How to write an arbitration clause? The number of arbitrators and language

As the say goes, the more the merrier, however, sometimes this is not so recommendable, since, when you are drafting your arbitration clause, you may increase the cost of your arbitration without noticing it.

The arbitral tribunals typically are composed by one or three arbitrators, but it can go as high as you want in uneven numbers, but the more people assigned to solve your dispute as an arbitrator the costlier your dispute will be, so try not to go bananas with the numbers, but be careful to choose uneven numbers, so you have always a majority or someone with the casting vote.

If you have three arbitrators, the cost will increase, if you have just one arbitrator the cost will be lower, but the decision of having one or three arbitrators, must not be on a pure economic basis, it must be directed at how complex the issue is, to more complexity you need more arbitrators, to a lesser complexity you need a smaller panel.

If you want to know more about the costs of a possible arbitration, almost all the institutional arbitrations have an arbitration calculator, so you can have a rough idea of the cost of the arbitration, which is to cover the expenses by the institution and the expenses and fees by the arbitrators, such will not cover what the law-firms will charge for their representation fees.

As to the language of your arbitration, I know that this can sound a little bit of an oxymoron if you have an arbitration clause within a contract agreed in English and determine that the language of the arbitration to be in Spanish.

Well this is possible, it is because it may happen that the agreement was made in one language, due to the needs of one of the parties, but the actual execution of the contract as a whole was made almost in its entirety in another language, and it is quite normal for this to happen, I was involved in a case that the agreement was in English and actually the arbitration clause was agreed to be the language in English, however, the only time that English was used was during the negotiations and the actual drafting of the contract.

As to the execution of the contract, was everything made under Spanish language, this is because the holdings get into the agreements, but because they tend to have some branches in one place, the whole execution and the day to day operation of the contract was in another language, determining the actual language upon which the parties will execute the contract will help you in saving quite a lot of money in interpreters and translations, so try to choose wisely.

Ultimately if you didn’t choose the language or it happens that in the contracts they were two versions in different languages determining both languages to be the official languages, then will be up to the arbitral tribunal to decide the issue, it will occur that you might have a mix of languages during your arbitration proceedings, so make sure to have people apt to litigate in such languages.

How to write an arbitration clause? Institutional or ad hoc?

After making sure that the parties had agreed to resolve their legal disputes through arbitration, and that you make sure that the parties agreed the seat of arbitration, upon which the Courts will have jurisdiction regarding the validity of the arbitration clause and the award or awards.

Then you have to choose whether to have an institution administering the arbitration or ad hoc and be administered by the parties in conjunction with the arbitral tribunal.

My point of view is that in order to avoid headaches choose an arbitral institution for the administration of your arbitration. The selection of the institution will cause your clients expenses in the future, so you have to make sure which arbitral institution is more apt to the needs of your clients.

If you are new to arbitration and you are litigating a case and you find that the parties choose an arbitral institution, be aware to determine the cost of the possible dispute, since the expenses of the institution and the arbitral tribunal must be determined, make clear to your clients, that such costs are not part of your fees, or you will end up being on the wrong side of the table.

But, the question is which arbitral institution is best? And how many are there? Well, there are quite plenty, so the selection becomes cumbersome, make sure to select an institution that has been around quite some time, and also that is backed up by people expert in arbitration. That is the staff is knowledgeable to arbitration. 

Also, the selection becomes important with the language of your dispute, since the institution needs to be able to handle the many issues between the parties and with the arbitral tribunal that occur during an arbitration, which means the institution needs to speak the language of the parties. Otherwise the administration of the case will be prong to misunderstandings. 

The selection of the institution also has an impact on the costs of the arbitration, depending on which institution you select it is the amount of money you will pay and the currency upon which the services will be charged. It is not the same to pay in British pounds, that in Euros, nor American Dollars, nor Canadian dollars, or Argentinian Pesos, or Mexican Pesos. Thus, the selection of the institution becomes important moneywise oriented.

When I say there are plenty of arbitral institutions out there believe me, they are. A point to take into account is that despite being established in a given geographical place, any arbitral institution is equipped to administer international commercial arbitrations.

And, let say that you don’t know where to start with the drafting of your first arbitral clause, well, the arbitral institutions make this journey a lot easier, since in their web and in their rules of arbitration they give you examples of arbitration clauses that you can use in your contracts.

So, there you go, when drafting an arbitration clause you have two options, one that is Institutional which will be administered by an arbitral institution, or the other ad hoc, which will be administered by the parties, the judge acting in support of the arbitration, and when the designation of an arbitral tribunal is made, well the arbitral tribunal.

If you want to be on the safe side and you want to include an arbitral clause into your contracts the safest bet is to designate an Arbitral Institution and their rules, you will eliminate quite a lot of headaches to your clients in the future.

How to write an arbitration clause? The seat of arbitration

In a recent post we talked about the necessity to have an agreement to arbitrate, so the parties can have the ability to present a request and a response to arbitration, which can be made before an arbitral institution or on an ad hoc basis.

So after making clear that the parties have agreed to submit all or part of their current or future disputes through arbitration, then another element that must be looked closely is the seat of the arbitration.

By saying the seat of the arbitration, it is the actual place where the arbitration judicially speaking will be located, this does not mean that you need to travel to such a place to present your request for arbitration, or answer, or your claim and response, but it could happen that you need to travel there for the audiences to be held.

It also does not mean that the arbitrators or the arbitral tribunal must be located physically there meanwhile the arbitration takes place. It is a judicial fiction, in the sense that the arbitrators and the arbitral tribunal even if seated in a given country, lets say, Santiago de Chile, it does not mean that necessarily, the arbitrators must be there the whole time, nor having their law firms there.

What does then means to have a judicial seat of the arbitration, well, it means that for judicial purposes, the seat of the arbitration will indicate the jurisdiction of the national courts which will be acting in support of the arbitration for one side, and for the other, once an arbitral award is rendered, then the national courts where the arbitration is taking place, will have the jurisdiction to decide on matters regarding the validity or not of the arbitration agreement as well as to the annulment or not of the final award.

Which also will impact the decision as to the lawyers that could be acting within the arbitration, as well as the lawyers who will be acting when there is the need of the involvement of the national courts of the seat of the arbitration.

If both parties are from Latin-America and choose as a seat of the arbitration to be Geneva, Switzerland, it will be advisable to have at least a correspondent lawyer in Geneva just to be on the safe side, even if the case does not need the intervention of such lawyers in Geneva.

Choosing the seat then becomes important as well with the attitudes the local courts may have towards arbitration, they can be pro-arbitration, or against arbitration, or in total ignorance of arbitration, as of today, it is more common to have national courts acquainted with arbitration, but a great assessment must be made as to the seat.

There you go, be clear in two aspects when drafting an arbitration clause or agreement, establish unequivocally that the parties wish to have their disputes resolve under arbitration, and second that the seat of the arbitration be in a given jurisdiction.

How to draft an Arbitration Clause? The agreement to arbitrate

As the say goes, in order to have a chicken stew you need to have the chicken, well that is the same with Arbitrations, in order to start a claim through Arbitration, you need first to have an agreement to arbitrate, and such agreement to arbitrate has different ingredients that can be combined with each other in order to have a successful arbitration clause or agreement.

To this point, you have rightfully pointed out that the arbitration agreements can have the form of a clause within a contract or the arbitration agreement can take the form of an entire different contract, obviously relating to the main contract upon which you wish to settle possible legal problems.

One of the first elements, whether in the form of a clause or an agreement, you need to have an actual agreement, and such agreement must be clear as to the willingness of the parties to resolve their given disputes through arbitration.

The agreement must convey such “meeting of minds” to arbitrate, which implies as well an obligation and a right, the obligation means that the parties are obliged to bring their possible disputes before arbitration, and on the other side of the spectrum there is the right of the parties to have their dispute resolve before an Arbitral Tribunal.

At least draft something along these lines: “…the parties agree to have their current or future disputes to be resolved under arbitration…”

So, if there is an actual agreement to resolve the disputes under arbitration, then you at least are good to go.

However, you will need at least a second element, which is the “seat” of the Arbitral Tribunal, we will discuss later on the seat.

What is arbitration? Six elements for Commercial Arbitration

I come from Mexico, and when you say arbitration, clients truly think that you are an actual referee in a football match or soccer for the misguided. I’ve being asked if I do International Arbitration why I haven’t been in the news as a referee on football matches, my answer is that hopefully one day.

That is why, when with clients I underline the word commercial arbitration, but the example of a referee of a football match resembles really well the reality of commercial arbitrations, two parties in a match will follow the findings of a neutral in the field (like it or not, even if you yell at the referee). However, instead of blowing a whistle, the determination can come in the form of a written arbitral award.

In essence, Commercial Arbitration can be understood as the process between two or more parties that agree to resolver their actual or future disputes under arbitration before an Arbitral Tribunal in order for such tribunal to render a final and binding decision.

This brief definition gives in many respects what to expect from arbitration, and in more concrete terms with commercial arbitration.

Such elements can be the following:

1 Two or more parties, which means, there can be a classic two party case with one claimant and one respondent, but it can be also multi-party.

2 It is a process.

3 You need to have an arbitration clause or an arbitration agreement as a separate contract.

4 Such agreement can be for the resolution of current or future disputes.

5 The decision rendered will be through a final and binding award (although you can agree having an appeal), by a third party neutral to the dispute.

6 The Arbitral Tribunal, which can be composed by a sole member or a three member tribunal, is a third party neutral to the actual dispute.

I know this can be quite basic but the aim is to have a general idea.

Later on we will discuss what to look for when drafting successful dispute resolution clauses, the core elements and optional elements.

Virtual Arbitration Mooting, do it!

The Mooting experience is one of a kind, and these days can be made either in person or a la distance, never miss the chance to put yourself to the test, especially in the oral hearings part, being in front of a panel of arbitrators is one of a kind experience, is like a roller-coaster were you have the opportunity to try your oral skills.

However, given the social distancing policies occurring around the globe the experience of having oral hearings in person might become somewhat difficult to have, but there is always a good side of the spectrum.

Being on site for oral hearings means that a lot of energy must be put forward, and especially for those that are studying and are on a budget, traveling expenses are a hurdle that is quite hard to overcome.

The good side, given the current times, you can circumvent somehow such financial struggle, there is no need to travel to be part of such great experience, yes I know, it might not be the same, however, don’t miss the chance.

Take the opportunity to register to the different Moots taking place in the virtual form, like the prestigious and world known Willem C. Vis Moot, which given the pandemic, will be hosting the 2nd ever Virtual Vis Moot.

So if you didn’t have the opportunity to be part of the Vis Moot due to some financial struggles, this might be an excellent time to take part of this amazing journey. At the end of the day, this virtual experience of conducting or being part of oral hearings taking place virtually is something that you will experience in real arbitrations.

Don’t miss the chance and be part of this great Moot competition!

Break into arbitration, ITA writing competition “new voices in International Arbitration”

As I said before, there are many strategies to make way into the great world of international disputes, one of these strategies is to be part of writing competitions, some of them are dedicated to actually writing arbitral awards, and others directed at an academic level. Both are great opportunities to train yourself in one of the elements that are needed within arbitration, and in general to every lawyer, which is writing!

An excellent opportunity is the Young ITA (Institute for Transnational Arbitration) Writing Competition “New Voices in International Arbitration”, this competition happens every year, and if you get to win, well you are awarded USD $3,000.00, books by Kluwer, and USD $1,500.00 for traveling expenses in order to be part of the ITA anual meeting taking place in Dallas every June.

But, to be part of this writing competition you need to be part of Young ITA, but do not be afraid, it is actually for free until you become less younger and turn 40, so if you are in your 20s and 30s, you can be part of Young ITA at no cost, and this will also help in your involvement to institutions that are active in the arbitration world.

To find out more and how to register click here choose the option Young ITA and get involved into all the great events happening with them.

As to the nits and bits of the competition you need to follow these basic rules:

1 Minimum 3,500 words up to 25,000 words, excluding footnotes

2 You can choose any theme that you like regarding commercial or investment arbitration

3 The deadline is 15th January, so you have enough time!

4 Must be written in English.

5 Need to be submitted in word and pdf formats to ita@cailaw.org

My recommendation is that you try to be part of this writing competition every now and then, so you can train yourself in one precious aspect of the legal profession. You will kill two birds with one stone, train yourself on your writing skills and second, be part of a community of young arbitrators!

I wish you all the best!

How to break into arbitration? Distance learning

Making your way into this so called small club of few players. Even if it might be true, I am of the idea that the more the merrier, the more people is acquainted to arbitration, especially lawyers and practitioners, more arbitral clauses, for helping in the faster resolution of disputes, at the international and at the national level.

How to make way in this world remains a great question, either for someone just starting in the legal field, or someone that wants to change paths within law.

The starting point might be to choose while studying your LL.B. a course that includes the subject of Alternative Dispute Resolution or ADRs, as it is commonly known these set of tools for dispute resolution or to choose a course exclusively directed at Commercial Arbitration, and in conjunction joining a Moot Competition team.

However, if there is no type of courses in your LL.B. at your university, you still can find courses offered in the summer by different universities or as MOOC Courses.

In my case I was fortunate enough to have both, the possibility to have a course on ADRs and the other to be part of a Moot team.

Given that today traveling is quite restricted, you can find different online offers, one of these offers is provided by the University of Leiden, and the Course International Law in Action: the Arbitration of International Disputes, this course gives you a broad perspective of what is international law and what can be understood of international disputes, but the focus is more on the public international law side, instead of private international law, however, it is highly recommended and bang for the buck.

But, if you want to get more serious in your path towards arbitration, you can be part of the summer programs a la distance given by the different Universities and Arbitration Centers, a good example of these are the well known courses developed by the Center of International Commercial Arbitration by the American University Washington College of Law, despite the price tag per program it is worth every penny, due to the great professors involved in such a program.

So, even if you are part of a Moot team or your university offers a course within your LL.B. it does not hurt to deepen your understanding of arbitration and international disputes having exclusive courses on the matter, the above are just examples of many more.

There you go, I hope this can help in your path for breaking into arbitration!

So it begins

Dear reader, let me introduce this new venture called, blogging about arbitration and international dispute settlement.

Yes it is another blog out the millions around internet this days. And yes it is another initiative about arbitration, as many other great initiatives out there, you name it: blogs, Youtube channels, podcasts, Law Journals, web pages, associations, etcetera.

However, this one, seeks to be the place for you to find answers ranging from the practical level on what is arbitration, to more technical aspects about dealing with arbitration in general.

This means, that you will find the different issues to be dealt here more readable and accesible giving you all the possible insights for your journey in this fascinating world of arbitration and in general terms international dispute settlement.

This means that we will explore issues from commercial arbitration, investment arbitration, state to state arbitration, meaning disputes taking place in other types of forums. However, the main agenda is to help you in finding your way in this exciting world of international dispute settlement, which is broader than you actually think.

Enjoy the read!

How to break into Arbitration?

Long ago I read an article by Mark Kantor who wrote an article on “how to break into Arbitration?“, quite a great post, which is a great guideline on the many institutions out there involved in international arbitration, mainly commercial arbitration.

Such a question is often made by young lawyers and young practitioners, I will give you some insights that can help you in taking decisive steps in order for you to be part of this world of international dispute resolution.

The world of international arbitration is quite luring, one day a dear colleague told me that international arbitration was like being in an adventure, with top notch practitioners around the globe. Certainly, it is a way to show your skills to your fellow colleagues. Like be part of this college like in Hogwarts in one of Harry Potter’s adventures..

And actually it is. It is quite a remarkable adventure that once you are part of it you get hooked by it. You want to ride again and again.

But well, how do you actually break into arbitration, as I said before this is not a one way street, it has many paths and every story is different. One day I did such a question to an established arbitrator his words were quite to the point, “focus into being a good lawyer”, if you are a good lawyer people will come to you.

So for starters be a good lawyer. What does that mean? You already know.

Aside of becoming a good lawyer, also you need to take into account couple of practical pointers so you can try so you can be part of this college of arbitrators and practitioners to international dispute resolution.

First, if you are a student, be part of a Moot Arbitration Competition, there are plenty around the globe, within your country, your region or at an international level. You just need to explore which competitions you can be part of. The most famous are the FDI Moot on Foreign Direct Investment Arbitration, and the Willem C. Vis Moot. After you finish the competition try to get involved with the associations that are formed of former alumni to such competitions, like the Vis Moot that has the Moot Alumni Association (MAA).

If you are no longer a student at a bachelor’s level or a master’s student, then try to be part of such competitions as an arbitrator, certainly what you need to be is a good lawyer, you can get the grip of how arbitrations take place. Fly under the wing of the most experience arbitrators by sitting as a co-arbitrator in such moot court competitions.

Also, another way is to be part of associations for international arbitration and dispute resolution, an example of this type is International Council for Commercial Arbitration (ICCA), be part of the conferences they have, or also try to register yourself with a local association for arbitration, the list develop by Mark Kantor comes really handy.

If you are under 40, then try to be part of the principal associations for young arbitrators, like the International Chamber of Commerce Young Arbitrators Forum (ICC-YAF) which is one of the most active around the globe with multiple conferences occurring year round, likewise is the Young International Arbitration Group (YIAG) from the London Court of International Arbitration (LCIA). Also the ICCA has a section for young lawyers known as YoungICCA.

Other options that we will explore later on are studying a master program in dispute resolution and also becoming part of a litigation team that has arbitration within their areas of practice.