Drafting Arbitration Agreements

Abstract

ARBITRATION IS based on the arbitral agreement, which flows from the parties’ common intention. The freedom of the parties may lead to good as well as to bad results. At the very outset of drafting the arbitration agreement, it must be clear that the parties wish to have their disputes resolved by an arbitral tribunal and to waive the jurisdiction of the ordinary courts. If this intention cannot be inferred, it means that the ‘medium’ used has missed its target. One can never over-emphasise the importance of the arbitration clause being clear, not obscure, with no drafting contradictions, and capable of implementation: these are the ‘capital sins’1 to be avoided at all costs. The reader of any reports of arbitral awards or judicial decisions reviewing the awards will remark that the great majority of disputes arise from the drafting of the arbitration agreement. International commercial arbitration institutions worldwide have worked hard to prevent problems arising from this specific issue, by drafting and suggesting the adoption of standard arbitral clauses; but this is sometimes not enough, because parties either add to or subtract from some parts of such clauses, or do not use them at all. Furthermore, we must stress the need for such clauses to be more comprehensive in an ad hoc arbitration than in an arbitration under institutional rules. The issue of pathological clauses is relevant from many points of view: for example, did the parties really want to take the arbitration rather than the court route? What sort of arbitration is intended, under which rules, where should it take place? I will survey below the most common issues in those situations. It is now more than 30 years since the problem of pathological clauses first appeared on the agenda,2 during which time the ‘chamber of horrors’ …