Title: Defective Arbitration Clauses: An examination of their practical consequences to Commercial Arbitration proceedings
Author(s): Dr. Julius Clement Mashamba (View Profile)
Journal: Indian Review of International Arbitration
Source: www.iriarb.com
Abstract:
The foundation of arbitration is an arbitration agreement or clause,1 through which parties to a commercial or investment contract consent to resolve disputes arising under or relating to such contract by arbitration. A carefully drafted arbitration clause normally yields into a smooth, expedient, and confidential dispute resolution process. However, a poorly drafted or ‘pathological’ arbitration clause often leads to prolonged litigation, where the parties are constrained to approach the court to obtain judicial interpretation and a directive on the validity, operativity, curability, legality or otherwise of the poorly drafted arbitration clause before the arbitration proceeding can even begin.
Notably, some of the defects are curable and some are incurable even upon approaching the courts. Whereas the incurability of a pathological clause makes it unenforceable, in effect, rendering the entire arbitration agreement fatal, curable defects in pathological arbitration clauses may be remedied through the tool of interpretation employed by courts of law in different jurisdictions around the world. A review of case law in this article has revealed two major consequences of pathological arbitration clauses: firstly, a pathological arbitration clause renders an arbitration clause null and void, inoperative or incapable of being performed. Secondly, although a pathological arbitration clause may be defective, the court may sustain, cure and reconcile it with the implied intention of the parties to refer a dispute to arbitration, rather than resorting to litigation in court.
Where an arbitration clause is pathological, parties are trapped in a prolonged litigation process in which they spend more time, effort and finances in pursuing the prolonged court process, which would otherwise not be the case if the arbitration clauses were crafted carefully and effectively. Therefore, it is pertinent that transactional experts involved in commercial negotiations leading up to the drafting of commercial contracts that contain arbitration clauses are well-versed with the essentials of drafting effective arbitration clauses.
Cite this as: Dr. Julius Clement Mashamba, “ Defective Arbitration Clauses: An examination of their practical consequences to Commercial Arbitration proceedings" 5 IRIArb (2025).
*The views expressed are of author(s) only.