International Commercial Arbitration
Brower – Fall 2010
Drafting an Arbitration Agreement
1. The Form of the Arbitration Agreement
a. “Arbitration Agreement”
i. NY Convention: Article II {Supp-1}
1. [NYC Art II(1)] Each state that is party to the contract shall recognize an agreement in writing which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.
ii. UNCITRAL Model Law: Article 7 {Supp-26}
1. [UNCITRAL Art 7(1)] “Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
b. “In Writing”
i. General
1. An arbitration agreement must be in writing to be valid
2. A signature is not required on the arbitration agreement if it is included in a contract that includes an arbitral clause (Sphere Drake v. Marine Towing)
3. When the agreement is translated, some countries require both the arbitration agreement and the contract to be signed, or the exchange of letters to be signed.
4. Bill of Lading: because they are not signed by the shipper, they are not considered written agreements. This issue may be solved by treaty or waiver if one party fails to object early on in the arbitral proceedings.
ii. NY Convention: Article II {Supp-2}
1. [NYC Art II(2)] The term ‘agreement in writing’ shall include:
a. an arbitral clause in a contract or an arbitration agreement,
b. signed by the parties, or
c. contained in an exchange of letters or telegrams
iii. UNCITRAL Model Law: Article 7 {Supp-26}
1. [UNCITRAL Art 7(2)] The arbitration agreement shall be in writing. An agreement is in writing if it is contained:
a. In a document signed by the parties or
b. In an exchange of letters, telex, telegrams, or other means of telecommunication which provide a record of the agreement, or
c. In an exchange of statements of claim and defense in which the existence of an agreement is alleged by one party and not denied by another
i. Subsections B & C can include correspondence that post-dates the arbitration agreement (“looking backwards”)
ii. “Record” only requires a form of writing on the assent of the parties, but does not require mention of the arbitral clause or that the letters be signed.
iv. Notes
1. In an exchange of forms (“battle of forms”), the final arbitration clause must be manifested and the intent of the parties to arbitrate must be evidenced in a clear and undisputable manner. (Nokia-Maillefer v. Mazzer)
2. If an exchange of forms shows the parties agreed to arbitrate, but does not indicate where, the lower court will determine the seat of arbitration (Nokia)
a. The ICC can correct and make suggestions to correct an arbitral clause.
c. Construction:
i. Arbitration agreements should include:
1. Intent: expression of the parties’ intent to arbitrate expressly stated
2. “Final and binding” award: “…shall be finally settled by binding arbitration”
a. Can be accomplished without expressly stating so by adopting ICC, AAA, or LCIA rules, but it’s best to state it
3. Scope of Arbitration: issues that will be arbitratable
a. Broad – “all disputes arising out of, connected with, or relating in any way to this agreement…”
b. Narrow – “all disputes arising under this agreement…”
4. Form of Arbitration:
a. Ad Hoc – follow UNCITRAL Model and Rules
i. If they don’t use UNCITRAL Rules, the parties must draft their own rules sufficient to conduct the proceeding, otherwise they must fall back on the law of the country where the arbitration will be held
b. Institutional – name the institution and respective rules
i. ICC, AAA, & LCIA are the most well-known
ii. All three above will apply UNCITRAL Rules if the parties agree to their use
5. Number of Arbitrators: can only be three-person or one-person tribunals
a. Three Person Tribunal – usually involves each party appointing one arbitrator, an
LCIA Rules provide that the initial language shall be that of the document containing the arbitration agreement unless the parties agree otherwise, but after the tribunal is formed, the arbitrators may decide the language to use
8. Entry of Judgment: the agreement should include a clause stating that a court may enter a judgment on an arbitral award
a. AAA Rules provide that parties adopting such rules were deemed to have agreed that judgment may be entered on the award
9. Independent and Impartial Arbitrators: though it should go without saying, stating that arbitrators should not have a stake in the outcome of the proceedings may be helpful
10. Governing Law: a governing law clause may be viewed as selecting:
a. The conflicts rules to be followed to determine the substantive law
b. The substantive law itself
c. The procedural law
d. The lex arbitri, or the law to determine the validity and effect of the arbitral clause
i. Usually determined by the arbitrators in a way that will validate the arbitration agreement
ii. Notes
1. Most courts construe an agreement broadly to coincide with the parties’ intent to arbitrate.
2. When drafting arbitration agreements, look at the model clause of the institution named in the arbitration agreement.
a. If you don’t want to use the relevant model clause, simply use the broadest language that is most relevant to the situation.
3. If you want ad hoc arbitration instead of institutional arbitration, look at the UNCITRAL model clause.
d. Model Arbitration Clauses:
i. UNCITRAL Model Arbitration Clause for Contracts
1. “Any dispute, controversy, or claim arising out of or relating to this contract, or the breach, termination, or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules.”
2. Note – Parties should consider adding:
