Most arbitration agreements are concluded within a wider contract and well before potential disputes are at the forefront of parties' minds. Nonetheless, when parties select arbitration as their chosen method of dispute resolution, it is vitally important that their arbitration agreement is clear and capable of implementation in the manner intended.

Badly drafted arbitration clauses can give rise to expensive and time-consuming satellite disputes, prejudice successful enforcement of awards and potentially render the agreement to arbitrate void.

A well drafted arbitration clause will clearly impose a legal obligation to arbitrate disputes and precisely define the parameters of such arbitrable disputes.

Preliminary considerations

Consideration ought to be given to whether arbitration should be the default method of dispute resolution for all potential disputes under the contract or whether it is appropriate for some categories of dispute to be carved out.

Parties will need to decide whether it is preferable to conduct an arbitration under the auspices of an arbitral institution (in which case there are institutional model arbitration clauses that parties could apply or tailor) or, alternatively, proceed on an ad hoc basis (meaning the procedure and administration of the arbitration would take place without the involvement of an arbitral institution).

If the governing law of the contract contains formal requirements with regard to arbitration agreements, those requirements will also need to be taken into account.


A comprehensive arbitration clause should make clear provision on the following: -

  • the governing law of the arbitration agreement (i.e. the substantive law which is to be applied to determine the disputed issues);
  • the seat of arbitration (the “seat” is the legal place for the arbitration and determines its procedural law);
  • whether the arbitration is institutional or ad hoc;
  • the selection, appointment and replacement of arbitrators;
  • the language of the arbitration;
  • applicability of any institutional rules; and
  • the breadth of disputes governed by arbitration (absent special circumstances, as broadly as possible).

Parties must bear in mind that arbitration is a private form of dispute resolution based on contractual agreement between parties. The jurisdiction of an arbitrator (or tribunal) therefore depends on a workable arbitration agreement.

A defective arbitration agreement (known as a "pathological clause") is likely to lead parties towards the very scenario they set out to avoid - public litigation and/or procedural uncertainty.