Drafting arbitration clauses shouldn’t be rocket science, though many people do believe so. There are arbitral institutions that offer sample model clauses for others to pull together arbitration agreements of their own. The clauses you draft in the document should be short yet effective while still incorporating specific relevant rules.
Problems can arise when parties in contract negotiations begin becoming adventurous. Here are some guidelines on what to include when it comes to drafting your arbitration agreement clauses if this is your own chosen resolution method.
Specify the Commitment to Arbitration
When it comes to arbitration, everything stems from the agreements made between the disputing parties. The arbitration agreement must have a clause that commits the disputing parties to the arbitration. This clause should be in an imperative language. Consider stipulating that any dispute that may arise between the parties. This could be relating to the contract or not. You should also include any questions that may arise in existence. Besides this, you should also mention the validity, or the termination of the contract, that the arbitration will determine.
Specify the Place of Arbitration
The specific place where the arbitration takes place is relevant and important. This is because every jurisdiction has its set of arbitration laws specified for it. These laws will govern the entire arbitration process. The place chosen will also be deemed as the place where the arbitration is awarded. Should the arbitration proceedings be held in a country with federal systems, it is advisable to specify the city where the arbitration will take place. This clause will maintain that the juridical seat of the arbitration remains the same, even if the physical venue does change.
Specify the Governing Law of the Contract
There should be no confusion between the substantive law governing the obligations and the rights of the disputing parties and the seat of the arbitration and the arbitration law. This clause will maintain that the arbitration’s juridical seat remains the same, even if the physical venue does change.
Specify an Arbitration Institution
If there is no stipulation of the arbitration being by ICC rules, ICDR rules or SIAC rules, or the rules of any other institution, then the arbitration is ad hoc. In this event, the arbitration law supplies the default rules. And these rules are supplemented by the procedures as directed by the tribunal.
When it comes to international arbitrations, the disputing parties commonly select an arbitral institution, even if the institution’s rules don’t have the status of the law. In these events, there are procedural rules that apply to the arbitration process that people contractually agree upon.
Specify the Language of Arbitration
The common assumption is that arbitration proceedings will take place in English. And that’s the reason why most arbitration contracts are in English. However, this is not always true. It is unsafe to make this assumption more so in the case of cross-border arbitration interactions that involve countries or companies. It operates in multiple languages or in languages other than English.
For this reason, it is prudent to stipulate clearly in the arbitration contract the language of the actual arbitration. You can choose any language, but you must bear in mind that the choice of language may limit the choice of counsel and arbitrators. Choosing languages other than English or major languages may also require translation of the arbitration records after the award of arbitration.
Going by these points, arbitration clauses has to be very specific and leave no doubt. Indeed, the greatest advice of all is that you should seek professional help when it comes to arbitration clauses. Having expert advice when drafting your clauses will go a long way in filling in any gaps and tying together any loose ends that may appear relevant to your specific situation.
Every circumstance is different. So it is never easy to draft such clauses without having had any experience in such matters. Arbitration is a time-intensive process that requires a lot of effort to help it move smoothly. And one needs ample experience for one to carry out the proceedings correctly. Don’t take shortcuts and don’t cut costs while putting together a proper draft of arbitration clauses. This way, you will avoid any legal hassles or troubles in the future.