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What are the considerations as to what should be contained in an arbitration clause?

The considerations for an adviser assisting you with this clause will be:

  1. The location of the parties
  2. The location of the subject matter of the agreement
  3. If the subject matter involves trade across borders, a neutral place where a dispute can be heard
  4. Enforceability of the agreement against assets of the parties in their jurisdictions
  5. The appropriate arbitration institution for the dispute which could be the ICC; a local arbitration institute in a neutral jurisdiction or a trade body
  6. The rules to be applied to the arbitration – these generally speaking should be the rules of the institution chosen, as choosing rules that an institution doesn’t generally administer can be problematic
  7. The law which will govern the arbitration. This is different to the law governing the contract. the procedural law governing the arbitration is the law which governs how the arbitration must be conducted and is generally the law of the place where the institution conducts the arbitration. To avoid doubt, this should be stipulated in the arbitration clause or arbitration agreement.
  8. The venue of hearings. Many rules actually state that the arbitration tribunal will choose the venue of the hearings, so stipulating where the hearings will be can be subject to change. The place of hearings should not be confused with the meaning of the ‘place of arbitration’ which is where the proceedings are deemed to be governed by a body of law. The hearings need not be in the same place at all.
  9. whether legal costs and other costs should be awarded as part of an arbitration award. In some jurisdictions, if you do not specify that legal costs should be awarded, then national legislation dictates that no legal costs will be recoverable. This is a serious matter as it is often only worth pursuing a dispute if there is a strong possibility of recovering costs including legal costs.
  10. How many arbitrators there will be. It is expedient and normal to have an odd number of arbitrators. Some jurisdictions only allow an odd number.
  11. If any expedited procedures can be used. Some institutions offer expedited procedures for smaller value disputes. If the parties agree to use such procedures this can be very helpful.
  12. If there are any pre-conditions before arbitration can commence. Sometimes mediation must first be attempted. Sometimes the parties must first escalate a dispute to a management tier or external dispute board. If any such conditions are to be drafted in an arbitration clause, they must be clear and linked to deadlines.

Other considerations apply.

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