Drafting an Enforceable Arbitration Clause - Chapter I.2 - Practitioner's Handbook On International Arbitration And Mediation- 3rd Edition
Richard Chernick is Managing Director of JAMS' National Arbitration Practice. Mr. Chernick has conducted hundreds of large and complex arbitrations and mediations employing various rules and before all major administering institutions, both nationally and internationally. He is Past Chair of the Dispute Resolution Section of the American Bar Association (ABA); Founding President of the College of Commercial Arbitrators (CCA); Founding Chair of the ADR Committee of the State Bar of California; Advisor to the ABA's drafting committee for the Revised Uniform Arbitration; Past President of the Los Angeles County Bar Association, the Legal Aid Foundation of Los Angeles, and past Chairman of the Board of Dispute Resolution Services, Inc., the dispute resolution program of the Los Angeles County Bar Association. Mr. Chernick was a Partner with Gibson, Dunn & Crutcher (1977-1994) where he specialized in commercial litigation and domestic and international arbitration.
Daniel M. Kolkey is a Partner in the San Francisco office of Gibson, Dunn & Crutcher a member of the Litigation Department, Co-Chair of the Appellate and Constitutional Law Practice Group and Vice-Chair of the Crisis Management Practice Group. Mr. Kolkey returned to the firm in November 2003 after five years as an Associate Justice on the California Court of Appeal, Third Appellate District, in Sacramento. He served as an adjunct professor of law, teaching international arbitration, at McGeorge School of Law from 2001-2004, served as legal affairs secretary and counsel to California Governor Pete Wilson from 1995 through 1998, was an Arbitrator on the bi-national panel for the U.S.-Canada Free Trade Agreement from 1990 to 1994; served as President of the Los Angeles Center for International Commercial Arbitration from 1990 through 1994; was appointed by the Governor in 1992 to the California Law Revision Commission, where he served as Chair in 1994; was an associate of the Chartered Institute of Arbitrators in London from 1986 to 1994; and served as chair of the International Law Section of the Los Angeles County Bar Association from 1991 to 1992. Mr. Kolkey has represented parties in both ad hoc and institutional international arbitrations, including those under the auspices of the Iran-United States Claims Tribunal, the American Arbitration Association (AAA), and the International Chamber of Commerce (ICC).
Originally from Practitioner's Handbook On International Arbitration And Mediation- 3rd Edition
This chapter discusses the components of an effective arbitration clause, which should include, among other things, the identification of the rules that will govern the arbitration, the number of arbitrators who will decide the dispute, the method for selecting the arbitrators (which is normally supplied by the rules governing the arbitration), the place of the arbitration, the language of the arbitral proceedings, discovery, the governing law, the scope of judicial review of the award, and the currency in which the award is to be rendered.
§ 2.01 Introduction
Whether the parties will reap or risk the benefits of their arbitration will depend, in part, upon the arbitration clause they draft. A poorly drafted clause can undermine enforcement, increase the costs of the arbitration (where the proceedings are held in a distant jurisdiction or needless translations are required), complicate completion of the arbitration (where the jurisdiction's procedural laws add unexpected proceedings), or thwart the expectations of at least one of the parties (where, for instance, the arbitration clause does not cover all relevant disputes, the arbitrator is not experienced in the field in which the dispute arises, or the arbitral site imposes more stringent review of the award than anticipated).
On the other hand, a well drafted arbitration clause can ensure that all disputes between the parties are arbitrated, enhance the prospects for enforcement, ensure the selection of an arbitrator experienced in the field in which the dispute arises, designate a convenient location for the proceeding, minimize translations, permit limited discovery, and address currency conversion problems.
Accordingly, a well drafted arbitration clause should address--or at least consciously decline to address--the following matters:
• The scope or nature of the disputes that are subject to arbitration;
• The rules that will govern the arbitral proceedings;
• Whether the arbitration will be administered by an arbitral institution pursuant to its rules or be ad hoc;
• The number of arbitrators;
• The method of selecting the arbitrators;
• The location for the arbitration;
• The language in which the arbitration shall be conducted;
• The discovery permitted prior to the arbitration hearing;
• The arbitrator(s)' power to grant interim relief and other remedies;
• The law governing the substance of the dispute;
• Judicial review, including the waiver or enlargement thereof;
• The currency in which the award is to be rendered;
• The award of attorney fees and costs; and
• Sovereign immunity, where one of the parties is a sovereign.
Chapter I.2
Drafting an Enforceable Arbitration Clause
Daniel M. Kolkey
Richard Chernick
SYNOPSIS
§ 2.01 Introduction
§ 2.02 The Scope of the Clause
[1] Alternatives
[2] Sample Clauses
§ 2.03 The Rules Governing the Arbitration
[1] Advantages of Selecting a Set of Rules
[2] Disadvantages of Selecting a Set of Rules
[3] Addresses of Some Leading Arbitral Institutions
[4] Sample Clauses that Include a Set of Arbitration Rules
§ 2.04 The Number of Arbitrators
[1] Designation by the Arbitration Rules Where the
Agreement Is Silent
[2] Considerations
[3] Sample Clause
§ 2.05 The Method of Appointment of the Arbitrators
[1] Selection Procedures in the Arbitration Rules
[2] Sample Clauses for Different Types of Selection
Procedures
[3] Additional Criteria for Selection
[4] Providing for a Decision by the Majority
§ 2.06 The Place of the Arbitration
[1] Considerations
[2] Sample Clauses For on Site Selection
§ 2.07 The Language of the Proceedings
§ 2.08 Discovery
§ 2.09 Interim Relief
§ 2.10 Choice of Law
§ 2.11 Judicial Review
[1] Limitation of Judicial Review
[2] Expansion of Judicial Review
§ 2.12 Currency of the Award
§ 2.13 Attorney Fees
§ 2.14 Sovereign Immunity
§ 2.15 Conclusion
Appendix of Arbitration Clauses