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Drafting Arbitration Clauses (paired with AtlAS/ACIAM Clause Manual)

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Grace Ha

on 9 February 2016

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Transcript of Drafting Arbitration Clauses (paired with AtlAS/ACIAM Clause Manual)

Drafting International Arbitration Agreements
The parties may consider specifying the powers of the tribunal to award compensatory damages and types of permanent injunctive relief.

Parties may wish to exclude other types of damages, such as punitive damages.

The parties may also wish to determine the applicable interest rate in order to avoid the application of a statutory interest rate. Fixed rates and simple interest rates are advisable.
Preliminary Question:
Will the arbitration be conducted according to a set of institutional rules or by a set of
ad hoc
rules?

Advantages of Institutional Rules
:
Predictable procedures
Default rules for procedural and administrative details
Access to administrative services and hearing spaces
Advantages of
Ad Hoc
Rules:
Tailored to the needs of the parties and circumstances, more party autonomy
Potential for heightened efficiency
Fundamental Considerations and Preliminary Question
Drafting Tips
:

Avoid over-elaborate clauses.
Determine if the procedural laws of the seat of arbitration impose formal requirements for arbitration agreements.
Watch out for potential conflicts between the governing law(s), the procedural law(s) and the needs of the parties.
Be particularly cautious when departing from standard clauses.
Once a set of arbitration rules are chosen--institutional or
ad hoc
--incorporate the rules into the arbitration clause by reference.
Basic Drafting Tips
1.
Includes an express agreement to arbitrate.
2.
Specifies the applicable rules – institutional or
ad hoc
.
3.
Defines the scope of any arbitration.
4.
Designates the seat of arbitration.
5.
Identifies the law governing the arbitration.
6.
Specifies the number and qualifications of arbitrator(s).
7.
Chooses the method of appointing the arbitral panel.
8.
Specifies language(s) for the proceedings.
9.
Addresses any obligations of confidentiality.
10.
Can be tailored to the needs of the parties.
An Effective Arbitration Agreement
Create an Express Written Obligation

Unequivocally state that the parties agree to arbitrate.

Use language that creates an obligation, like "shall," and avoid permissive language, such as "may."
1. Include an Express Agreement to Arbitrate
SAMPLE 1 - Obligatory Arbitration Provision (Administered Arbitration; ICC, pg. 215 of the Clause Manual)
:
"All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules."
3. Define the Scope of Arbitration
SAMPLE 2 - Scope Narrowed by Contractual Provisions (ICC, pg. 215 of the Clause Manual (tailored))
:
"All [OR, Any] disputes arising out of or in connection with [INSERT Article or Part of the Contract that is subject to arbitration] of the present contract shall be settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules."
SAMPLE 1 - Broad Scope (VIAC, pg. 423 of the Clause Manual)
:
"All disputes or claims arising out of or in connection with this contract including disputes relating to its validity, breach, termination or nullity shall be finally settled under the Rules of Arbitration of the International Arbitral Centre of the Austria Federal Economic Chamber in Vienna (Vienna Rules) by one or three arbitrators appointed in accordance with the said Rules."
SAMPLE 4 - Existing Disputes (LCIA, pg. 317 of the Clause Manual)
:

"A dispute having arisen between parties concerning [DESCRIBE BRIEFLY], the parties hereby agree that the dispute shall be referred to and finally resolved by arbitration under the LCIA Rules."
5. Identify the Law Governing the Arbitration
If the parties intend for the governing law of the arbitration to be different from the governing law of the contract, the governing law of the arbitration should be separately designated in the arbitration clause.
The governing law of the contract (
e.g.
, New York law) controls on the substantive issues of the contract and may be determinative of the outcome of the arbitration (
e.g.
, standards of liability, statute of limitations, etc.).
The governing law of the contract may differ from the law that governs the arbitration clause, according to the principle of the severability of arbitrability (codified at GA Code § 9-9-37(1)).
Step 2: Define the Disputes to Be Arbitrated
SAMPLE 1 - Specific Governing Law Clause (AAA)
:
"This agreement shall be governed by and interpreted in accordance with the laws of the State of [
e.g.
, New York OR Georgia]. The parties acknowledge that this agreement evidences a transaction involving interstate commerce. The United States Arbitration Act [OR other relevant statute/act] shall govern the interpretation, enforcement, and proceedings pursuant to the arbitration clause in this agreement."
SAMPLE 2 - General Governing Law Clause (SCC, pg. 81 of the Clause Manual)
:
"This contract shall be governed by the laws of the substantive law of [SPECIFY national/state/trade law]."
4. Designate the Seat of Arbitration
Select a seat or place of arbitration, also known as the juridical home of the arbitration.
Where appropriate, identify venue or location of the arbitral hearing.

The procedural laws of the seat will be the
lex arbitri,
controlling the procedural matters of the arbitration.
The selection of the seat will have a decisive bearing on procedural aspects of the arbitration.
The receptiveness of the jurisdiction to arbitration may affect a tribunal's willingness to participate in the proceedings, and may even impact the enforceability of the award.

Factors to consider in determining the seat
:
The availability of interim or injunctive remedies from local courts.
The practical enforceability of the arbitration agreement.
The likelihood of enforcing the award.
Neutrality of the local laws.

The hearings and other proceedings, do not have to be conducted in the seat, unless the arbitration laws of the seat state otherwise.

Factors to consider in determining the location of the hearings
:
Availability of facilities
Convenience of the facilities
Proximity/Accessibility to witnesses, evidence and the arbitral tribunal
SAMPLE 1 - Seat of Arbitration Provision (SCIA, pg. 371 of the Clause Manual)
:
"
The seat or place of arbitration shall be [Atlanta, Georgia, U.S.A.]."
6. Specify the Number and Qualifications of Arbitrator(s)
SAMPLE 3 - Method of Appointment Set by Institutional Rules (Henning, pg. 163 of the Clause Manual):

"The arbitration shall be conducted by one or more arbitrators selected by the parties from HMA panel of arbitrators, or, if they are unable to agree on the selection, by one or more arbitrators appointed by HMA."
8. Select the Language of the Proceedings
It is advisable for parties to agree on the language in which the arbitration will be conducted.
SAMPLE 1 - Language Provision
:
"
The arbitration shall be held, and the award rendered, in [LANGUAGE(s)]."
SAMPLE 2 - Language Provision
:
"The arbitration shall be conducted in the language in which the contract is written."
2. Designate the Applicable Rules - Institutional or Ad Hoc
Clearly state the choice of an administered arbitration and the selected institutional rules, OR
ad hoc
arbitration and the selected
ad hoc
rules.

Consider the particularities of the given contract to determine the best arbitral regime for resolving potential disputes.
An arbitration can be administered by an established arbitral institution or as an
ad hoc
arbitration.
Arbitral institutions most often administer arbitrations conducted according to their own rules, but may also have separate procedures for administering arbitration conducted according to a set of
ad hoc
rules.
Ad hoc
arbitration can be unadministered, or once a tribunal is established a secretary to the tribunal may be appointed by the tribunal to assist with administrative details.

Institutions constantly revise their rules.
Generally, the applicable version of the institutional rules default to the version in effect at the time the contract is executed. However, certain institutions have standing rules that state that a new arbitration will be administered by the version of the rules in effect at the time of the filing of the arbitration.
If the parties want to deviate from the institution's default provisions, they should indicate which version of the selected rules should apply.
SAMPLE 1 - Institutional Provision (ICDR, pg. 266 of the Clause Manual)
:
"Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be determined by arbitration administered by the International Centre for Dispute Resolution [OR, another arbitral institution] in accordance with its International Arbitration Rules."
9. Address any Obligations of Confidentiality
Confidentiality is one of the main features that attract parties to international arbitration, but is not necessarily automatic.
Some, but not all, prominent arbitration rules have built-in confidentiality provisions, although they vary in scope as to the extent of confidentiality required (
e.g.
ICC (pgs. 229, 240-42 of the Clause Manual), ICDR (pg. 292 of the Clause Manual), JAMS (pgs. 309, 312 of the Clause Manual), SCAI (pgs. 391-92 of the Clause Manual), etc.).
Parties may include an express provision for confidential obligations, along with a remedy for breach to ensure strict compliance.

The Scope of Confidentiality could extend to:
(1) The existence of the arbitration itself;
(2) Any documents prepared or created for the arbitration (
e.g.
, pleadings);
(3) Any evidence submitted by the parties (except those publicly available);
(4) Any correspondence from the arbitral organization or the tribunal including procedural orders, as well as interim and final awards.
SAMPLE 1 - Imposing a Confidentiality Obligation (IBA Guidelines for Drafting International Arbitration Clauses, pg. 458 of the Clause Manual):

"The existence and content of the arbitral proceedings and any rulings or award shall be kept confidential by the parties and members of the arbitral tribunal except (i) to the extent that disclosure may be required of a party to fulfill a legal duty, protect or pursue a legal right, or enforce or challenge an award in bona fide legal proceedings before a state court or other judicial authority, (ii) with the [written] consent of all parties, (iii) where needed for the preparation or presentation of a claim or defense in this arbitration, (iv) where such information is already in the public domain other than as a result of a breach of this clause, or (v) by order of the arbitral tribunal upon application of a party."
SAMPLE 2 - Disclaiming any Confidentiality Obligation (IBA Guidelines for Drafting International Arbitration Clauses, pg. 459 of the Clause Manual)
:
"The parties shall be under no confidentiality obligation with respect to arbitration hereunder except as may be imposed by mandatory provisions of law."
10. Other Considerations for Parties
Parties May Consider:

Dealing with multiple parties.
Dealing with multiple contracts to a single arbitration agreement.
Drafting stepped clauses.
Drafting carve-out clauses.
Apportioning the costs of arbitration.
Electing to apply particular procedures or powers.
Imposing contractual time limits to expedite arbitration.
Providing for a waiver of sovereign immunity (if one party is a sovereign).
Excluding any rights of appeal or challenge.
Prohibiting class action arbitration.
Allowing for preliminary or interim relief.
Permitting or excluding particular categories of damages.
The term "multi-party" usually refers to the situation where there is a single contract to which there are more than two parties.

A multi-party arbitration clause should provide for the following:
Joinder of, or intervention by, each of the parties.
A time limit for third-party intervention in order to limit delays.
A mechanism for the appointment of arbitrators.

NOTE
:

Certain institutional arbitration rules contain provisions for joinder of parties, including time limits for joining parties and mechanisms for appointment of arbitrators (
e.g.
, CPR (pgs. 145-46, 150 of the Clause Manual), SIAC (pgs. 351-52 of the Clause Manual), SCAI (pg. 375 of the Clause Manual), etc.).
The term "multi-contract" is used to refer to the situation where there are several contracts, possibly with different parties.

Multi-Contract situations should consider
:
Compatibility of the related contracts
Consolidation of arbitral references
Concurrent hearings
Common evidence
Appointment of a single tribunal to determine disputes arising under various contracts

Options for Structuring Multi-Contract Arbitration Agreements:
Stand-alone or umbrella agreement, separately signed by all parties.
Each contract to incorporate by reference a global arbitration agreement.

NOTE
: Considerations favoring a consolidation clause might include common issues of law or fact, efficiency, prejudice to any party or undue delay.
A stepped clause,
or a "multi-tiered clause," provides a sequenced use of dispute resolution techniques before embarking on arbitration or litigation.

A stepped clause should
:
Clearly identify the form of dispute resolution technique(s) to be used.
Specify whether the techniques are to operate concurrently or sequentially.
Clearly identify the order the dispute resolution technique(s) are to be used.
Clearly specify when and how each dispute resolution technique starts and ends.
Clearly state whether each dispute resolution technique is mandatory or optional.
Make clear what happens if the initial dispute resolution technique(s) do not resolve the dispute (
e.g.
, arbitration or litigation).
State the method of apportioning costs for each technique used.
A carve-out clause
allows for specific types of disputes to be carved out from the agreed dispute and submitted to a different dispute resolution mechanism. This clause should clearly differentiate between disputes and anticipate challenges to enforcement.
National laws diverge widely (from no recovery at all to full recovery by the prevailing party), and most rules give arbitrators wide discretion to apportion costs.

Drafters should pay particular attention to how the costs of arbitration will be apportioned
(e.g.
, what constitutes "costs in the arbitration" and what categories of costs are and are not recoverable).

NOTE
: Institutional Rules may provide for apportionment of costs, and may initially require parties to submit equal retainers for fees and costs related to administration of the arbitration.
Parties can provide deadlines for filings and tribunal decisions, subject to discretionary extensions to preserve the jurisdiction of the tribunal.

Deadlines are not generally recommended for complex arbitration because once entered into, these clauses will limit the arbitrator's authority to mold the process to the specific dictates of the case (
i.e
., deadlines can attract unnecessary challenges and can result in an arguably unenforceable award if not rendered within the prescribed period).

NOTE
: Some institutions provide for expedited proceedings, with built-in deadlines for submissions and tribunal decisions.
If a sovereign entity is party to the agreement, consider including an express and unequivocal waiver of sovereign immunity in the arbitration agreement.
(A sovereign entity could be a government, a governmental agency or a government owned or controlled entity.)

While entering into an arbitration agreement may be interpreted as a waiver by the sovereign of the right to challenge the arbitral tribunal's jurisdiction, such waivers are interpreted very narrowly. Therefore, the arbitration clause, by itself, may not constitute a waiver of sovereign immunity pertaining to (i) the recognition of an award, (ii) the execution of a recognized award against sovereign assets or (iii) a pre-award attachment.
Although one of the advantages of arbitration is finality, some jurisdictions still allow a party to an arbitration clause to submit certain issues to the courts (
e.g
., The English Arbitration Act allows parties to appeal to a court on questions of law). Parties may exclude this possibility in the arbitration clause.

Other jurisdictions allow complete waivers of any recourse to a court, even on limited grounds, but these waivers should be used cautiously
(e.
g., Swiss Federal Statute on Private International Law (PIL)).

NOTE
: U.S. laws do not allow for the exclusion of rights of appeal or challenge if the grounds are valid under the Federal Arbitration Act.

Appeals to a second arbitral panel may be available under certain rules. (
e.g.
, JAMS, CPR) It is recommended that model language be used to provide for an appeal to a second arbitral panel.
Types of interim relief include:
(i) preliminary injunctions
(ii) orders for security for costs
(iii) freezing orders
(iv) anti-suit injunctions

Some institutional rules have built-in rules for interim relief.

To preserve the right to petition the court for an interim relief, parties should expressly preserve such rights in their arbitration agreement and make clear that resort to the courts for interim relief is not a waiver of the arbitrators' jurisdiction.
Multiple Parties
Multiple Contracts
Stepped Clauses
Carve Out Clauses
SAMPLE 1 - Multi-Tiered Clause (LCIA)
:
"In the event of a dispute . . . the parties shall first seek settlement of that dispute by mediation in accordance with the 'LCIA Mediation Rules] . . .If the dispute is not settled by mediation within [X] days of the commencement of the mediation, or such further period as the parties shall agree in writing, the dispute shall be referred to and finally resolved by arbitration under the [LCIA Rules] . . ."

SAMPLE 2 - Med-then-Arb Clause (Henning, pg. 163 of the Clause Manual)
:

"Any controversy or claim arising out of or relating to this contract or the breach thereof, shall be submitted to mediation administered by Henning Mediation & Arbitration Service, Inc. (HMA) in accordance with its procedures. If the parties are unable to resolve their dispute in mediation, the dispute shall be settled by binding arbitration administered by HMA in accordance with its rules, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof."
Apportioning Costs of Arbitration
SAMPLE 1 - Arbitrators Given Discretion to Allocate Both Costs and Fees
:
"The arbitral tribunal may include in its award an allocation to any party of such costs and expenses, including attorneys' fees [and experts and witnesses], as the arbitral tribunal shall deem reasonable."

SAMPLE 2 - Allocation of Costs and Fees to the Prevailing Party
:
"The arbitral tribunal may award its costs and expenses, including attorneys' fees, to the prevailing party, if any, and as determined by the arbitral tribunal in its discretion."

SAMPLE 3 - Allocation of Costs and Fees in Proportion to Success
:

"The arbitral tribunal may include in their award an allocation to any party of such costs and expenses, including attorneys' fees [PLUS ANY OTHER COSTS], as the arbitral tribunal shall deem reasonable. In making such allocation, the arbitral tribunal shall consider the relative success of the parties on their claims, counterclaims, and defenses."

SAMPLE 4 - Parties Split Costs Equally
:
"All costs and expenses of the arbitral tribunal [and of the arbitral institution] shall be borne by the parties equally. Each party shall bear all costs and expenses (including of its own counsel, experts and witnesses) involved in preparing and presentiment of its case."
Expedited Arbitration Clause
SAMPLE 1 - Expedited Clauses (SCC (pg. 81 of the Clause Manual))
:
"Any dispute, controversy or claim arising out of or in connection with this contract, or the breach, termination or invalidity thereof, shall be finally settled by arbitration in accordance with the Rules for Expedited Arbitrations of the Arbitration Institute of the Stockholm Chamber of Commerce."

SAMPLE 2 - Expedited Clauses (AAA)
:
"The award shall be rendered within nine months of the commencement of the arbitration, unless such time limit is extended by the arbitrator. Failure to adhere to this time limit shall not constitute a basis for challenging the award."

"Consistent with the expedited nature of arbitration, pre-hearing information exchange shall be limited to the reasonable production of relevant, non-privileged documents, carried out expeditiously."
SAMPLE 1 - Multi-Party Initiation Provision
:
"Any party may, either separately or together with any other party to this Agreement initiate arbitration proceedings pursuant to this clause by sending a request for arbitration to all other parties and the designated arbitral institution, if any."

SAMPLE 2 - Multi-Party Intervention/Joinder Provision
:
"Any party may, either separately or together with any other party to this Agreement, intervene [or join if named as a respondent] in arbitration proceedings hereunder by submitting a written notice of claim, counterclaim, or cross-claim against any party to this agreement, provided that such notice is sent to all other parties to this Agreement within [30] days from receipt by such [intervening or joining] party of the relevant request for arbitration or notice of claim, counterclaim, or cross-claim. Any [joined or intervening] party shall be bound by any award rendered by the arbitral tribunal, even if such party chooses not to participate in the arbitration proceedings."
Waiver of Sovereign Immunity
SAMPLE - Immunity Waiver
:
"To the fullest extent permitted by law, the [STATE ENTITY] hereby irrevocably waives any claim of sovereignty or any other immunity regarding any proceedings commenced pursuant to this Agreement, including, without limitation, any proceedings to recognize and/or enforce an award rendered by the arbitrator(s). Specifically, this waiver includes immunity from suit, immunity from service of process, immunity from jurisdiction of any court, and immunity of property and revenues form execution and/or attachment or sequestration before or after an award or judgment."
Excluding Rights of Appeal or Challenge
Preliminary or Interim Relief
SAMPLE 1 - Preliminary Relief Clause (AAA)
:
"Either party may apply to the arbitrator seeking injunctive relief until the arbitration award is rendered or the controversy is otherwise resolved. Either party also may, without waiving any remedy under this agreement, seek from any court having jurisdiction any interim or provisional relief that is necessary to protect the rights or property of that party, pending the establishment of the arbitral tribunal (or pending the arbitral tribunal's determination of the merits of the controversy)."

SAMPLE 2 - Exclusive Authority of the Arbitral Tribunal
:
"Except as otherwise specifically limited in this Agreement, the arbitral tribunal shall have the power to grant any remedy or relief that it deems appropriate, whether provisional or final, including conservatory relief and injunctive relief, and any such measures ordered by the arbitral tribunal may, to the extent permitted by applicable law, be deemed to be a final award on the subject matter of he measures and shall be enforceable as such."

SAMPLE 3 - Limiting the Parties' Right to Resort to the Courts Once the Arbitral Tribunal is Constituted
:
"Either party has the right, consistent with this Agreement, to apply to any court of competent jurisdiction for provisional and/or conservatory relief, including pre-arbitral attachments or preliminary injunctions, provided, however, that, after the arbitral tribunal is constituted, the arbitral tribunal shall have sole jurisdiction to consider applications for provisional and/or conservatory relief, and any such measures ordered by the arbitral tribunal may be specifically enforced by any court of competent jurisdiction."
Damages
Selecting the Right Arbitral Institution
Unless all disputes arising out of the contract or the parties' business relationships are to be arbitrated, carve out the types of disputes that are not to be arbitrated or specify the types of disputes that will be arbitrated.

Depending on the seat of the arbitration and the arbitration laws of the seat, disputes concerning some areas of law (
i.e.
, IP, Competition and consumer disputes) may be precluded from arbitration.

If allowed by the procedural laws of the seat, consider specifying whether an arbitrator or a court is to resolve the preliminary question of whether an issue is arbitrable (i.e., substantive arbitrability), and whether the arbitral tribunal has jurisdiction over the question of arbitrability.

Keep in mind that according to the principle of c
ompetence-competenc
e, arbitral tribunals generally have the authority to determine their own jurisdiction where there is "clear and unmistakable" evidence that the parties intended to grant such authority.
Number of Arbitrators
Generally, a panel of three arbitrators or a sole arbitrator is advised.
Factors to consider for selecting the number of arbitrators:
Amount in controversy
Complexity of dispute or contract
Time constraints
Budget constraints

Qualifications of Arbitrators
Indicate any specific qualifications necessary for the conduct of arbitration.
For a more extensive discussion of arbitral institutions and their model clauses, rules and drafting guidelines, please refer to the
International Dispute Resolution Drafter's Manual
(Clause Manual)
. The following comparison of the features of some leading arbitral institutions is located in Chapter 7 of the Clause Manual, pgs. 73-80.
Basic Aspects of an Arbitration Clause:
Scope
- The clause should define the scope of arbitration and leave no doubt as to whether it covers a particular claim.
Exclusivity
- Arbitration should be the sole means of dispute resolution.
Rules
- Parties have a choice of institutional or
ad hoc
rules.
Model Clauses
- Many arbitral institutions recommend model clauses. Use the clause recommended by the institution that promulgates the rules chosen by the parties.

Submission Agreements:
Arbitration can be commenced after a dispute arises by the parties' agreement to submit to arbitration and to be bound by the results of the arbitration, often in lieu of litigation.
SAMPLE 4 - Enforcement Clause (JAMS, pg. 301 of the Clause Manual)
:
"Judgment upon the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof [or having jurisdiction over the relevant party or its assets]."
SAMPLE - Carve-Out Clause
:

"Except for those matters which are specifically excluded from arbitration ('Exempted Matters'), any dispute . . . shall be governed by arbitration. The following Exempted Matters shall be specifically excluded from arbitration: [LIST MATTERS]. The courts of [COUNTRY X] shall have exclusive jurisdiction over all Exempted Matters."
Features of Major Institutional Rules (by Elizabeth Silbert, King & Spalding)
Presentation Created by: Hillary Kinsey, Morris Manning & Martin and Grace Ha, ACIAM
7. Address the Method of Appointing the Arbitral Panel
SAMPLE 1 - Appointing Authority in
Ad Hoc
Arbitration (UNCITRAL, pg. 401 of the Clause Manual)
:
"The appointing authority shall be the [DESIGNATE an Institution or Person]."
Many institutional rules have default rules on appointing arbitrators, and if the arbitration is administered by an arbitral institution, it is advisable to adhere to the rules.

Establishing a method of selection, and particularly the replacement of arbitrators is particularly crucial for
ad hoc
arbitration. Also, in an
ad hoc
arbitration agreement:
Consider designating a neutral third party as the appointing authority.
Consider specifying a time limit (20-30 days).
Consider specifying a designated pool of arbitrators or qualifications, or both.
Structuring the selection or replacement of arbitrators can cut down on delays to the proceedings.
SAMPLE 2 - Obligatory Arbitration Provision (
Ad Hoc
Arbitration; UNICITRAL Rules, pg. 401 of the Clause Manual)
:
"
Any dispute, controversy or claim arising out of or relating to this contract...shall be settled by arbitraiton in accordance with the UNCITRAL Arbitration Rules as at present in force."
For Example:
Many sets of institutional rules (e.g., AAA) have a default rule that states that the arbitrability of a dispute is to be determined by the arbitrator, not a local court; this may be in conflict with certain jurisdictional rules or laws (e.g., state law in Delaware ) that may require the parties to evidence a clear and unmistakable intent to submit questions of substantive arbitrability to the arbitrator in instances where they (1) have entered into a broad arbitration agreement that (2) adopts institutional rules calling for the arbitrator to rule on substantive arbitrability.
SAMPLE 3 - Scope Narrowed by Type of Dispute (ICC, pg. 215 of the Clause Manual (tailored))
:
"All [OR, Any] disputes arising of or in connection with matters of [INSERT type of dispute that is subject to arbitration, e.g., Delivery, Conformity of Goods, Tax Liabilities, etc.] of the present contract shall be settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules."
SAMPLE 2 - Sole Arbitrator (SCC, pg. 81 of the Clause Manual)
:
"The arbitral tribunal shall be composed of a sole arbitrator."
SAMPLE 3 - Panel of Three Arbitrators (SCC, pg. 81 of the Clause Manual)
:
"The arbitral tribunal shall be composed of three arbitrators."
SAMPLE RULE - Default to Sole Arbitrator, and Considerations Given (Art. 12.2 of the ICC Rules, pg. 225 of the Clause Manual)
:
Where the parties have not agreed upon the number of arbitrators, the Court shall appoint a sole arbitrator, save where it appears to the Court that the dispute is such as to warrant the appointment of three arbitrators.
SAMPLE 2 - Institutional Appointing Authority in
Ad Hoc
Arbitration (ICDR administering UNCITRAL Rules, pg.

272
of the Clause Manual)
:
"The appointing authority shall be the International Centre for Dispute Resolution [OR any Arbitral Institution that administers applicable ad hoc rules]."
SAMPLE 1 - Odd Number of Arbitrators (SIAC, pg. 345 of the Clause Manual)
:
"The Tribunal shall consist of [State an odd number. Either state one, or state three.] arbitrator(s)."
SAMPLE 3 - Incorporating
Lex Mercatoria
(VIAC, pg. 423 of the Clause Manual)
:
"The substantive law of [SPECIFY national/state law] shall be applicable;*

*In this context, consideration may be given to the possible application or exclusion of the United Nations Convention on Contracts for the International Sale of Goods (CISG)."
Make the Arbitration Mandatory, Binding and Final

The arbitration clause should explicitly state that parties submit to
final
and
binding
arbitration.
SAMPLE 1 - Binding Arbitration Provision (CIETAC, pg. 105 of the Clause Manual)
:
"The arbitral award is final and binding upon both parties."
SAMPLE 2 - Finality of Arbitration Provision (SCC, pg. 81 of the Clause Manual)
:
"Any dispute, controversy or claim arising out of or in connection with this contract,...shall be finally settled by arbitration in accordance with the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce [OR any other Arbitration Institution]."
Practitioner's Tips
:

Nearly all arbitration rules - institutional or
ad hoc
- state that the arbitral award is to be final and binding on the parties.

Parties should incorporate the arbitration rules into the arbitration clause by reference, by using specific language to that effect.

Parties may want to consider whether the arbitration agreement will bind signatories as well as successors and affiliates. The contract must list affiliates and successors in order for them to be bound by the arbitration agreement.
Practitioner's Tips
:

Check for consistency of the contractual provisions, the arbitration rules, governing laws of the contract and the laws of the seat of the arbitration.

Institutional rules often have mandatory provisions that may affect the parties' choice of seat, method of selecting arbitrators or involvement of the local courts, or default provisions that obviate the parties' need to negotiate on every aspect of the arbitration clause.

For
ad hoc
arbitrations, check whether the seat of the arbitration allows for
ad hoc
arbitrations.

Most leading arbitral institutions provide model clauses that may be a helpful starting point for drafting an agreement.

Be cautious about removing language from the model clauses.
Practitioner's Tips:


Check for physical presence requirements of the seat, if any. While the seat of the arbitration does not necessarily dictate where the hearing is held or the award is handed down, procedural laws of some jurisdictions require hearings to be held, and awards to be executed, within the physical confines of that jurisdiction (
e.g.
, Dubai and the UAE).

Make sure the procedural laws of the seat of arbitration do not conflict with the governing law of the contract or the selected arbitration rules.

Ensuring that the seat of the arbitration is a party to the New York Convention or similar treaty for the recognition of awards by the courts of party nations will assist with issues of enforcement of the award later. In particular, look for public policies that would subject the award to challenges.

Consider the compatibility of the seat of the arbitration and the selected rules of the arbitration, and note how selection of the chair of the tribunal and arbitral appointments work under the seat and the rules.
Practitioner's Tips:


Sole arbitrators are favored when the claims or amounts disputed are relatively small, the disputes are not complex or when the parties wish for a more expedient process. A panel of three arbitrators are favored when the contract or dispute deals with highly complex or technical issues or the amount claimed is very high, and the parties are less concerned about costs or time constraints.

Some parties choose to leave the number of arbitrators undetermined until the dispute arises, as the specific needs of the tribunal are unknown at the time the clause is being drafted. Alternatively, some parties predetermine the number of arbitrators for the case based on the amount in dispute.

If the number of arbitrators is not specified in the arbitration clause, many institutional rules have a default number (1 or 3). The parties may, however, agree on the number of arbitrators at the commencement of the arbitration.

Particularly in
ad hoc
arbitrations, add in selection processes of arbitrators at the clause-drafting stage .

If a contract concerns matters that are highly technical or requires specific industry knowledge, consider requirements of the arbitrators with experience in, or knowledge of, the industry.
Practitioner's Tips
:

Be careful not to over-draft this section as provisions that are restrictive may make it impossible to locate arbitrators meeting the specifications.

Pay attention to the language of the rules of arbitration selected, some institutions allow for the "nomination" of arbitrators by the parties and reserve the right to "appoint" arbitrators by the institutional secretariat or appointing authority, while others allow for the "appointment" of arbitrators by parties.
Practitioner's Tips:

One language is preferred.

The language(s) of the arbitration may affect the pool of available arbitrators or counsel.

Generally, a language that requires extensive translation of evidentiary documents or witness statements may add to the costs of the arbitration and potentially delay the proceedings.
Practitioner's Tips:

Failure to expressly state the governing law of the contract and the arbitration agreement may lead to further disputes regarding jurisdiction among other matters.

When choosing a governing law, it is advisable to choose the law of a specific sovereign.

The governing law may be the law of the seat of the arbitration, however, this is not mandatory.

The governing law should not conflict with the procedural laws of the seat.

An alternate option is to choose international trade law
,
or
lex mercatoria
, as the governing law. However, trade laws may provide an incomplete set of standards and may cause procedural delays and unclear interpretation or application of certain principles.

If the New York Convention or the Panama Convention do not apply, parties should
expressly
provide that a court may enforce the award.
Practitioner's Tips
:

Exception to confidentiality: In certain instances, a local court may request information on the arbitration. The party seeking to enforce confidentiality provisions may request an in-camera review, or consult the opposing party or parties as to the necessity and the extent of disclosure.

Parties at times mistake privacy and privilege for confidentiality. Parties should be cautioned against false assurances of inapplicable confidentiality.
Privacy or non-disclosure features of the contract pertain to bidding procedures, negotiations or commercial terms, but often do not bind parties to confidentiality during the proceedings and after the conclusion of the proceedings.
Privilege, a professional duty of lawyers to maintain client confidences, is not universal.
Parties are advised to include explicit obligations of confidentiality in the arbitration clause, specifying the full extent to which matters are to be kept confidential (
e.g.
, the existence of arbitration, or the final results of the arbitration, etc.) and to explicitly extend obligations of confidentiality to the post-award enforcement stages.
Look for our "
Practitioner's Tips
" to take advantage of practical suggestions.
SAMPLE 3 - Incorporation of Arbitration Rules by Reference (LCIA, pg. 317 of the Clause Manual)
:
"Any dispute arising out of or in connection with this contract...shall be referred to and finally resolved by arbitration under the LCIA Rules, which Rules are deemed to be incorporated by reference into this clause."
SAMPLE 2 -
Ad Hoc
Provision (UNCITRAL, pg. 401 of the Clause Manual)
:
"Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force."
SAMPLE 2 - Seat of Arbitration Provision with hearings elsewhere (SCIA, pg. 371 of the Clause Manual)
:
"
The seat or place of arbitration shall be [Atlanta, Georgia, U.S.A.]. Hearings shall be held at [Atlanta, Georgia, U.S.A.] or at such other location(s) as may be designated by the arbitrators or agreed by the parties."
SAMPLE 3 - Explicit Confidentiality Clause (ICDR, pg. 271 of the Clause Manual)
:
"Except as may be required by law, neither party nor its representatives may disclose the existence, content or results of any arbitration hereunder without the prior written consent of [all/both] parties."
SAMPLE 1 - Multiple Related Contracts without Stand-Alone Dispute Resolution Agreement (IBA Guidelines, pg. 468 of the Clause Manual)
:
" The parties agree that an arbitral tribunal appointed hereunder or under [the related agreement(s)] may exercise jurisdiction with respect to both this agreement and [the related agreement(s)]."

SAMPLE 2 - Consolidation of Related Arbitrations (IBA Guidelines, pgs. 468-69 of the Clause Manual)
:
" The parties consent to the consolidation of arbitrations commenced hereunder and/or under [the related agreements] as follows:
If two or more arbitrations are commenced hereunder and/or under [the related agreements], any party named as claimant or respondent in any of these arbitrations may petition any arbitral tribunal appointed in these arbitrations for an order that the several arbitrations be consolidated in a single arbitration before that arbitral tribunal (a "Consolidation Order")..."
SAMPLE 1 - Waiver of Recourse or Appeal (IBA Guidelines, pg. 462 of the Clause Manual)
:
"Any award of the arbitral tribunal shall be final and binding on the parties. The parties undertake to comply fully and promptly with any award without delay and shall be deemed to have waived their right to any form of recourse [or appeal] insofar as such waiver can validly be made."

SAMPLE 2 - Appeal Restriction
:
"The parties expressly agree that an application for the determination of a preliminary point of law under Section 45 or leave to appeal under Section 69 of the English Arbitration Act of 1996 may not be sought with respect to any question of law in the course of arbitration pursuant to this Agreement or arising out of an award stemming from such arbitration."

SAMPLE 3 - Appeal to a Second Arbitral Panel
:

"An appeal may be taken under the CPR Arbitration Appeal Procedure from any final award of an arbitral panel in any arbitration arising out of or related to this Agreement that is conducted in accordance with the requirements of such Appeal Procedure. Unless otherwise agreed by the parties and the appeal tribunal, the appeal shall be conducted at the place of the original arbitration."

SAMPLE 4 - Expanded Scope of Judicial Review (IBA Guidelines, pg. 462 of the Clause Manual)
:
"The parties shall have the right to seek judicial review of the tribunal's award in the courts of [selected jurisdiction] in accordance with the standard of appellate review applicable to decisions of courts of first instance in such jurisdiction(s)."
SAMPLE Rule - Advances on Costs of Arbitration (SIAC (pg. 360 of the Clause Manual)):
Rule 30.2
"The Registrar shall fix the advances on costs of teh arbitration. Unless the Registrar directs otherwise, 50% of such advances shall be payable by the Claimant and the remaining 50% of such advances shall be payable by the Respondent. The Registrar may fix separate advances on costs for claims and counterclaims, respectively."
Practitioner's Tip:


Adding language that expressly incorporates the selected rules of arbitration by reference can help to dispel any confusion as to the intent of the parties to arbitrate.
SAMPLE 1 - Limitation of Damages
:
"The arbitrator(s) shall have no authority to directly or indirectly award any form of consequential damages, as such damages have been waived by the parties to this Agreement. Such prohibited damages include lost profits; any form of overhead not directly incurred at the project site, such as home office overhead; wage or salary increases; ripple or delay damages; loss of productivity; increased cost of funds for the project; extended capital costs; lost opportunity to work on other projects; inflation costs of labor, material, or equipment; non-availability of labor, material or equipment due to delays; increased costs of bonding due to delay; or any other indirect losses arising from the conduct of the parties to this Agreement."

SAMPLE 2 - Exclusion of Punitive, Exemplary, or Similar Damages
:
"The parties expressly waive and forgo any right punitive, exemplary, or similar damages as result of any dispute, controversy, or claim relating to, connected with, or arising out of this Agreement, or the breach, existence, validity, or termination thereof."

SAMPLE 3 - Compounded Interest
:
"Interest shall be awarded at [RATE and PERIOD] and be compounded [TIME PERIOD]."

SAMPLE 4 - Simple Interest
:
"Simple interest of [RATE] shall be accrued from [DATE]."
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