Guide to Drafting International Dispute Resolution Clauses
Introduction
Arbitration, mediation and other alternatives to litigation are most frequently accessed by reference to a “future disputes” clause in a commercial contract. The following “Model” dispute resolution clauses, accompanied by short commentary, are intended to assist contracting parties in drafting alternative dispute resolution (ADR) clauses. Parties with questions regarding drafting an South Asian International Arbitration Centre (SAIAC) clause should email Info@saiac.in or contact their regional SAIAC office for assistance (see SAIAC contact details at end of document).
Several cautionary notes at the outset: Too often, discussion regarding the dispute resolution clause of the contract is left until the close of negotiation. Best practice is to consider the matter of problem solving and dispute resolution early in the negotiation, so providing a positive environment for further negotiation and avoiding the undue pressure of a closing deadline. In any case, each and every commercial relationship is unique. Contracting parties are well advised to seek appropriate guidance when drafting such clauses.
Model “Short Form” Arbitration Clause The short form arbitration clause below will guide the parties through all the major aspects of international arbitration.
Incorporating by reference a modern set of arbitral procedures which meet the expectations of the parties in international arbitration proceedings, the short form clause serves as an excellent starting point for the drafter, with additional language added only as necessary to either address particular needs of the contract or to emphasize certain powers of the tribunal. Incorporation of the short form clause provides for the following critical aspects of the arbitral process:
• Notice Requirements
• Form of Claim and/or Counterclaim
• Interim and/or Emergency Relief
• Appointment of the arbitral tribunal,
• Arbitrators’ Conflicts of Interest
• Scheduling
• Place of Arbitration
• Jurisdiction—Powers of the Tribunal
• Conduct of the Arbitration—The adducement of Evidence
• Proceedings in the Absence of a Party’s Participation
• Costs
• The Form and Effect of the Award
SAIAC also administers cases under various international rules where the parties have provided for those Rules in their contract.
The SAIAC offers the following short form standard clause for International Commercial Contracts:
“Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be determined by arbitration administered by the South Asian International arbitration centre in accordance with its International Arbitration Rules.”
The parties should consider adding:
• “The number of arbitrators shall be (one or three)”;
• “The place of arbitration shall be [city, (province or state), country]”;
• “The language(s) of the arbitration shall be .”
As the SAIAC has separate administrative offices, its own roster of arbitrators and mediators and a unique set of arbitration rules which meet international expectations, contracting parties may also use the following short form standard clause for international Commercial Contracts:
“Any controversy or claim arising out of or relating to this contract, or a breach thereof, shall be determined by South Asian International Arbitration centre in accordance with its International Arbitration Rules.”
The parties should consider adding: •
“The number of arbitrators shall be (one or three)”;
• “The place of arbitration shall be [city, (province or state), country]”;
“The language(s) of the arbitration shall be _____”
Model “Step” Dispute Resolution Clauses
Contracting parties may wish to include a provision requiring negotiation or mediation before arbitration is initiated. Such clauses, which are often referred to as “step-clauses”, are particularly appropriate where the parties have a long-standing and on-going commercial relationship, and where there may be factors to consider other than the narrow scope of a particular dispute. While those factors are missing in a commercial relationship arising out of a single transaction, it is the rare case that would not benefit from settlement discussions.
A legitimate concern about the use of “step clauses” is the potential for a party to unnecessarily delay an adverse decision. However, this problem can be addressed by providing time limits on each step. These limits are, at best, an educated guess regarding appropriate timing for negotiations or a mediation to be completed by the disputing parties.
Alternatively, the clause might be drafted to allow each party to demand arbitration without recourse to the previous step(s), or by permitting mediation and arbitration to proceed concurrently. Otherwise, having agreed to a series of conditions precedent, parties should be prepared to go through each required dispute resolution process.
Guide to Drafting International Dispute Resolution Clauses
Introduction
Arbitration, mediation and other alternatives to litigation are most frequently accessed by reference to a “future disputes” clause in a commercial contract. The following “Model” dispute resolution clauses, accompanied by short commentary, are intended to assist contracting parties in drafting alternative dispute resolution (ADR) clauses. Parties with questions regarding drafting an South Asian International Arbitration Centre (SAIAC) clause should email Info@saiac.in or contact their regional SAIAC office for assistance (see SAIAC contact details at end of document).
Several cautionary notes at the outset: Too often, discussion regarding the dispute resolution clause of the contract is left until the close of negotiation. Best practice is to consider the matter of problem solving and dispute resolution early in the negotiation, so providing a positive environment for further negotiation and avoiding the undue pressure of a closing deadline. In any case, each and every commercial relationship is unique. Contracting parties are well advised to seek appropriate guidance when drafting such clauses.
Model “Short Form” Arbitration Clause The short form arbitration clause below will guide the parties through all the major aspects of international arbitration.
Incorporating by reference a modern set of arbitral procedures which meet the expectations of the parties in international arbitration proceedings, the short form clause serves as an excellent starting point for the drafter, with additional language added only as necessary to either address particular needs of the contract or to emphasize certain powers of the tribunal. Incorporation of the short form clause provides for the following critical aspects of the arbitral process:
• Notice Requirements
• Form of Claim and/or Counterclaim
• Interim and/or Emergency Relief
• Appointment of the arbitral tribunal,
• Arbitrators’ Conflicts of Interest
• Scheduling
• Place of Arbitration
• Jurisdiction—Powers of the Tribunal
• Conduct of the Arbitration—The adducement of Evidence
• Proceedings in the Absence of a Party’s Participation
• Costs
• The Form and Effect of the Award
SAIAC also administers cases under various international rules where the parties have provided for those Rules in their contract.
The SAIAC offers the following short form standard clause for International Commercial Contracts:
“Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be determined by arbitration administered by the South Asian International arbitration centre in accordance with its International Arbitration Rules.”
The parties should consider adding:
• “The number of arbitrators shall be (one or three)”;
• “The place of arbitration shall be [city, (province or state), country]”;
• “The language(s) of the arbitration shall be .” As the SAIAC has separate administrative offices, its own roster of arbitrators and mediators and a unique set of arbitration rules which meet international expectations, contracting parties may also use the following short form standard clause for international Commercial Contracts: “Any controversy or claim arising out of or relating to this contract, or a breach thereof, shall be determined by South Asian International Arbitration centre in accordance with its International Arbitration Rules.” The parties should consider adding: • “The number of arbitrators shall be (one or three)”; • “The place of arbitration shall be [city, (province or state), country]”; • “The language(s) of the arbitration shall be .”
Model “Step” Dispute Resolution Clauses
Contracting parties may wish to include a provision requiring negotiation or mediation before arbitration is initiated. Such clauses, which are often referred to as “step-clauses”, are particularly appropriate where the parties have a long-standing and on-going commercial relationship, and where there may be factors to consider other than the narrow scope of a particular dispute. While those factors are missing in a commercial relationship arising out of a single transaction, it is the rare case that would not benefit from settlement discussions.
A legitimate concern about the use of “step clauses” is the potential for a party to unnecessarily delay an adverse decision. However, this problem can be addressed by providing time limits on each step. These limits are, at best, an educated guess regarding appropriate timing for negotiations or a mediation to be completed by the disputing parties.
Alternatively, the clause might be drafted to allow each party to demand arbitration without recourse to the previous step(s), or by permitting mediation and arbitration to proceed concurrently. Otherwise, having agreed to a series of conditions precedent, parties should be prepared to go through each required dispute resolution process.
There are various examples of “step-clauses”. They may require parties to seek resolution of the dispute by negotiation and/or mediation before resorting to arbitration.
For the benefit of parties drafting commercial contracts who wish to include an express obligation to seek resolution of disputes by negotiation and/or mediation prior to arbitration, the South Asian International Arbitration centre (SAIAC) offers
the following model Negotiation-Arbitration, Mediation-Arbitration, and Negotiation-Mediation-Arbitration “step” clauses:
Negotiation-Arbitration Clause
“In the event of any controversy or claim arising out of or relating to this contract, or a breach thereof, the parties hereto shall consult and negotiate with each other and, recognizing their mutual interests, attempt to reach a satisfactory solution. If they do not reach settlement within a period of 90 days, then, upon notice by any party to the other(s), any unresolved controversy or claim shall be resolved by arbitration administered by the South Asian International Arbitration centre in accordance with the provisions of its International Arbitration Rules.”
The parties should consider adding:
• “The number of arbitrators shall be (one or three)”;
• “The place of arbitration shall be [city, (province or state), country]”;
• “The language(s) of the arbitration shall be _.”