Institutional Rules or Not?

One of the advantages of arbitration over proceedings before national courts is procedural flexibility; generally, procedure can be agreed between the parties. In commercial contracts, the most common way in which the parties provide for this is through the use of the rules of an arbitral institution.

There are two main advantages to providing in your arbitration clause that any arbitration is to be referred to a particular arbitration institution: the institution's rules will provide a procedural framework for your arbitration and the institution will provide administrative support to the arbitration. In the case of the better known institutions, their rules will have been extensively tested and the institution is often willing to give impartial guidance to the parties (and the tribunal) as to the application of its rules. Often, the institution will also administer the arbitration, though the extent of administrative support varies from institution to institution.

Incorporating reference to an arbitral institution (and its rules) can also avoid problems with such matters as commencing the arbitration, appointing, removing and replacing arbitrators, basic procedure, costs etc. Institutions will charge a fee for their support, but the above advantages mean that, for commercial contracts, use of institutional rules is the most common approach.

For more information on arbitral institutions, their rules, and specimen clauses click on "Arbitral Institutions and Clauses" on the menu on the right. 

If the parties do not adopt a set of institutional rules then, unless, most unusually, the parties write their own set of rules, the procedure will depend upon what the parties can agree between them once a dispute has arisen. Failing such agreement, procedure will be established by the tribunal (subject to any mandatory rules of the Seat). The principal problem with this approach (which is sometimes known as an "ad hoc" arbitration) is that if the parties do not agree on the constitution of the tribunal (and have agreed no fallback) then the relevant provisions of the law of the seat will determine the manner in which the tribunal is appointed.

Note that, under some arbitration laws, use of an arbitration institution may (sometimes with other conditions) be prescribed in certain circumstances and so may need to be taken account of (to the extent relevant); for example in the case of PRC seated arbitrations (see here for more).

For more details on the procedure followed in arbitrations see Procedure. An example of a clause that does not incorporate a reference to institutional rules can be found at Stand-Alone Clauses.