A critical review of arbitration agreements in light of global trends in international arbitration practice: The Ex Ante approach
The Latin term “Ex Ante” simply means, beforehand or before the event. The term is used generally in the commercial world, where results of a particular action, or series of actions, are forecast in advance. Within this context, I shall narrate this paper from the premise that careful consideration of arbitration agreements or the arbitration clause of an agreement ought to be closely examined by Counsel, Parties and other relevant stakeholders prior to the execution of the named agreement. I shall both discuss and critically review the reasons to orchestrate focused pre-contract deliberations, to ensure that the arbitration agreement is not only “fit for purpose” but mutually beneficial to all, ahead of a potential dispute.
The importance of arbitration agreements
“Arbitration is private justice born out of the parties’ will, by including an arbitration clause in a contract, the parties choose to settle their disputes in the event any arise out of court. Those disputes will be submitted to arbitrators.” It is agreed that it is impossible to foresee if contractual relations may rupture during the course of an agreement given the absence of a crystal ball provided by Counsel. However, to conceptualise my firm belief that arbitration agreements ought to have psychic ability in the manner they are drafted, I shall highlight the value of arbitration clauses which are both non-pathological but serve to sufficiently operate when faced with real and existing conflicts.
Arbitration practice has illustrated that pre-dispute arbitration agreements or clauses are problematic for various reasons that range from haphazardly drafted clauses, Parties dispute averse nature, failure of Counsel to hold reasonably focused pre-contractual negations wherein relevant stakeholder may articulate their base level requirements in the instance that a dispute occurs and the arbitration clause is therefore required.
The utility of arbitration agreement
Given the utility of arbitration agreements within the present-day global economy, where commercial organisations are litigation opposed, pursuant to the notion that arbitration is a dispute resolution mechanism that is somewhat more economically tenable, over litigation in Court that may persist for a ten-year period or more. Be that as it may, Separability is a legal doctrine that allows an arbitration agreement to be considered entirely separate from the underlying contract in which it is contained. The existence of the Doctrine of Separability further elucidates the need for arbitration agreements to be drafted with presence of mind. Largely, it is my considered opinion that Arbitration remains the best guardian for foreign investments and international trade and thus, that arbitration clause ought to be the clause one is most familiar with, given its protective nature of parties’ economic interests.
The growth of arbitration as a dispute mechanism
At the attendant growth of arbitration as a dispute resolution mechanism, it is certain that the arbitration agreement is the foundational document of the entire proceedings, which shall mandate the way in which the proceedings are determined and issues of dispute are considered by the Arbitral Tribunal. The efficacy of the arbitration agreement should not be examined at the commencement of the arbitral proceedings following the service of Notice of proceedings, as I have witnessed only too often in practice. It is at this juncture, parties to an arbitration are confronted with their reality of an agreement which falls short at capturing their commercial intentions. The arbitration clause will now be considered as a roadblock than a mechanism for quick dispensation of justice.
An Arbitration clause in their contractual agreements to forestall a situation where any of them will have to approach the Court of law to settle any dispute that may arise. It is safe to say that the drafting of the arbitration agreement is integral to arbitral proceedings at large. Furthermore, there is a need for proper negotiation of clause alongside other clauses by experienced dispute lawyers. Parties should also refrain from adopting boilerplates on the issue of arbitration clause, and have a more expansive outlook to the arbitration clause.
*Fawehinmi is an Associate of Kenna Partners and can be reached firstname.lastname@example.org