Gary B. Born - International Arbitration and Forum Selection Agreements, Drafting and Enforcing

International Arbitration and
Forum Selection Agreements

International Arbitration and Forum Selection Agreements

Drafting and Enforcing

Sixth Edition

by

Gary B. Born

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Kluwer Law International B.V.

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ISBN: 978-94-035-3250-9

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e-ISBN: 978-94-035-3251-6

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Table of Contents

4 . Choice-of-Law Clauses

Choosing Between Ad Hoc and Institutional Arbitration

29 . Incorporation of Arbitration Agreement by Reference

2 . Nonarbitrability Exceptions

UNCITRAL Model Law on International Commercial Arbitration (1985)

Preface and Acknowledgements to the First Edition

Disputes have a critical impact on international commercial dealings. Properly handled, contractual disagreements need not jeopardize, and can enhance, a companys bottom line. Handled ineffectively, disputes can produce unjust or disproportionate liability, extravagant legal costs, adverse publicity, and worse. These risks are especially great in international commercial transactions, where parties expectations and national legal systems differ widely.

This book examines the principal means for reducing the risks inherent in international commercial disputes. Specifically, it examines international forum selection clauses and international arbitration agreements, as tools for choosing tribunals to resolve parties international commercial disputes. The book seeks to explain, in concise and accessible language, the advantages and disadvantages of different types of dispute resolution provisions. It then details the various options which are available in drafting these provisions providing representative text for each. The emphasis throughout is on simple, practical, and durable solutions.

This book would not have been possible without the assistance of countless colleagues, students, clients, and competitors, rendered over the course of decades. Any list of acknowledgements would fail properly to attribute the enormous credit due to those who have assisted. In particular, I wish to acknowledge the care and ingenuity of Elke Jenner and the research of Joe Profaizer, Kevin Pettican, and Susie Williams. As always, John Berger provided invaluable editorial advice.

Gary B. Born

March 1999

Preface and Acknowledgements to the Sixth Edition

This is the sixth edition of a guide to drafting international arbitration and forum selection agreements. First published in 1999, the guide discusses the principal means for reducing the risks inherent in international commercial disputes namely, international forum selection and arbitration agreements. The guide focuses on practical observations and model clauses, with both hopefully drafted in concise and accessible language.

This edition of the guide is updated to January 2021, and seeks to take into account developments since the previous editions were published (in 1999, 2005, 2010, 2013, and 2016). Nonetheless, one striking aspect of the dispute resolution provisions discussed in this edition is how little they have changed in the past twenty years. Now, as then, simple forum selection clauses and arbitration agreements provide the most practical and durable mechanisms for reducing the risks and costs of transnational disputes.

This expanded edition also introduces a number of additional model provisions which can be used either to supplement agreements to arbitrate (and forum selection clauses) or to replace them (as with expert determination provisions). As with prior versions, the guide is not a substitute for consideration of the circumstances and needs of particular transactions, or specialized advice about dispute resolution mechanisms for those transactions. Rather, it provides language and identifies issues in order that such consideration and advice can be more focused and efficient.

As with its predecessors, this sixth edition is only possible because of the invaluable assistance of my colleagues, students, clients, and competitors. In particular, Katrin Frach and Marta Valtulini provided exceptionally diligent and careful assistance, as did Marc Lee, Gustavo Gaspar, Maria Pabon, Youjin Jo and Jared Tan. My publishers at Kluwer Law International, particularly Gwen de Vries and Steve Lambley, have also provided characteristically invaluable editorial advice and assistance.

Any comments, criticisms and queries are welcome by email to gary.born@ wilmerhale.com.

Gary B. Born

March 2021

Chapter 1

Planning for International Dispute Resolution

A.IMPORTANCE OF CONTRACTUAL FORUM SELECTION IN INTERNATIONAL DISPUTES

Recent decades have seen an unparalleled expansion of global trade and investment. That expansion has weathered political, financial and other crises, and, notwithstanding recurrent crises, appears likely to endure. Together with prosperity, increased international trade and investment have brought about increased numbers of international commercial disputes. Business enterprises of every description can find themselves entangled in legal proceedings with foreign companies, sometimes before distant, unsympathetic, or corrupt tribunals. The costs of these proceedings, and the consequences of losing, are often substantial.

Almost every international commercial controversy poses a critical preliminary question Where, and by whom, will this dispute be decided? The answer to this question often decisively affects a disputes eventual outcome. It can mean the difference between winning and losing, between de minimis damages and a multimillion dollar, euro, pound, yen, or renminbi award.

There are many reasons why the same dispute can have materially different outcomes in different fora. Procedural, choice-of-law, substantive, and other legal rules differ from one jurisdiction to another. The character, competence, and integrity of tribunals also vary substantially among different states. Other considerations, such as inconvenience, local bias, and language, may make a particular forum much more favorable for one party than another. These differences are almost always more pronounced across international borders than within purely domestic political systems.

Because of the importance of forum selection, parties to international transactions often include contractual dispute resolution provisions in their agreements. As detailed below, these provisions significantly reduce the uncertainties inherent in international commercial disputes, and can sometimes offer a substantial measure of legitimate partisan advantage. As a consequence, it is almost always advisable to include a contractual dispute resolution provision in any international contract. These provisions typically take the form of: (1) forum selection clauses, or (2) arbitration agreements. Either form of agreement can, and frequently is, combined with a choice-of-law clause, selecting the substantive law applicable to the parties relationship.