Arbitration Agreement Clause

Arbitration Agreement Clause

When to use this

Use this skill when drafting a dispute resolution clause that selects arbitration as the mechanism, for insertion into:

• Commercial contracts (sale, service, construction, agency, distribution)
• Joint venture agreements
• Shareholder agreements
• Licensing agreements
• Investment agreements

This skill is particularly critical in the MENA context: the choice of seat, institution, and governing law determines not only procedural rules but also whether an award can be enforced in the relevant country, whether emergency arbitrators are available, and what courts will supervise the arbitration.

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Prompt template

Draft an arbitration clause for [type of contract] selecting [arbitration institution: ICC/LCIA/SIAC/DIAC/other]. Specify seat of arbitration, governing law, language, number of arbitrators, and any specific procedural rules or expedited procedures.

Use [[conversation-clarifying-questions]] to elicit [bracketed] inputs before drafting.

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Required inputs

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Key decisions and their implications

1. Choice of institution

2. Seat of arbitration

The seat (legal domicile of the arbitration) determines:

• Which national courts supervise the arbitration
• The grounds for setting aside the award
• Whether interim measures (injunctions, asset freezes) are available from local courts
• The form of the arbitration agreement required by local law

MENA seat options:

3. Governing law of the contract vs. seat

These are separate choices:

• Seat governs the procedure and the courts that supervise
• Governing law of the contract governs the substance (what the parties' obligations are)

Example: a UAE company and a French company contracting for services in Lebanon may choose Paris as the seat (French courts supervise), DIAC rules (familiar to the UAE party), and UAE law as governing law (where performance occurs). This is a valid combination.

Important: the governing law of the arbitration agreement itself is also separate and may differ from both. In MENA practice, it is common to state the governing law of the arbitration agreement explicitly.

4. Number of arbitrators

Most institutional rules default to one arbitrator unless the parties agree otherwise or the institution determines three is appropriate given the complexity.

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Standard clause drafts

Institutional clause (example: DIAC, Dubai seat)

Any dispute, controversy or claim arising out of or in connection with this Agreement, or the breach, termination or validity thereof, shall be finally settled by arbitration under the Dubai International Arbitration Centre (DIAC) Rules, as currently in force. The seat of arbitration shall be Dubai, United Arab Emirates. The number of arbitrators shall be [one/three]. The language of the arbitration shall be [English/Arabic/English and Arabic]. The governing law of the arbitration agreement shall be UAE law.

Ad hoc clause (UNCITRAL, any seat)

Any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in accordance with the UNCITRAL Arbitration Rules. The seat of arbitration shall be [city, country]. The number of arbitrators shall be [one/three]. The language of the arbitration proceedings shall be [language].

Multi-tier clause (negotiation → mediation → arbitration)

(a) The parties shall attempt in good faith to resolve any dispute arising out of or in connection with this Agreement through direct negotiations between their senior representatives for a period of [30] days from the date one party notifies the other of the dispute. (b) If the dispute is not resolved under (a), the parties shall attempt to resolve it through mediation under [DIAC/DIFC-LCIA/ICC] mediation rules for a period of [30] days. (c) If the dispute is not resolved under (b), it shall be finally settled by arbitration under [institution] Rules. [seat, language, arbitrator number as above]

Multi-tier clauses are common in construction and long-term commercial contracts. MENA trap: ensure the escalation steps are drafted as conditions precedent, not merely directory — courts have dismissed arbitral proceedings for failure to follow mandatory pre-arbitration steps.

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Jurisdictional notes

UAE

Since UAE Federal Arbitration Law 6/2018, UAE-seated arbitration is fully UNCITRAL Model Law-based and pro-arbitration. DIFC seat is advantageous for enforcement because the DIFC Courts can directly execute awards without going through onshore courts. Note: arbitration cannot be used for disputes that must be decided by UAE government entities (some real estate, employment, administrative matters).

KSA

Saudi Arbitration Law 2012 allows arbitration with a Saudi seat. Awards are enforced by Saudi courts but may be challenged on Sharia-law grounds. Consider Sharia-compliance of the governing law and award content when selecting a Saudi seat. International awards are enforceable in Saudi Arabia under the New York Convention (KSA acceded in 1994) and Arab League Convention on Commercial Arbitration (1987).

Lebanon

Lebanon has a developed arbitration tradition (particularly at the Beirut Chamber of Commerce). Enforcement of foreign awards is generally effective. Lebanese courts have set aside awards for public policy violations — define public policy scope in the governing law clause.

Egypt

Egypt is one of the most pro-arbitration MENA jurisdictions. Egyptian Arbitration Law 1994 is UNCITRAL Model Law-based. Cairo is a major arbitral seat (CRCICA); ICC Africa/Middle East cases also frequently seated in Cairo.

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Common mistakes

• Omitting the seat (pathological clause — arbitration cannot proceed without a seat)
• Confusing governing law of the contract with the seat (different choices; make both explicit)
• Ad hoc arbitration without any institutional support in a jurisdiction where party cooperation is uncertain
• Escalation clause drafted as advisory rather than mandatory (courts can dismiss for non-compliance)
• Not addressing emergency arbitrator provisions when interim relief may be needed

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Related skills

• [[prompt-pack-arbitration-clause-comparison]] — compare arbitration clauses from different institutions
• [[prompt-pack-arbitration-cost-submission]] — costs submission at the end of an arbitration
• [[prompt-pack-award-enforcement-application]] — enforcing the resulting award
• [[kb-arbitration-mena]] — MENA arbitration law and institution reference
• [[heuristic-always-state-jurisdiction-first]] — jurisdiction-first drafting