Conflicts Between Arbitration Agreements and Arbitration Rules

Arbitration is a "creature of contract." As a result, under the Federal Arbitration Act ("FAA") and equivalent state laws, both the obligation to arbitrate and the specific terms under which arbitration will occur are typically determined by the agreement of the parties. In many instances, parties choose to adopt the rules of an arbitration-sponsoring organization such as the American Arbitration Association ("AAA"). But parties are also free to adopt their own ad hoc procedures (sometimes based on elements of the rules of an arbitration-sponsoring organization) or to use the rules of an arbitration-sponsoring organization as a base and modify those rules to suit their needs. What happens when the terms of an arbitration clause and the provisions of the rules of an arbitration-sponsoring organization conflict?

In Brady v. The Williams Capital Group, L.P., the New York Court of Appeals held that where inconsistency exists between an arbitration agreement and the AAA rules by which parties have agreed to arbitrate, the arbitrator must enforce the arbitration agreement rather than the AAA rules. This Article discusses the Brady case, related cases in other jurisdictions, and the implications of this line of authorities for arbitration practitioners and their clients.