Common arbitration clause defects

Arbitration clauses are drafted last and litigated first. A small number of defects recur.

Optional or permissive language. May be referred to arbitration produces years of litigation about whether arbitration is mandatory.

Naming a non-existent institution or garbling its name, which requires a court to determine the parties’ intent or to declare the clause inoperable.

Conflicting clauses across related agreements in the same transaction — one providing for arbitration, another for court, with different governing law.

Silence on the seat, which leaves the supervisory jurisdiction and the procedural law undetermined.

Confusing seat with venue, so that hearings held elsewhere are argued to have changed the legal seat.

Silence on the number of arbitrators, which under most rules defaults to one and occasionally to three, with cost consequences either way.

Carve-outs that swallow the clause — excluding claims for injunctive relief, for intellectual property, for collection — leaving parallel proceedings.

Conditions precedent without a mechanism for satisfying them where the other party will not participate.

Silence on confidentiality, which is not automatic in all systems.

The fix. Use the institution’s model clause and add only what is deliberately intended.