Fallible Antidotes: Notes on the Pathology of the Arbitral Clause and Its Overcoming
Numerous virtues distinguish the arbitral process, such as its speed in resolving disputes, the freedom to choose the arbitrators and the “rules of the game,” confidentiality, immediacy, among others. Undoubtedly, it is an antidote to the “particularities” of the ordinary judicial path, which is why it is not uncommon to find arbitral clauses in contracts today. However, imprecise drafting of these clauses can open up fertile ground for confusion and disagreement. Today, I will focus the analysis on pathological clauses, their legal effects, and how to avoid them.
When arbitration agreements are not sufficiently clear and precise, they lead to a foggy area called the pathology of the arbitral agreement; this anomaly may be found in the impossibility of executing the will of the parties, which is why, in order to avoid the presence of pathological clauses, it is imperative to anticipate, when drafting them, the effects these may trigger. It is essential to dedicate enough time to their drafting, avoiding late-night clauses (leaving their drafting until the last moment), or, alternatively, adhering to the model prescribed by arbitral institutions, which in the Honduran context refers to the model preconized by the Chamber of Commerce and Industries of Tegucigalpa and the Chamber of Commerce and Industries of Cortés. This approach prevents the improper use of unclear or ambiguous arbitral clauses, ensuring a drafting that effectively aligns with their original purposes.
So, how can we identify the pathology in the arbitral agreement? “An arbitral agreement is pathological when, due to defects, imperfections, or deficiencies in its drafting, it prevents the proper and normal development of the arbitration” (Matheus, 2004). It follows, then, that the effective application of an arbitral clause will consist in avoiding ambiguity, obscurity, and imprecision, whether in any of the validity requirements or in the non-essential elements of the clause.
To facilitate its identification, doctrine has already developed that any arbitral agreement is pathological if it fails to meet these four functions:
a) To produce effects that are mandatory for the contracting parties.
b) To prevent ordinary justice from intervening before the arbitral award is issued.
c) To give competence to the arbitrators to resolve the conflict or conflicts.
d) To provide the necessary conditions for the development of an organized procedure that concludes with an award. (Eisemann, 1974)
Consequently, it is important to remember that arbitral clauses are often the key that opens the door to efficient dispute resolution. Therefore, correct drafting is fundamental. When these clauses are not drafted with precision or when they are incorrectly layered, they can become a handicap in the normal development of arbitration; that is, they present a problem rather than a solution.
It is not uncommon to come across contracts with unclear, imprecise, or simply incorrect arbitral clauses, such as when they designate, for example, non-existent arbitral institutions or even involve the ordinary judicial path to resolve the dispute. For this reason, the need to draft arbitral clauses with precision and patience cannot be underestimated. Clear and specific language is essential to ensure that all parties involved understand the terms and conditions under which any dispute will be resolved—LESS IS MORE. Lack of precision can lead to divergent interpretations, giving rise to additional disputes regarding the validity and scope of the clause itself.
Another critical aspect, no less important, is the clear identification of the applicable arbitral rules and procedures. The choice of a specific set of rules provides a coherent framework with no room for confusion.
In conclusion, clear and precise drafting is essential to ensure that these clauses fulfill their purpose effectively.
At Lexincorp, we pay attention to every detail in contract drafting. Investing time and effort in drafting well-defined arbitral clauses allows the involved parties to build a solid foundation for the efficient resolution of disputes.
Thank you for reading. If you enjoyed my article and need advice on this matter, feel free to contact me via email at currutia@lexincorp.com.
Written by: Carlos Urrutia
Bibliography:
Eisemann, F. (1974). La Clause d’arbitrage phologique. Minoli, E. Arbitraje comercial: Turín: Unione tipografico-editrice.
Matheus, C. (2004). Reflexiones sobre el convenio arbitral en el derecho peruano. n. 108.
