Sunday, July 16, 2006

Pathological Arbitral Clauses

An international commercial arbitration begins way before the controversy of the parties. It actually begins with the drafting of an appropriate arbitral clause in the disputants' contract, or, in other words, with the drafting of a non-pathological arbitral clause (as those poorly-drafted arbitral clauses are called by international arbitration doctriners).

Last week I received a draft contract for review, and it contained a pathological arbitral clause. This reminded me of a MoU that I reviewed a few years ago. Such MoU, prepared by the counsel of the opposing party, contained an arbitration clause worded as follows:


THIS Agreement shall be considered and interpreted solely in accordance with the laws of the State of Virginia and of the United Kingdom. In the event of any disputes that cannot be resolved by good faith negotiations between XXXXXXX XXXXXX and YYY, both parties agree to resolve any disputes by arbitration pursuant to the guidelines of the International Arbitration Association. Any award or remedy bestowed by an arbitration conducted in accordance with the procedures of the International Arbitration Association shall be binding on the parties hereto."

It looks to me that pathological clauses will never go away...

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