Arbitration clauses in contracts

DEFECTIVE ARBITRATION CLAUSE

Our court practice shows that quite often companies cannot be protected in courts or in arbitration because of a defective arbitration clause. Mostly this happens when the companies forget to mention in the arbitration clause the number of arbitrators, the place of the arbitration, and the language of the arbitration.

For example, a company wants to recover debts from a counterparty and tries to start the arbitration process. Arbitral tribunal refuses to consider the dispute and says that the case should be sent to the court, due to the incorrect and non-arbitrable arbitration clause. Further, the company goes to court. The court also refuses to consider the case, since the courts are overloaded and they do not consider cases if there are arbitrational clauses in the contracts. As a result, the Company remains in the middle of the court and arbitration, and the dispute is not resolved.

RECOMMENDATIONS

• Before concluding the contract, we recommend to check the draft contract with the professional lawyers practicing in court, and to make sure that the arbitration clause is properly drafted.

• Before going to the court or arbitration, we recommend to receive qualified legal advice from the professional lawyers on where the dispute should be considered (jurisdiction of the dispute).