We looked into the importance of specifying the language of arbitral proceedings distinctive of its underlying contract. I am sharing today the need to expressly specify the seat of the arbitration and also the law of the arbitration. What’s the seat of arbitration? It’s simply the legal home of the whole arbitration process from initiation to the final award. The law of the jurisdiction of the seat dictates the procedural and supervisory framework of the arbitration process. It will also determine the extent and how the judicial system or the courts will intervene in the process including making preliminary awards or orders.
What if parties did not expressly state the seat of the arbitration and the law? There are many options available. Parties still reserve the right to mutually agree, failing which the tribunal when formed could help the parties to decide by looking at the parties’ intended or implied choice, or referred to the courts. Ultimately, the outcome of this depends on many variables. Any seat that would be decided will emerge after due consideration of any intent or inferences about the seat that could be drawn from any or all of the following: (1) the underlying contract (2)the arbitration agreement (3)wordings of the arbitration provision in the underlying contract (4)the law governing the contract (5)”nationalities” of the parties, (6)neutrality and (7)unencumbered laws (favourable laws) to effecting any arbitral awards made (international arbitration). Summarily, it’s safer to expressly state the seat of the arbitration in the arbitral agreement.
Similarly, parties should also not ignore to expressly state the law that would govern the arbitration, particularly in international arbitration. Where parties failed to do so, a similar process narrated above for seat would apply i.e. parties would be allowed to mutually agree failing which implied law would be considered by the tribunal for acceptance of the parties or court decides. Where parties failed, the first rule of preference by either the arbitral tribunal or the court would be to consider the law of the underlying contract, then followed by the law of the seat of the arbitration after due consideration has been given to the aforementioned points (5), (6) and (7) above.
Express provisions in arbitration agreements save parties a lot! Practice it.
Recent Comments