Arbitration is a mechanism through which the parties involved in a conflict entrust its solution to an arbitral tribunal, which has sufficient powers to take a final decision called the arbitration award.
In the commercial field, it is an attractive alternative to the judicial processes in charge of the common courts, since it has advantages such as the effectiveness and efficiency with which the procedure is developed, the speed in which a final decision is obtained, the control that the parties have over the most convenient way to carry out certain acts within the procedure, the selection of the arbitrators, among others. Generally, for controversies or conflicts to be resolved through arbitration, it is necessary that the parties have previously agreed to an arbitration clause. Said arbitration clause is of fundamental importance since without it, the arbitration would not be valid. For this reason, arbitration clauses should not be drafted lightly, copied from a standard template, or left last in a negotiation.
Its elementary content must be carefully selected by the parties, taking into consideration their interests and relevant aspects of their commercial relationship, such as the type of business, the place where they operate or the place where their obligations will be fulfilled, their nationality, and even their language.
Hereunder, we will proceed to detail the essential elements that must be considered to properly draft an arbitration clause:
The first thing we must consider is that the arbitration clause must be valid. This means that the people who subscribe it must have sufficient powers, by being the legal representatives or proxies of a company, among other possible capacities. In addition, said arbitration clause must be in writing, and the intention of the parties to resolve disputes arising from the contract through arbitration must be expressed in a clear and unequivocal manner.
It is of fundamental importance that the scope of the arbitration clause is determined by the parties. This means that the type of conflicts or controversies that must be resolved through arbitration must be agreed and established in the arbitration clause, as well as the determination of a mediation or negotiation phase as a prerequisite to initiate arbitration, among other similar aspects.
In the arbitration clause, aspects regarding the administration of the arbitration must be determined. These aspects include: The seat of the arbitration, which is the place where the proceedings take place; the language of the arbitration, which is relevant when one of the parties speaks in a foreign language; the type of arbitration, which can be in equity when the arbitrators decide according to their conscience, in law when they decide according to the applicable and technical when they decide according to the parameters of a particular discipline; The type of procedure to be developed, either an ad hoc arbitration, in which the rules of the procedure are agreed by the parties or an institutional arbitration, in which the rules of the procedure are determined in the regulations of the institution in charge of administer the arbitration; among other aspects.
At the same time, it is important to consider the nature of the contract and the parties involved, because if one of them is the State or some autonomous institution, there are certain rules in the applicable regulations that must be considered for the validity and effectiveness of the arbitration clause.
In short, arbitration has proven to be a convenient and modern mechanism to resolve disputes that arise between the parties to a contract, especially since it represents an alternative to common courts. However, it is very important that the arbitration clause be tailored to the needs of the parties, so that the arbitration is valid, develops correctly and represents a truly effective and efficient dispute resolution mechanism.