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Why to incorporate an Arbitration clause while entering into International Contracts?

Angola, an African country known for its Oil reserves joined New York Convention on Recognition and Enforcement of Foreign Arbitration awards on 6th April 2017. New York Convention has convention has brought 157 countries together agreeing to enforce foreign Arbitration awards passed in other seats of the member countries, of course subject to some conditions. The Progress of recognizing the International arbitration awards globally has helped all member countries to increase the international business activities and to reduce the risk in the field of international commercial dispute resolution.


Mr S Ravi Shankar an International Arbitration lawyer, Senior Partner of Law Senate Arbitration law firm, while commenting on the above said News stated that the New York Convention & UNCITRAL Model law on arbitration have made wonders to not only international arbitration but also to International business. He further stated that the Courts in one country does not recognize the judgment of the other country barring a few exemptions. Hence the parties had to go to a foreign land where opposite party is living, to file a case and resolve their disputes. Naturally conducting a trial in a foreign country, producing witnesses and facing appeals made the dispute resolution very expensive. More over courts also were supportive to their citizens rather than ensuring justice to a foreigner and hence the element of neutrality was missing.


Now after the above said New York convention, if a party incorporates a clear international arbitration clause into its contract with the foreign company, it can choose the applicable laws and place of arbitration. Hence parties can choose a law of a neutral country and conduct the arbitration in a neutral place, hence the comfort level on both the sides are ensured.


Moreover, since it is a private system approved by law, it is faster and less expensive. The arbitrations are administered by very renowned arbitral institutions like International Chamber of Commerce (ICC), Singapore International Arbitration center (SIAC), IDAC India etc., These institutions have transparent Arbitration Rules and Fee structure. They have straight forward trained and experienced arbitrators in their panel. The final decision also will come within 12 months. These decisions can be enforced through the Court of the country where the opposite party is having its assets. Their properties will be attached and money will be recovered.


Hence all companies entering International Contracts should incorporate “International Arbitration clauses” in their contract and get the benefits. The International arbitration clause should specifically mention the number of arbitrators, language of arbitration, appointment procedure, name of administering arbitral institution, seat of Arbitration & applicable laws.


A Model clause of IDAC India is given below:


“In cases of disputes between the parties, arising out of or in relation to the contract shall be resolved by way of International Arbitration administered by IDAC India (www.idacindia.org). The language of arbitration shall be English and the seat of Arbitration shall be New Delhi, India. The substantive law and law applicable to arbitration shall be English laws and the procedural law shall be Indian law.”


We provide free service to parties, for drafting an arbitration agreement. Interested parties can contact ravi@lawsenate.com