The principle of party autonomy lies at the heart of international arbitration, allowing the parties to determine the applicable law and procedural framework. This flexibility ensures that the arbitration process is tailored to the specific needs and circumstances of the parties. However, this autonomy may be limited in international commercial or investment contracts that embed standard institutional arbitration clauses. While these standard clauses provide a stable foundation and ensure enforceability, they may not adequately address the unique requirements of each contract. Recognising and addressing these different needs is critical, particularly in the context of incorporating arbitration clauses.
The perspectives of legal experts on the power dynamics in arbitration vary widely, leading to considerable debate. On the one hand, some emphasise the critical role of the arbitral tribunal in enhancing procedural consistency. They argue for the evolving role of international arbitration and highlight the growing influence of arbitral institutions. On the other hand, some prioritise party control, arguing that increasing the power of arbitral institutions could limit the parties’ freedom of choice. At the heart of this debate is the right balance between the arbitral tribunal’s authority and the parties’ autonomy in the arbitral process.
However, it’s important to note that there is no conclusive data to support one view over the other. Naturally, most arbitral institutions and their members tend to seek greater influence over the arbitral process. On the other hand, while recognising the valuable contribution of arbitral institutions, parties often feel strongly about retaining control over their proceedings.
The key to effectively navigating these divergent views is to draft well-considered arbitration clauses. Lawyers have a crucial role to play in this process. They are responsible for drafting provisions utilising arbitral institutions’ strengths and preserving the parties’ autonomy. This careful drafting ensures a fair and balanced arbitration process that harmoniously balances institutional influence and party control.
When drafting an arbitration clause or agreement, it’s essential to look beyond the standard clauses suggested by arbitration institutions and consider several key points to create an effective, fair and tailored document. Here are some key considerations:
- Prioritise negotiation before resorting to arbitration by exploring all avenues for amicable resolution. This approach saves time and resources and preserves valuable business relationships.
- Ensure that the arbitration agreement is consistent with the law governing the substantive aspects of the case. This alignment promotes consistency throughout the arbitration process.
- Clearly outline the disputes or issues the arbitration clause covers to avoid misunderstandings and disputes about what is covered.
- Carefully weigh the pros and cons of the arbitration forum and rules, as they can significantly affect the dispute resolution process and outcome.
- To ensure effective communication and understanding, choose a language that is convenient to all parties, not just the default language suggested by the arbitration rules.
- Determine the seat and venue of the arbitration, considering the legal framework and the convenience of the parties.
- Allow the parties to have a say in selecting the arbitrators, including the presiding arbitrator. Include a provision for an impartial party to step in if there is a disagreement over the selection.
- Establish a realistic timeframe for the arbitration and be transparent about costs. All parties should be prepared to be flexible in managing time and expenses.
- Confidentiality is inherent in arbitration, yet parties can incorporate clauses to protect sensitive information and ensure it is maintained throughout the process to protect the interests of all parties.
- The enforcement and appeals procedures will be governed by applicable law and case law. Parties may provide for additional appeal procedures within the limits of applicable law to provide a comprehensive framework for dispute resolution.
In brief, addressing these considerations in an arbitration agreement enhances its effectiveness and fairness. This well-structured framework strikes a balance between formality and flexibility, promotes mutual respect and fair solutions, and meets the specific needs of the parties. It plays a critical role in fostering cooperation, preserving relationships, and ensuring fairness and justice in alternative dispute resolution.
Disclaimer: This summary, based on HCLA research and arbitration cases, is for informational purposes only and does not constitute legal advice. For detailed analysis or advice, please consult a professional.