An arbitration clause, also known as an arbitration agreement, is one of the tools that allows parties to refer a dispute to an arbitration court instead of the common court system. The appropriate wording of such a clause is essential for the effectiveness and efficiency of conflict resolution, especially in domestic and international economic relations. What conditions must it meet and what mistakes should be avoided? We provide some tips below.
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What is an Arbitration Clause?
An arbitration clause is a contract between two or more parties.
They agree to resolve disputes through arbitration instead of going to court. It may cover all disputes or only the specified scope. The agreement must refer to a defined legal relationship. It may take the form of:
- an arbitration clause included in the main contract (the most commonly used solution),
- a separate arbitration contract, concluded at the time the dispute arises or beforehand
According to Art. 1161 § 1 of the Polish Code of Civil Procedure, an arbitration agreement must be written. This includes electronic correspondence if it preserves the content and identifies the parties.
In international trade, the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards plays a key role. Over 170 countries have ratified it and follow its rules.
Why Is It Worth Including an Arbitration Clause?
An arbitration clause is not only a formal expression of consent to arbitration. It is also a tool for legal risk management. Concluding it helps avoid uncertainty regarding jurisdiction. Moreover, it increases predictability and control over future proceedings.
Benefits of an Arbitration Agreement:
- Procedural flexibility – parties choose rules, language, location, and arbitrators.
- Confidentiality – hearings are not public, which protects reputation and trade secrets;
- Faster dispute resolution – arbitration is usually quicker than court proceedings;
- High level of arbitrator expertise – arbitrators often have industry-specific experience, improving decision quality;
- Easier enforcement abroad – based on the New York Convention.
An arbitration clause is especially recommended in contracts:
- with foreign partners,
- of high value,
- in regulated industries (e.g., energy, construction, IT),
- requiring confidentiality.
How to Draft an Effective Arbitration Clause?
An arbitration clause should be valid, clear, and enforceable. In practice, many problems arise from vague or incomplete clauses.
Formal Requirements:
- Written form – the clause must be recorded in a way that allows its content to be retrieved (e.g., contract, email, business correspondence);
- Explicit consent by both parties – lack of objection is not sufficient;
- Reference to a specific legal relationship – e.g., “disputes arising out of this agreement.”
Key Elements of the Arbitration Clause:
- A clear statement that disputes will be resolved through arbitration;
- Indication of the arbitration institution (e.g., SAKIG, ICC, VIAC);
- Location of arbitration (e.g., Warsaw, Vienna, Stockholm);
- Number of arbitrators and the method of their appointment;
- Language of the proceedings;
- Option to have a single-stage or multi-stage process (e.g., mediation first, then arbitration).
What to Avoid When Drafting an Arbitration Clause:
Vague or general wording often leads to practical issues. Disputes over clause validity or jurisdiction are a common cause of arbitration delay.
Common Mistakes:
- No clear reference to arbitration (e.g., saying “the parties will seek to resolve disputes amicably”);
- Failure to name the arbitration institution;
- Missing details on language, location, or number of arbitrators;
- Conflicts between the arbitration clause and other contract terms (e.g., a jurisdiction clause);
- Relying on outdated arbitration rules;
- Failing to account for legal successors.
Even small inaccuracies can lead to the clause being considered invalid or unenforceable.
Arbitration Clause – Summary
An arbitration agreement is a significant legal tool. When well drafted, it offers an effective, confidential, and predictable way to resolve disputes. Its importance increases due to the development of international business relations. There is also a growing need to reduce risks linked to national court jurisdiction.
A well-drafted arbitration clause helps maintain control over disputes and resolves them efficiently.
Do you need help drafting an arbitration agreement?
Our team assists in preparing and reviewing arbitration clauses. We will adjust them to the specifics of your contract and industry. Contact us today.
FAQ – Frequently Asked Questions About Arbitration Clause
1. What is an arbitration clause?
It is an agreement between parties to refer a dispute to an arbitral tribunal instead of a state court.
2. Must the arbitration clause be in writing?
Yes, according to Art. 1162 of the Code of Civil Procedure, a written or other recordable form allowing the content to be reviewed is necessary.
3. Can parties conclude the agreement by email or in a commercial offer?
Yes, provided the documentation indicates the parties’ mutual consent.
4. Can the arbitration clause cover only some disputes?
Yes, parties can limit the scope, e.g., only to disputes arising from failure to perform the contract.
5. What if the clause does not specify the arbitration institution?
This may cause difficulties in appointing arbitrators or disputes over jurisdiction. It’s best to avoid such situations.
6. Does the arbitration clause bind legal successors?
Yes. Unless the parties exclude it, the agreement also applies to assignees and heirs.
7. Can a common court review the validity of the arbitration agreement?
Yes, for example, when considering a challenge to set aside an arbitral award or when addressing an objection regarding the court’s jurisdiction.
8. Can parties withdraw their consent to arbitration?
Only if both parties agree to change the dispute resolution method.
9. Is arbitration always cheaper than court?
No — it may be cheaper for high-value disputes, but for simple cases, courts can be more economical.
10. What are the most common mistakes in drafting arbitration clause?
Lack of precision, unclear reference to disputes, omission of the arbitration institution, or inconsistency with arbitration rules.