The Arbitration Clause in International Contracts
When the parties to a contract are domiciled in different countries, it's not enough to simply discuss price, deadlines, and guarantees.
If a dispute arises, where is it resolved? Who decides? What rules apply? This is where the arbitration clause (the clause that submits the contract to arbitration) comes into play.
When is it advisable to agree to international arbitration?
When the parties are located in different countries.
When the contract is of significant value (because international arbitration is more expensive than a local lawsuit).
What defines an arbitration clause?
A good arbitration clause is not merely decorative; it regulates critical aspects of the contract, such as:
Submitting the contract to arbitration (instead of ordinary courts).
Number and profile of the arbitrators: One or three arbitrators, experience in a specific industry, nationality, etc.
Type of arbitrator: For example, whether a legal arbitrator, an arbitrator of equity, or one with specific technical knowledge is required.
Place of arbitration (seat): City and country where the proceedings are legally established.
Language of the proceedings: Essential when the parties come from countries with different languages.
Law applicable to the substance of the contract: That is, which legislation will be used to resolve the dispute.
Risk of not properly regulating the clause
If an appropriate arbitration clause is not agreed upon, the weaker party may be left defenseless in the event of a dispute:
Subject to distant courts,
Under a law they don't understand,
In a language they don't speak,
Or before arbitrators without the appropriate technical expertise.
In international contracts, the arbitration clause is not a minor detail, but a strategic protection tool.
Does your company sign contracts with foreign counterparties?
At Cuevas Abogados, we help you design and review international arbitration clauses to balance risks and better protect your interests.
