Harper James advises UK businesses on drafting arbitration clauses for commercial contracts governed by the laws of England and Wales. An arbitration clause determines how disputes are resolved, who appoints the arbitrator, where the arbitration takes place and which procedural rules apply.
A well-drafted clause identifies the disputes covered by the agreement. Broad wording usually captures disputes arising out of or connected with the contract, including questions about its existence, validity and termination. The clause should also specify the seat of arbitration. The seat is the legal location of the arbitration and determines the supervisory court and procedural framework. It is separate from the physical venue of hearings.
The clause should name an arbitral institution, such as the London Court of International Arbitration (LCIA), or provide detailed ad hoc procedures. Institutional rules normally address matters such as tribunal appointments, pleadings, evidence, fees and procedural timetables. The clause should state whether the tribunal consists of one or three arbitrators, the language of the arbitration and the governing law of both the contract and the arbitration agreement.
The number of arbitrators affects cost and timing. A sole arbitrator is generally appropriate for lower-value or less complex disputes, while a three-member tribunal provides a different decision-making structure for substantial matters. The clause should also address appointment mechanisms, especially where one party fails to cooperate. If the contract involves several parties, related agreements or guarantors, the drafting should deal with joinder and consolidation where the applicable rules permit it.
Confidentiality should not be assumed to operate in the same way in every arbitration. Parties should consider an express confidentiality obligation covering the proceedings, documents and award. The contract should also preserve access to urgent court remedies where appropriate, including injunctions or orders supporting the arbitration. Provisions on costs, expert evidence, service of notices and the enforcement of the award can further reduce procedural disputes.
An arbitration clause should be checked against the transaction structure, likely dispute value and the locations of the parties and assets. Inconsistent dispute resolution clauses in connected contracts create uncertainty, particularly in supply chains, finance arrangements, joint ventures and SaaS agreements. The final wording should align with the governing law, chosen arbitral rules and any court jurisdiction provisions. Under the Arbitration Act 1996, an arbitration agreement requires clear agreement to submit disputes to arbitration, so precision at drafting stage reduces the risk of a later jurisdiction challenge.