AVOIDING HYBRID ARBITRATION CLAUSES IN COMMERCIAL AGREEMENTS

Hybrid arbitration clauses, whereby parties agree to have one arbitration institution administer an arbitral proceeding using the rules of another institution, are increasingly seen in commercial agreements. Such clauses are often the result of compromise between negotiating parties, who may each demand that its preferred or ‘go-to’ institution or rules be used to resolve their disputes. Some institutional rules, such as those of the China International Economic and Trade Arbitration Commission, expressly recognise party autonomy to provide for such hybrid clauses. However, as institutions may differ significantly in terms of organisational, functional or governance structures, requiring one institution to administer a proceeding using the rules of another institution may be fraught with practical difficulties, if not legal risks. A number of recent examples highlight these issues.

Validity of hybrid arbitration clauses upheld in the Insigma case

Hybrid arbitration clauses came up for judicial scrutiny in Singapore recently in connection with a dispute between Insigma Technology Co Ltd (‘Insigma’) and Alstom Technology Ltd (‘Alstom’). The relevant contract between them provided that all disputes should be resolved “by arbitration before the Singapore International Arbitration Centre (‘SIAC’) in accordance with the Rules of Arbitration of the International Chamber of Commerce (‘ICC Rules’)”. Alstom commenced ICC arbitration in Paris against Insigma but then withdrew its request for arbitration when Insigma disputed the jurisdiction of the ICC and contended that the SIAC should have the jurisdiction to administer the arbitration under the ICC Rules. Thereafter, Alstom commenced arbitration at the SIAC.

Oct-Dec 2013 issue

O’Melveny & Myers LLP