Originally from American Review of International Arbitration - ARIA

Preview Page

I. INTRODUCTION

To any disputes practitioner, it is stating the obvious to say that inadequacies in contract drafting account for a large percentage of contract disputes. In the field of international arbitration, some drafting problems are more fundamental than others. Most significantly, problems with the drafting of arbitration clauses will often lead to challenges to the very jurisdiction of an arbitral tribunal. Uncertainties in drafting can also lead to concurrent court applications, with court litigation countered by applications for stays in favor of arbitration, or lead to subsequent annulment challenges, or attempts to block enforcement of arbitral awards. Another scenario is where an institution itself makes a determination that the designation is not sufficiently clear for it to accept jurisdiction. 

This article considers the principles that have been applied or recommended over the years to determine the validity or otherwise of poorly drafted arbitration agreements, and evaluates their suitability for such a task. Over the years, leading scholars and practitioners have attempted to identify some core criteria by which to analyze what have been described as pathological arbitration clauses, with a view to distinguishing between those that are effective and enforceable and those that are fatally flawed. Numerous reported cases, whether in courts or tribunals, display differing views as to the criteria to be employed, the applicable law, and the relevant evidence and standards of proof, including the role of presumptions, whether rebuttable or otherwise. 

Some commentaries purport to identify broad principles by which to determine validity.  Others tend to adopt an inductive approach by seeking to categorize various pathologies and draw broad conclusions from the results in each scenario.  Thus they might look at typologies of bad drafting, such as where there is no selection of a seat, or no method of appointing an arbitrator, or mis-description of an institution. 

This article primarily works deductively from an identification of the core elements of an arbitration agreement, to try and draw broad conclusions about various kinds of deficiencies. It seeks to highlight the fact that cases of this nature are nothing more than attempts to find meaning in the face of suboptimal drafting by the parties concerned.  In such circumstances, it is difficult to define rigid and exact principles of validity, as legal systems will always find some difficulty in identifying intent when its evocation is unclear and disputed. Nevertheless, an understanding of the essential nature of the exercise can help to promote a more harmonized approach. This article contends that the most significant variables are first, the type of evidence that a tribunal has before it, either requested or voluntarily produced, and second, the weight it wishes to give to such evidence. Hence, a proper analysis of the challenge necessitates a proper analysis of the role of evidence in the process of interpretation of sub-optimal contract drafting. This article argues that the preferred approach should be the application of neutral standards of proof utilizing the broadest forms of admissible evidence in testing for the presence of the minimum requirements for a valid arbitration agreement.