KluwerArbitration
Document information Chapter 3: Formation and Validity of International
Arbitration Agreements
Publication A central issue in the enforcement of international arbitration agreements concerns the standards
for formation and validity of such agreements. These standards play an essential role in ensuring
International Arbitration:
that international arbitration agreements are enforced in an effective and efficient manner, and are
Law and Practice
of substantial practical importance in the arbitral process.
(Third Edition)
Bibliographic §3.01 FORMATION OF INTERNATIONAL
reference ARBITRATION AGREEMENTS
Arbitration agreements, like other categories of contracts, give rise to questions of contract
'Chapter 3: Formation and
formation (particularly issues of consent). It is elementary that an agreement to arbitrate cannot be
Validity of International
recognized or enforced unless it has been validly formed. (1) The formation of arbitration
Arbitration Agreements', in
agreements raises several related issues: (a) consent to the agreement to arbitrate; (b) the
Gary B. Born , International
essential terms required for an arbitration agreement; and (c) defects in the arbitration agreement
Arbitration: Law and Practice
(or so-called “pathological” arbitration clauses).
(Third Edition), 3rd edition
(© Kluwer Law International;
Kluwer Law International [A] Consent to International Arbitration Agreements
2021) pp. 81 - 102 In order for an arbitration agreement to exist, the parties must have validly consented to that
agreement. The question whether parties have validly consented to an arbitration agreement is
governed in most legal systems by generally-applicable principles of contract law, and specifically,
contract formation. (2)
In practice, consent in international commercial transactions is usually evidenced by written
instruments, typically with the execution of a formal contract with
P 82
a corporate officer’s signature. Nonetheless, other modes of establishing consent are also
frequently encountered, including by less formal writings, exchanges of writings (including electronic
or other communications), oral communications and conduct or acquiescence. Note that there is a
distinction between the existence of consent to an arbitration agreement (evidenced, for example,
by oral communications) and the formal validity of the arbitration agreement (which may require a
writing or signature). (3)
In most cases, consent to an arbitration clause will be evidenced by consent to the parties’ main or
underlying contract (containing the arbitration clause); notwithstanding the separability presumption,
a party’s acceptance of the underlying contract will almost always entail consent to the arbitration
clause in that contract. Nonetheless, cases arise in which one party argues either that: (a) in
consenting to the main or underlying contract, it did not also consent to the arbitration clause (for
example, because it was unaware of the clause or because it indicated non-acceptance of the
clause); or (b) while the underlying contract was never executed, the parties agreed separately to
the arbitration clause (for example, to cover disputes involving conduct in unsuccessful contractual
negotiations). In these instances, courts and arbitral tribunals consider whether the parties
sufficiently manifested their consent to the separable arbitration agreement, regardless of their
consent to the underlying contract.
A party’s commencement of arbitral proceedings, or its participation without protest in such
proceedings, can be the basis for finding valid consent to an arbitration agreement. Article 16(2) of
the UNCITRAL Model Law requires that any objection to a tribunal’s jurisdiction be raised no later
than the statement of defense, failing which the jurisdictional objection is waived. Other national
laws are similar. Under these authorities, a party’s tacit acceptance of its counter-party’s initiation of
arbitration, through participation in the arbitral proceedings without raising a jurisdictional objection,
can provide the basis for the formation of an agreement to arbitrate. (4) As a practical matter,
waivers of jurisdictional objections frequently occur, providing a valid basis for subsequent arbitral
proceedings and arbitral awards.
[B] Standard of Proof for International Arbitration
Agreements
Different approaches have been taken to the standard of proof required to establish the existence
of an arbitration agreement. Some authorities have required a heightened standard of proof, as
compared to other contracts, holding that the parties’ agreement to arbitrate must be clearly
(5)
1
© 2021 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
, demonstrated or that waiver of access to national courts must be express. (5) Other authorities have
required a relaxed standard of proof, relying on the pro-arbitration policies of the New York
Convention and national arbitration
P 83
legislation. (6) Finally, a few authorities apply the same standard of proof required for the formation
of other types of contracts. (7)
[C] Essential Terms of International Arbitration Agreements
In order for a valid international arbitration agreement to be formed, the parties must reach
agreement on a core of essential issues. Absent agreement on these essential terms, the
arbitration agreement will generally be void for indefiniteness or uncertainty.
[1] Agreement to Arbitrate
The essential core of an arbitration agreement is simple: it consists of nothing more than an
obligation to resolve certain disputes with another party by “arbitration” and the right to demand that
such disputes be resolved in this fashion. Thus, the essential terms of an arbitration agreement are
contained in the phrase: “All disputes shall be finally resolved by arbitration.” (8) Alternatively, though
ill-advised, these terms can contain nothing more than the word “arbitration,” included in a contract,
letter, or email, by which the parties commit to resolve disputes relating to their transaction by
arbitration.
[2] Incidental Terms
As discussed above, international arbitration agreements typically do, and should, contain
additional important terms, including the scope of the obligation to arbitrate, the arbitral seat,
institutional rules, language and the like. (9) Nonetheless, failure to include these terms does not
render the arbitration clause indefinite. Rather, in almost all jurisdictions, national law provides
default mechanisms that will give effect to the parties’ agreement (e.g., by providing for judicial
selection of arbitrators and by authorizing the arbitral tribunal to perform various functions, such as
selecting the arbitral seat and language).
[3] Blank Clauses
Some authorities hold that a so-called “blank clause,” which does not specify either the arbitral seat
or the means of choosing the arbitrators, is indefinite and void. These authorities reason that a
blank clause provides no means for either selecting an arbitral tribunal (absent agreement by the
parties) or the seat (where judicial assistance to appoint arbitrators can be sought). Other
authorities hold that a blank
P 84
clause impliedly authorizes the claimant to designate the arbitral seat, thereby providing the
requisite certainty for the arbitration agreement. (10)
[D] “Pathological” Arbitration Clauses
Although model arbitration clauses are readily available from most arbitral institutions (or other
sources (11) ) in practice, parties not infrequently include so-called “pathological” arbitration clauses
in their contracts. These provisions contain a variety of defects, which are often argued to render the
arbitration agreement invalid. As discussed below, however, most courts endeavor to give effect to
these provisions by either ignoring or seeking to cure their “pathological” elements. For example,
one court cited the “general principle that Courts should uphold arbitration, by striving to give effect
to the intention of parties to submit disputes to arbitration, and not allow any inconsistencies or
uncertainties in the wording or operation of the arbitration clause to thwart that intention.” (12)
Potentially “Pathological” Arbitration Clauses
“Jurisdiction. In case of disputes, the parties undertake to submit them to arbitration as provided for
by the Fédération Française de la Publicité. In case of disputes, the Tribunal de la Seine would
have exclusive jurisdiction.”
“The parties may refer any dispute under this agreement to arbitration.”
“Any dispute may be resolved by arbitration under the ICC Rules, applying the UNCITRAL
Arbitration Rules.”
“The arbitration shall be seated in Miami; the seat of the arbitration shall be at the ICC in Paris.”
[1] Indefinite Arbitration Agreements
Parties frequently draft arbitration agreements that lack specificity (for example, agreeing on
“Arbitration – New York”). National courts and arbitral tribunals generally seek to give effect to
arbitration agreements lacking specificity, holding that only the
2
© 2021 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
Document information Chapter 3: Formation and Validity of International
Arbitration Agreements
Publication A central issue in the enforcement of international arbitration agreements concerns the standards
for formation and validity of such agreements. These standards play an essential role in ensuring
International Arbitration:
that international arbitration agreements are enforced in an effective and efficient manner, and are
Law and Practice
of substantial practical importance in the arbitral process.
(Third Edition)
Bibliographic §3.01 FORMATION OF INTERNATIONAL
reference ARBITRATION AGREEMENTS
Arbitration agreements, like other categories of contracts, give rise to questions of contract
'Chapter 3: Formation and
formation (particularly issues of consent). It is elementary that an agreement to arbitrate cannot be
Validity of International
recognized or enforced unless it has been validly formed. (1) The formation of arbitration
Arbitration Agreements', in
agreements raises several related issues: (a) consent to the agreement to arbitrate; (b) the
Gary B. Born , International
essential terms required for an arbitration agreement; and (c) defects in the arbitration agreement
Arbitration: Law and Practice
(or so-called “pathological” arbitration clauses).
(Third Edition), 3rd edition
(© Kluwer Law International;
Kluwer Law International [A] Consent to International Arbitration Agreements
2021) pp. 81 - 102 In order for an arbitration agreement to exist, the parties must have validly consented to that
agreement. The question whether parties have validly consented to an arbitration agreement is
governed in most legal systems by generally-applicable principles of contract law, and specifically,
contract formation. (2)
In practice, consent in international commercial transactions is usually evidenced by written
instruments, typically with the execution of a formal contract with
P 82
a corporate officer’s signature. Nonetheless, other modes of establishing consent are also
frequently encountered, including by less formal writings, exchanges of writings (including electronic
or other communications), oral communications and conduct or acquiescence. Note that there is a
distinction between the existence of consent to an arbitration agreement (evidenced, for example,
by oral communications) and the formal validity of the arbitration agreement (which may require a
writing or signature). (3)
In most cases, consent to an arbitration clause will be evidenced by consent to the parties’ main or
underlying contract (containing the arbitration clause); notwithstanding the separability presumption,
a party’s acceptance of the underlying contract will almost always entail consent to the arbitration
clause in that contract. Nonetheless, cases arise in which one party argues either that: (a) in
consenting to the main or underlying contract, it did not also consent to the arbitration clause (for
example, because it was unaware of the clause or because it indicated non-acceptance of the
clause); or (b) while the underlying contract was never executed, the parties agreed separately to
the arbitration clause (for example, to cover disputes involving conduct in unsuccessful contractual
negotiations). In these instances, courts and arbitral tribunals consider whether the parties
sufficiently manifested their consent to the separable arbitration agreement, regardless of their
consent to the underlying contract.
A party’s commencement of arbitral proceedings, or its participation without protest in such
proceedings, can be the basis for finding valid consent to an arbitration agreement. Article 16(2) of
the UNCITRAL Model Law requires that any objection to a tribunal’s jurisdiction be raised no later
than the statement of defense, failing which the jurisdictional objection is waived. Other national
laws are similar. Under these authorities, a party’s tacit acceptance of its counter-party’s initiation of
arbitration, through participation in the arbitral proceedings without raising a jurisdictional objection,
can provide the basis for the formation of an agreement to arbitrate. (4) As a practical matter,
waivers of jurisdictional objections frequently occur, providing a valid basis for subsequent arbitral
proceedings and arbitral awards.
[B] Standard of Proof for International Arbitration
Agreements
Different approaches have been taken to the standard of proof required to establish the existence
of an arbitration agreement. Some authorities have required a heightened standard of proof, as
compared to other contracts, holding that the parties’ agreement to arbitrate must be clearly
(5)
1
© 2021 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
, demonstrated or that waiver of access to national courts must be express. (5) Other authorities have
required a relaxed standard of proof, relying on the pro-arbitration policies of the New York
Convention and national arbitration
P 83
legislation. (6) Finally, a few authorities apply the same standard of proof required for the formation
of other types of contracts. (7)
[C] Essential Terms of International Arbitration Agreements
In order for a valid international arbitration agreement to be formed, the parties must reach
agreement on a core of essential issues. Absent agreement on these essential terms, the
arbitration agreement will generally be void for indefiniteness or uncertainty.
[1] Agreement to Arbitrate
The essential core of an arbitration agreement is simple: it consists of nothing more than an
obligation to resolve certain disputes with another party by “arbitration” and the right to demand that
such disputes be resolved in this fashion. Thus, the essential terms of an arbitration agreement are
contained in the phrase: “All disputes shall be finally resolved by arbitration.” (8) Alternatively, though
ill-advised, these terms can contain nothing more than the word “arbitration,” included in a contract,
letter, or email, by which the parties commit to resolve disputes relating to their transaction by
arbitration.
[2] Incidental Terms
As discussed above, international arbitration agreements typically do, and should, contain
additional important terms, including the scope of the obligation to arbitrate, the arbitral seat,
institutional rules, language and the like. (9) Nonetheless, failure to include these terms does not
render the arbitration clause indefinite. Rather, in almost all jurisdictions, national law provides
default mechanisms that will give effect to the parties’ agreement (e.g., by providing for judicial
selection of arbitrators and by authorizing the arbitral tribunal to perform various functions, such as
selecting the arbitral seat and language).
[3] Blank Clauses
Some authorities hold that a so-called “blank clause,” which does not specify either the arbitral seat
or the means of choosing the arbitrators, is indefinite and void. These authorities reason that a
blank clause provides no means for either selecting an arbitral tribunal (absent agreement by the
parties) or the seat (where judicial assistance to appoint arbitrators can be sought). Other
authorities hold that a blank
P 84
clause impliedly authorizes the claimant to designate the arbitral seat, thereby providing the
requisite certainty for the arbitration agreement. (10)
[D] “Pathological” Arbitration Clauses
Although model arbitration clauses are readily available from most arbitral institutions (or other
sources (11) ) in practice, parties not infrequently include so-called “pathological” arbitration clauses
in their contracts. These provisions contain a variety of defects, which are often argued to render the
arbitration agreement invalid. As discussed below, however, most courts endeavor to give effect to
these provisions by either ignoring or seeking to cure their “pathological” elements. For example,
one court cited the “general principle that Courts should uphold arbitration, by striving to give effect
to the intention of parties to submit disputes to arbitration, and not allow any inconsistencies or
uncertainties in the wording or operation of the arbitration clause to thwart that intention.” (12)
Potentially “Pathological” Arbitration Clauses
“Jurisdiction. In case of disputes, the parties undertake to submit them to arbitration as provided for
by the Fédération Française de la Publicité. In case of disputes, the Tribunal de la Seine would
have exclusive jurisdiction.”
“The parties may refer any dispute under this agreement to arbitration.”
“Any dispute may be resolved by arbitration under the ICC Rules, applying the UNCITRAL
Arbitration Rules.”
“The arbitration shall be seated in Miami; the seat of the arbitration shall be at the ICC in Paris.”
[1] Indefinite Arbitration Agreements
Parties frequently draft arbitration agreements that lack specificity (for example, agreeing on
“Arbitration – New York”). National courts and arbitral tribunals generally seek to give effect to
arbitration agreements lacking specificity, holding that only the
2
© 2021 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
