Courts around the world regularly encounter arbitration clauses that are ambiguous, contradictory, or simply broken. Some named institutions that do not exist. Others contain internal contradictions between the main contract and attached schedules. Others specify a seat without understanding the legal consequences of that choice. The resulting litigation, sometimes lasting years, often costs more than the underlying dispute.
This guide addresses the key decisions involved in drafting an arbitration clause for international commercial contracts. It covers institutional arbitration: arbitration administered by an established institution such as the ICC, LCIA, SIAC, HKIAC, ICDR, or SCC, which provides the procedural framework, maintains a roster of arbitrators, and oversees the process. Ad hoc arbitration, in which parties manage the procedure independently without institutional support, entails additional drafting considerations not covered here.
Start with the institution’s model clause
Every major arbitral institution publishes a model arbitration clause on its website. These clauses are designed to be legally effective, procedurally complete, and compatible with the institution’s rules. They cover the essentials: the institution’s name, the number of arbitrators, the seat, the language of the proceedings, and the governing law.
The starting point for any arbitration clause should be the relevant institution’s model clause, not a clause borrowed from a previous contract or adapted from a generic template. Arbitral institutions design their model clauses to address the procedural problems they encounter most frequently. Departing from the model clause is sometimes appropriate, but it should be a deliberate decision made with an understanding of the consequences, not a default.
Adaptations to a model clause, whether adding provisions, removing standard language, or combining elements from different institutions’ models, require care. Changes that appear minor can have significant consequences in practice.
Choose the institution carefully
Choosing an arbitral institution is one of the key decisions parties must make when agreeing to institutional arbitration. The institution selected will determine the procedural rules governing the arbitration and the administrative support available throughout the proceedings. Differences in costs, case management practices, and institutional experience can materially affect how the arbitration unfolds.
In most cases, institutional arbitration is the safest and most straightforward option. Established arbitral institutions provide a tested procedural framework, administrative assistance throughout the proceedings, and mechanisms designed to address common procedural issues. As a result, selecting the appropriate institution at the contract-drafting stage can contribute significantly to the efficiency and predictability of the arbitral process.
The major global institutions, the ICDR, ICC, LCIA, SCC, SIAC, HKIAC, VANIAC and DIAC, are widely recognized, and their awards are routinely enforced in most jurisdictions. Regional institutions may be more appropriate for disputes with a specific geographic connection, and some sectors have specialist institutions better suited to their particular types of dispute.
The choice of institution should reflect the nature of the contract, the likely location and nationality of the parties, the jurisdictions in which enforcement may be needed, and any sector-specific considerations. Choosing an institution simply because it was used in the last contract is not a sufficient basis for the decision.
Three laws govern your arbitration: specify all three
A common misconception in international arbitration is that a single law governs every aspect of the dispute. In reality, different legal issues arising in the same arbitration may be governed by different legal systems, each serving a distinct purpose.
The first is the law applicable to the underlying contract. This law regulates the substantive relationship between the parties and provides the legal framework for resolving questions of contractual interpretation, performance, breach, liability, and available remedies. In most cases, the parties identify this law in the contract’s governing law provision.
The second requires separate consideration: the law governing the arbitration agreement. Although contained within the main contract, the arbitration clause is generally treated as an independent agreement. As a result, the law applicable to the contract as a whole will not necessarily govern the arbitration clause. The applicable law may influence the existence, validity, interpretation, scope, and enforceability of the clause, as well as whether particular parties may rely upon or be bound by it. Where the parties do not make an express choice, the determination of the applicable law is typically left to courts or arbitral tribunals applying relevant choice-of-law principles.
The third is the law of the seat, sometimes referred to as the lex arbitri. This is the law of the jurisdiction in which the arbitration is legally located. It provides the procedural framework for the arbitration, allocates supervisory authority to the local courts, and regulates issues such as challenges to arbitral awards and applications to set them aside.
Parties should consider each of these legal regimes separately rather than assuming that a single choice of law will govern all aspects of the arbitration. Where a particular issue is left unaddressed, the applicable law may be determined by statutory default rules or judicial principles that do not correspond with the parties’ expectations. Under the Arbitration Act 2025, for example, the default rule for arbitrations seated in England and Wales provides that, if the parties do not agree otherwise, the arbitration agreement shall be governed by the law of the seat, not the law governing the underlying contract. This distinction may become significant where the contract is governed by a foreign law, such as New York law, but the arbitration is seated in England.
The seat: a legal choice, not a location
The seat of arbitration is not simply the city where hearings will take place. Hearings can be conducted anywhere, including remotely, regardless of where the arbitration is formally seated. The seat is a legal concept: it determines the national legal framework that applies to the arbitration, which courts have supervisory jurisdiction over, and on what grounds the award can be challenged.
The choice of seat affects the arbitration in several ways. Courts at the seat can assist with the appointment of arbitrators if the agreed mechanism fails, grant interim relief in support of the arbitration, and hear challenges to the tribunal’s jurisdiction or to the award itself. The procedural latitude available to parties and tribunals, the scope of challenge, and the approach of local courts to supporting or intervening in arbitral proceedings all vary significantly between seats.
A clause that specifies a place of arbitration without considering what that choice means legally is a common source of difficulty. Where parties have chosen a seat without understanding its legal implications, disputes about the supervisory framework can arise before the underlying commercial dispute is ever addressed.
Arbitrability: verify that your dispute can be arbitrated
Not every dispute is capable of being submitted to arbitration. The concept of arbitrability, whether a particular type of claim can be resolved by arbitration rather than by national courts, is determined by the law of the seat and, in some cases, by the substantive law of the contract as well.
Arbitrability standards differ between jurisdictions. Claims that are freely arbitrable in one country may be excluded from arbitration in another on public policy grounds. Competition and antitrust claims, insolvency-related disputes, certain intellectual property matters, and claims involving regulated industries are areas where arbitrability is not uniform across seats.
The point is illustrated by Mitsubishi Motors Corp v Soler Chrysler-Plymouth Inc (US Supreme Court, 1985), in which the Supreme Court held that antitrust claims in international commercial arbitration were arbitrable, overriding earlier US case law that had excluded them on public policy grounds. The decision is a reminder that arbitrability standards are not universal and are not static: what is excluded at one seat, or at one point in time, may not be excluded at another. Before finalising the choice of seat, parties should verify that the types of dispute likely to arise under the contract are capable of being arbitrated there.
Number of arbitrators
It is important to specify in the arbitration clause whether a sole arbitrator or three arbitrators will decide the future dispute. This choice affects both cost and process. A sole arbitrator is generally faster and less expensive. A three-member tribunal provides an additional layer of deliberation and is more appropriate for complex, high-value disputes.
Most institutional rules provide a default but allow parties to specify their preference in the arbitration clause. Where the contract is likely to give rise to significant disputes, specifying three arbitrators avoids subsequent disagreement about the composition of the tribunal. Where the preference is for a sole arbitrator, specifying this avoids the possibility of a party seeking three arbitrators once a dispute has arisen, when its interests may differ from those at the time of contracting.
Language of the proceedings
The arbitration clause should specify the language in which the proceedings will be conducted. This includes written submissions, oral hearings, and the award itself. Where the parties are from different language backgrounds, or where the contract is drafted in a language other than the parties’ primary languages, the choice of language has practical consequences for the cost and conduct of the proceedings.
Most institutional rules allow the tribunal to determine the language of the proceedings in the absence of party agreement, but leaving this to be determined later is an unnecessary source of potential dispute. Specifying the language in the arbitration clause is straightforward and avoids the issue entirely.
Use the institution’s exact registered name
The arbitration clause must identify the administering institution by its exact registered name. Clauses that misname the institution, combine elements from different institutions’ rules, or refer to institutions that do not exist can be found invalid or unenforceable.
Courts have taken different approaches to defective institutional references. In Grand Ocean & Williams Co., Limited v Huaxicun Offshore Engineering Co Ltd (Hong Kong Court of First Instance, 2023), a clause naming a non-existent institution was found void and incapable of being performed. In Re Shanghai Xinan Screenwall Building & Decoration Co (Singapore High Court, 2022), a court facing the same problem took a different approach and attempted to reconstruct which institution the parties must have intended, ultimately saving the clause, but only after contested enforcement proceedings to determine what the parties had meant.
Neither outcome is desirable. The correct institutional name can be verified in seconds on the institution’s website. Before signing, the institutional name in the arbitration clause should be checked against the institution’s own published materials and confirmed to be accurate.
Watch for conflicting clauses within the same contract
Complex commercial contracts frequently consist of multiple documents: a master agreement, schedules, annexes, purchase orders, and general or special conditions. Each document may have been drafted separately, at different times, and possibly by different lawyers. Where these documents contain different dispute resolution provisions, a conflict arises that must be resolved before the underlying dispute can be addressed.
Conflicts between dispute resolution clauses within the same transaction can take several forms. Two documents may specify different arbitral institutions. They may specify different seats. One may provide for arbitration, while another provides for court proceedings. Each of these conflicts requires a threshold determination, sometimes before national courts, before arbitration can begin.
Tecnicas Reunidas Saudia for Services and Contracting Ltd v Petroleum Chemicals and Mining Company Ltd (English High Court, 2025) is a recent illustration. A purchase order and general conditions in the same contract applied to different institutions and seats. Resolving the conflict required three years of litigation before the court can start addressing the underlying commercial dispute.
The solution is straightforward in principle: before signing, all documents forming part of the transaction should be reviewed together, their dispute resolution provisions compared, and any conflicts resolved. Where the documents cannot be fully aligned, a hierarchy clause should be included specifying which provision governs in the event of conflict.
Align provisions across all connected agreements
The same principle applies across separate but connected agreements. Where a commercial transaction involves multiple contracts, a joint venture agreement, a shareholders’ agreement, a loan agreement, and an offtake agreement, for example, each contract may be subject to its own dispute resolution clause. If those clauses are inconsistent, disputes that arise from the transaction as a whole may need to be resolved in different forums, under different rules, with the risk of conflicting outcomes.
A recent decision illustrates the problem at its most consequential. In Coinbase, Inc. v. Suski (US Supreme Court, 2024), two contracts between the same parties contained conflicting provisions on who decides arbitrability: one delegating that question to arbitrators, the other giving sole jurisdiction to California courts. The Supreme Court held that a court, not an arbitrator, must decide which contract governs. An inconsistency introduced by a later agreement can strip away the arbitration mechanism built into an earlier one.
Where a transaction involves multiple contracts, all dispute resolution clauses should be drafted consistently from the outset. Where this is not possible, a governing clause should specify which agreement’s dispute resolution provisions take precedence. All documents should be reviewed together before execution.
Optional provisions worth considering
Beyond the essential elements, parties may wish to consider provisions addressing confidentiality, emergency relief, consolidation, and multi-party disputes.
International arbitration is private by default, meaning the proceedings themselves are not public, but the position on confidentiality of the award and related documents varies between institutions and seats. Parties who require strict confidentiality should include an express confidentiality provision in the arbitration clause rather than relying on the default position under the applicable rules.
Most major institutions now provide for an emergency arbitrator procedure, allowing a party to seek urgent interim relief before a full tribunal is constituted. Parties should verify that the chosen institution offers this mechanism and that it applies to their arbitration. Some institutions require an opt-in; others apply it by default.
Standard arbitration clauses are drafted for two-party disputes. Where a transaction involves multiple parties, or where related disputes are likely to arise under several contracts, the clause should address whether and how proceedings can be consolidated and how the tribunal will be constituted in a multi-party context. The major institutions have developed rules addressing these situations, but the clause can supplement or modify those rules to reflect the parties’ specific requirements.
The drafting process
The most effective arbitration clauses are negotiated as a substantive element of the transaction, not added at the end as standard language. The key decisions, choice of institution, seat, governing laws, number of arbitrators, and language are interconnected. A change in one can affect the others, and the combined effect of the choices made should be considered as a whole.
Clauses borrowed from previous contracts without review carry the risk that the circumstances of the new transaction differ in ways that make those choices inappropriate. Clauses left to the other side’s lawyers carry the risk that the choices made reflect the other side’s interests rather than a balanced allocation.
Where a transaction involves significant value, cross-border enforcement risk, or parties from jurisdictions with complex arbitration law, specialist input at the drafting stage is proportionate to the risk involved. Most arbitration clause disputes could have been avoided entirely at a cost far below what their resolution ultimately required.
ArbitraLex advises on the structuring of international dispute resolution across a range of sectors and jurisdictions. For guidance on arbitration clause drafting or dispute resolution strategy, contact us at makchurina@arbitralexlegal.com