Drafting international arbitration clauses

23 Мар

Статья посвящена вопросам, связанным с заключением арбитражного соглашения. Автор предостерегает от тех ошибок, которые часто встречаются в арбитражном соглашении, а именно: излишняя краткость, либо излишняя многословность, а также неясное определение применимого права и подсудности (юрисдикции).

Arbitration agreements, though often deceptively short, merit great care in their drafting. The law of arbitration is complex and can give rise to formidable conflicts of laws problems. In many cases, different systems of law will apply to different questions. There will be a lex causae (the law governing the contract), a curial law (the law of the seat of the arbitration), a law governing the arbitration agreement, and a procedural law. Some or all of these may be different. Some may not be governed by systems of domestic law at all. Some may be governed by public international law, or even a transnational private law. If the relationships between these areas are misunderstood, the potential for unintended consequences and costly ancillary litigation is significant.

This article will investigate three common mistakes in drafting arbitration clauses.


The first mistake is to say too little. In one notorious English case, a dispute resolution clause merely provided for disputes to be resolved “by a QC” (a “Queen’s Counsel”, a senior English lawyer given official government recognition of his or her expertise). Nothing was said about choice of law, how to choose the QC, or what procedures the QC should follow. Was this really an arbitration agreement at all? Or rather some sort of expert determination provision? The question is an important one: arbitration law contains guarantees of due process, impartiality and judicial review, whereas other forms of dispute resolution may not. Ultimately, the English courts held that this was indeed an arbitration clause, governed by English law and with an English seat. However, the parties spent months (and no doubt a significant amount of money) reaching this conclusion.

The concept of arbitration implies guarantees by domestic courts of a process with minimum elements of judicial integrity. Parties should be sure that this is how they want to decide their disputes. If disputes are likely to be purely technical, then determination by an expert third party operating outside the boundaries of a legal process may offer a cheaper, easier and quicker resolution than arbitration. However, the problem with expert determination is that if something goes wrong, options for recourse are limited and without the possibility of review, the expert may take less care when reaching a conclusion.

If parties want a dispute resolution clause specifying expert determination, it should be crafted with care, because judges regularly find that experts are really arbitrators and hence operating within the confines of judicial supervision. To opt out of arbitration law is not always easy. Even the words “This is not an arbitration agreement.” may not be enough. Some countries’ courts insist on deeming any extra-judicial dispute resolution agreement as an arbitration clause. The choice of seat for an expert determination can therefore be significant in order to avoid being obliged to arbitrate even where parties thought they had agreed that they would not.

Opting for ad hoc arbitration — an arbitration agreement that does not refer to any institutional rules – can also have unforeseen consequences. The operation of the arbitration will fall back upon the default rules in the arbitration legislation of the country which is the seat of the arbitration. These default rules may be sparse (as they are in France and Switzerland), leaving arbitral procedure mostly unregulated. Even where they are detailed, the rules may not be what the parties intended. For example, under England’s Arbitration Act 1996, if a respondent defaults in appointing a member of a three-person panel, the arbitration may proceed using the claimant’s choice as a single arbitrator. In order to avoid such unexpected consequences, it may be safer to follow an established set of arbitral rules, such as UNCITRAL, LCIA, SIAC or ICC.

Choices of law and seat

The second mistake in drafting an arbitration clause is not to consider carefully one’s choices of law and seat.

The choice of seat of an arbitral tribunal can affect the outcome of the arbitration in rather surprising ways. The seat is not the place where the arbitral hearings will be held, or the country of residence of the arbitrators. Rather, it is the legal jurisdiction whose courts will have authority to supervise the conduct of the arbitration. Some countries’ arbitral laws permit more extensive judicial interference in arbitral proceedings than others. For example, the US courts are far more likely to become involved than most, the Swiss courts far less so.

Some jurisdictions should be avoided all together. Only those countries whose judiciary adopt a conscious policy to permit and encourage arbitration without too much judicial interference should be considered as venues for arbitral proceedings. A contract providing for arbitration in a jurisdiction in which the courts will never permit the procedure to reach the award stage may be worse than having no contract at all.

The elusive concept of “transnational law” must be taken into account when considering a choice of seat. This is not the law governing relations between states, which is international law. Transnational law is more akin to a global commercial law governing international business transactions which sits above, and perhaps even overrides, a choice of law clause in a contract. If the seat of an arbitration is in a country which favours the concept of transnational law, it may have a significant impact on the outcome. This debate is known principally to divide England and France and, although for the most part it makes little practical difference, from time to time it can be critical. For example, French law recognises the “group of companies doctrine” as part of transnational arbitral law. If one company signs an arbitration agreement and another company in the same group breaches the agreement, it may be treated as having consented to the arbitration clause and can be included as a co-respondent. It may seem extraordinary to a common lawyer that privity can be violated in this way as a matter of transnational rather than domestic law. However, respected international textbooks on commercial arbitration confirm that this is so. Transnational law is unlikely to feature prominently if the arbitral seat is London; but if the seat is Paris, the position will be quite different. French legal scholars are much in favour of the development of an arbitral lex mercatoria and there is evidence to suggest that the French judiciary will support them.

The prospects of enforcement should also affect the choice of seat. Almost 150 countries have signed up to the 1958 New York Convention and abide by its obligations to respect and enforce international arbitration awards. (This is perhaps the quintessential example of transnational arbitral law.) Arbitral awards issued from jurisdictions which fall outside the New York Convention may prove difficult to enforce in the world’s major banking centres. The New York Convention also has limitations however. In the United States, enforcement litigation can easily take a year or more as spurious public policy defences may be mounted in last-ditch efforts to avoid payment.

Where a less commonly used  lex causae is chosen, the parties should also bear in mind that expert evidence will then be required on its content and meaning. This can be both expensive and time consuming.

Some choices of lex causae can have unexpected consequences. For example, Polish law provides that any arbitration agreement is automatically void upon commencement of insolvency proceedings. How will this affect a contract governed by Polish law but with an arbitration clause providing for the arbitral seat in some other jurisdiction, for example England or Switzerland? If the Polish respondent is sued and places itself into insolvency proceedings, will the arbitration come to an end? Will the Polish lex causae prevail or the English (or Swiss) curial law? The English and Swiss courts have reached opposite conclusions on this issue. The High Court in London declared that in such circumstances the arbitration would continue, while the Federal Tribunal in Lausanne declared that it must stop. In both cases the benefits of an expeditious arbitral procedure were lost while the domestic courts debated the issues.

The moral of this is to treat with circumspection any unfamiliar choice of substantive law that might contain rules declaring arbitration agreements invalid or unenforceable in certain circumstances. This is of particular concern where one of the contracting parties is a state-owned institution. A number of legal systems limit the capacity of public bodies to arbitrate, or may contain unusual rules to the effect that the entirety of an agreement – even an arbitration clause – is invalid if certain formal requirements such as compliance with public procurement rules, have not been observed.

Saying too much

A third peril in drafting an arbitration clause is to say far too much. Arbitration law involves the complex interaction of at least five sets of legal rules: the law governing the contract; the law of the seat of the arbitration; the law governing the arbitration agreement; the procedural rules of the institution appointed to administer the arbitration; and the law of any forum in which interim relief or enforcement of an arbitration award is sought. These rules have been interwoven to achieve approximate consistency over a long period of time. Most institutions’ arbitration rules are compatible with permissive arbitral jurisdictions’ curial laws. Those rules are designed to give the arbitrators the maximum latitude to manage proceedings as they see fit, consistent with the minimum standards of due process required of any arbitration procedure by the courts of the commonest arbitral seats.

Nevertheless, parties can be tempted to specify detailed procedural rules about how the arbitration should proceed. Arbitration clauses sometimes refer to rules of evidence, time limits within which awards should be rendered, or rules about submission of documents. Complex rules about the role of the Chair of the Tribunal may be included (for example making him an “Umpire”, whose decision is relevant only if the other two cannot agree). The tribunal may be permitted to order interim relief, or certain countries’ courts may be authorised to do so.

As a general rule, these sorts of provision cause more problems than they solve. They are typically at variance with the rules of the arbitral institution the parties have agreed to use. The institution may be content that its rules be amended by the parties. But if it is not, the arbitrators will have to establish which rules take precedence. Agreed procedural rules may be at variance with the curial law and shrewd lawyers for a respondent can take advantage of this to create delay and expense.

Clauses giving arbitral tribunals jurisdiction to grant interim relief may also flounder: interim relief granted by an arbitral tribunal is seldom of much use because a litigant must still go to a domestic court to enforce it. A direct approach to the court is usually best: the commercial courts in commonly used jurisdictions will usually want to support arbitral procedures, finding jurisdiction to grant interim relief in cases of genuine urgency or peril, without needing encouragement from lengthy arbitration agreements.

Getting it right

The key to an effective arbitration clause is to keep it as simple as possible, relying upon arbitral law and practice developed over several decades and codified in the best known rules of arbitration and the curial laws of respected jurisdictions. Parties should avoid prescribing rigorous procedures for arbitrators to follow. Instead, they should rely on selecting wise and effective arbitrators who will use their discretion to adjudicate disputes in accordance with experience and commercial common sense. The strength of arbitration lies not in speed or cost but in the refreshingly practical approach a robust arbitral panel can take both to the course of the proceedings and the final result. These benefits are easily marred by inappropriate choices of law or seat, or unduly complex arbitration clauses, which often lead to satellite litigation.

Автор: Matthew Parish

Источник:   http://www.hfw.com/publications/bulletins/international-arbitration-quarterly-march-2012/international-arbitration-quarterly-march-2012-drafting-international-arbitration-clauses