Print- Arbitration is generally premised upon the legally binding consensus of two parties that have agreed to arbitrate actual or potential disputes that either have arisen or might arise between them. See Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574 (1960). Although compulsory arbitration can exist in some limited instances, one of the distinguishing features of arbitration is the parties’ joint willingness to avoid dispute resolution before national courts of competent jurisdiction by submitting the dispute(s) for resolution through arbitration. This willingness can be expressed either before or after a dispute actually arises.
- Pre-dispute agreements to arbitrate typically are embodied in clauses to commercial contracts.
- By comparison, post-dispute agreements (sometimes called “submission agreements”) usually take the form of stand-alone contracts between two parties that – despite other disagreements they may have – have decided to submit their claims and defenses to arbitration.
- Thus, arbitration clauses and submission agreements memorialize the agreement of the parties to resolve their disputes in a forum outside of any national courts that might have jurisdiction to hear the case. See, e.g., First Options v. Kaplan, 514 U.S. 938, 942 (1995).
- There are a handful of internationally recognized requirements that arbitration clauses or submission agreements should meet in order to be enforced. Under the New York Convention, each contracting state has undertaken to recognize and give effect to agreements to arbitrate when the following requirements have been met:
- The agreement must be in writing (Art.II.1);
- The agreement must deal with existing or future disputes (Art.II.1);
- The dispute(s) must arise in respect of a defined legal relationship, whether contractual or not (Art.II.1);
- The dispute(s) must concern a subject matter capable of settlement by arbitration (Art.II.1);
- The parties to the agreement must have legal capacity under the law applicable to them (Art. V.1(a)); and
- The agreement must be valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the arbitral award was made (Art.V.1(a)). (As the New York Convention mentions elsewhere (Art.II.3), the agreement must not be “null and void, inoperative or incapable of being performed.”)
- Provided these guidelines are met, the parties to an arbitration agreement generally are free to customize the procedural and substantive parameters of the arbitration, jointly selecting from among a fairly wide-ranging list of options.
- For example, the parties are free to reach agreement on things such as:
- The venue of the proceedings;
- The process according to which arbitrator(s) will be selected;
- If more than one arbitrator will be used (i.e., an arbitration panel), the number, composition and/or background(s) of the arbitrators;
- The types of things (e.g., conflicts), if any, that will disqualify an arbitrator;
- The language in which the arbitral hearing (and other submissions) will be held;
- The applicable procedural rules and substantive law;
- The issues to be decided (and the issues “carved-out” from resolution via arbitration); and
- The type of award and relief.
Practice Tip: In order to make the parties’ mutual intent as clear as possible, the parties’ arbitration clause or submission agreement should address – at least to the extent they can be anticipated in advance – as many of the details surrounding the arbitration as possible. And although a party may be familiar with the operation and conduct of domestic arbitration, cross-border arbitration presents a whole variety of unique issues and challenges. A U.S. party contemplating agreeing to an arbitration clause or entering into a submission agreement with a non-U.S. party is well-advised to seek the early assistance of legal counsel with experience in the international-arbitration context.