Key points
- Always specify the seat of arbitration; venue and seat are different, and the seat decides which court supervises the arbitration.
- Never allow one party to appoint the sole arbitrator or to control the panel; the clause will be struck down.
- Specify an odd number of arbitrators, the language, the governing law and, ideally, an institution and its rules.
1. No seat, or seat confused with venue
The seat determines the court with supervisory jurisdiction and the law governing the arbitration. Following BGS SGS Soma v. NHPC (2019), a clause that names only a venue is usually read as fixing the seat there, but ambiguity invites litigation. Write: "The seat of arbitration shall be New Delhi."
2. Unilateral appointment
Clauses giving one party the right to appoint the sole arbitrator, or to supply a panel from which the other must choose, are unenforceable after Perkins Eastman and CORE v. ECI-SPIC. Provide for mutual agreement failing which institutional appointment.
3. Even number of arbitrators
Section 10 requires an odd number. A two-arbitrator clause is not void, but it creates avoidable disputes.
4. Vague scope
"Any dispute arising out of or in connection with this agreement, including its validity, interpretation, performance, breach or termination" captures everything. Narrower wording invites arguments that a claim falls outside the reference.
5. Pre-conditions without teeth
Multi-tier clauses requiring negotiation and mediation before arbitration are enforced. If you include them, set time limits so a party cannot stall.
6. Stamping
Since the Interplay decision, an unstamped agreement no longer blocks reference to arbitration, but the tribunal will still impound it. Pay the stamp duty when the contract is signed.
7. Silence on institution and rules
Ad hoc arbitration works, but institutional rules (DIAC, MCIA, SIAC, ICC) provide appointment machinery, fee schedules and emergency arbitrators. Naming one avoids a Section 11 petition altogether.
Frequently asked questions
Should an Indian contract choose a foreign seat?
Two Indian parties may choose a foreign seat (PASL Wind Solutions v. GE Power, 2021), but enforcement will then be under Part II and Indian courts cannot grant Section 9 relief unless the parties opt in. For domestic contracts a New Delhi seat with institutional rules is usually more practical.
Can an arbitration clause cover disputes with a non-signatory?
Only where the group of companies or similar doctrine applies (Cox and Kings v. SAP India, 2023). If you intend a parent or affiliate to be bound, make them sign.
Related practice area: Commercial Litigation & Arbitration
This article is for general information and does not constitute legal advice. Laws, rules and limitation periods change and depend on the facts; please take advice on your own situation before acting. Reading this article does not create a lawyer-client relationship with Akhtars Legalitarian.