Arbitration in life science and cannabis sectors both domestically and internationally have reached new highs. The AAA 2019 Annual Report indicates that the largest claim by industry was in life sciences with a claim of $1 billion, whereas the cannabis sector represented the largest increases in caseload by industry at 225%. www.adr.org. The trend continued last year with another increase of 176% as cannabis cases grew from 26 matters in 2019 to 46 in 2020. Last year, the Life Science and Cannabis sector accounted for over 200 cases at the AAA. Some of the reasons for the increase in arbitrations in the life sciences sector are attributable to more licensing and research and development collaborations. The typical disputes arising under life science contracts often include complex licensing or joint venture agreements; disagreements over development, licensing, marketing of a particular drug or product; change in control provision resulting from merger/acquisition; investor disputes; and investor state arbitrations. A carefully drafted ADR clause is critical to have a dispute design system that serves your needs.

Many life science disputes often require collaboration so a multi-tiered clause beginning with layers of negotiations and mediation at different levels of progressive seniority is a prerequisite before resorting to arbitration. Carefully drafted ADR clauses should address any discovery parameters, confidentiality, arbitrator selection criteria, any interim relief and institutional rules. For cannabis matters, additional precautionary language has been suggested because despite the Federal Arbitration Act's limited grounds for vacating awards, in the twilight zone of illegality it is safer to guard against potential challenges based upon manifest disregard for the law or public policy. Some states, such as Colorado, have specifically added additional language to their Revised Uniform Arbitration Acts to clarify that no challenge to an award can be based on a manifest disregard for the law or based upon an argument that a court might not have the power to grant the relief in law or equity. Commentators and practitioners advocate in favor of specialized ADR clauses that provide extra measures to ensure that any awards are affirmed. See Madeline Landry, From Arbitrary to Arbitration: Using ADR's Popular Favorite to Resolve Commercial Marijuana Disputes, Hastings Bus. L.J. (Winter 2018) (outlining specific ADR clauses for cannabis contracts); Todd Wells et al., Enforcement of Cannabis Related Contracts and Arbitral Awards, ITA Review (Winter 2019). The increase in arbitration in cannabis cases owes a great deal to the uncertainty of whether courts will enforce an agreement still illegal at the federal level.