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Ahead of the Curve Auto Supplier Blog

August 26, 2013

Arbitrate With Care

So you’d rather arbitrate than litigate? Before you give up your right to litigate, you should carefully consider the parameters of your arbitration agreement. A recent federal court decision from California highlights yet another reason why it is crucial to understand the terms and conditions that govern your supply relationships, including dispute resolution terms. In that case, a Taiwanese company with a California-based affiliate instituted an arbitration proceeding before the American Arbitration Association’s International Centre for Dispute Resolution to enforce an indemnification provision against several individuals. As part of the arbitration, one of the individuals sought an order compelling the Taiwanese company to produce various documents pursuant to a statute that gives federal courts discretion to order discovery for use in a “foreign or international tribunal.” The court denied the request, holding that private arbitration does not constitute a “foreign or international tribunal” and noting that permitting discovery in private arbitration would defeat the timeliness and cost-effectiveness of arbitration. What is the take away from this case? If you plan to enter into an agreement with a foreign entity that contains a mandatory arbitration provision, consider addressing the availability of discovery in that arbitration at the outset. Taking this proactive approach may not only ensure that any potential arbitration would be cost-effective, but that you do not find yourself at a disadvantage when the time comes for discovery.

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