Use Of Arbitration Clauses In Commercial Agreements



The parties should carefully choose an appropriate applicable law. The applicable law of a contract may be decisive not only for its creation and validity, but also for whether disputes arising out of or related to the contract may be subject to arbitration and what remedies may be granted by arbitrators. It is therefore always advisable to indicate the legislation in force when designing the contract. If the parties do not choose an applicable law, the choice is made for them by the arbitrators. Recent Supreme Court cases (such as an American Express case in 2013) have confirmed the right of companies to introduce binding arbitration clauses in agreements with other companies or consumers. It is also customary to find “multi-level dispute resolution clauses” that provide that parties must submit to another type of alternative dispute resolution mechanism, such as negotiation or mediation, prior to arbitration. These clauses are not pathological in themselves, but they may be so depending on how they are regulated; Often, ambiguous language is used and made mandatory, so that the parties are required to exhaust it before the opening of arbitration proceedings, while understanding that, otherwise, the arbitration agreement will be violated, making the arbitral award that could be made questionable. In addition, they are often used as a dilatory practice, with no real intention on the part of the parties to reach an agreement. It is therefore generally advisable not to involve them, because if the parties are willing to negotiate during the arbitration, nothing prevents them from doing so. On the contrary, the Commercial Code recognizes this situation and stipulates in Article 1447 that, if the parties reach a settlement during the proceedings that conclude the dispute, the arbitration panel will terminate the proceedings and, if both parties so request and the arbitration panel does not object, the settlement will be presented in the form of an arbitral award. If you opt for arbitration because you want your disputes to be decided by someone in the same industry or with particular expertise, it is useful to define this in the arbitration agreement. It is customary to provide for arbitration clauses when the parties agree that an arbitrator must be a member of an organization or possess particular qualifications.

In contrast, ad hoc arbitration is an arbitration that the parties manage themselves. It shall be carried out in accordance with the rules adopted for the purposes of the specific arbitration procedure, without the participation of an arbitral institution. . . .