Suggest a specific arbitration clause that can be incorporated into an international trade contract, explaining clearly why each element of the clause should be included. Also identify potential problems that should be avoided when selecting language for the clause.

The first thing to consider when it comes to arbitration clauses that are to be incorporated within a contract is the form that should be adopted. Will an oral agreement suffice? The answer to this question is no. S.5 of the Arbitration Act 1996 makes it clear that for Part 1 (the majority of the legislation) of the Act to apply to an arbitration choice, the agreement for choose arbitration must be one that is incorporated through writing. 

 

The suggested arbitration clause used by many legal firms and recommended as such is as followed:

 

All disputes arising out of or in connection with or relating to the present contract, or the breach, termination or invalidity thereof, shall be finally settled under the 2012 version of the Rules of Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the said Rules. The seat of arbitration shall be London, UK. Procedure shall be governed by English law. The language to be used in the arbitral proceedings shall be English.

 

The above clause is attractive for several reasons. Firstly, it indicates the specific arbitration rules under which the arbitration process is to be governed; this is important as it works to avoid confusion, doubt, and later disputes relating to which arbitration rules are to apply. In the same line, it is beneficial as it stipulates that the governing law of an disputes shall be English law, alleviating some of the concerns that might arise in relation to private international law and which law is applicable.

 

A further matter which the parties must consider is which types of disputes are to be governed by arbitration proceedings exclusively. It may be that the parties wish certain proceedings to be governed by litigation and certain to be governed by arbitration – if this is the case the parties should expressly stipulate that this is the case. If, on the other hand, the parties wish all matters to fall within the scope of arbitration the clause should follow the above example which uses broader language in the hope of catching broader disputes.

 

It is also important, as the above clause has set out, that the binding nature of an arbitration decision is made clear. Without such an element, national courts may be able to try the matter notwithstanding the arbitration clause.

 

The clause, as is suggested above, would do well to stipulate the composition of the arbitration panel and also the selection process. Such an inclusion is important to ensure fairness is achieved.

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