1. Importance of clear drafting

1. Importance of clear drafting 

The arbitration agreement is a fundamental contract that serves as an empowering provision, allowing parties to agree on a suitable procedure and scope for resolving disputes while their relationship is still collaborative. Because this agreement forms the basis of the arbitral tribunal’s jurisdiction and sets the rules for any future proceedings, clear and precise drafting is pivotal to the success of the process. Poorly drafted provisions, often referred to as "pathological arbitration clauses”, frequently lead to expensive and confused jurisdictional battles in court. Common drafting errors include a lack of mandatory language (such as using “may” instead of “shall”), naming non-existent appointing bodies or procedural rules, and creating ambiguity regarding the number of arbitrators. 

While Hong Kong courts adopt a “pro-arbitration” approach and try to give effect to these clauses whenever possible, parties are strongly advised to use model clauses provided by major institutions to ensure a valid and binding agreement. A failure to draft properly may still lead to expensive jurisdictional challenges. In extreme cases, the arbitration agreement may be so uncertain or unworkable that the court will decline to enforce it and will assume jurisdiction over the dispute. 

An effective arbitration agreement should deal with the following matters, either expressly in the clause itself or by incorporating arbitral rules that address them: 

• the scope of disputes referred to arbitration; 
• any pre-arbitration negotiation, mediation or adjudication steps; 
• the seat of arbitration; 
• governing law and choice of law; 
• whether the arbitration will be institutional or ad hoc; 
• if institutional, which institution and which institutional rules will apply; 
• if ad hoc, whether the UNCITRAL Arbitration Rules will apply or whether bespoke procedures will be drafted; 
• the number of arbitrators and the method of appointment; 
• the language of the arbitration; 
• the procedure the tribunal will adopt in deciding the dispute; 
• confidentiality arrangements; 
• interim measures and emergency relief; 
• joinder, consolidation and multiparty issues; 
• costs; 
• legal representation; and  

• any time limits for the award.