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Drafting contracts

(d) Arbitration institute or ad hoc arbitration?

Once it is decided to go for arbitration, the parties should decide to submit to ad hoc arbitration or choose an appropriate arbitration institute. If the potential disputes under a contract are likely to be ‘simple’ or capable of being resolved relatively easily, it is perfectly fine to provide for ad hoc arbitration. In that case, the arbitration law of the place of arbitration will determine how the arbiter or arbitral tribunal will be appointed, unless the parties have provided for their own appointment mechanism.

Which institute? Normally, the parties will agree on an arbitration institute to administer their arbitration. Which arbitration institute should be chosen? Arguments of particular expertise or location of the institute’s principal office, as well as a link with the applicable law, might influence the choice. A contract drafter will encounter competition amongst the major arbitration institutes: ICC, AAA, LCIA, the Stockholm or the Swiss chambers of commerce, the NAI, CEDR, ‘Singapore’ or CIETAC each have their particular benefits. It may be helpful if you establish a contracting policy as regards the arbitration institute you appoint when the agreement ‘moves out of your jurisdiction’.

Often, for contracts with a link to Eastern Europe or Russia, arbitration is sought under the rules of the Stockholm Chambers of Commerce. ICC has the reputation of being expensive but an arbitral award will likely not be voidable as this is specifically double-checked as part of the ICC arbitration procedure, and the ICC is at least clear about the costs, which is not necessarily the case for other arbitration institutes. Sometimes, for Asian parties, arbitration under the Singapore SIAC rules may be preferred. In China, it may well be that you end up litigating under the rules of the CIETAC (China International Economic and Trade Arbitration Commission). Note that NAI is a highly respected international institute, due to a long tradition of well-known arbitrators. But there are similar arguments in favour of LCIA, its competitor in London. In the U.S., one would often choose either the ICC or ICDR (International Centre for Dispute Resolution), the international division of the AAA (pronounced: ‘triple A’). Finally, especially in connection with mediation, CEDR administers arbitrations.

Which arbitration clause? After the choice of an arbitration institute, it is recommended to include the model arbitration clause of the elected institute in the contract. When you switch from arbitration institute during contract negotiations, the arbitration clause should be amended according to the agreed institute’s model clause.

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Drafting contracts

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