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Arbitration Clause In International Commercial Agreements

In case of any disputes, most international agreements have an arbitration clause with regards to settlement of such disputes. However, not much is discussed about how to go about such an international arbitration proceeding, and parties usually assume that itís a standard clause in every business contract. But there are many other factors which need consideration and proper discussion by both parties in order to make sure that both parties are on the same page. Factors such as what law is to be made applicable, which countryís arbitration regulations are to be followed, what should be the language used and code of conduct must be negotiated upon before the arbitration clause can be duly inserted in any contract.

When it comes to deciding upon the applicable law, parties to an international agreement must decide in a 3-fold manner, i.e., what law will govern the agreement, what law will govern the arbitration and, in the end, what law will regulate the conduct of such arbitration proceedings.[i]

When it comes to deciding upon the place of arbitration, two concepts come into play, which are different from each other, namely seat and venue. The seat of arbitration is decided upon in the arbitration contract. When parties decide upon such a seat, they also decide to submit their arbitration to the judicial supervision of the courts under whom the seat falls. [ii]As regards to the venue, the venue can be any as long as the seat of arbitration is unaffected.

When it comes to deciding upon the number of arbitrators, only odd number of arbitrators are permitted. Even number of arbitrators are not permitted under most legal systems. As per the UNICTRAL rule, if the clause regarding number of arbitrators to be appointed is absent from the arbitration contract, the standard rule of appointing 3 arbitrators is followed, 2 which are appointed by both the parties individually, and one presiding officer which is appointed by both the arbitrators. However, parties can also choose to appoint a solo arbitrator.

Parties are also supposed to provide for the procedure as regards the appointment of arbitrators in the arbitration clause. Such process can be ad-hoc or institutional. In the ad-hoc process, the parties are free to nominate 2 arbitrators of their choice and the 3rd (presiding officer) is appointed by both of these arbitrators. However as per the institutional system of appointing arbitrators, an institution is responsible for such appointment. For example, in India, the Supreme court allots arbitrators for international arbitration proceedings. A mix of these 2 systems can also be followed, in which each party is free to nominate any arbitrator provided by such an institution.

Deciding upon the language of arbitration proceedings is also a must. English being a widely spoken language across the globe is usually the language or international arbitration proceedings. But if the arbitration contract has no mention of such a preferred language, any party may insist on the usage of any other language other than English.

In conclusion, both parties to an international arbitration must make sure that all these factors are duly considered are discussed before inserting the arbitration clause in the business contract so as to avoid any scope of confusion or misconceptions.

References:
  1. Bharat Aluminium Company vs. Kaiser Aluminium Technical Services Inc, MANU/SC/0090/2016
  2. Anil Chawla Law Associates LLP, Guide For Arbitration Clause In International Agreements In India (2017)

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