Arbitration clauses: drafting tips

Following Brexit, there is increasing interest in English arbitration. One of the key benefits of arbitration is that an arbitral award will be recognised and can be widely enforced in any country which is a signatory to the New York Convention 1958. London is a major arbitration centre and arbitration is part of the Commercial Court's routine business. 

Drafting ingredients

When drafting an agreement to arbitrate, it should contain the following ingredients:

• a definition of the disputes to be arbitrated;
• the agreement that the disputes will be arbitrated (and the rules that will apply to the arbitration);
• the seat of the arbitration; and
• the governing law of the contract.

Also, arbitration agreements often specify the number of arbitrators and the language of the arbitration.  

There can sometimes be other considerations too, such as the nationality and qualifications of the tribunal, how the tribunal is appointed, where the hearings should take place and whether to use institutional rules (such as the LCIA or ICC).

FAQs and tips

1. The seat of the arbitration determines the supervising Court and also the curial law (the procedural law governing the arbitration). Some points to note:
   • If the seat of an arbitration is in England and Wales, the procedural law will be the Arbitration Act 1996 and the supervising Court will be the Commercial Court.
   • The Commercial Court retains powers to order injunctions and interim remedies to support arbitrations.  These powers are broad and extend to making orders to help with the formation of the tribunal and to give directions as to the conduct of the arbitration; 
   • The curial/procedural law does not have to be the same as the law governing the contract.
2. The Arbitration Act 1996 contains a complete procedure: there is no need to adopt any institutional rules (although parties sometimes prefer to do so, especially in the context of international arbitration).
3. An arbitration agreement will oust the jurisdiction of the Courts.  The English Courts will uphold and enforce agreements to arbitrate. This means that if Court proceedings are brought in breach of an arbitration agreement, they will be stayed.  Similarly, if there is a problem with the arbitral process (such as a defect in the arbitration agreement), the Commercial Court will still give effect to the parties' intention to arbitrate.
4. If the parties have agreed to arbitration, the contract should not contain a clause specifying a Court has jurisdiction to determine disputes.
5. Arbitration is confidential and agreements to arbitrate are only binding on the parties to that agreement. These features of arbitration make it very difficult to join third parties to an existing arbitration.  Therefore, if there is a chance that a dispute will involve multiple parties, this should be considered at the time the arbitration agreement is negotiated. This is a complex issue: it may be that arbitration is not appropriate.
6. If the parties have decided to use institutional rules (rather than relying on the curial law), the arbitral institutions usually publish standard sample arbitration clauses.  
7. The costs and indicative fees for the various institutions are also published.  It is worth paying attention to the fact that sometimes the costs burden can fall disproportionately on the claimant.