THE ART OF DRAFTING
ARBITRATION CLAUSES
Uganda Law Society CLE Training on "Commercial
Contracts: What you need to know".
By:
David Kaggwa
About the Presenter
DAVID KAGGWA, FCIArb, FICCP, LLM, LLB Construction Arbitrator and Lawyer.
Chairman: Chartered Institute of Arbitrators – Uganda Chapter.
Senior Partner: Kaggwa & Kaggwa Advocates specializing in Arbitration
and Construction Law.
Executive Director: Construction Law Institute.
Fellow: Chartered Institute of Arbitrators (FCIArb).
Fellow: Institute of Construction Claims Practitioners (FICCP).
Member: Society for Construction Law for Africa.
Holds a Master of Laws Degree in Construction Law and Arbitration from
the Robert Gordon University - Aberdeen Scotland.
ARBITRATION AGREEMENT –A DEFINITION
A valid Arbitration Agreement/Clause
(1) An “Arbitration agreement” is an agreement by the parties to
submit to arbitration all or certain disputes which have arisen or
which may arise between them in respect of a defined legal
relationship, whether contractual or not. An arbitration
agreement may be in the form of an arbitration clause in a
contract or in the form of a separate agreement. (UNCITRAL)
THE ARBITRATION AGREEMENT
• An “Arbitration agreement” is an agreement by the
parties to go to arbitration in the case of all, or certain
disputes, in order to finally resolve the dispute.
• The dispute may arise between them in contract or
otherwise.
• An arbitration agreement may be a clause in a contract or
in the form of a separate agreement.
• An valid arbitration agreement must clearly chose
arbitration over litigation.
• Most institutions have template clause.
Example 1
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.
Example 2
• Any dispute arising out of or in connection with this Agreement, including any question
regarding its existence, validity or termination, shall be referred to and finally resolved by
arbitration under the London Court of International Arbitration (LCIA) Rules, which Rules are
deemed to be incorporated by reference into this clause.
• The number of arbitrators shall be three
• The seat, or legal place, of arbitration shall be London
• The venue shall be London
• The language to be used in the arbitral proceedings shall be English
• The governing law of the contract shall be the substantive law of England
A Med-Arb Clause
“Any dispute difference or controversy arising out of or in connection with
this contract shall first be referred to mediation at the Indian Institute of
Arbitration & Mediation (IIAM) and in accordance with its then current
Mediation Rules and as per the Arbitration & Conciliation Act, 1996.
If the mediation is abandoned by the mediator or is otherwise concluded
without the dispute or difference being resolved, then such dispute
difference or controversy shall be referred to and determined by arbitration
as per the Arbitration & Conciliation Act, 1996* by IIAM in accordance
with its Arbitration Rules”.
SIAC Med-Arb Clause
Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be
referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (“SIAC”) in accordance with the
Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force, which rules are deemed to be
incorporated by reference in this clause.
The seat of the arbitration shall be [Singapore].*
The Tribunal shall consist of _________________** arbitrator(s).
The language of the arbitration shall be ________________.
The parties further agree that following the commencement of arbitration, they will attempt in good faith to resolve the Dispute through mediation
at the Singapore International Mediation Centre (“SIMC”), in accordance with the SIAC-SIMC Arb-Med-Arb Protocol for the time being in force.
Any settlement reached in the course of the mediation shall be referred to the arbitral tribunal appointed by SIAC and may be made a consent award
on agreed terms.
SIAC Med-Arb Clause
THE AGREEMENT MUST BE IN ‘WRITING’ BEFORE, OR AFTER THE DISPUTE
STARTS- – Section 3 ACA
An arbitration agreement may be in the form of an arbitration clause in a
contract or in the form of a separate agreement.
An arbitration agreement shall be in writing.
An arbitration agreement is in writing if it is contained in—
• a document signed by the parties; or
• an exchange of letters, a telex, a telegram or other means of
telecommunication which provides a record of the agreement.
The reference in a contract to a document containing an arbitration clause
shall constitute an arbitration agreement if the contract is in writing and the
reference is such as to make that arbitration clause part of the contract.
SIAC Med-Arb
ELEMENTS OFClause
AN ARBITRATION AGREEMENT
1. The 5 layers of law
2. The arbitrator(s)
Law governing the contract
3. The place
Law governing the arbitration agreement
4. The language
The Seat of the arbitration
Procedural rules governing the arbitration
The law governing enforcement
SIAC Med-Arb
THE LAW Clause
OF THE CONTRACT
Usually specified in the contract.
If not, it may be implied that the laws of the
country where the contract was performed will
apply.
SIAC Med-Arb Clause
THE SEAT/LEGAL JURISDICTION OF
THE ARBITRATION
The “seat” of the arbitration, is the legal jurisdiction to
which the arbitration is tied. The seat will determine the
procedure or rules which govern the arbitration, including;
Arbitrability, time limits for commencement, interim
measures, some procedures, powers of the arbitrators,
Jurisdiction
confidentiality, form and validity of the award, finality of
the award including appeal rights, enforcement
SIAC Med-Arb
ISSUES ClauseTHE SEAT
REGARDING
• Do not confuse the seat or legal place of the arbitration with the location of the arbitration
• E.G. The Court of Arbitration for Sports, (CAS), sits in whatever country the Olympic games is situated,
but the seat is always Switzerland and the rules are those of CAS.
• The five most preferred and widely used seats are London, Paris, Hong Kong, Singapore and Geneva.
• Based on reputation of the seat, neutrality of the local legal system, national arbitration law, track record for
enforcing agreements to arbitrate and arbitral awards, availability of quality arbitrators, cultural familiarity,
efficiency of local court proceedings, location of a party’s people, availability of specialised lawyers at the
seat, cost, location and quality of hearing facilities, location of the arbitral institution, language, transport
connections
THE RULES OF PROCEDURE
•Can be written by the parties
•Adopted from one of the institutions
•Taken from the rules of arbitration organisations
such as the AAA, and IBA.
OTHER REQUIREMENTS
The place of arbitration
–Anywhere in the world
The number of arbitrators
–Dependent on the nature of the dispute and
recourses.
The language of the arbitration
–That which is most convenient
DEFECTS’ IN ARBITRATION
CLAUSES
DEFECTS’ IN ARBITRATION CLAUSES
KVC Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd
[2017] SGHC 32.
• ‘The Seller and the Buyer agree that all disputes arising out of or in connection with this agreement that
cannot be settled by discussion and mutual agreement shall be referred to and finally resolved by
arbitration as per Indian Contract Rules’.
• Second contract referred to the ‘Singapore Contract Rules’.
• One of the contracting parties was from Singapore
• The Singapore High Court found that a bare arbitration clause which merely provides for submission of
dispute to arbitration without specifying the place of the arbitration, the number of arbitrators or the
method for establishing the arbitral tribunal remains a valid and binding arbitration agreement if the
parties have evinced a clear intention to settle any dispute by arbitration.
• Under Section 8(2) of Singapore’s International Arbitration
Act (‘IAA’) (Cap. 143A), the President of the SIAC Court
of Arbitration is designated as the statutory appointing
What is the relevant law authority.
• Article 11(3) of the Model Law provides that where the
from the decision in KVC
parties had not agreed on the mechanism for appointment
Rice Intertrade Co Ltd? of arbitrator(s), the default appointing authority (i.e. the
Singapore International Arbitration Centre ("SIAC")
President) in this case will appoint the arbitrator(s).
The reasoning in KVC Rice Intertrade Co Ltd
• Where there was no other way to prevent injustice to a would-be claimant, the Court is prepared to
step in to appoint an arbitrator for the parties. This is provided the dispute has some connection with
Singapore, which was satisfied in this case as the defendant was a Singapore company.
• The President of the SIAC Court of Arbitration is designated as the statutory appointing authority
under Section 8(2) of Singapore’s International Arbitration Act (‘IAA’) (Cap. 143A), and was
therefore able to appoint an arbitrator in the case
• Even if the President of the SIAC Court declines to appoint the arbitrators for whatever reason, the
Singapore court retains “residual jurisdiction” to ensure that the arbitration under both arbitration
clauses proceed notwithstanding any deadlock between the parties on the appointment of arbitrators.
What is a Tiered Dispute
Resolution Clause?
What is a Tiered Dispute Resolution Clause?
• A tiered dispute resolution clause involves a series of steps in the overall dispute resolution process,
each designed to handle the dispute if it has not been resolved by the previous step.
• These vary from the single step clause which provides for mediation and then arbitration, to a multi-
step clause which provides for a series of direct negotiations followed by mediation if the
negotiations fail and then arbitration.
• If drafted properly, the structure can be very effective but if not, can be used tactically to delay
matters. To avoid this the drafting should ensure that it is clear when one stage ends and another
begins.
• The common approach is to provide for a structured time scale for when the various steps are to take
place and to make it clear when the time period for each stage ends.
Drafting the Tiered Clause
• The detailed clause will minimise procedural disagreement and may enhance the possibility of a court
treating it as enforceable.
• If litigation is commenced in breach of an obligation to mediate/pursue ADR the court may order a stay of
proceedings pending mediation.
• In arbitration the situation is different because the arbitration tribunal derives its jurisdiction from the parties'
agreement to arbitrate.
• If the tiered clause provides that the parties have first to go to ADR the effect could be to deprive the tribunal
of jurisdiction until the ADR process has been exhausted.
• When drafting the ADR clause it is up to the parties to decide whether they wish to specify a particular ADR
procedure or whether they prefer to agree on one as and when a dispute arises.
• Tiered clauses should provide a mechanism for a final, binding and enforceable resolution of the dispute,
typically arbitration but not both arbitration and litigation.
Drafting Rules
• The golden rule with any dispute resolution clause is
clarity in drafting.
• A clear process;
• Certainty when the process is triggered;
• Incorporate a time frame (beginning and end);
• Ensure that the decision makers are easily identifiable;
• Make it clear whether the mediation is to take place
before or during arbitration.
• State that the arbitral award shall be final and binding.
Sample Tiered Clause
• “If any dispute arises out of or in connection with this agreement or its formation, directors or other senior representatives of the
parties with authority to settle the dispute will, within 30 days of a written request from one party to the other, meet in a good
faith effort to resolve the dispute.
• If the dispute is not wholly resolved at that meeting, the parties will attempt to settle it by mediation in accordance with the
ICAMEK Mediation Rules. Unless otherwise agreed between the parties within 15 days of notice of the dispute, the mediator
will be nominated by ICAMEK. To initiate the mediation a party must give notice in writing ("ADR notice") to the other
party(ies) to the dispute requesting mediation. A copy of the request should be sent to ICAMEK. Unless otherwise agreed, the
mediation will start not later than 30 days after the date of the ADR notice.
• No party may commence any arbitration in relation to any dispute arising out of this agreement until it has attempted to settle
the dispute by mediation and either the mediation has terminated or the other party has failed to participate in the mediation.
• If the dispute is not settled by mediation within 60 days of commencement of the mediation or within such further period as the
parties may agree in writing, the dispute shall be referred to and finally resolved by Arbitration. ICAMEK shall be the
appointing body and administer the arbitration. ICAMEK shall apply the ICAMEK rules in force at the time arbitration is
initiated. In any arbitration commenced pursuant to this clause the number of arbitrators shall be 3 and the seat or legal place of
arbitration shall be Kampala, Uganda.”
Pathological
Arbitration
Clauses
Pathological Arbitration Clauses.
• The term “pathological clauses”, coined by Frédéric
Eisemann, is widely used to describe arbitration clauses with
apparent defect(s) liable to disrupt the smooth progress of
the arbitration. Such clauses may be a source of conflict for
the whole duration of the dispute – from
jurisdictional battles to challenges at the enforcement stage.
• However, not all “defects” render an arbitration clause
devoid of any effect. Some of these imperfections may be
resolved through the tool of interpretation.
Sloppy multi-tiered clause (Lack of clarity as to when stages begin/end, whether stages are optional or
not):
“Disputes shall be submitted to arbitration according to the Rules of Conciliation and Arbitration of the
ICC… ; disputes which may be resolved by conciliation shall be submitted first to conciliation”.
(Pathological Arbitration clauses Pathological Arbitration clauses, Marie , Marie - H
élèneMalevilleMaleville, IBLJ, n °1, 2000, p.69) 2000, p.69)
“The parties shall mediate so long as one party believes settlement through mediation is possible, after
which the parties shall submit the dispute to binding arbitration”.
Singapore is also well-known for the willingness of its courts to uphold arbitration agreements. As the
Singapore Court of Appeal explained in the case of Insigma v Alstom:
“… where the parties have evinced a clear intention to settle any dispute by arbitration, the court should
give effect to such intention, even if certain aspects of the agreement may be ambiguous, inconsistent,
incomplete or lacking in certain particulars… so long as the arbitration can be carried out without
prejudice to the rights of either party and so long as giving effect to such intention does not result in an
arbitration that is not within the contemplation of either party”.
Contact:
0700 521 398 / 0789 519 111 / 0700 597 888
Email:
[email protected]
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