Arbitration offers an established method of resolving disputes that presents a potentially more flexible and appropriate process for the parties to submit to than traditional litigation. When entering into an agreement to arbitrate, there are a number of key points that should be borne in mind by the parties. This article, as the first in the series, explores some of these considerations.
Basis and incorporation
Arbitration is a creature of contract. An agreement to arbitrate can take the form of a standalone 'arbitration agreement' or, more commonly, as a provision within a dispute resolution clause.
In any event, careful consideration should be given to ensure that, where dealing with a suite of contracts as part of a transaction, the agreement to arbitrate is effectively incorporated into all of the contracts in that suite. This can be achieved in a number of ways, including the parties signing an 'umbrella' arbitration agreement and/or each contract in the suite being incorporated by reference into a global arbitration agreement.
Governing law and arbitration seat
The governing law of the arbitration usually reflects the law chosen by the parties to govern their contract. It is advisable to stipulate the law governing the arbitration agreement to avoid uncertainty resulting from a Court having to determine this point for themselves.
Assuming that they are the same, the seat of the arbitration usually reflects both the governing law of the contract and the arbitration agreement. The seat of the arbitration is effectively the home of the arbitration and determines (amongst other things) which courts have supervisory jurisdiction over the arbitration and the country where any arbitral award is made – an important factor when considering enforcement.
The seat of the arbitration can be different to where the arbitration will take place – this is usually determined as a place of convenience, based upon where the parties to the agreement are located. Such locations are often major arbitration hubs, such as London, New York or Singapore.
An ad hoc or institutional arbitration
An arbitration agreement will require consideration as to whether the arbitral procedure should be conducted under the auspices of an arbitral institution or whether an 'ad hoc' process would be more appropriate. On the former, it is worth considering what arbitral institution (such as internationally recognised institutions like the London Court of International Arbitration or International Chamber of Commerce) would be most appropriate, given the nature of the contract.
Alternatively, the parties can choose an 'ad hoc' arbitration process. Here, the parties choose the arbitrator(s) without reference to an arbitral institution and the proceedings are agreed and conducted without supervision or support from an institution.
The Arbitrator(s)
When negotiating an arbitration agreement, the parties need to consider how many arbitrators will hear the dispute (most commonly one or three), the mechanism to appoint those arbitrators and how to resolve any disagreements as to who should be appointed.
Confidentiality
One of the key hallmarks of the arbitration process is confidentiality. The parties are open to agree in the arbitration agreement provisions regarding the confidentiality of the proceedings and the resulting arbitral award.
Burges Salmon has considerable experience in preparation of arbitration agreements and conducting arbitration proceedings. We would be delighted to assist you with any arbitration related issues that you may have. If you need any advice or support please contact Christopher Wenn, Gregor Hayworth or Oliver Macrae; the authors of this article.