ARBITRATION

CLAUSES
LIKE CONSUMMATED ROMANCE,
ARBITRATION RESTS ON CONSENT. AN
AGREEMENT OF SOME SORT WAIVES EACH
SIDE’S RIGHT TO INVOKE THE
JURISDICTION OF OTHERWISE
COMPETENT COURTS.

William W. Park
THE MODEL LAW, ARTICLE 7

“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 de ned
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.

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ARBITRATION CLAUSE (CLAUSE COMPROMISSOIRE)

“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 de ned
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.

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SUBMISSION AGREEMENT (COMPROMIS)

“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
de ned 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.
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THE DIFFERENCE BETWEEN ARBITRATION CLAUSE AND SUBMISSION AGREEMENTS

Historically, there was an important difference between

submission agreements and arbitration clauses, as
arbitration clauses were only enforceable when followed by
submission agreements.

Nowadays, this distinction lost its signi cance and remained

only in terminology. fi
LABOUR ARBITRATION - ONLY SUBMISSION AGREEMENTS

Art.1164 of the PCCP

An arbitration agreement concerning employment disputes

can be made only after the dispute arises and must be in
writing.
SEPARABILITY OF ARBITRATION AGREEMENT

Arbitration agreement may be both in form of contractual

clause (i.e. provision in the main contract) or separate
agreement.

Even if an arbitration agreement is in the form of contractual

clause then it is treated as if it was in the form of separate
agreement.

As a result, arbitration clause survives termination or

invalidity of main contract, and claims as to the validity of
the main contract may be decided by arbitral tribunal.
SEPARABILITY OF ARBITRATION AGREEMENT

The Model Law, Article 16

(1) The arbitral tribunal may rule on its own jurisdiction,

including any objections with respect to the existence or
validity of the arbitration agreement. For that purpose, an
arbitration clause which forms part of a contract shall be
treated as an agreement independent of the other terms
of the contract. A decision by the arbitral tribunal that the
contract is null and void shall not entail ipso jure the
invalidity of the arbitration clause. [emph. added]
COMPETENCE-COMPETENCE DOCTRINE (KOMPETEZ-KOMPETENZ)

By virtue of competence-competence doctrine arbitral

tribunal is empowered to rule on its own jurisdiction i.e.
validity of arbitration agreement.
COMPETENCE-COMPETENCE DOCTRINE

The Model Law, Article 16.

(1) The arbitral tribunal may rule on its own jurisdiction,

including any objections with respect to the existence or
validity of the arbitration agreement.
This [ability to decide on its own jurisdiction] may at rst seem illogical given that the arbitral tribunal’s decision
could be in the negative. How could an arbitral tribunal decide that it does not have jurisdiction if a
consequence of that decision is that the arbitral tribunal did not have jurisdiction to make it in the rst place?
Given the consensual basis for arbitral jurisdiction, one might consider that without an agreement to arbitrate, an
arbitral tribunal could not – as a matter of common sense – decide anything, and any decision it does make
would be void of any effect. Pursuing that line of reasoning, one may argue that only a competent court could
rule on the jurisdiction of arbitral tribunals. Arbitral tribunals can, however, decide on their own jurisdiction, and
even 5.48 rule that they do not have jurisdiction. As explained by Fouchard, Gaillard and Goldman, ‘the
competence-competence principle also allows arbitrators to determine that an arbitration agreement is invalid
and to make an award declaring that they lack jurisdiction without contradicting themselves’. In order to
overcome the apparent contradiction of an arbitral tribunal deciding that it does not have jurisdiction, the
competence-competence rule must exist above and beyond the agreement to arbitrate. Arbitration experts
therefore tend to agree that the source of an arbitral tribunal’s power to determine its own jurisdiction is not the
agreement to arbitrate but rather the law governing the arbitration proceedings. In other words, an arbitral
tribunal has the authority to decide on its own jurisdiction ultimately because an applicable domestic arbitration
law authorises it to do so.

Simon Greenberg et al.

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THE „MIDNIGHT CLAUSE”

Arbitration clauses are known as midnight clauses as they are

agreed in the end of negotiations (usually after midnight). It
is common practice that arbitration clauses are reused from
existing contracts without any consideration or ill-advised
which puts arbitration clauses at the risk of being invalid or
inoperable.
MODEL ARBITRATION CLAUSES

To avoid problems with drafting arbitration agreements

arbitral institutions as well as UNCITRAL Arbitration Rules (for
the needs of ad hoc arbitration) provide model (or
standard) arbitration agreements.
STANDARD CLAUSES - THE ICC STANDARD CLAUSE

All disputes arising out of or in connection with the present contract shall be nally
settled under the Rules of Arbitration of the International Chamber of Commerce
by one or more arbitrators appointed in accordance with the said Rules.

The parties may also wish to stipulate in the arbitration clause:

- the law governing the contract;

- the number of arbitrators;

- the place of arbitration; and/or

- the language of the arbitration.

▸

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STANDARD CLAUSES - THE UNCITRAL MODEL CLAUSE

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.

Note. Parties should consider adding:

(a) The appointing authority shall be ... [name of institution or person];

(b) The number of arbitrators shall be ... [one or three];

(c) The place of arbitration shall be ... [town and country];

(d) The language to be used in the arbitral proceedings shall be ... .

STANDARD CLAUSES - THE VIAC STANDARD CLAUSE

▸ All disputes or claims arising out of or in connection with this contract

including disputes relating to its validity, breach, termination or nullity shall
be nally settled under the Rules of Arbitration of the International Arbitral
Centre of the Austrian Federal Economic Chamber in Vienna (Vienna Rules)
by one or three arbitrators appointed in accordance with the said Rules."

▸ Possible supplementary agreements:

▸ (1) The provisions on expedited proceedings are applicable;

▸ (2) The number of arbitrators shall be .............. (one or three);

▸ (3) The substantive law of .............. shall be applicable;*)

▸ (4) The language to be used in the arbitral proceedings shall be .............. .

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MODEL CLAUSES - SUMMARY

Model clauses provide for all essential elements of

arbitration agreement which are:

- identi cation of legal relationship;

- adoption of arbitration as a method of dispute resolution;

-selection of institutional or ad hoc arbitration;

-scope of arbitration agreement;

-provision on nality and bindingness.

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IDENTIFICATION OF LEGAL RELATIONSHIP

The very basic wording of model arbitration clause indicates

the legal relationship out of which a dispute may arise.

Model clauses cited refer to present contract or this contract

as these model clauses are to be provided in main contract
(e.g. contract of sale).

When drafting arbitration agreement in the form of separate

agreement the legal relationship have to be precisely
de ned.
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EXAMPLE:

Any dispute, controversy or claim arising out of or relating to

Framework Sales Agreement of 22 June 2016, or the
breach, termination or invalidity thereof, shall be settled by
arbitration in accordance with the UNCITRAL Arbitration
Rules.
ADOPTION OF ARBITRATION AS A METHOD OF DISPUTE RESOLUTION

Arbitration clause or submission agreement have to be clear

that parties agree on arbitration. Particularly, indication of
arbitral institution is insuf cient as arbitral institutions
provide assistance also in other types of dispute resolution
(usually mediation or conciliation).
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OPTIONAL ARBITRATION CLAUSES

Occasionally parties agree on so-called optional arbitration clauses which

provide that parties may (but not have to) submit future dispute to arbitration.

In such case, claimant simply chooses whether it would like to arbitrate or

litigate a dispute.

Now, optional arbitration clauses are recognized as binding and valid, but in
past the effectiveness of such clauses was put into question by national courts.

Please note, that the validity of unilateral or asymmetrical optional arbitration

clauses (i.e. clauses which empower only one party to choose between
arbitration and litigation) is under discussion.
SELECTION OF INSTITUTIONAL OR AD HOC ARBITRATION

Arbitration agreement shall also indicate whether parties submit

to institutional or ad hoc arbitration.

In case of institutional arbitration arbitration agreement shall

name particular arbitral institution.

If no arbitral institution is selected, then arbitration agreement is

deemed to provide for ad hoc arbitration. Notwithstanding,
parties shall provide for appointing authority (either arbitral
institution or person) that will be empowered to appoint
arbitrators if one of the parties refuse to appoint arbitrator or
remain inactive.
THE SCOPE OF ARBITRATION AGREEMENT

A dispute may be arbitrated only if it is covered by arbitration

clause as arbitration agreement underlays the jurisdiction of an
arbitral tribunal.

Please note that national court may refuse to recognize and enforce
(under Art. V(1)(c) of the New York Convention or 36(1)(a)(iii) of the
Model Law) or set aside (under art. 34(2)(a)(iii) of the Model Law)
arbitral award going beyond scope of arbitration agreement.

Because of the scope arbitration agreements are divided into two

types: narrow arbitration agreements and wide arbitration
agreements.
COMPARE FOLLOWING ARBITRATION CLAUSES:

All disputes arising out of or in connection with the present

contract shall be nally settled under the Rules of Arbitration
of the International Chamber of Commerce by three
arbitrators appointed in accordance with the said Rules.

All disputes arising under the present contract shall be nally

settled under the Rules of Arbitration of the International
Chamber of Commerce by three arbitrators appointed in
accordance with the said Rules.
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THE SCOPE OF ARBITRATION AGREEMENT

All disputes arising out of or in connection with the

present contract shall be nally settled under the Rules of
Arbitration of the International Chamber of Commerce by
three arbitrators appointed in accordance with the said
Rules.
All disputes arising under the present contract shall be nally
settled under the Rules of Arbitration of the International
Chamber of Commerce by three arbitrators appointed in
accordance with the said Rules.
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 NARROW ARBITRATION AGREEMENT

All disputes arising under the present contract shall be

nally settled under the Rules of Arbitration of the
International Chamber of Commerce by three arbitrators
appointed in accordance with the said Rules.

Narrow arbitration agreements cover only disputes arising

out of particular legal relationship.
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WIDE ARBITRATION AGREEMENT

All disputes arising out of or in connection with the present contract

shall be nally settled under the Rules of Arbitration of the
International Chamber of Commerce by three arbitrators appointed in
accordance with the said Rules.

Wide arbitration agreements cover disputes arising out of particular

legal relationship as well as other disputes connected with this legal
relationship, such as: tort claims, statutory claims or fraud-in-the-
inducement claims.
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WORDS INDICATING NARROW MEANING OF ARBITRATION CLAUSES

▸ under

▸ in connection with

▸ in relation to
WORDS INDICATING WIDE MEANING OF ARBITRATION CLAUSES

▸ in respect of

▸ with regard to
WORDS INDICATING THE WIDEST WORDING OF ARBITRATION CLAUSE

▸ arising out of

▸ connected with

▸ relating in any way

▸ arising out of
PROVISION ON FINALITY AND BINDINGNESS

Arbitration is nal and binding which means that the award

rendered by arbitral tribunal is not just a recommendation for
parties, but parties are bound to compel with arbitration award
and an award itself have res judicata effect (it is no longer
subject to hearing).

Please bear in mind grounds of judical review are limited to

procedural and jurisdictional defects, and national court are not
empowered to review arbitral awards on merits. Nonetheless,
some of arbitral institution allow appeal within arbitral
procedure which does not violate nality of an award.
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PROVISION ON FINALITY AND BINDINGNESS

It should be mentioned that some countries (e.g. England or

New Zealand) allow court appeals against arbitral award on
question of law. However, such appeals are usually permitted
in domestic arbitration due lack of recognition and
enforcement of the award by foreign courts.
KEEP IT SHORT AND SIMPLE

It is advisable to always keep arbitration clauses as simple

and clear as it possible and very carefully adapt model
arbitration clauses to parties’ needs.

However, if tailored arbitration agreement is needed it

should be revised by expert arbitration lawyer to avoid any
possible defects rendering arbitration clause pathological.
PATHOLOGICAL ARBITRATION CLAUSES

Wide party autonomy in arbitration is both a blessing and a

curse. Modi cation of arbitration agreements by parties (or
counsel) may render arbitration clause vague or inoperable.

Arbitration clauses leading to disputes over its interpretation

are widely-known as pathological arbitration clauses and
were rst described by Frederic Eisemann in his well-known
work La clause d’arbitrage pathologique.
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PATHOLOGICAL ARBITRATION CLAUSES - TYPES
- equivocal as to whether binding arbitration is intended

- naming a speci c person as arbitrator who is now deceased or who refuses to act;

- selecting never-existing or misnaming institution to administer the arbitration proceeding or

to appoint the arbitrators,

- empowering one institution to administer another institution’s rules

-referring to an arbitral institution by its location rather than by its name

- providing unreasonably short deadlines for action by the arbitrators,

- providing too much speci city with respect to the arbitrators' quali cations

- providing for con icting or unclear procedures e.g. the clause provides that the dispute shall
be decided by two arbitrators and an umpire - in the typical umpire procedure, the arbitrators
decide a case and only if they are unable to do so an umpire is appointed to decide case alone.
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EXAMPLES OF PATHOLOGICAL ARBITRATION CLAUSES

In case of a dispute the parties undertake to submit to

arbitration but in case of litigation the Tribunal de la Seine
shall have exclusive jurisdiction.

Any dispute will be settled by the rules of arbitration of the

International Chamber of Trade of Singapore by one or
several arbitrators appointed accordingly [sic] to the rules.

The dispute shall be decided by arbitration in Vienna by the

International Arbitration Tribunal under its International
Arbitration Rules in accordance with international practice.
EXAMPLES OF PATHOLOGICAL ARBITRATION CLAUSES

Any and all such disputes shall be nally resolved by arbitration

before the Singapore International Arbitration Centre in
accordance with the Rules of Arbitration of the International
Chamber of Commerce in effect and the proceedings shall take
place in Singapore and the of cial language shall be English.

The number of arbitrators shall be three. Each of appointed

arbitrators shall be english-speaking Italian, with a French law
degree and a familiarity with Mid-East construction
contracts.
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CURING PATHOLOGICAL ARBITRATION CLAUSES

Thanks to pro-arbitration approach which is quite strong

both in scholarly writings and practice pathological
arbitration cases may be saved.

Pro-arbitration approach indicates that arbitration agreement

shall be interpreted in such way to give priority to parties will
to arbitrate, even if the arbitration agreement has some
defects.
A pro-arbitration approach is normally also adopted in cases where the arbitration
agreement is challenged for its lack of precision. Courts have held that once it is
clear that the parties were willing to refer their disputes to arbitration, such
agreements are in general to be interpreted widely and, where possible, in
favour of the validity of the arbitration agreement (…) Where it is, however, not
clear whether the parties were indeed willing to refer their disputes to arbitration
or any other form of alternative dispute resolution, courts have been more
reluctant to adopt an arbitration friendly interpretation (…) . [emph. added]

the UNCITRAL Digest on the Model Law