Where counterparties are in different countries, arbitration is usually preferable to litigation because awards are enforceable in most of the world under a widely adopted convention. The clause must be drafted deliberately.
The agreement to arbitrate. Broad wording covering all disputes arising out of or in connection with the contract, including its existence, validity and termination.
Institution and rules. A named institution and its rules, or ad hoc arbitration under established rules with a designated appointing authority. Naming an institution that does not exist, or garbling its name, is a recurring and expensive error.
Seat. The legal place of arbitration, which determines the supervisory court and the law governing the arbitration itself. Choose a jurisdiction that is a convention party with a supportive judiciary and limited grounds for challenge. The seat is distinct from the physical venue of hearings.
Number of arbitrators and method of appointment. One for smaller disputes, three for larger, with a mechanism for appointing the chair.
Language of the proceedings, stated expressly.
Governing law of the contract, stated separately from the seat.
Optional additions. Consolidation and joinder for multi-contract projects; document production expectations; confidentiality; and interim relief from courts pending constitution of the tribunal.