Evaluating Model Arbitration Clauses

UPDATED: A lot of traffic comes to this post, and I don't like much of this post anymore, so here's an improved excerpt from a recent post on how I would have liked to improve this post. Followed by the original post.

If you're drafting an arbitration clause you should first go to the website of the organization that you want to arbitrate under. Then read this document and fill in the holes in the clause from the organization you just got a clause from. That document also has some good tips on building step clauses. This JAMS ADR site also has a bunch of arbitration clauses that will help you build an airtight arbitration clause with step clauses, and it is good for filling in holes in your clause.

Note: The ICC clause is missing a lot, but that is only because the ICC is going to fill in all of the holes for you, but beware, you might find yourself arbitrating in Paris, France if you don't include a location.


Original Post
In my International Commercial Arbitration course we are currently covering arbitration clauses. Professor Richard Page advised us that if we want to make sure that we end up in arbitration, then the arbitration clause better be well drafted. Words such as "shall" rather than "may" go a long way towards getting this done. But, the professor suggested that the most sure-fire way of ending up in arbitration is to use the model arbitration clause of the body under which you wish to arbitrate.

A good place to start is with a comprehensive arbitration clause guide at the American Arbitration Association (AAA).

International Centre for Dispute Resolution (ICDR) Guide to Drafting International Dispute Resolution Clauses at AAA

"Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be determined by arbitration administered by the International Centre for Dispute Resolution 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 and/or country)”;
• “The language(s) of the arbitration shall be ___.”

This arbitration clause also binds the parties to the following under the Rules of ICDR:

• 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 taking of evidence
• Proceedings in the absence of a party’s participation
• Costs
• The form and effect of the Award

Very comprehensive, and very explicit, and it comes with a nice handy guide.

International Chamber of Commerce (ICC) Suggested Clauses

In general:

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

In Mainland China:

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

Scarce documentation, and from what I can tell the suggested clause for Mainland China is sending the parties to arbitrate before a tribunal at the ICC in Paris. And if not, our professor suggested that the ICC does not take kindly to the application of its rules by other tribunals, and the ICC does not enjoy applying the arbitration rules of others in its own tribunals.

China International Economic and Trade Arbitration Commission Model Contracts

Hmm... I guess they haven't gotten around to this yet. Might be for the better; CIETAC has had problems with corruption, and it is a little slow. The Shanghai Arbitration Commission (SAC) and Beijing Arbitration Commission (BAC) offer quickness, predictability, likelihood of enforcement, and some dang good arbitration clauses.

BAC Model Arbitration Clause

"All disputes arising from or in connection with this contract shall be submitted to Beijing Arbitration Commission for arbitration in accordance with its rules of arbitration in effect at the time of applying for arbitration. The arbitral award is final and binding upon both parties."

The BAC makes it easy to find this clause, it is right there on the main page, no scrolling necessary. Concise, and strong, but as we will find from SAC's website, it would be advisable to read Article 16 of the Arbitration Law of the PRC.

SAC Model Arbitration Clause

“The disputes, arising between the parties of the contract, shall be settled by consultation; the disputes, if may not be settled by consultation, shall be submitted to Shanghai Arbitration Commission for arbitration according to the arbitration rules of the Arbitration Commission.”

The SAC further reminds us that Art. 16 of the Arbitration Law of the PRC demands that the parties include the following three provisos in the contract or the arbitration is non-binding:

1. Express intent of the parties' wish to arbitrate;
2. The issues for arbitration; and
3. The arbitration commission selected.

The strongest arbitration clause for contracts in China could probably be constructed by combining the SAC and BAC model clauses. Using the language of the BAC model clause with the provisos of the SAC, and replacing Shanghai with Beijing where appropriate, seems like it would go a long way towards a binding arbitration clause. The only problem is the lack of a time frame. I am not sure whether inserting a time frame for arbitration would improve the clause, but it couldn't hurt.