The Best Practices in Drafting an International Arbitration Clause for Agreement
International business transactions can be complex, and when disputes arise, the parties often turn to arbitration to resolve their differences. Drafting an international arbitration clause for an agreement is an essential step in protecting your interests and ensuring a fair and efficient resolution of disputes. Here are some best practices to keep in mind when drafting an international arbitration clause.
Choose the Right Arbitration Institution
The first and foremost step is to choose the right arbitration institution. The arbitration institution will administer the arbitration, appoint arbitrators, and provide procedural rules. Consider the reputation, experience, and facilities of the institution while making the choice. Popular institutions like ICC, LCIA, and AAA are well-respected and have extensive experience in international arbitration.
Select an Appropriate Seat and Governing Law
The seat determines the legal framework under which the arbitration takes place. The governing law governs the substance of the dispute. Choosing an appropriate seat and governing law is crucial for the enforceability and validity of the award. Consider the jurisdiction of the parties, the complexity of the dispute, and the convenience of the parties while making the choice.
Define the Scope of Dispute Resolution
The arbitration clause should clearly define the scope of disputes that fall under the purview of arbitration. The clause should be broad enough to cover all disputes arising out of or related to the agreement but not so broad that it creates ambiguity. Consider including a non-exhaustive list of disputes to be covered.
Designate the Number and Appointment of Arbitrators
The number and appointment of arbitrators are crucial in determining the cost and efficiency of the arbitration proceedings. Consider the complexity of the dispute, the experience and qualifications of the arbitrators, and the cost of the proceedings while deciding the number and appointment of arbitrators. Designate a method of appointment, such as by the institution or by the parties, and a time frame for appointment.
Determine the Language and Place of Proceedings
The language and place of proceedings can impact the efficiency and convenience of the arbitration. Consider the language proficiency of the parties, the location of evidence and witnesses, and the cost of the proceedings while deciding the language and place of arbitration. Choose a language that is convenient for the parties and arbitrators and a place that is neutral and convenient for the parties.
Conclusion
Drafting an international arbitration clause for an agreement is a complex and essential task. Choosing the right arbitration institution, selecting an appropriate seat and governing law, defining the scope of dispute resolution, designating the number and appointment of arbitrators, and determining the language and place of proceedings are vital components of an effective arbitration clause. By following these best practices, parties can ensure a fair and efficient resolution of disputes in an international business transaction.
