As an international business attorney, a focal point of my practice involves advising clients how to best handle cross-border disputes. The most effective mechanism by far in resolving international dispute is international arbitration. Why? International arbitration levels the playing field by taking away the home court advantage of parties on either side of a transaction.
But the most attractive aspect of arbitration is that the awards issued by an international arbitration tribunal will receive worldwide recognition by countries that are members of one of the international conventions on the enforcement of tribunal awards.
Given the superior advantages arbitration has over litigation in resolving international disputes, it’s essential that you make the international arbitration agreement ironclad and bullet proof.
Here’s how to do it:
1. Be Unambiguous.
Unequivocally state that any dispute will be resolved through arbitration e.g. “Any dispute or difference arising out of or relating to this agreement shall be finally resolved by arbitration …”
2. Be Clear
Define whether arbitration is to be preceded by negotiation or mediation and designate a timeframe e.g. “If no agreement has been reached within __ days of the delivery of written notice of the existence of a dispute, either party may serve a request for arbitration …”.
3. Be Specific
Specify the administering institution and the rules to be applied e.g. “The arbitration shall be administered by the International Center for Dispute Resolution in accordance with its International Arbitration Rules
4. Be Careful
Carefully select the site of the arbitration taking into consideration the quality of its arbitration jurisprudence and the respect of its courts for the arbitral process. e.g. China, no. Hong Kong, yes.
5. Be Meticulous
Meticulously set forth the number of arbitrators on the panel and how they will be selected. Choose an arbitrator who demonstrates communicative proficiency, a firm appreciation of the rules of evidence and an acknowledged expertise in the industry in which the dispute arose or about the issues in dispute.
6. Be Heard.
Designate the language of the proceeding. It is unsettling how many times parties overlook this provision and are forced to rely on a foreign translator to communicate every word of the proceeding.
7. Be Final
In order to prevent further review and appeals of an arbitral award once it is rendered, you must include a statement in the arbitration agreement that clearly states that the award is final e.g. “The arbitral award is binding, final, not subject to review, and not subject to appeal by the courts in any jurisdiction." This provision is particularly essential in jurisdictions where the laws allow parties to appeal an award issued in that country.
Follow the points I described above, and you’ll be well on your way to drafting a bullet proof international arbitration agreement.