How to Negotiate An Arbitration Clause
Negotiate an arbitration clause by fixing the seat, rules, language, and number of arbitrators up front, and by checking the cost of arbitration doesn't effectively price you out of ever bringing a claim. An arbitration clause that's vague on these mechanics can itself become a source of dispute before the underlying issue is even addressed.
This guide describes general, widely-used commercial negotiation practice — it is informational, not legal advice on any specific contract. The right position for your deal depends on your actual leverage, relationship, and governing law. Have your actual clause reviewed by a lawyer before relying on any of this.
What each side typically wants
Often wants arbitration seated in its home jurisdiction, under rules and in a language that favor its own counsel and resources, sometimes with a single arbitrator to reduce cost.
Wants a neutral seat, familiar or well-established arbitration rules, and cost/procedure terms that don't make bringing a claim impractical.
Red flags worth pushing back on
- Seat of arbitration and governing arbitral rules left undefined, or defaulting silently to the other party's home jurisdiction
- No cap or allocation mechanism for arbitration costs, which can be substantial and deter smaller claims
- Language of arbitration set as one party's native language with no accommodation for the other
- No carve-out for urgent injunctive relief through courts while the substantive dispute goes to arbitration
- Ambiguous scope — unclear whether it covers all disputes or only certain categories, inviting a fight over jurisdiction itself
How to negotiate it
- Fix a neutral seat and a well-established institutional rule set (e.g. SIAC, ICC, LCIA) rather than leaving it open
- Specify the number of arbitrators (commonly one for smaller disputes, three for larger/complex ones) and how they're appointed
- Address costs directly — e.g. costs follow the outcome, or are split, rather than left to arbitrator discretion with no guidance
- Carve out interim/injunctive relief so either party can still go to a court for urgent measures without waiving arbitration for the main dispute
- Define the scope of arbitrable disputes clearly to avoid a preliminary fight over whether a given dispute is even covered
Sample fallback language
"Any dispute arising out of or in connection with this Agreement shall be referred to and finally resolved by arbitration under the [Institution] Rules, seated in [neutral location], before [one/three] arbitrator(s), conducted in the English language."
Illustrative starting language only — have it reviewed and adapted to your actual deal and governing law before using it.
Frequently asked questions
Is arbitration always faster and cheaper than litigation?
Not necessarily — it depends heavily on the seat, rules, and number of arbitrators chosen. A poorly negotiated clause (undefined seat, three arbitrators for a small dispute) can end up slower and more expensive than court litigation would have been.
Can I still get urgent court relief if there's an arbitration clause?
Only if the clause explicitly carves out interim/injunctive relief — without that carve-out, a broadly worded arbitration clause can be read to exclude court intervention even for genuinely urgent situations.
Don't negotiate this alone.
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