• Before Entering Into a Contract With an Arbitration Provision, Consider What Time Period the Parties Will Have to Bring Claims
  • December 12, 2018 | Author: Vania Ratliff
  • Law Firm: Vandeventer Black LLP - Norfolk Office
  • Statutes of limitations are statutory deadlines for filing legal actions. Limitation periods vary by the type of action. It is important to evaluate these limitation periods because if the deadline is missed, then the claim may be time-barred by the court.

    Arbitration provisions are increasingly common. Only a few jurisdictions, however, explicitly address whether statute of limitations provisions apply to arbitration provisions. For example, the Code of Virginia addresses various matters concerning the validity and enforceability of arbitration agreements; but, it does not address the interplay of limitations periods.

    Without a specific statutory provision governing the limitation on an arbitration proceeding, how may parties to an arbitration protect against a claim being brought too late? One way is contractually. Parties may expressly agree in their contract that a certain limitations period will apply to the arbitration proceeding. If, however, the parties do not designate an applicable limitations period, then depending on the specific arbitration language in the contract, timeliness becomes an issue for determination by either the arbitrator or a court.

    Generally, that determination depends on the governing state’s law or other substantive law controlling the parties’ claims. The laws of two states, Georgia and New York, limit an arbitrator’s authority by specifically extending the application of statute of limitations periods to arbitrations. For other states, the answer is less clear. Most states, including Virginia, have limited the applicability of the statute of limitations to “actions.” Some states have determined that the term “actions” only applies to judicial proceedings and not arbitrations, meaning that in cases governed by those states’ laws, state statutes of limitations will not apply. Virginia, however, has not addressed that question.

    Parties may avoid the issue by including a specific reasonable limitation period and by mandating determinations of arbitrability otherwise to the arbitrator. Keep in mind that unreasonable limitation periods may be subject to public policy enforcement considerations. Additionally, regardless of the parties’ agreement, all limitations defenses are subject to the specific circumstances of a case.

    The limitations period, like other aspects of arbitration agreements, requires careful consideration and drafting.