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Chapter Three - Drafting the Arbitration Agreement

Published online by Cambridge University Press:  05 June 2012

Margaret L. Moses
Affiliation:
Loyola University, Chicago
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Summary

The arbitration agreement serves the critical function of creating a framework for the parties’ own private dispute resolution system outside of national courts. To ensure proper functioning of the system, the agreement should be drafted with great care. A well-drafted arbitration clause has a significant impact on how well the parties resolve the dispute – how efficiently, how fairly, and how successfully. Unfortunately, in negotiating and drafting a contract, attorneys and parties too often do not focus on drafting the arbitration clause. This can result in a “pathological clause” – one that is defective in some way. It may be so defective that it invalidates the arbitration agreement. At the very least, the defect may create a basis for extensive disputes over the meaning of the clause and over how the arbitration will proceed.

Many kinds of defects can render a clause pathological. For example, the clause may be ambiguous or equivocal, or it may contain mistaken information. The clause may use the wrong name for an arbitral institution or its rules, resulting in the choice of a nonexistent institution. Clauses may provide for choosing a specific arbitrator, who may be deceased by the time an arbitration commences. Parties may state in one clause that disputes will be resolved by arbitration, and in another clause in the same contract may state that a particular court will have exclusive jurisdiction of any dispute. Even if not pathological, the clause may not provide a process that is efficient or beneficial to the parties.

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Publisher: Cambridge University Press
Print publication year: 2012

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References

Craig, W. LaurencePark, William W.Paulsson, Jan 2000
Stipanowich, ThomasContract and Conflict Management 834 2001
Lew, Julian D. M.Mistelis, Loukas A.Kroll, Stefan M. 2003
Derains, YvesSchwartz, Eric 2005
Brown, Alexis C.Presumption Meets Reality: An Exploration of the Confidentiality Obligation in International Commercial Arbitration 16 2001
Moses, Margaret L.Can Parties Tell Courts What to Do? Expanded Judicial Review of Arbitral Awards 52 2004

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