Pathetically Pathological – A Stumble Through The Maze Of Dispute Resolution Clauses

Arbitration is intended to be a more efficient and commercial alternative to litigating in the courts. As we all know, arbitration is strictly consensual and contractual. The basic principle is that absent agreement, nobody can be compelled to arbitrate, so the arbitration clause is of fundamental importance. In this article, we look at some recent decisions illustrating how far the English Courts will go in helping parties who have signed up to a defective arbitration.

A reminder: what to address in your arbitration clause

In an ideal world, there is a fairly lengthy 'wish list' of procedural or administrative matters that the parties ought to address in their arbitration clause. There are also a number of legal systems (or 'applicable laws') that come into play - and it is here that difficulties can arise. The following may serve as a reminder:

Key procedural matter Options for the parties What kind of disputes should be referred to arbitration? It generally makes most sense to provide that each and every dispute that relates to the contract, or which arises out of or in connection with the contract, should be referred to arbitration (so including claims in tort, equitable claims and claims about the validity or termination of the contract). English law strives to construe arbitration clauses generously - they cast a very wide net over the types of dispute that may arise. Should an arbitral institution administer the proceedings? Institutions such as the ICC or the LCIA provide administrative support, and publish their own set of (tried and tested) procedural rules for any arbitration proceedings under their auspices. They can also assist with appointing arbitrators. The involvement of institutions is not, however, compulsory or necessary. Whether you should use one will depend on each case - check with your arbitration lawyer. How many arbitrators? A tribunal usually consists of either one or three arbitrators. Some institutional rules have a preference in favour of one or the other. The ideal size of the tribunal (or whether to leave this point open in the contract) is something that is best considered in each particular case. What should be the language of the arbitration proceedings? The parties have complete freedom of choice in this regard. Where should the arbitration hearings take place? Again, the parties have complete freedom of choice, but they need to choose their words carefully. References to a 'venue' or a 'place' of the arbitration may be taken to amount to a choice of the juridical seat, not just the physical location of the hearing. Should there be any right of appeal from the tribunal's decision? Arbitration awards are meant to be final and binding, but some seats provide for a (usually limited) right to appeal. If this is not desired, it needs to be expressly excluded. The appeal on a point of law under Section 69 of the English Arbitration Act 1996 is an example of a right that can be excluded by the parties contractually. Note that by adopting the rules of arbitration of a major institution such as the ICC and the LCIA, rights of recourse against an award are likely to be limited to matters that the parties cannot exclude as a matter of law, such as serious procedural irregularities, bias on the part of the tribunal or lack of due process. Choices implicating a jurisdiction or an applicable law Options for the parties What is the seat of the arbitration? The choice of the seat of the arbitration brings with it the supervisory jurisdiction of the local courts in that jurisdiction, applying their own local laws governing arbitration proceedings. Those courts, and the local laws, are likely to be the first, or perhaps the exclusive, port of call for key matters such as: Granting interim, provisional or supportive measures that require the backing of the judicial, or state, enforcement mechanism with contempt of court as the ultimate sanction (such as effective freezing injunctions or orders compelling the attendance of witnesses). Welcome court support can sometimes turn into unwelcome court intervention, so the seat should be chosen carefully. Rules safeguarding due process of the arbitration proceedings, including standards of impartiality and fairness required of arbitrators, and the mechanism for challenges to, and removal or disqualification, of arbitrators. Enforcing the arbitration agreement, including the application of any specific formal requirements (i.e. does the arbitration agreement have to be in a particular form in writing?). The courts of the seat may also assist in...