Drafting an arbitration clause

• Autor: Mateo Verdías
• Páginas: 245-260

DRAFTING AN ARBITRATION CLAUSE

MATEO VERDÍAS

Abstract

Entrance to an adequate arbitration is not as simply as including an arbitration clause in a

contract. When parties wave its right to such an essential right as ordinary courts proceedings,

they have to be extremely diligent on how they do it, and in respect to who they do it. This article

provides a notion of how to avoid unwanted consequences when introducing an arbitration agree-

ment, and how to duly anticipate contingencies in its wording.

“Being the consent of the parties the main door to enter arbitration, it shall not be disre-

garded, neither forced”.

INDEX

1. Introducing arbitration. 2. The regulatory framework. 3. Some basics about the Ar-

bitration Agreement. ¿Which kind of arbitration clause is to be chosen? 4. Pathological arbi-

tration clauses. 5. Drafting the arbitration agreement.

Issues that must be regulated within the arbitration clause. 6. Conclusion. 7. Table of Au-

thorities. 8. Table of Cases. 9. Table of Rules.

1. Introducing arbitration.

International commercial arbitration is an alternative method of resolving dispu-

tes arising out of commercial transactions between private parties across national bor-

ders that allows the parties to avoid litigation in national courts [Georgetown Universi-

ty Law Library1].

As said by Prof. Moses, arbitration is “a private system of adjudication”. Parties who

arbitrate have decided to resolve their disputes outside any judicial system, being that

in most instances arbitration involves a final and binding decision, producing an award

that is enforceable in a national court [Moses, p. 12].

Now, parties decide whether the arbitration will be conducted by an international

arbitration institution [ex. g.: ICC, LCIA, ICDR], or will be ad hoc, which means no insti-

tution is involved [Rodriguez Roblero, p. 793].

1 Georgetown University Law Library. Available online at: http://guides.ll.georgetown.edu/InternationalCommer-

cialArbitration

2 MOSES, Margaret. The Principles and Practice of International Commercial Arbitration, second edition. P. 1.

3 RODRÍGUEZ ROBLERO, María Inmaculada. “Impugnación de acuerdos sociales y

Arbitraje”. Memoria para optar al grado de Doctor. Available online at: http://eprints.ucm.es/11611/1/T32148.pdf

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Furthermore, the rules that will apply are the rules of the arbitration institution or the

rules chosen by the parties.

In sum, arbitration gives the parties substantial autonomy and control over the pro-

cess that will be used to resolve their disputes.

It can be affirmed that this is a really important issue in international commercial ar-

bitration, since the parties do not want to subject their dispute to the jurisdiction of the

other party´s court system. Arbitration avoids the fear each party has to the other party´s

“home court advantage”.

2. The regulatory framework

The regulatory framework of arbitration is to be defined as an inverted pyramid, in

which the point is facing down –containing the arbitration clause-, and affecting only the

parties of the agreement [Moses, p. 64].

Above that point/arbitration agreement, are the International Treaties, International

Arbitration Practice, National Laws, and Arbitration Rules.

It can be said hence, that above the arbitration agreement, the framework expands in

terms of scope and applicability beyond the immediate parties.

3. Some basics about the Arbitration Agreement.

The Arbitration Clause is commonly known as a “creature of contract” [Steelworkers

of America v. American Manufacturing Co.5; Henderson, p. 8946; Born, 5047]. The arbi-

tration agreement gives the arbitrators the power to decide the dispute and defines the

scope of that power. As said by many scholars, in essence, the parties create their own

private system of justice [Drahozal, p. 5788; Murray, p. 1339; Hazel Genn, p. 9, 101011].

Since the arbitration agreement constitutes the wave of an important right –the “ju-

diciary justice”- and creates other rights, and because the arbitration clause affects how

the entire arbitration process will proceed, careful drafting is required [Pereira Campos,

p. 8612].

4 MOSES, Margaret. The Principles and Practice of International Commercial Arbitration, second edition. P. 6

5 U.S. Supreme Court, Steelworkers v. American Mfg. Co., 363 U.S. 564 (1960). Decided June 20, 1960. Page 363 U. S.

570. Available online at: https://supreme.justia.com/cases/federal/us/363/564/case.html

6 HENDERSON, Alastair. “Lex Arbitri, Procedural Law and the Seat of Arbitration: Unravelling the laws of arbitration pro-

cess”. Singapore Academy of Law Journal, 2014. Available online at: http://journalsonline.academypublishing.org.sg/

Journals/Singapore-Academy-of-Law-Journal-Special-Issue/e-Archive/ctl/eFirstSALPDFJournalView/mid/513/Arti-

cleId/335/Citation/JournalsOnlinePDF

7 BORN, Gary. “International Commercial Arbitration: International and USA Spects commentary and Materials”.

Kluwer Law International, Apr 26, 2001, p. 504.

8 DRAHOZAL R., Christopher. “Privatizing Civil Justice: Commercial Arbitration and the Civil Justice System”. 9 Kan. J.L.

& Pub. Pol'y 578 (1999-2000). P. 578.

9 MURRAY L., Peter. “Privatization of Civil Justice”. 15 Willamette J. Int'l L. & Dis. Res. (2007).

10 HAZEL GENN, Damel. “Why the Privatization of Civil Justice is a rule of Law issue”. 36th F A Mann Lecture, Lincoln’s

Inn. 19 November 2012. Pp. 9-10. Available online at: https://www.laws.ucl.ac.uk/wp-content/uploads/2014/08/36th-

F-A-Mann-Lecture-19.11.12-Professor-Hazel-Genn.pdf

11 Prof. Hazel points out that “ICC Annual reports shows a gradual upward trend in arbitrations”.

12 PEREIRA CAMPOS, Santiago. Autonomía de la Cláusula Arbitral y competencia del Tribunal Arbitral para resolver

sobre su competencia en el arbitraje interno uruguayo. Revista de Derecho de la Universidad de Montevideo. Available onli-

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