Arbitration clauses: questions before agreeing

An arbitration clause can determine where and how a future commercial dispute will be decided. LCIA model clauses show decisions commonly required, including the seat, language and number of arbitrators. ^[1]

Distinguish the seat from the hearing venue The legal seat has procedural significance even if meetings take place elsewhere or online. Identify the intended governing law of the contract and obtain advice on the law applicable to the arbitration agreement itself.

Check the clause's scope and the rules incorporated. Consider whether related contracts use compatible procedures; inconsistent clauses can complicate a dispute involving several suppliers or group companies.

Compare the consequences before agreeing Ask about appointment costs, tribunal fees, interim measures and the available challenge routes. Do not assume arbitration guarantees absolute confidentiality or a general appeal on the merits. Cross-border enforcement also deserves consideration where assets are abroad.

Read any preceding escalation requirements and map the entities potentially involved. A model clause is a starting point for deliberate choices, not wording to paste without completing its options or checking how it fits the transaction.

Identify the transaction and disputes the clause must cover Describe the commercial relationship and the parties whose disputes may need determination. Consider the main contract, related guarantees, purchase orders and any agreement involving a different group company. Ask whether the proposed clause reaches the intended issues and whether connected contracts use compatible procedures. A broadly phrased arbitration clause may still leave questions about non-signatories or a related transaction. Provide the drafting adviser with the actual structure so compatibility can be assessed before a disagreement exposes gaps between documents.

Think about where relevant people, records and assets are located. These facts may affect practical conduct and enforcement, although they do not themselves determine the correct clause. If the business expects to pursue assets abroad, explain that expectation and ask for advice about the relevant jurisdictions. Avoid assuming that a familiar institution's name guarantees recovery everywhere. The clause should be evaluated as part of the transaction's risk allocation, including the possibility that a successful decision still requires further steps before money or performance is obtained.

Separate the legal seat from logistical convenience Identify the intended seat expressly and ask the adviser to explain its procedural significance. A hearing held online or in a convenient city does not necessarily change the legal seat. The main contract's governing law and the law governing the arbitration agreement also require distinct consideration. For cases within its applicable scope, the Arbitration Act 2025 introduces a rule referring first to an express choice for the arbitration agreement and otherwise to the law of the seat. Do not assume the main contract's choice alone answers that question. [2]

Check applicability and transitional issues for the transaction or proceedings concerned. The commencement regulations brought the remaining 2025 Act provisions into force on 1 August 2025, but a commencement date should not be treated as eliminating every question about an earlier arbitration or agreement. Ask which regime applies and why. Record the advice in the transaction file, particularly when revising an existing clause. This avoids a later reviewer relying on a general account of reform that does not address the relevant timing or legal circumstances. ^[3]

Understand the rules and appointments being selected If institutional rules are incorporated, identify the institution correctly and review the relevant choices. LCIA's recommended clauses illustrate options including arbitrator numbers, language and seat; blanks and alternatives need deliberate completion. Ask how an appointment proceeds if a party does not cooperate and what administrative and tribunal costs may arise. Do not improvise an institution's name or combine parts of several models without checking consistency. A short clause can create extensive procedural consequences through the rules it incorporates. [1]

Consider whether the proposed arrangement is proportionate to likely disputes. A small recurring invoice disagreement may create different practical concerns from a complex cross-border project. Ask how language, specialist evidence and the number of decision-makers could affect the process and expenditure. Do not assume arbitration is always quicker, cheaper or completely confidential. Identify the particular benefits the business seeks and the terms supporting them. Where confidentiality matters, have its scope and exceptions assessed alongside any separate contractual confidentiality obligations.

Check remedies, challenges and related proceedings Ask how urgent interim relief, court support and available challenge routes interact with the proposed arbitration. A general expectation of a second merits hearing may be misplaced, so understand the limits before agreeing the forum. Where several parties or contracts are involved, discuss whether claims can be managed together under the selected rules and agreements. Avoid assuming that commercial connection alone establishes a right to consolidate every dispute. The intended route should be legally workable as well as convenient on paper.

Read the final clause with any negotiation or mediation stages and the contract's notice provisions. Resolve inconsistent terms before signing and confirm that the executed version contains the approved choices. Give the operational contract owner a brief explanation of where the clause is and when legal advice should be sought if a dispute arises. That handover should help staff identify the correct process without encouraging them to improvise an arbitration notice from an unrelated court template or an outdated model clause.