The purpose of this bulletin, the first in our “Dispute Resolution Clauses - Two Minute Drafting Tips” series, is to provide parties involved in negotiating commercial agreements with quick, actionable tips for crafting effective dispute resolution clauses. This bulletin focuses on the potential benefits of using a model clause provided by arbitral institutions, and what it means to have an arbitration administered by those institutions.
Using Model Arbitration Clauses Can Be Beneficial
Rather than drafting from scratch, or resorting to just doing what has been done previously, it is worth looking at sample clauses provided by arbitral institutions like the International Centre for Dispute Resolution (ICDR) Canada, the Vancouver International Arbitration Centre (VanIAC), the ADR Institute of Canada (ADRIC) or the International Chamber of Commerce (ICC). Using a model clause has advantages, for instance:
- these clauses are drafted to ensure that they address key legal points; and
- the model clauses incorporate by reference the rules of those institutions, which avoids the need to spell out extensive terms in the contract itself; and
- using a model clause can be less contentious in negotiations.
Parties can change these clauses, or augment them, as required. This could include carving out exceptions or adjusting how the institution’s rules are applied.
Administered vs. Ad Hoc Arbitration
Most of these model clauses contemplate an “administered” arbitration, meaning that the arbitral institution charges a fee in exchange for providing services to the parties during an arbitration. The fees involved in administered arbitration may make some contracting parties reticent to use a model clause, or choose to remove that aspect of the model clause. However, administered arbitrations can have advantages. When determining whether to opt for administered arbitration, consider the following:
The services provided by these institutions typically include:
- Administrative Support: Logistics of the arbitration, including scheduling hearings, managing communications, and maintaining records.
- Appointment of Arbitrators: Institutions assist in the selection and appointment of arbitrators, which can be of significant value if it avoids delays in the commencement of an arbitration.
- Emergency Arbitrators: Some institutions have rules allowing for the appointment of emergency arbitrators pending constitution of the arbitral tribunal. These emergency arbitrators can make orders about preservation of assets or other matters intended to avoid irreparable harm.
- Fee Management: Institutions manage the financial aspects of an arbitration, including collecting deposits and disbursing payments to arbitrators.
Administration fees vary depending on the institution and the complexity of the case. For example, VanIAC, ICC and ICDR charge fees based on the amount in dispute. The fees can be significant for large disputes, but can be quite modest for smaller arbitrations under expedited rules. Keep in mind that the ostensible savings for parties from avoiding institutional fees can be illusory if the parties’ lawyers are otherwise having to spend more time (and money) to perform these services themselves.
