Arbitration Do's And Don'ts

Do's

• Do make sure you have a clear, unequivocal agreement to arbitrate. A clause that does not firmly commit the parties to arbitrate their disputes may not be enforceable.
• Do consider the dispute resolution clause early in negotiations.
• Do consider whether to include a formalized pre-arbitration procedure (eg, negotiation and mediation). Consider timing and costs, and specify the process to be followed.
• Do make an informed choice be-tween institutional arbitration (eg, ICC or AAA) and ad hoc arbitration (eg, under the UNCITRAL Arbitration Rules), having considered which type of arbitration best suits the parties and the types of dispute that might arise.
• If you are not familiar with the proposed arbitration rules, do read them or seek advice.
• Do specify the “seat” or formal pla-ce of the arbitration. This should be a place:
• • Where arbitration agreements are enforceable;
  • Where the types of claim likely to arise are arbitrable;
  • Where the laws and courts are pro-arbitration (rather than where there are likely to be sources of intervention and delay);
  • That has ratified the New York Convention on the Recognition and Enforcement of Arbitral Awards (see, www.uncitral.org for a list of signatories; check for reservations); and
  • Where recourse can be made to the courts for interim orders and other supportive measures.
• Do specify an odd number of arbitrators who are to decide the dispute (usually one or three), the manner of appointment and, if it will be an ad hoc arbitration, an appointing authority.
• Do specify the language of the arbitration.
• Do consider the intended scope of the agreement to arbitrate (eg, for a typical broad arbitration clause, “any dispute, claim or controversy arising out of or in connection with”).
• If it is not dealt with elsewhere in the parties' agreement, do specify the governing law.
• Do make sure any waiver of judicial review or appeal of decisions of the tribunal is adequately provided for under any arbitration rules that apply. If not, do draft suitable waivers.
• If it is a multi-party or multi-contract situation, do consider providing for joinder or consolidation of disputes.
• If contracting with a sovereign state or agency, do consider providing for a waiver of sovereign immunity (jurisdictional and execution).
• If it is a contract for the supply of essential services do consider providing for the obligations under the contract to continue pending any award.

Don'ts

• Do not assume that, because all is well at the contract negotiation stage, there will never be a dispute and that consequently dispute resolution provisions do not really matter.
• Do not assume that arbitration is the best option for all disputes.
• Do not assume that all jurisdictions are as supportive of arbitration as your own.
• Do not blindly adopt an arbitration clause from another agreement. It may not be appropriate.
• Do not draft an arbitration clause without examining the rest of the agreement to check whether there are any inconsistent or alternative dispute resolution provisions.
• Do not combine a jurisdiction clause, let alone an “exclusive jurisdiction” clause, with an arbitration clause.
• Do not choose more than one governing law or seat.
• Do not choose arbitration rules that are inconsistent with the provisions of the arbitration clause without making it clear that such rules are being amended, if allowed, by agreement.
• Do not assume that “split clauses”(which provide for one party to have the option to arbitrate or litigate while the other party can only litigate) are legally valid in all jurisdictions. Check where any resulting award may have to be enforced and obtain local advice.
• Do not provide for restrictive criteria for the qualifications of arbitrators that may make it difficult or impossible to appoint suitable arbitrators. Likewise do not name individuals as arbitrators (at least without a default mechanism) in case they are unwilling or unable to act.
• Do not specify as an appointing authority a person, position or institution unless you are sure that it exists and will be willing to make the appointment.
• Do not assume that arbitration will be confidential. If the parties want confidentiality, provide for it expressly.
• Do not agree to arbitrate in a country that is not a party to the New York Convention.
• Do not agree an ICSID arbitration clause without taking specialist advice. The ICSID mechanism is complex and many ICSID arbitrations run into immediate jurisdictional problems that could otherwise be avoided by careful drafting. Always have a default mechanism in case ICSID refuse jurisdiction.

Model Arbitration Clauses

All contract drafters should be aware of “model” arbitration clauses, recommended by many arbitration institutions and organizations, and available on their Web sites. Some examples include those provided by the International Chamber of Commerce, American Arbitration Association, Hong Kong International Arbitration Centre and the LCIA (formerly the London Court of International Arbitration). These model clauses, however, should be seen as a starting point and should not be used without taking specialist advice. All the issues identified above (eg, seat, language) will still need to be considered.