Arbitration
Seven rules for drafting an arbitration clause that works
An arbitration clause is drafted in a day and suffered for years. Most arbitrations that go wrong do not fail on the merits, they fail on how the clause was drafted. These are the seven decisions to make in writing.
- 01
That it exists, and what it covers
The clause must be in the contract and in its annexes, and cover both disputes arising out of and related to it. An annex without a clause is a lawsuit waiting.
- 02
Seat and rules
The seat defines judicial control and the rules define cost and timing. Choosing a seat out of habit, without comparing, is an expensive decision.
- 03
Number of arbitrators
One for small matters, three for complex or high value ones. Three arbitrators triple the cost and do not always improve the decision.
- 04
How they are appointed
Appointment mechanism and what happens if the other party does not cooperate. Without a replacement rule, the arbitration can stall.
- 05
Language and governing law
Language of the proceedings, law of the contract and law of the seat. Where they differ, say so expressly.
- 06
Interim measures
Provide for the supportive judicial route and whether the tribunal may order measures. Without it, time is lost exactly when it matters.
- 07
Costs and fees
Who pays, how costs are allocated and whether the tribunal may award costs. This clause decides whether arbitration is proportionate to the amount.
If the clause already exists and so does the dispute, the first task is to read it precisely: which forum it opens, what it covers and what falls outside. That determines where the case is filed and what it costs.
Related cases