Arbitration Clauses

The arbitration clause is the agreement between the parties of a certain legal relationship to submit all or certain disputes that may arise between them to binding arbitration. When drafting an arbitration agreement or clause at the beginning of a long-term business relationship, it is important to bear in mind that a dispute may arise years after the contract between the parties has been entered into. Therefore, it is advisable that clients consider at the outset:

whether all disputes are to be arbitrated or whether some disputes can be referred to litigation,
whether the parties’ associates, affiliates, successors or assigns shall also be bound by the arbitration clause,
whether non-contractual claims (i.e. unjust enrichment or tort claims relating to the underlying contract) shall be arbitrated as well,
which laws will govern the arbitration,
whether the arbitration will be ad hoc (i.e. not administered by an arbitral institution) or institutional,
whether the dispute should be resolved by one or three arbitrators,
where the arbitration will take place (as the seat of arbitration determines important procedures relating to arbitration and whether the claim is arbitrable),
which language the arbitration shall be conducted in,
which rules are to be used by the arbitrators in resolving the dispute.

Standard Recommended Clauses by Institution

While clients may wish to refer their disputes to ad hoc arbitration to avoid bureaucracy and have more control over the arbitral procedure and costs of the arbitration, it has the disadvantage that its effectiveness relies heavily on the parties’ willingness to agree on the procedure to be followed when in most cases they are already in dispute. In contrast, arbitration institutions that administer the proceedings offer certain advantages that can be outlined as follows:

Main institutions constantly revise their rules to meet the evolving needs of arbitration proceedings,
They ensure time and cost effectiveness, thanks to their specialized and multilingual staff who oversee the proceedings,
They offer more predictability of the proceedings and less procedural breakdowns, due to time-tested and clear institutional rules,
They have access to a wider pool of expert arbitrators and efficient mechanisms for their appointment,
The enforcement of arbitral awards from the main institutions are easier before national courts.

As to which institution should be selected to administer the arbitration proceedings, the answer largely depends on the rules provided by each institution and the needs of the parties regarding the involvement of the institution, time management, costs, and fees, etc. Please see the below presented links for model arbitration clauses of different institutions:

https://iccwbo.org/publication/standard-icc-arbitration-clauses-english-version/

https://www.camera-arbitrale.it/en/arbitration/arbitration-clauses.php?id=63

LCIA

https://www.lcia.org/Dispute_Resolution_Services/LCIA_Recommended_Clauses.aspx

Singapore International Arbitration Centre

https://www.siac.org.sg/67-model-clauses