispute as to the interpretation or breach of this Agreement.  During such court action, the parties shall continue to perform their respective obligations under this Agreement that are not affected by the dispute.

From the AAA’s model mediation clause:

If a dispute arises out of or relates to this contract, or the breach thereof, and if the dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Commercial Mediation Procedures before resorting to arbitration, litigation, or some other dispute resolution procedure.

Arbitration

From the AAA’s model clause on U.S. domestic commercial agreements:

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the [American Arbitration Association] in accordance with its Commercial [or other] Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

Tricks & Traps

What to include in an arbitration clause

The parties should establish what types of claims are eligible for the arbitration (i.e. is it all claims arising under or related to the agreement? Or just certain types?), and identify whether the arbitration is permissive vs. mandatory (e.g. the parties “may” arbitrate vs. the parties “shall” arbitrate). The parties can also identify other matters like the tribunal for the arbitration, the number of or even the specific arbitrators desired or approved, how the arbitration will proceed, and under what governing arbitration body or set of rules. The AAA also suggests^[4] that the parties consider specifying matters like:

• Number and/or qualifications of arbitrators;
• Locale;
• Scope of discovery
• Remedies, damages, and fees;
• Confidentiality; and
• Appeal rights

Appealability

It’s worth flagging again that: in general arbitration decisions may not be appealed. So if you want to establish the right to appeal, you should define one in the arbitration clause.

Importance and risk

Alternative dispute resolution may save parties time and money vis-a-vis litigation. And when dealing with foreign publishers, arbitration may also offer more certainty and clarity than having to engage in protracted court disputes over proper venue. However, there are some downsides: In the case of mediation, there is no guarantee that you’ll be able to reach an agreement (or that the other party will approach mediation in good faith), so you may wind up having to litigate in addition to mediating. And in the case of arbitration, unless specified otherwise in the agreement, arbitration awards are not appealable. In all events, your institution may have a policy on what you can agree to both for mediation and arbitration, and it is best to consult with your campus counsel if you are considering agreeing to any mandatory ADR provision.