Worldwide Forum on the Arbitration of Intellectual Property Disputes

March 3 - 4, 1994, Geneva, Switzerland

 

DRAFTING ARBITRATION CLAUSES
© Marc Blessing
Partner, Bär & Karrer, Zürich;
President, Swiss Arbitration Association (ASA)

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Here is the essence and the best advice: If you need an arbitration clause: go and see a fortune-teller at Jackson Square in New Orleans or else: develop your own skills in card- or palm- reading ....... But in any event: be aware that the skill which is required is that you can predict the future! The second best advice is to carefully study this Report..... !

 

Structure of the Report

Introductory Remarks

Check-List for drafting Dispute Resolution Clauses

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INTRODUCTORY REMARKS

The drafting of a dispute resolution clause or of an arbitration clause is always a dilemma.

Should you pick one of the ready-made clauses as they are proposed by certain arbitral institutions? Or should you sit down and start your own drafting for something tailored to measure, something more elaborate with the aim to hopefully remove or avoid certain pitfalls in the runway of a future arbitration?

Parties may have antagonistic views and preferences in this respect:

The commodity trader: will dislike any clause consisting of more than three words, namely: "arbitration in [Zürich]";his ideal, however, risks to create numerous uncertainties

The overly cautious lawyer: on the contrary, will be horrified by the trader's proposal and dislike anything else but the most complete and scrupulously drafted clause; his solution, however, might not be saleable, or risks to be an "overkill";

The creative businessman normally stands between the two extremes: as usual he wants both: to have the cake and eat it!

The aim of my presentation is to carry you through a number of checks that you should make when drafting or reviewing an arbitration clause so that you will be familiar with its anatomy.

No doubt you will, at the end, share my view to conclude:

• that there is no "ideal" dispute resolution or arbitration clause, there is no "miracle-clause" (and I do not pretend to have one!)
• that the "perfect" arbitration clause is an illusion, and
• that each arbitration clause has the disadvantage that it may either prove to be too simple, or incomplete, or too complicated.

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Check-list for Drafting Dispute Resolution Clauses

A.Preliminary Question: ADR (such as Mediation) OR Arbitration?

1. To me, the answer is simple and clear!

An ADR procedure [such as a mediation, conciliation, joint conciliation, mini-trial, neutral evaluation, advisory (non-binding) arbitration] will be and remain a consensual procedure, and thus depends on the free willingness of the parties to participate, and at the end will depend on a voluntary compliance regarding its outcome (be it a settlement agreement, or a recommendation or "decision" of the mediator (negotiator, or facilitator)). Thus, the ADR procedure will have no "teeth," and will not normally (unless carried out, or later on converted into, a MED-ARB or MEDALOA procedure; see hereto Part D, para. 9 and Part E, para. 5) result in an enforceable "product" comparable to an arbitral award. Of course, only arbitral awards (being the result of a binding arbitration) will qualify for recognition and enforcement pursuant to the terms of the New York Convention of 1958.

2. Therefore, if you opt for a mediation procedure, you should provide for a so-called "escalating dispute resolution clause" which will make sure that in any event you will also have a subsequent arbitration procedure as a safety device, in case the mediation process should fail. Otherwise you would ultimately have to sue in ordinary courts, and this might not be what you want to do.

Do not use a mediation clause alone [such as, e.g., the Mediation Clause proposed by WIPO, or the LCIA (proposing mediation in accordance with the UNCITRAL Mediation Rules), or the ICC or AAA], unless you will at the same time include a "default-arbitration" clause (sometimes called an "escalating arbitration clause") in the sense that, if either party will not participate in the mediation (or other ADR procedure), or if any party will be dissatisfied with the mediation procedure or its outcome, the dispute shall be referred to arbitration. Either party will!

If you provide for mediation (or for another ADR procedure), do state clearly whether such mediation procedure will be a compulsory procedure (such that arbitration could not take place unless the mediation procedure had taken place without resulting in an accepted solution), or whether it should be a merely optional "cooling-down" procedure, leaving it in the hands of the parties to start arbitration right away.

Reflect carefully whether, in a subsequent arbitration, the mediator should then change his "hat" and become your sole arbitrator (which is the solution in the so-called MED-ARB procedure; if so, he obviously will take into account all the knowledge obtained during the mediation procedure, including concessions made therein; this may have an advantage if you seek a more business-oriented solution, but may be a disadvantage for those who, if it comes to arbitration, will primarily seek a solution strictly governed by the rule of law).

In contrast to the above, it is the predominant attitude, at least prevailing in Europe, that the mediator should not, if mediation fails, also be the arbitrator. It is felt that a mediator is "worn out" if his mission fails, since he has become "poisoned" in caucus sessions (which are typical for mediations), whence it is felt that, in a subsequent arbitration, one or more fresh persons should carry out the adjudicatory function (which, after all, is somewhat different from the mediatory or advisory function).

Therefore, provide for strict confidentiality of the mediation process. Unless you had chosen the MED-ARB route, no statement made during the mediation process nor any document filed in its framework should later on be used in a subsequent arbitration, and of course the mediator cannot later on be called as a witness. See hereto the explicit confidentiality provisions of the Draft WIPO Mediation Rules (for this Report no reference is made to the number of the individual rule or article, as such numbering may change in the final Rules which are likely to become effective as of October 1, 1994).

3. In the following I will discuss the drafting of an arbitration clause which may, or may not, provide for an ADR procedure (such as mediation) to precede arbitration.

 

B. The Basic Choice: Institutional Arbitration or ad hoc Arbitration

1. Making my presentation under the auspices and control of two pre-eminent arbitral institutions (i.e., the going-to-be WIPO Arbitration Center and the leading United States institution of the AAA) probably implies the expectation that I should vigorously advocate institutional arbitration as being much superior and preferable than ad hoc arbitration. However, I do not think that I should make such a propaganda campaign.

Here are some pros and cons:

Institutional Arbitration:

tried and tested set of Rules providing a known and predictable structure;

administrative and supervisory infrastructure;

separation of tasks, e.g., regarding the determination of costs and deposits;

a certain safeguard by the scrutiny exercised by some institutions regarding the proper conduct of the arbitral proceedings and the format of the arbitral award;

"acceptability" of the process due to the good and world-wide recognized reputation of the particular arbitral institution:

sometimes inflexibility of the institutional rules;

sometimes bureaucratic procedures; and

additional administrative costs charged by the institutions;

some institutions do not credit the interest earned (on the sometimes large deposits) to the parties, but keep them for covering their overheads.

Ad hoc Arbitration:

a tailoring to the very specific needs is possible;

more flexibility of the procedure;

possibility to make use of the very well suited UNCITRAL Arbitration Rules which provide for an excellent and tested format for the arbitral proceedings, and also provide for a reliable Appointing Authority;

more flexibility for making a direct agreement regarding proper fees to be paid to the arbitrators (which of course will fully account for interest earned on deposits);

no interference or overlapping between the provisions contained in the arbitration law (Arbitration Act) at the place of arbitration and the provisions contained in arbitration rules of a particular institution:

less tools available for ascertaining that the arbitral tribunal can be constituted even against a recalcitrant party;

more dependence on the suitability of the rules/provisions contained in the Arbitration Act as applicable at the place of arbitration; thus make sure to provide for a place of arbitration in an "arbitration-friendly" country such as (of course) Switzerland, France and some others;

lack of the somehow more official standing of an institutional arbitration which may be of importance, e.g., with parties coming from Eastern European countries, or from developing countries.

On balance I would not wish to make one particular recommendation. In fact you will have to consider a number of detailed aspects when making your own evaluation in a given instance.

2.If your preference is for Institutional Arbitration:

Do you know the interaction between the Institutional Rules and the lex arbitri, i.e., the Arbitration Act at the proposed/contemplated place of arbitration?

Here below are the most essential areas of concern where you may check for harmony (or conflict) between provisions of Institutional Arbitration Rules and the provisions of the lex arbitri (i.e., the Arbitration Act at the place of arbitration) as far as such latter provisions are of a mandatory character, or pertaining to public policy at the place of arbitration:

(a)Does the lex arbitri restrict the objective arbitrability of claims in dispute?

- In connection with licence agreements (where disputes may arise regarding the exploitation of a patent, or the use of trademarks or of a copyright), or in connection with corporate acquisitions (where disputes about the ownership of intellectual property may arise), or in connection with research and development contracts and related employment contracts (where disputes may arise as to who has become the owner of the intellectual property created under such contracts) you may wish to ascertain whether these matters (which frequently involve public interests, specifically where a monopoly is claimed) are arbitrable under the law of the country where the arbitration is to take place (as well as under the law of the country or countries where, most likely, enforcement may have to be sought). Some national laws are not supportive of the arbitrability of IP disputes (those countries were reported by the ICC Working Group on IP Disputes to include Brazil, India, Israel, Republic of Korea and South Africa); the largest group of countries (including China, Finland, France, Hungary, Italy, Ireland, Japan, Spain and Sweden) recognize the objective arbitrability of intellectual property disputes with some restrictions concerning public policy, whence it is necessary to check this matter, particularly regarding the attitude of courts when seized of an intellectual property case in respect of which an arbitration agreement has been signed; the third group of countries (comprising Australia, Belgium, Switzerland, the United Kingdom and the United States are favorable to recognize arbitrability of all intellectual property disputes (however, an arbitral tribunal can only decide inter partes and thus cannot make decisions erga omnes).

-In case of a State-controlled co-contracting party: Does the lex arbitri restrict defences, e.g., of a State or State-controlled entity seeking to invoke inarbitrability of a particular issue by reference to its own domestic law (see, e.g., Article 177 of the Swiss PIL Act)?

(b)Does the lex arbitri contain specific requirements as to the form and validity of the arbitration clause or arbitration agreement?

-Or does it reflect a broad in favorem validitatis provision as, e.g., in Article 178 of the Swiss PIL Act?

(c)Does the lex arbitri recognize that the particular arbitral institution (such as the ICC, AAA LCIA, WIPO etc.) will be competent to decide on the appointment, removal or challenge of arbitrators (as, e.g., pursuant to Article 179/180 of the Swiss PIL Act).

-Or does the lex arbitri provide for an ultimate or supervisory control by its own national courts?

(d)In particular: Does the lex arbitri contain specific requirements regarding the persons who may serve as arbitrators, or regarding their independence and impartiality, which may stand in contradiction to the provisions as contained in Institutional Arbitration Rules? Does the lex arbitri provide for specific disclosure requirements?

(e)All Institutional Arbitration Rules recognize the freedom of the parties to agree on the procedure.

-Does the lex arbitri impose limits to such freedom (other than by stating the normal requirements of "due process" in the sense that the parties must be treated with equality and that they must be given full opportunity to present their respective case)?

(f)Absent an agreement of the parties on the procedure, most Institutional Arbitration Rules grant a far-reaching freedom of the arbitrators to determine, as far as necessary, the procedural rules to be followed (see, e.g., Article 182 of the Swiss PIL Act and Article 1494 (2) of the French NCPC).

-Does the lex arbitri restrict such freedom? Does it require that specific procedural rules be followed, or does it even require that the arbitrators should be guided by a domestic Code of Civil Procedure as applicable at the place of arbitration?

-Does the lex arbitri contain provisions regarding multiparty arbitration or regarding consolidation and third party intervention (such as the Netherlands Arbitration Act, Articles 1045/1046)?

(g)Does the lex arbitri contain specific provisions of a mandatory character regarding proceedings in the absence of the defendant party (see, e.g., Austria and the Netherlands Arbitration Act, Article 1040)?

(h)Does the lex arbitri recognize the determination made by the parties or, failing them, the respective Arbitral Institution regarding the place of arbitration and the language in which the arbitral proceedings shall have to be conducted (or is it possible for a domestic party to require, even despite such a language clause, that proceedings be held in a local language)?

(i)Does the lex arbitri (or the substantive law applicable to the dispute) contain provisions of a mandatory character regarding the amendment or amplification of a claim or defence, or provisions regarding set-off and counter-claims and their admissibility?

(k)Does the lex arbitri recognize the authority (as provided for by most Institutional Arbitration Rules) of the arbitrators to rule on interim measures of protection and to grant injunctive relief?

-Or does it restrict such authority, or deny the same completely (reserving such competence exclusively to national courts; see the situation, e.g., in Italy and Scandinavian countries)?

-Is it possible for a party (or the arbitral tribunal) to seek enforcement of an interim measure ordered by the arbitral tribunal via the assistance/co-operation of the local court at the place of arbitration and judicial aid via bilateral treaties or international conventions such as those of Brussels, San Sebastian and Lugano?

(l)Does the lex arbitri contain provisions for court assistance in connection with evidentiary proceedings, for instance for compelling recalcitrant witnesses to appear before the arbitral tribunal, or to compel the production of documents etc.? Does the lex arbitri provide for a right of the party to obtain a discovery of documents (even beyond the provisions regarding the disclosure of documents as may be contained in Institutional Arbitration Rules)?

(m)Does the lex arbitri recognize the so-called "competence-competence" of the arbitrators, or is it possible for a party to resort to the ordinary courts to seek determination of arbitral jurisdiction (as, until recently, in the U.K.)?

(n)Does the lex arbitri restrict the freedom of the parties to designate the law (or rules of law) applicable to the substance of the dispute?

-Failing a choice by the parties: Does the lex arbitri restrict the freedom/autonomy of the arbitrators to designate the rules of law applicable to the substance?

-Does the lex arbitri impose that its own conflict of laws system be applied, or does it grant a freedom including the so-called voie directe (see, e.g., Article 1496 of the French NCPC and the independent conflict of laws rule in Article 187 (1) of the Swiss PIL Act)?

-Does the lex arbitri contain provisions regarding the application (or the taking into account) of provisions pertaining to other laws (such as mandatory rules of law outside the lex contractus?

(o)Does the lex arbitri recognize an authority given to the arbitrators to decide ex aequo et bono, or to act as amiables compositeurs, or to fill gaps?

(p) Does the lex arbitri contain special requirements regarding the arbitrators' deliberations?

-For instance, does the lex arbitri recognize the authority of a "truncated arbitral tribunal"? Does it recognize a provision such as Article 11 of the International Rules of the AAA, or (the less clear) Article 16.2 of the LCIA Rules?

-Does it recognize an authority given to the chairman to decide alone if no majority can be obtained (see, e.g., Article 19 of the ICC Rules and Article 16.3 of the LCIA Rules)?

(q)Does the lex arbitri allow a dissenting opinion (or would a dissenting opinion jeopardize the enforceability of the award, or would a dissenting opinion be seen as a violation of the secret du délibéré)?

(r)Does the lex arbitri allow requests for the correction (and/or interpretation) of the arbitral award?

(s)What are the grounds for challenging an award on the basis of procedural defects? Do they, by and large, correspond to the grounds for refusing recognition and enforcement as per Article V (1) (a) - (d) of the New York Convention of 1958?

(t)Does the lex arbitri provide for a challenge of the award on the merits other than for reasons of public policy?

-Is public policy, in this context, the same as the domestic public policy, or is there a more restrictive public policy in international affairs?

-What are the notions and criteria applied under the lex arbitri?

(u)What is the time-limit for filing a challenge (strictly limited, e.g., 30 days in Switzerland, 3 months or even unlimited as under other national arbitration laws)?

(v)Does the lex arbitri provide that there shall be only "one shot" for a challenge, in the sense that there shall be only one court instance (such as the supreme court, see, e.g., Article 191 of the Swiss PIL Act)?

-Or do you have to be prepared to go through two or even more court instances (for instance by filing a challenge to the Paris Cour d'Appel whose decision will then be subject to the control of the French Cour de Cassation)?

(w)Does the lex arbitri require that, after a successful challenge, the case be remitted to the ordinary State court for making a new decision (as, e.g., under the present Taiwan Arbitration Act in its Article 26!), or is the case remitted to the arbitrators which had rendered the award (e.g., in Switzerland)?

(x)Does the lex arbitri provide for a revision of the award, if it had been obtained by improper means (such as fraud); time-limits?

(y)Does the lex arbitri allow the parties to conclude a so-called Exclusion Agreement waiving all (or some) grounds for challenging an award?

-What are the requirements for such Exclusion Agreement?

-Is an indirect exclusion (e.g., via the ICC Rules) a valid exclusion (as admitted in the U.K.), or would it not be sufficient (as in Switzerland, see Article 192 of the Swiss PIL Act)?

3.Adoption or Derogation regarding Model Clause?

·Your next question will be whether to use the model arbitration clause as is, i.e. as it is proposed by each arbitral institution in their booklets or rules, as a "prêt-à-porter clause"(possibly with the respective optional additions);

·or whether you should contemplate to amend or expand that model, shaping it to your own specific needs, thus creating your own "haute-couture clause."

I believe that in both cases you should consider all of the checklist points, which I am going to mention below, to make sure that you will not overlook an element which you should have considered when drafting the arbitration clause, even if your ultimate conclusion may well be to adopt the model clause of the institution unchanged.

The check-list below may also be used in connection with the drafting of a submission agreement which parties may wish to establish once a dispute has arisen. It is quite normal that such a submission agreement shall be in more elaborate form than the usual arbitration clause and will aim to reflect, as far as possible, the parties' common understanding in view of the forthcoming arbitral procedure.

There are certain elements which should be checked even before attempting to draft a clause (or a submission agreement) on paper (I am calling these the "Pre-drafting Checks"), and I will thereafter discuss those elements which should be considered while drafting the clause as such ("Drafting Checks").

C."Pre-drafting" Checks for Arbitration Clauses

It is necessary that, prior to starting the drafting of an arbitration clause, the following matters be carefully checked and examined since, as the case may be, the answers under the following points may suggest or necessitate certain particular provisions to be incorporated in the arbitration clause:

1.Status of Parties

The legal status of the contractual party or parties may have consequences for drafting an appropriate clause.

·Is your co-contracting party a State-controlled organization? If so: what is its exact status/independence? Is there (or not) a liability of the State itself (as this has often been asserted, but only in exceptional cases with success)? The approval or ratification of a contract by the superior ministry of a State does not as such make the State itself a party to your contract (see the famous "Pyramids case" in Re SPP v. EGOTH and Egypt, ICC Case No. 3493, Recueil I. 124).

·Is the party a consortium or a partnership? If so: what is its exact legal status? Are its members or partners to be bound and liable under the agreement, with individual or joint and several liability? All of this requires careful checking!

·Is there an alter ego party which ultimately you wish to be able to sue (such as a non-disclosed principal, beneficial owner, shareholder or parent company, sister company or subsidiary)? If so, contractual provisions should pave such route, as you may not rely on an extension of the arbitration clause to any non-signatories (such an extension, made in a few very specific arbitration cases, mainly under the ambit of the so-called Group of Companies Doctrine, is tied to very restrictive notions; see hereto Part D, para. 15).

2.Capacity

The capacity (subjective arbitrability) of the contractual party should be checked against local restrictions, specifically restrictions imposed on State-controlled entities, as they may apply. Frequently it might be prudent to require a specific warranty, or confirmation from the government, that the party has the capacity and authority to enter into an arbitration clause and to validly and bindingly submit future disputes to arbitration. Capacity matters are normally governed by the lex incorporationis, i.e., the domestic law of each party.

3.Arbitrability

The objective arbitrability of the claims which, possibly, might arise under the contract may be critical in antitrust/competition law matters, industrial property rights, bankruptcy matters, sometimes in contracts regarding natural resources and labor law relationships.

What about arbitrability of intellectual property claims?

-What about arbitrability regarding the validity of an intellectual property title?

-What about arbitrability regarding a claim of infringement of an intellectual property title?

-What about arbitrability of a dispute regarding ownership of such title?

It is beyond the scope of this paper to cover this subject. A simplified short answer is to say that, under Swiss law and if arbitration takes place in Switzerland, practically all disputes inter partes are arbitrable, but of course the arbitral award cannot have an erga omnes effect. For detailed answers see the detailed Conference Reports of the ASA Conference of 19 November 1993 which have been published in the volume, ASA Special Series No. 6: Objective Arbitrability, Antitrust Disputes and Intellectual Property Disputes. This Brochure can be ordered from the ASA Secretariat, Dr. Rainer Füeg, St. Alban-Graben 8, P.O. Box 1548, CH-4001 Basel; Fax: (..41-61) 272 80 60.

Caveat: What law governs the issue of arbitrability? - a widely debated issue. Is it the national law of one particular party, or the lex contractus, or the lex loci solutionis (where the essential performance is to be rendered), or the lex arbitri (governing at the place of arbitration), or the law of the country in which most likely execution of the award will have to be sought, or any other law or a combination of the foregoing, or common and fundamental principles of law (applying a de-nationalized approach)?

·There is no unanimous answer and all above referenced solutions have been advocated and practiced in the framework of international proceedings and arbitral awards.

·The new Swiss Arbitration Law tries to solve this matter, in its Article 177.1 of the Swiss Private International Law Act, by stating an independent and broad rule of private international law (see hereto Marc Blessing, in ASA Special Series No. 6, Objective Arbitrability, Antitrust Disputes and Intellectual Property Disputes, Report No. 1, pp. 14 - 20).

·See also Article V of the New York Convention of 1958, where a test of arbitrability of the subject matter of the dispute is likely to be made under Article V (1)(a) in the context of the validity as such of the arbitration clause, as well as under Article V (2)(a), where the test of arbitrability will be made against the laws of the country in which enforcement of the arbitral award is being sought.

4.Representatives

The valid representation and the powers of those signing the contract embodying the arbitration clause, or the separate arbitration agreement, should be checked. Would it be advisable or necessary, under the particular situations of a case, to require a specific warranty or confirmation by a Board of Directors' Resolution, or a Shareholders' Resolution, or a Council of Ministers' Resolution, or the confirmation by any other governmental body?

Caveat: The issue whether someone signing a contract or an arbitration clause had been validly empowered to do so is not normally or necessarily governed by the lex contractus but, as to the existence of a valid authority, by the domestic law of the represented company and, as to the extent and scope of such authority, by the law of the country in which the authority or power was used or where the acts were carried out. However, a plea invoking the absence of a valid power of attorney may be regarded as incompatible with the principle of bona fides.

5.Form Requirements

Check particular local form requirements that might have to be taken into account for the sake of ascertaining that the arbitration clause will be validly established in proper form. Please note that certain countries require a particular written form, and there are still some countries where the binding nature of an arbitration clause is not as yet recognized (e.g., Venezuela, Brazil). Moreover, various restrictions exist in Middle Eastern countries.

6."Arbitration-friendly" Environment at the Proposed Place of Arbitration

Most definitively you will expect to conduct "your" arbitration procedure in a suitable, "arbitration-friendly" environment.

What does that mean in legal terms?

(a)a modern Arbitration Act which is up to the level/standard of the UNCITRAL Model Law, or modern legislation (Arbitration Acts);

(b)a recognition of the "specificity of international arbitration";

(c)no interference by domestic/municipal laws, or by a national Code of Civil Procedure;

(d)a broad recognition of the objective arbitrability of a dispute;

(e)a broad recognition of the validity of an arbitration clause;

(f)a full respect of the parties' autonomy to decide on (and organize) the arbitral process, including matters of the appointment or challenge of arbitrators and the structuring of the arbitral proceedings;

(g)a far-reaching autonomy conferred upon the arbitrators to organize the arbitral proceedings as they deem appropriate, without local constraints, restrictions or time-limits (in those cases where the parties had not agreed on procedural issues);

(h)a recognition of the parties' right to be treated with equality and their right to be heard in adversarial proceedings;

(i)an authority for the arbitrators to decide on interim measures of protection;

(k)a flexibility in respect of the structuring of evidentiary proceedings satisfying the expectations and needs of the parties;

(l)a competence of the arbitrators to rule on their own jurisdiction (so-called "competence-competence");

(m)an assurance as to the availability of a "safety net" provided by the Arbitration Act to see to it that:

·an arbitral tribunal can properly be constituted (with appointing authority mechanisms in case a party should fail to make a nomination, or if an arbitrator has to be revoked or replaced);

·for determining on a challenge regarding an arbitrator in case of lacking independence, partiality or misconduct;

·for keeping the arbitral tribunal "alive" until it has rendered its final arbitral award.

(n)parties will of course want to be able to use their own lawyers; a foreign party should not be expected to appoint a local lawyer, and the arbitration law should, therefore, be such that there shall not exist a factual constraint to appointing a local lawyer;

(o)an efficient and cost-effective procedure without local pitfalls;

(p)confidentiality of the entire arbitral process;

(q)assistance by, and co-operation of, local courts in aid of arbitration, if and where required, for instance in the framework of evidentiary proceedings;

(r)full respect of the choice of law made by the parties (unless such choice had been made in violation of public policy):

·and absent such a choice of law: an autonomy given to the arbitrators to decide on the rules of law governing the contract (without a necessity or requirement that the arbitrators shall have to apply the local private international law for that purpose);

·a possibility for the arbitrators to adjudicate a dispute ex aequo et bono if the parties had so agreed;

(s)recognition of the finality of the award:

·subject only to very limited grounds for a challenge (annulment) of the award, namely essentially.

(t)where the arbitral tribunal has violated fundamental notions of "due process" (as enumerated in Article V (1) of the New York Convention, respectively comparable to the grounds as per Article 190 (1) (a)-(d) of the Swiss Private International Law Act);

(v)enforceability of the arbitral award in the country of origin of the award without further scrutiny by a local court or the requirement of a double exequatur;

(w)enforceability of the award outside the country of origin of the award in accordance with an efficient bilateral treaty network or, most essentially, via the New York Convention of 1958; see para. 7 below.

7.Treaty Network

Check the Treaty Network for recognition and enforcement of the arbitral award. Most essentially, you should check whether the country or countries where, most likely, execution will have to be sought are signatory States of the New York Convention of 1958 and whether such countries have acceded to the Convention under the First Reservation. In this case you will have to ascertain that the place of arbitration is in a country which is also a signatory of the Convention. There are still some important countries that have not as yet acceded to the New York Convention, such as, e.g., Portugal, Zaire, Brazil, Venezuela, certain Middle Eastern countries such as Iran, Iraq (whereas Saudi Arabia has recently acceded in January 1994).

D.Drafting Checks for Arbitration Clauses

1.Scope and Reach

Carefully define the scope and reach of the arbitration clause, avoiding a narrow wording.

^."All disputes arising out of or in connection with this Contract ... " is considered to be a broad formula (broader than "all claims arising under this Contract" and broader than "all claims arising during the execution of this Contract," which latter wording might make it doubtful whether a dispute as to the validity of the contract would also be covered). English courts have been much used to draw subtle distinction between disputes arising "out of" or "under" or "out of and under" or "relating to" or "in connection with" a contract, which narrow grammatical interpretations may strike continental lawyers as being quite devoid of merit (at least in those cases where the parties' intention to arbitrate is sufficiently clear and where, as in Switzerland, a bona fides oriented interpretation of the parties' true intentions will, in an international context, normally support the conclusion that the parties intended to arbitrate (and not litigate) all of their disputes as may arise under a particular contractual relationship). However, in order to avoid arguments which are likely to procrastinate the arbitral process, it is well warranted to be careful about the wording. (For the interpretation in the United Kingdom see, in addition to the standard reference books by Russell and Mustill/Boyd, the recent article by S.K. Chatterjee, "Do Disputes Arise "out of" or "under" or "out of and under" a Contract?," in Arbitration (The Journal of the Chartered Institute of Arbitrators), May 1994, 117 ss.).

^.What about claims in tort, or quasi-contractual claims, or the breach of ancillary duties of care? It is prudent to make a specific reference that all such disputes and claims should also be covered by the scope and reach of the arbitration clause!

^.What about set-off claims? Should a party be allowed to plead and operate a set-off by invoking a claim originating from a different contract (which may or may not contain an arbitration clause, or may contain a different arbitration clause)? This issue is much debated and is likely to be linked to substantive law (in most civil law countries) and to procedural law (in many common law countries), with multiplied legal complications in those cases where the place of arbitration is, e.g., in a common law country, whereas the law governing the contract pertains to the family of civil laws. It will be prudent or necessary to clarify this matter (either by explicit provision or explicit negation) so as to avoid lengthy arguments later on, specifically where, for instance in construction matters, various parallel (or otherwise related) contracts are being made, possibly in successive stages.

^.Possibly, where various contracts exist, it is wise to provide for a synchronizing arbitration clause in the sense that one and the same arbitral tribunal will be competent to adjudicate any and all claims between the parties, whether arising out of Contract A,B or C ... . This would then have as an effect that, if Party X sues Party Y for a claim under Contract A, Y could invoke not only a set-off claim arising under Contract B or C, but could also make a counter-claim for claims arising under Contract B or C. As the case may be, you may wish to specifically negate or exclude these.

2.Ad hoc or Institutional Arbitration

Choose between ad hoc or institutional arbitration; see Part B above.

·If you choose an institution (such as ICC, LCIA, WIPO, AAA or the Zurich Chamber of Commerce ....) make sure that the institution is correctly named. It is both surprising and frustrating to see, in actual practice, how frequently totally ambiguous references are made by the parties, or references to institutions which do not exist on our globe!

·Define clearly whether the rules at the time of signing the contract shall be applicable, or those prevailing at the time when filing the request for arbitration (this latter solution would seem to be preferable, on the (hopefully justified) assumption that future modifications of existing Rules will provide improvements, rather than retrograde steps). Absent an explicit provision in the arbitration clause or in the institution's rules, it will normally be concluded that the rules as in force when making the arbitration clause shall prevail.

3.Place of Arbitration

Determine the place of arbitration, naming a city (and not only a country as such) in an "arbitration-friendly" State (see the criteria spelled out above under Part C para. 6), having regard to the treaty-network (see Part C para. 7).

·There exists a wide consensus in favor of preferring a neutral venue, i.e., a place of arbitration situated in a third country (not connected to the parties in question, or the essential place of performance).

·The legal consequence of choosing the place of arbitration is that this choice will trigger the applicability of the Arbitration Act of such country (lex arbitri or lex arbitrii).

·If reference is made to the ICC (Paris) as the institution, you should nevertheless define where the particular arbitral tribunal (to be established under the ICC Rules) shall have its seat, otherwise the designation shall be made by the institution (ICC).

·Most model arbitration clauses suggested by arbitral institutions (except, e.g., ICC) do recommend that you should specify the place of arbitration; do follow this recommendation (but, of course, there are situations where no agreement can be reached on this issue, so that the determination will then have to be made by the institution).

·The determination of the place of arbitration is even more important in ad hoc arbitration.

4.Sole Arbitrator or Arbitral Tribunal, Multiparty Situations

Determine whether the reference should be to a sole arbitrator or an arbitral tribunal consisting of 3 (or sometimes of another number of) arbitrators. If a claim is likely to be below USD 1 or 1.5 million you may prefer to opt for a sole arbitrator.

·You may, in institutional arbitration, leave that choice to the institution; they have their own, well tested criteria for making this determination.

·Some of them also have a suitable answer for multiparty situations (in the sense that if, e.g., there is more than one defendant party, they will have the option to either select one commonly designated arbitrator, or else to require that both arbitrators to be named by the claiming side and by the defending side be designated by the arbitral institution itself, for the two, so nominated, arbitrators to propose the chairman (this is likely to be the solution to be reflected in the final WIPO Arbitration Rules, which is a more flexible solution than the one contained in the International Arbitration Rules of the Zürich Chamber of Commerce, Article 13, or in Article 10.1 of the Rules of Arbitration of the International Arbitral Centre of the Federal Economic Chamber, Vienna)).

·WIPO, under the ambit of its "Expedited Arbitration," will always appoint one sole arbitrator.

5.Appointing Mechanism in ad hoc Arbitration

You may wish to define the appointing mechanism, stating particular time-limits for the nomination of arbitrators and for the appointment (either by the parties themselves or, alternatively, by the arbitrators nominated by them) of the presiding arbitrator.

·in institutional arbitration the respective Rules will contain time-limits.

6.Specific Qualifications

Should an arbitrator or (typically) the presiding arbitrator have specific qualifications? Should he be a citizen of and residing in a "neutral" country (not connected to the residence of the parties and the place of performance)? Should he have specific professional qualifications (such as, e.g., a practicing lawyer with at least 15 years professional experience)?

Caveat: Avoid making a too narrow qualification! Be aware of local requirements of the type of the former Article 502(3) of the Egyptian Civil Procedure Code!

7.Appointing Authority (in ad hoc Arbitration only)

You may wish to designate an appointing authority which will make the appointment of an arbitrator or presiding arbitrator if no agreement can be reached, or if a party fails to make an appointment. In Switzerland, for instance, the President of the Swiss Arbitration Association (Association Suisse de l'Arbitrage) is specifically empowered on the basis of the Statutes of the Association to make such appointments. Likewise, the Zurich Chamber of Commerce may be designated as an appointing authority, or any Swiss court instance.

·Or you may consider making reference to the appointing authority as provided for under Article 6.2 of the UNCITRAL Arbitration Rules: the Secretary-General (at present Mr. Hans Jonkman) of the Permanent Court of Arbitration at The Hague (c/o International Bureau of the Permanent Court of Arbitration, Peace Palace, NL - 7517 KJ The Hague, Tel. (070) 3 46 96 80; Fax (070) 3 56 13 38).

8.Replacement of an Arbitrator (mainly in ad hoc Arbitration)

You may wish to specify the consequences in case a party-nominated arbitrator is to be replaced (in the sense that the new arbitrator will have to take over without a full or partial repetition of proceedings that have already taken place in the past) and you may determine a different approach if the Chairman has to be replaced.

·Some institutional rules do contain provisions in this regard; see, e.g., Draft WIPO Arbitration Rules, Rule 27; ICC Rules Article 2.12; AAA IAR Article 11 (2); see, also, its highly interesting provision in Article 11(1). The International Arbitration Rules of the Zürich Chamber of Commerce, in contrast to the solution in the aforementioned Rules, provide that the procedure shall be continued where the preceding arbitrator has left it (Article 18(3)), instead of leaving that decision within the discretion of the arbitrators.

9.Mediation or Other "Cooling-down" Mechanism, MED-ARB, MEDALOA

Should there be a "cooling-down" mechanism prior to starting arbitration in the sense that first some mediation procedures should take place? If so, such procedure should be clearly defined, and it is necessary to clarify whether such mechanism is meant to be a compulsory requirement prior to starting arbitration (which will necessitate very careful wording!), or whether it should be entirely optional. Moreover it is necessary to provide for confidentiality in a very broad sense in respect of all matters discussed or divulged during the mediation process; see Part A para. 2 above.

The most frequently used types of ADR procedures are mediation, conciliation and the mini-trial. None of these types will fit into a narrow definition, and they will not be discussed here in detail. It may suffice to indicate that the terms "mediation" and "conciliation" are often used quite indistinctively; nevertheless, one may differentiate between the two in that a conciliator will normally offer an opinion as to the appropriate resolution of the dispute, whereas the mediator does not. You may wish to define the role when drafting a clause or agreement, and to describe his task as being either evaluative or facilitative. The mini-trial procedure is characterized by the idea that, essentially, the case should be brought before a panel consisting of a top- ranking senior executive of each of the parties and a presiding neutral person and that their "distance" to the matter, their authority and their businessman like approach should enable them to reach a solution; if not, it would be for the chairperson to render an opinion on the matter, or to make a recommendation; see hereto the Mini-Trial Rules of the Zürich Chamber of Commerce of 1984.

What is to happen if the ADR procedure fails? These are the main options:

·litigation before the ordinary courts; this may not be desirable in the international context;

·arbitration (in the ordinary sense), to be heard by fresh persons sitting as arbitrators;

·a MED-ARB type of arbitration in the sense that the same person who has served as mediator should thereafter sit as arbitrator (and will be expected to benefit from the knowledge gained during the mediation process);

·a MEDALOA type of arbitration in the sense that, at the end of the mediation procedure, each party will have to submit its last (best) offer and that, in the subsequent arbitration, the arbitrators' mission will then simply consist in deciding whether the last offer of party A is to be accepted, or the last offer of party B. "MEDALOA" stands for Mediation - and - last - offer - Arbitration. The idea is that the tribunal should not be allowed to make a decision which lies between those two last offers, so as to preserve the effect of this device (namely, the effect that each party will be forced to take a very reasonable attitude when considering its last offer); of course parties may authorize the arbitral tribunal to rule in between those last offers (but the likely effect thereof will be that parties will make as little concessions as possible and thus may be tempted to argue on their extreme positions instead of seeking to find an acceptable solution). First experiences on MEDALOA - procedures in the United States praise the advantages of this device, particularly because the arbitral process will be clearly focused (its scope will not reach from A to Z, but will only consider whether the solution is (say) the position "G" or the position "R") and may, through concentration of the procedure, provide a resolution (with an enforceable arbitral award) within a very short period of time; for a draft MEDALOA Clause see Part E para. 5.

10.Language

Determine the language to be used in the framework of the arbitral proceedings. In most cases this will be the language used in the main Contract (containing the arbitration clause). Nevertheless, it is highly recommended to specifically determine the language to be used in the framework of the arbitral proceedings.

·You may also wish to say that documents may be filed in their original language if such language is, e.g., English, French, German and Italian, whereas, documents in any other language (a language not commonly or reasonably known to the arbitrators and/or the parties and their representatives) will have to be translated into the language in which the arbitral proceedings are conducted. Likewise, you may determine in what languages witnesses and/or experts may be examined without the assistance of interpreters.

·Most institutions recommend determining the language by adding a respective sentence to their recommended model arbitration clause (AAA, LCIA, WIPO, but not in ICC); do follow that recommendation!

·Bilingual proceedings (with two reference languages) are a headache.

·Caveat: Some Rules or local laws may still provide that a party or arbitrator may require oral proceedings to take place in a local language.

11.Law Applicable to the Arbitration Clause

Unless the place of arbitration is in Switzerland, it may -- in some cases -- be wise to determine the law applicable to the arbitration clause as such, since this is a widely disputed issue (with essentially five different solutions that have been adopted in international arbitration practice).

Such a choice of law would no longer be necessary if the place of arbitration is in Switzerland because the new Swiss International Arbitration Law now contains (in Article 178 of the Swiss Private International Law Act) a provision which assures that the confidence of a party in the validity of the arbitration clause will not be frustrated.

12.Law Applicable to the Merits

Determine the substantive law applicable to the dispute, that is, the claims submitted to arbitration, or verify that the main contract does contain a specific clause for the purpose.

·Avoid a narrow wording such as "this contract is construed under (or governed by) the laws of [Switzerland]," because the dispute may involve issues which are not solely or directly related to the "construction" of the contract; therefore, a broader clause would seem to be preferable such as: "All disputes referred to arbitration including those on any statute of limitations, set-off claims, tort claims and interest claims, shall be governed by the substantive laws of [Switzerland]."

·The normal choice is for reference to a particular national law, unless there are special circumstances.

·Propose the choice of a neutral (and modern) substantive law!

·If the parties cannot agree on the choice of law, you may consider whether the arbitrators should be given a certain guidance so as to facilitate their task; see hereto para. 28, below.

·In construction contracts the owner or employer will very frequently impose the applicability of his own law, i.e., the law of the State where the construction is to be built, including its public law. Thus, the construction contract is likely to be governed by the laws of Malaysia, or Nigeria, or Taiwan, none of which may be sufficiently known to you.

·In the latter context you may, therefore, wish to require explicit guarantees of the owner (possibly backed up by representations of the approving Ministry) that the local laws contain nothing that would invalidate the contractual terms or frustrate the contractor's confidence in the validity and sanctity of the contractual terms.

·You may wish to insert a "no material adverse changes" - clause with the aim of having a sort of "insurance policy" for being able to terminate the contract if its implementation gets affected by unforeseen (and unforeseeable? - a careful drafting is required!) material (to be specified for clarity's sake!?) adverse (should it be defined what will have to be regarded as adverse?) changes (what is a change?).

·Moreover, you may wish to make a reference to trade customs, or to general principles of law, or to lex mercatoria. Such references are seen as a guarantee or somehow as an "insurance policy" to protect you against surprising provisions which may be contained (or may come into) local laws which might frustrate your confidence in the validity of the contractual terms. Alternatively, you may wish to explicitly exclude the arbitrators' authority to base their decision on general principles or on the lex.

·Should there be reference to mandatory public law rules that might play a role (for instance, in the country where the characteristic performance or a particular construction is to be carried out, or where raw materials are produced or supplied) such as competition and antitrust laws, trade restrictions, currency restrictions, laws protecting particular national interests?

·Even where parties have chosen a specific national law to govern their contract, the arbitral tribunal may nevertheless either directly apply, or at least consider, foreign laws (typically public laws of a transnational character, such as competition laws (see hereto Daniel Hochstrasser, "Choice of Law and Foreign Mandatory Rules in International Arbitration," in Journal of International Arbitration, Vol. 11 No. 1/1994, pp. 57-86); a specific exclusion of such "undesired" foreign laws is frequently regarded as being invalid -- this is a wide battlefield for scholarly writings, and a subject matter which has much tried international arbitral tribunals).

·Should the arbitral tribunal be given an explicit authority to fill gaps, or to adapt the contract to changed circumstances? Without a specific authorization it will be highly questionable whether, in a given situation, an arbitral tribunal would exercise such power or authority (which may be regarded as being beyond the adjudicatory function normally vesting in an arbitral tribunal).

·Should the arbitral tribunal be given the authority to decide ex aequo et bono, or to decide as amiables compositeurs? Should this be only an authority, or should instead the tribunal be clearly mandated to decide ex aequo et bono (such that the tribunal would violate its duty if it rendered its decision purely by application of the rule of law)?

As a variant: Should matters pertaining to the an debeatur be decided by the rule of law, whereas the quantum debetur will then have to be decided on an ex aequo et bono basis? - This formula is sometimes used in cases where both parties know and agree that a quantification (e.g., of damages suffered as a consequence of patent infringement, or of loss of goodwill) through strict legal proof will be difficult or even impossible (and where yet both parties agree that damage may have to be awarded by an arbitral tribunal in a liberal appreciation of all circumstances).

13.Procedural Rules

Should a reference to particular procedural rules or a particular procedural law be made for governing the arbitral procedure as such?

·In most cases it will be inappropriate to make a reference to a particular national (domestic) law of civil procedure, since such domestic laws should not play a role and should not be applied in the framework of a truly international arbitration.

·In institutional arbitration, the Rules of the Institution in question will prevail, unless such Rules would stand in contradiction to mandatory rules of law which may be contained in the underlying Arbitration Act applicable at the place of arbitration; such mandatory rules would then override the provisions contained in the Institution's Arbitration Rules. It is, therefore, important for you to know the Arbitration Act applicable at the place of arbitration!

·In ad hoc arbitrations, parties will very frequently make reference to the UNCITRAL Arbitration Rules which are very well structured and well suited for the purpose (but you may note that this will be an ad hoc arbitration since UNCITRAL is not as such (unlike the ICC, LCIA, AAA , WIPO... ) an arbitral institution).

·You may consider referring to particular rules concerning a particularly important aspect such as the taking of evidence, and here you may wish to refer to the IBA Rules of Evidence ("Supplementary Rules Governing the Presentation and Reception of Evidence in International Commercial Arbitration") as in force at the time of instituting the arbitral proceedings. The recommended clause reads as follows:

"The IBA Rules of Evidence shall apply together with the General Rules governing any submission to arbitration be incorporated in this Contract. Where they are inconsistent with the aforesaid General Rules, these IBA Rules of Evidence shall prevail but solely as regards the presentation and reception of evidence."

·You may consider being specific about certain procedural aspects which are likely to be of particular importance in a given situation, e.g.:

-the basic structuring of the arbitral process (such as providing for a double exchange of written pleadings, followed by evidentiary proceedings), or providing for a combination of common law and civil law elements;

-should there be some form of discovery (if so, you should be quite specific about the scope thereof, and the time)?

-should the Memorials be accompanied by written witness statements? If so, in what form? Should the tribunal disregard such written witness statements, if the particular witness cannot - in addition to the statement - be examined in the framework of an oral hearing, or value the same in accordance with its own best appreciation and discretion?

-in what manner should Minutes of oral hearings be taken? Should it be agreed that all hearings be fully tape-recorded, with the tapes thereafter to be copied and delivered to the parties? Or should there be an agreement that verbatim transcripts be produced in respect of the oral hearings?

-should the tribunal be explicitly authorized to conduct site visits (it will most probably have this authority anyhow);

-should the tribunal be specifically authorized to appoint one or more technical and/or commercial expert(s);

-should, in the opposite, there be a "document-only" arbitration?

-should you include a clause requiring the parties to submit to the arbitral tribunal an agreed "bundle of documents" (agreed by both parties), as is frequently used in the U.K. (which procedure may prove useful and expeditious)?

-should you include general language to express the importance of an expeditious adjudication of the dispute, e.g., by reciting that prompt resolution is of importance to the parties, or -- going one step further -- by fixing a time window for a double exchange of written memorials, as well as for subsequent hearings (or a time window for the entire arbitration, such as 12 months or 18 months from the date of filing within which the arbitral award must be rendered);

-should you stress the notion that the arbitral tribunal has the authority to exclude evidence deemed irrelevant or redundant and to set the limits for the number of memorials, the volume of documents, the scope of discovery (if any!) or of requests for the submission of documents, the number of hearing days, the number of witnesses, etc., so as to ascertain an expeditious and cost-efficient resolution of the dispute? (Such an explicit clause may also have the effect of barring attempts to challenge the award on an argument that the arbitral tribunal allegedly violated the right to be heard);

-should you provide for an expedited or "fast-track arbitration" (according to a recent ICC pattern which is described in the Report of Professor Hans Smit submitted to the WIPO Conference, such as an expedited arbitration in accordance with the WIPO's special Rules for that purpose);

-should you indicate that the award shall indicate the essential reasons only and shall not exceed [30] pages;

·You may consider requiring specifically the organizing of a preparatory conference in accordance with the (forthcoming) "UNCITRAL Guidelines for Preparatory Conferences in Arbitral Proceedings" (A/CN.9/396/Add.1). As at present, those Guidelines have been circulated in draft version (as of March 30, 1994) and are likely to be finalized by end of 1994. They do provide for an extremely useful check-list to be considered so as to start the arbitral proceedings on the right foot and to obtain a clear understanding as to the organization and conduct of the arbitral proceedings up to the rendering of the award.

14.Multiparty Arbitration

Should there be specific provisions providing for, or expressly negating, multiparty arbitration?

·It is wise to be specific, so as to avoid lengthy procedural battles before the arbitrators.

·Special care is needed regarding the appointment of the arbitrators, as a consequence of the (regrettable) decision of the French Cour de cassation in Dutco v. BKMI and Siemens. In essence, the multiple defendants (or, as the case may be, claimants) should have the option to either agree on one jointly named arbitrator, or else require that the two arbitrators for both "sides" be named by the institution, or an appointing authority, and for the two, so appointed, then to name (or propose the nomination of) the presiding arbitrator.

·And further care may be needed for defining suitable procedural rules so as to avoid that a multiparty procedure (which is a very frequent procedure in practice!) will become a headache; however, it may not be possible to predict the implications already in the framework of the arbitration clause, so that such issues are normally dealt with at the occasion of a Preparatory Conference organized by the arbitral tribunal (see, in this respect, the excellent "Guidelines for Preparatory Conferences in Arbitral Tribunals" which are at present under preparation by the UNCITRAL and are likely to be adopted towards the end of 1994).

·Would you wish to provide for a consolidation of the arbitration with another arbitration in case of convexity of the subject matters? See hereto

15.Group of Companies, Consortium

If you act for a company "A" which is part of a larger group of companies ("Group"), you will normally wish to make sure that the co-contractant "X," in a law-suit against A, will not succeed in initiating its claim also against other companies pertaining to the Group, such as the parent company, or any of its (other) subsidiaries.

Quite to the contrary, if you act for X, you will be keen to have a possibility to sue not only the particular subsidiary A, but also other companies belonging to the Group, most essentially the parent company.

In all such situations where one party belongs to a group of companies, it is wise to specifically address this matter by clearly negating the possibility for X to raise any claim out of the underlying contract against any other party than A. If, on the contrary, other companies of the group should possibly be included in a future arbitration, then it will be prudent to address this clearly and to obtain specific declarations to this effect.

Absent a clear contractual solution, you risk being confronted with the so-called Group of Companies Doctrine pursuant to which, under specific circumstances, the scope and reach of an arbitration clause might be extended to one or more parties of the Group which have not themselves signed the particular arbitration clause (and you risk lengthy arguments before the arbitral tribunal regarding the preliminary issues of jurisdiction and locus standi). Such situations were, for instance, debated in the following ICC cases: 1434, 2375, 4402, 4504, 4972, 6519 (in all these cases the issue was whether the arbitration clause signed by the parent company alone was to be extended to one or more of its subsidiaries); compare also ICC Cases 4131, 5730 and 5721 (where the issue was whether an arbitration clause signed by a subsidiary can or should be extended to its parent company).

Similarly, contractual provisions should be inserted in the case of a joint-venture or consortium so as to make clear whether the parties or partners standing behind such structures are directly liable and covered by the scope and reach of the arbitration clause.

Will it be possible for your co-contractant to invoke in future arbitral proceedings set-off or recoupment claims as a defence, although such claims arise in connection with one or more different contracts between the same (or related) parties? What about counter-claims? These questions may give rise to very lengthy arguments before the arbitral tribunal, and indeed different answers to such questions are given around the globe.

It, therefore, seems justified to deal with such matters explicitly within the arbitration clause (or elsewhere within the main contract), by either negating such possibilities, or by making their admissibility dependent on explicit consent to be given by the other (claimant) party or, as the case may require, to explicitly allow such set-off operations and/or counter-claims.

17.Third Party Intervention, Joinder

You may wish to specify whether a voluntary third party intervention should be permitted.

Similarly you may wish to determine whether one party may require a third party (which is not directly a party to the contract in question, e.g., a subcontractor) to take part in the arbitral proceedings, such that the third party will either be allowed or required to take part in the arbitral proceedings; obviously a request will only have legal binding effect on the third party if its participation in the arbitral proceedings is covered by a submission agreement (or if covered by conclusive behavior of the third party without raising jurisdictional objections).

You may then also wish to clarify the procedural position of any such third party and clarify whether the arbitral award should not only deal with the main claim (e.g., of the owner against the general contractor), but should also deal with, and determine, any recourse claims (e.g., of the general contractor against his/its sub-contractor(s)) within the framework of the same arbitral proceedings (this will obviously require that such third party/sub-contractor will be able to fully state its case). Such participation is likely to convert a pending arbitration into a multiparty arbitration, and thus the question as to the composition of the arbitral tribunal will quite inevitably arise. Provisions in the present context, therefore, require very careful drafting.

18.Consolidation

Should a consolidation of cases be possible between multiple parties having signed various different contracts for one particular project or construction? For instance, if the employer starts an arbitration against the general contractor, and if the general contractor thereupon institutes arbitration against a dozen individual sub-contractors: should all those cases be consolidated in one case? If so, this will require very specific consents, notably a synchronized arbitration clause, unless the arbitration laws at the place of arbitration specifically allow such consolidation (see, e.g., in the USA and the Netherlands Arbitration Act of 1 December 1986, Article 1046; see also Part D para. 1 above).

19.Interim or Conservatory Measures

In certain types of contracts, such as:

-commodity contracts;

-construction contracts;

-contracts on licensing intellectual property rights of any kind;

it will be particularly important to determine the powers of the arbitral tribunal or the sole arbitrator to direct interim or conservatory measures or injunctive relief, including measures for the conservation or storage of goods, or the sale of perishable goods, or the continuation of the performance or of the construction works irrespective of the submission of a dispute to arbitration, or for the authorization of the taking-over of a particular job by a new party or contractor, or for ordering or extending guarantees or performance bonds securing the contractual performance, or for immediately prohibiting the use of intellectual property, for prohibiting a violative production, for prohibiting any selling and/or marketing activities, or for enjoining an infringing publication of trade secrets. In all such cases very careful wording will be required. Regarding arbitrability and arbitral jurisdiction to decide on interim measures, see the remarks above under Part B, para. 2 (a) and (k).

You may wish to clarify particularly whether the competence of the arbitral tribunal should be exclusive (in the sense that a party may not alternatively or in addition seek to obtain interim or conservatory measures or injunctive relief from a local State court), or whether -- on the contrary -- a party should also be free to seek such relief from any State court having jurisdiction (such recourse not amounting to a waiver or forfeiture of the agreement to arbitrate). The latter will be the normal situation; see also and specifically WIPO Arbitration Rules. In fact, it would be important specifically in intellectual property disputes to be able to resort to the competent ordinary State courts for immediate action.

·Should there be a penalty clause or a clause providing for certain liquidated damages in case a party would not voluntarily honor the provisional measures ordered by the tribunal? Alternatively, should the arbitration clause provide that the arbitral tribunal may embody the order for provisional measures in the framework of an interim award or partial award which then would qualify for international recognition and enforcement under the terms of the New York Convention of 1958 (as this is specifically provided for in Article 26.2 of the UNCITRAL Arbitration Rules, and moreover in Article 22.2 of the new AAA International Arbitration Rules as of March 1, 1991 and the WIPO Arbitration Rules?

·Since it is a matter of wide dispute to what extent interim measures are an issue of procedural law, or an issue of procedural law and substantive law, you may be prudent to specify the various tests under which the tribunal should make its determination such as, e.g., (i) irreparable prejudice to the claiming party; (ii) immediacy of such prejudice; (iii) the prima facie likelihood of success on the merits in the framework of the arbitration, and (iv) the lack of prejudice or absence of major injury to the defendant party.

·Caveat: Note that the arbitration laws of some countries do not grant an authority to the arbitrator to rule on interim measures, reserving such domain to State-courts (see, e.g., Italy and Scandinavian countries).

·In an ICC arbitration you may elect to make specific reference to the ICC Pre-Arbitral Referee Procedure according to the Rules in force as of January 1, 1990 (ICC Publication No. 482).

20.Confidentiality

Specifically in intellectual property disputes, confidentiality of certain documents is sometimes of crucial importance. The situation does arise (and, e.g., has arisen in the IBM/Fujitsu arbitration) that a party may wish to rely on documents which should not be seen by the other party (which may be its main competitor in this specific field). Unless there is a specific provision to this effect within the arbitration clause, it will be almost impossible, once a dispute has arisen, to agree on a procedure whereby such confidential documents (or further confidential information) can be validly introduced and considered by the arbitrators without making such documents or information directly available to the other party (since the other party will say that its right to be heard will not be satisfied unless it has been able to have full and unrestricted access to any such documents or information and to comment thereon accordingly).

·However, within the arbitration clause it would be possible and appropriate to contemplate and specifically agree that such confidential documents and information (which will have to be defined carefully) will only be made known and fully disclosed to the arbitrators (but not to the other party), or will be disclosed and made available to a neutral third party (such as an expert, or auditing firm), which third party would then issue a certification, or a report, or an assessment for the arbitral tribunal.

·It is possible for the parties to agree that such a report or assessment be made in the form of a so-called "Expert Determination" (Schiedsgutachten; see below para. 22), which as such will be and become binding for the parties as well as for the arbitrators in respect of the matters confirmed, certified or assessed therein; see, in this respect, para. 22 below.

How confidential are arbitral proceedings? This is a highly controversial and difficult issue and the article of Jan Paulsson, "The Trouble with Confidentiality," which was published in the June 1994 issue of the ICC Bulletin is worthwhile reading. He proposes various wordings for inclusion in the arbitration clause or in an arbitration agreement along the following lines:

"Suggested Provision 1

No information concerning an arbitration, beyond the names of the parties and the relief requested, may be unilaterally disclosed to a third party by any participating party unless it is required to do so by law or by a competent regulatory body, and then only: -- by disclosing no more than what is legally required, and -- furnishing to the arbitrator details of the disclosure and an explanation of the reason for it.

Suggested Provision 2

1. Any documentary or other evidence given by a party or a witness in the arbitration shall be treated as confidential, and shall not be disclosed, by any party whose access to such evidence arises exclusively as a result of its participation in the arbitration, to any third party for any purpose without the consent of all parties or order of a court [or arbitral tribunal] having jurisdiction. (For the purpose of this rule, a witness called by a party shall not be considered a third party. To the extent that a witness is given access to evidence obtained in the arbitration in order to prepare his testimony, the party calling such a witness shall be responsible for his maintaining the same degree of confidentiality as that required of the party).

2. [To the extent that they describe or refer to evidence] written pleadings shall not be disclosed to third parties for any purpose save as stated in 1 above.

3. An arbitrator, when issuing an order for the production of documentary or other evidence, may in his discretion make such order conditional upon the other party or parties' specific written undertaking not to disclose any of the evidence (or details of it) to third parties.

Suggested Provision 3

Awards should be treated as confidential and not be communicated to third parties unless all parties [and the arbitrator] consent; or they fall into the public domain as a result of enforcement actions before national courts [or other authorities]; or they must be disclosed in order to comply with a legal requirement imposed on an arbitrating party or to establish or protect such a party's legal rights against a third party.

Suggested Provision 4

Any person serving as arbitrator, or expert appointed by an arbitral tribunal, or appearing as the representative of a party in an arbitration, thereby undertakes on his own behalf mutatis mutandis to respect the rules of confidentiality defined in Articles .... ."

21.Experts

Further, you may wish to define the role of experts within the arbitral proceedings. Here, it is necessary to determine whether the expert should consider (i) all files which the parties are submitting in the framework of the arbitration, or (ii) only a part thereof, unless otherwise agreed as determined by the arbitral tribunal, or (iii) whether, on the contrary, the expert should be mandated and have the authority to request on his own motion the production of other documents and obtain direct information from the parties, may visit their own offices, interrogate personnel, carry out inspections on site etc.

Moreover, one should clarify carefully if and to what extent the finding of the expert should be final and binding for the arbitrators or whether the arbitrators may have a discretion to evaluate and weigh the findings of the expert in the overall context of the arbitration.

Caveat: Make a clear distiction between experts advising the arbitrators, and the so-called "Expert Determination"; see, in this respect, the next paragraph.

22.Expert Determination

Expert determination is to be clearly distinguished from the use of experts (whether party-nominated or appointed by an arbitral tribunal as neutral experts) in the sense of the foregoing paragraph. While those experts (or expert witnesses) will assist the parties or the tribunal and make statements or give explanations to be valued by the arbitral tribunal, expert determination as meant under this paragraph is a means by which parties agree to jointly instruct a third party (i.e., an expert) to decide a specific issue (mostly an issue of fact, rarely an issue of law) in a binding manner. The characteristic element, therefore, is the binding determination and the specificity of the issue (whereas arbitrators will have to consider and adjudicate the dispute as a whole). The device of an expert determination is frequently used, e.g., to determine the value of certain assets (e.g., in connection with an acquisition, including the determination of intellectual property rights), the determination of the value of a real estate property, the determination of relevant market prices, the determination of the value of the parties' shares in oil exploration agreements, for determining issues relating to engineering or regarding research and development.

It is often advantageous to isolate such issues and to provide for their definitive determination by such an expert with the view to removing those issues from a possibly much more cumbersome and controversial fact-finding and adjudication in the framework of a lengthy arbitral process. The difficulty is to very clearly define the issues and the authority to determine the same in a definitive manner (so as to avoid a dispute about the question whether the particular issue is to be determined by the arbitral tribunal or by the expert). Moreover, it will be important to establish rules for the nomination of the expert, his authority to obtain information directly from the parties, the time-frame of his mission and the allocation of costs. Parties should be aware that it is quite difficult to challenge the expert's determination. As such determination is not equal to an arbitral award, the statutory remedies for challenging arbitral awards are not available. In most jurisdiction areas, the expert's determination can only be attacked if his determination had been affected by a fraudulent behavior, or if the expert had considered the wrong object or answered the wrong questions. However, if the expert had answered the right questions in the wrong way, then his decision will still be binding.

23.Disputes Review Boards (DRB) (specifically in Construction Contracts)

In large construction cases you may consider providing for the constitution of a special Disputes Review Board which will function during the entire construction phase and consist of two or three independent persons with particular knowledge. Parties may then, during the construction period, submit their claims or disputes as they arise to such Board. The Board may regularly or occasionally meet during the construction period and render advice thereon. Parties may agree to abide by such advice pending the construction period, subject to a final determination thereafter in the framework of an arbitration. The Board may be empowered to name a Certifier for determining a particular status of facts. The careful structuring and use of such a Board may greatly facilitate the good understanding among the parties and may be instrumental in avoiding the necessity to pursue claims in subsequent arbitration.

24.Competence-Competence

Should the arbitral tribunal's power to rule on its own competence (the "so-called competence-competence") be defined more carefully so as to avoid a dispute in this often difficult context? (You may note that for instance in the United Kingdom a substantially different understanding had, until very recently, prevailed (and still today prevails in countries with Arbitration Acts influenced by that of the United Kingdom, such as, e.g., the Arbitration Act of the Republic of South Africa) in that the United Kingdom State courts can always resolve jurisdictional questions at any time at the request of either party, and this is not understood this way in most civil law countries).

25.Award on Jurisdiction

You may also wish to define whether a preliminary award on jurisdiction (e.g., as to the validity of the arbitration clause, its scope and reach, the valid constitution of the arbitral tribunal) should be made prior to an examination of the merits, or whether the arbitral tribunal may proceed with the arbitration and rule on jurisdiction in the framework of the final award. The better solution, however, is to leave this decision to the appreciation of the arbitral tribunal.

26.Assignment

In the case of an assignment, if the contract as such is likely to be assigned to, and taken over by, a third party (such as a sister company, or a new company to be formed when the plant to be constructed is operative), then the arbitration clause is likely to remain applicable, but it is still wise to spell this out clearly. Such legal succession will normally require the consent of the other party; yet specific situations may arise such as e.g., in case of a forced restructuring of a group of companies, merger or acquisition of an entire business with dissolution of the party which initially had signed the arbitration clause.

Where only an individual or particular claim which has arisen or arises out of a contract (containing an arbitration clause) is assigned to a third party (for instance to a bank as the assignee), the prevailing view in most civil law countries is that the arbitration clause "will go with the claim" and, therefore, that the assignee as claimant can take the other contract party to arbitration. However, this is not so clear, e.g., under the United States laws, and it may be prudent to clarify this issue precisely. Moreover, the assignor is well advised to draw the assignee's attention to the fact that the assigned claim arises under a contract with an arbitration clause.

You may wish to exclude or at least control the possibility of assigning claims, for instance by requiring the debitor cessus' explicit consent to any assignment.

27.Powers of the Presiding Arbitrator

As to the handling of the procedure: should the presiding arbitrator on his own have the power to grant and extend time-limits for the parties in respect of filings to be made? Such a clause is normally quite practical and suitable. Compare, in this respect, the WIPO Arbitration Rules.

28.Guidance as to the Designation of the Rules of Law to be Applied

If the parties have not defined the law applicable as to the merits of the dispute (see Part D, para. 12 above), the arbitration clause may contain nevertheless an indication in one or more of the following senses:

·Should the arbitral tribunal apply particular conflicts of laws rules (if so, which ones), or should it be free to apply the so-called voie directe, or should it simply apply the "closest connection test" (as, e.g., provided for in Article 187.1 of the new Swiss Arbitration Law (Chapter 12 PIL Act)?

·Should the arbitral tribunal be compelled to determine a particular domestic law (which may be inappropriate in an international context), or should the arbitral tribunal be free to determine "rules of law" which will not necessarily be the same as a domestic law in its entirety?

·Should the arbitral tribunal have authority to apply directly, or to take guidance from, so called general principles of law, or rules pertaining to a transnational law? Or should there be reference to rules considered to form part of the lex mercatoria?

·Should the tribunal take into account specific public law rules which may claim to be applied directly or, at least, to be taken into consideration by the tribunal?

·Should one and the same contract be subject to one and the same legal regime, or should the tribunal be free to say that different regimes apply? This is a particularly important issue, e.g., in the context of an engineering contract which may, to the extent of (say) 50% require engineering work to be done at the home office of the engineering firm in Paris, while the other 50% are to be done on the construction site in Oman. It may seem that there are really no overall satisfactory solutions to such a situation!

·Should the arbitral tribunal be given an explicit authority to decide ex aequo et bono? If so, does it mean that the tribunal is freed from determining and applying particular rules of law (or what else is the understanding of such a reference)?

·Sometimes the power to rule ex aequo et bono is limited to the assessment of damages (where there might be serious problems of proof, for instance, where a party fears that its reputation may suffer, or where it may have to sue for loss of profit), and in such situations it may be advantageous to provide for such an authority (whereas the issue as to liability and proximate causation will have to be adjudicated in accordance with the rules of law); see, in this respect and as to the following, Part D, para. 12 above.

·Should the arbitral tribunal, in addition, have an authority to fill gaps (which goes beyond the normal authority of making an appropriate interpretation of the contract)? If so, this should be specified very clearly and precisely!

·Should the tribunal have an authority to even adapt the contract to changed circumstances? If so, the parties should determine the parameters for such adaptation themselves so as to provide the necessary tools to the arbitrators!

·Should the tribunal be given an express authority for awarding consequential damages, punitive and/or treble damages; or should this be specifically excluded?

·Should there be a specific determination how the tribunal should handle and decide on interest and interest rates? (This issue has given rise to very serious and difficult questions in practice, and cases are not so rare where interest, over the years, may equal the amount of the principal claim, or may even build up to a multiple thereof!). In any event, one must take the care to specify rates, their adjustment, the nature whether simple or compound interest (see, e.g., Article 16.5 of the LCIA Rules which provides for an authority to adjudicate compound interest).

29.Decision Making Process

How should the decision of the arbitrators be taken? It is essential that the presiding arbitrator has the power to decide alone (as if he was a sole arbitrator) in case no majority among the arbitrators can be reached (as this is explicitly provided for in Article 189.2 of the new Swiss International Arbitration Law, equally reflected in Article 19 of the ICC Rules). Most other arbitration rules including AAA, UNCITRAL Arbitration Rules, UNCITRAL Model Law require a majority decision which may have the disadvantage that the presiding arbitrator might be compelled to either support the extreme view of one party-nominated arbitrator, or the equally extreme view of the other party-nominated arbitrator.

30.Authority of a Truncated Arbitral Tribunal

Should there be a provision for the functioning of a truncated arbitral tribunal? See, in this respect, the wise provisions in Article 11 of the AAA International Arbitration Rules which say that, if one arbitrator fails to participate (or otherwise comply with his duties), the other two arbitrators may proceed and make an award themselves. You may have to verify whether such a provision, if reflected in the arbitration clause, will be compatible with the arbitration law at the place of arbitration. Such a clause is, in my view, likely to be valid under Swiss law, since the parties' autonomy to rule on the mission of the arbitrators, on the arbitral process as such and, in particular, on the making of the arbitral decision is fully respected and honored, subject only to the equality requirement as per Article 182(3) PIL Act (obviously, there is a danger that a party will dispute the validity of a provision similar to the one in Article 11 of the AAA IntArbR by arguing incompatibility with Article 182(3), and it will yet have to be seen how the Swiss Federal Supreme Court (or any other national court) will deal with such issue).

31.Exclusion Agreement/Waiver of Appeal

Should there be an exclusion agreement or waiver of appeal? If so, to what extent, fully or partially? Such exclusion/waiver may validly be made for instance in Switzerland under Article 192 PIL Act. Note that the general reference hereto as per the ICC Rules would not be regarded as a sufficiently clear waiver, whereas United Kingdom courts have adopted a contrary view.

32.Interpretation and Correction

Should there be a possibility for interpretation or correction of the award? If so, this may have to be specified unless the law at the place of arbitration does already provide for that authority; this will normally be the case in those countries which have recently amended their arbitration laws by adopting (or reflecting the provisions of) the UNCITRAL Model Law and its Article 33. The present proposals for the amendments of the arbitration laws in Germany and the United Kingdom likewise contain a comparable provision. In Switzerland, leading doctrine affirms such an authority of the arbitral tribunal, although there is no specific reference thereto in Chapter 12 of the PIL Act. The Swiss Federal Supreme Court has not as yet had an opportunity to opine on this issue.

33.Entry-of-Judgment Stipulation

The old-fashion formula which had been used in so many arbitration clauses ("... and judgment upon the award rendered by the Arbitrator/Arbitral Tribunal may be entered in any Court having jurisdiction thereof or having jurisdiction over either of the Parties or their assets", today, has very little significance. It is, therefore, a bit surprising to see that this quite dispensable element has found its way into the new WIPO Model Arbitration Clause, its Model Mediation and Default Arbitration Clause, its Model Submission Agreement and its Model Expedited Arbitration Clause.

·In fact, leading authorities tell us today that an "entry-of-judgment" stipulation is no longer necessary, and the sole reason for maintaining this formula might be to be on a safer side if the arbitral award will not be covered by the New York Convention of 1958. For details hereto see Craig, Park and Paulsson, ICC Arbitration, Second Edition (1990) pp. 148-151.

34.Further Provisions in Contracts with States or State-controlled Entities

A number of issues might be considered if a contract is made with a State-controlled entity, such as, e.g.:

·Should there be a particular stabilization of law clause ("clause de gel")? (To what extent may one rely on such a clause?).

·It may be advisable to require a specific waiver regarding sovereign immunity from suit and immunity from execution.

·The situations of force majeure may have to be defined very carefully, excluding certain types of governmental intervention (such as exchange control regulations, export or import restrictions, embargoes, customs laws, new enactments of competition laws etc.).

·If there is a likelihood of nationalization or expropriation, it would be essential to define the agreement as to the basic calculation and measurement of an appropriate compensation for any such act (compensation for the net asset value, or for the cost value, or for the market value taking into account profitability etc.).

E.Model Arbitration Clauses

How should you draft your arbitration clause?

1.ake the Model Clause as proposed by the respective institution of your choice, or take a suitable Model Clause for ad hoc arbitration.

In most cases, such Model Clause will be satisfactory (and will easily be acceptable to your contract partner).

·Carefully consider whether, under the specific circumstances of your case, you will need more specific provisions in one or another direction.

·You may use this paper as a check-list in respect of particular aspects, and you will have to evaluate very carefully which elements should be added without making your arbitration clause too long, too complicated and, in the end, not saleable to your contract partner.

There exist numerous articles and reports on the drafting of arbitration clauses. A special reference may be made to the article by ICC's Benjamin Davis, "Pathological Clauses; Frédéric Eisemann's Still Valid Criteria," published in Arbitration International, Vol. 7, No. 4/1991, pp. 365-388.

2.Proposed Model Arbitration Clause for ad hoc Arbitration

I would propose the following wording:

"Any dispute, controversy or claim arising under, out of or relating to this Contract (and subsequent amendments thereof), its valid conclusion, binding effect, interpretation, performance, breach or termination, including tort claims, shall be referred to and finally determined (to the exclusion of the ordinary courts) by an ad hoc [arbitral tribunal consisting of three arbitrators] [sole arbitrator]. The place of arbitration shall be [Zürich/Switzerland]. The language to be used in the arbitral proceedings shall be [English].

All disputes, controversies or claims referred to arbitration (including those on any statute of limitations, set-off claims, tort claims and interest claims) shall be governed by the substantive law of [Switzerland]."

à [....]=denote options to be chosen!

[Additional components as may be required, to be added here; see the check-list above!].

Variant: " ... by an ad hoc [arbitral tribunal consisting of three arbitrators] [a sole arbitrator] in accordance with the UNCITRAL Arbitration Rules in force at the time of initiating the arbitration."

3.Proposed Model Arbitration Clause for Institutional Arbitration

I would propose a clause as follows:

"Any dispute, controversy or claim arising under, out of or relating to this Contract (and subsequent amendments thereof), its valid conclusion, binding effect, interpretation, performance, breach or termination, including tort claims, shall be referred to and finally determined by arbitration in accordance with the:

[WIPO Arbitration Rules]

[International Arbitration Rules of the AAA]

[Rules of Arbitration of the International Chamber of Commerce]

[Rules of The London Court of International Arbitration]

[Rules of Arbitration of the International Arbitral Centre of the Federal Economic Chamber in Vienna]

[International Arbitration Rules of the Zürich Chamber of Commerce]

as in force at the time [of the Contract][when initiating the arbitration]. The arbitral tribunal shall consist of [three arbitrators] [a sole arbitrator]. The place of arbitration shall be [Zürich/Switzerland]. The language to be used in the arbitral proceedings shall be [English].

All disputes, controversies or claims referred to arbitration (including those on any statute of limitations, set-off claims, tort claims and interest claims) shall be governed by the substantive law of [Switzerland]."

[Additional components as may be required, to be added here; see the check-list above!]

4.Proposed Model Arbitration Clause for WIPO Mediation and Default Arbitration

I would recommend the following escalating clause:

"Any dispute, controversy or claim arising under, out of or relating to this Contract (and subsequent amendments thereof), its valid conclusion, binding effect, interpretation, performance, breach or termination, including tort claims (hereinafter referred to as "the Dispute") shall be submitted to Mediation in accordance with the WIPO Mediation Rules in force at the time of initiating the mediation procedure.

If the Dispute has not been settled pursuant to the Mediation procedure within 60 days of the initiation of the Mediation, or if either party will not participate in the Mediation, the Dispute shall be referred to and finally determined by arbitration in accordance with the WIPO Arbitration Rules in force [at the time of the Contract] [when initiating the arbitral procedure]. The arbitral tribunal shall consist of [three arbitrators] [a sole arbitrator]. The place of arbitration shall be [Geneva/Switzerland]. The language to be used in the arbitral proceedings shall be [English].

All disputes, controversies or claims referred to arbitration (including those on any statute of limitations, set-off claims, tort claims and interest claims) shall be governed by the substantive law of [Switzerland]."

[Additional components as may be required, to be added here; see the check-list above!]

5.Proposed Model MEDALOA Clause

I would propose to draft a MEDALOA clause along the following lines:

"Any dispute, controversy or claim arising under, out of or relating to this Contract (and subsequent amendments thereof), its valid conclusion, binding effect, interpretation, performance, breach or termination, including tort claims (hereinafter referred to as "the Dispute") shall be resolved by an alternative dispute resolution procedure (hereinafter referred to as "the ADR Procedure") in the sense of a:

[conciliation under the UNCITRAL Conciliation Rules]

[mediation under the CPR Mediation Rules]

[mini-trial under the Mini Trial Rules of the Zürich Chamber of Commerce]

[mediation under the WIPO Mediation Rules]

as in force at the time of initiating the procedure.

If the Dispute has not been settled pursuant to such ADR Procedure within 60 days of the initiation thereof, each party shall submit its best last offer ("the Last Offer") to the mediator (or conciliator or facilitator) and the other party, and a further bona fides attempt shall be made to resolve the dispute within a further time period of 20 days.

If such further attempt fails, the Dispute shall be referred to and finally determined by a Last-Offer-Arbitration, conducted as an ad hoc arbitration. The arbitral tribunal shall consist of [three arbitrators] [a sole arbitrator]. The place of arbitration shall be [Zürich/Switzerland]. The mission of the arbitral tribunal (respectively of the sole arbitrator) shall be confined to determine on the basis of an arbitral procedure and in the framework of an arbitral award whether the Last Offer of party A or of party B shall prevail and, consequently, shall be enshrined in the operative part of the award. The language to be used in the arbitral proceedings shall be [English].

In making its determination, the arbitral tribunal (respectively the sole arbitrator) shall apply or have regard to the substantive laws of [Switzerland] in respect of the dispute, controversy or claims referred to such Last-Offer-Arbitration (including those on any statute of limitations, set-off claims, tort claims and interest claims).

The parties are agreed that the award shall be final and binding on them and undertake to honor the terms of the award voluntarily; they are moreover agreed that the award shall qualify for recognition and enforcement under the terms of the New York Convention of 1958 on the Recognition and Enforcement of Arbitral Awards.

If a party fails to take part in the ADR Procedure and, particularly, if a party fails to submit its Last Offer as per the second paragraph above, the other party shall be entitled to initiate ordinary ad hoc arbitration, and it shall be entitled to require that such ordinary arbitration shall be conducted under the terms of the UNCITRAL Arbitration Rules as in force at the time [of the Contract] [when initiating such arbitration]. Regarding the place of arbitration, the language and the substantive law applicable, the provisions as above provided for the MEDALOA procedure shall apply.

[Additional components as may be required, to be added here; see the check-list above!]

 

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