# Arbitration Clause

Source: https://contracko.com/clause-library/arbitration

# Arbitration Clause

Refers disputes to private, binding arbitration instead of the public courts, fixing rules, seat and language.

## What it is

An arbitration clause commits the parties to resolve disputes by binding arbitration before private arbitrators rather than a public court. It specifies the institution and rules (e.g. NAI, ICC), the seat, number of arbitrators and language. Awards are widely enforceable internationally under the New York Convention.

## Why it matters

Arbitration offers confidentiality, expert decision-makers and easier cross-border enforcement, but it can be costly and provides limited appeal rights. Choosing it deliberately and drafting the clause completely avoids unenforceable "pathological" clauses.

## How to apply it

- Name the institution and rules, the seat, the language and number of arbitrators.
- Confirm the arbitration is binding and final, with limited grounds to challenge.
- Decide whether confidentiality applies to the proceedings and the award.
- Preserve the right to seek urgent interim measures from a court.

## Sample wording

> Any dispute arising out of or in connection with this Agreement shall be finally settled by arbitration under the Rules of the Netherlands Arbitration Institute (NAI). The seat is Amsterdam and the language of the arbitration is English.

## Negotiation tips

- • For smaller disputes, agree a single arbitrator to keep costs proportionate.
- • Pick a seat in a New York Convention state for reliable enforcement.

## Common pitfalls

- • A "pathological" clause naming a non-existent institution or contradictory forums.
- • Forgetting that arbitration usually excludes appeal on the merits.

### How Contracko helps

Contracko stores all contracts containing arbitration clauses in one searchable repository, so your legal team can instantly identify which disputes must go to arbitration and under which institutional rules. Its AI review flags pathological or internally inconsistent arbitration clauses before signing, helping your team avoid the costly consequence of a clause that cannot be enforced when a dispute actually arises.

## Legal references

- [Rv art. 1020 Dutch Arbitration Act (Arbitragewet, Rv Book 4) Dutch law](https://wetten.overheid.nl/BWBR0001827)
- New York Convention on enforcement of awards

Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.

## Relevant for

[Construction](https://contracko.com/industries/construction-industry)[Shipping](https://contracko.com/industries/shipping)[Logistics & Distribution](https://contracko.com/industries/logistics)[Financial Services](https://contracko.com/industries/financial-services)[Engineering & Architecture](https://contracko.com/industries/engineering)

## Related clauses

- [Dispute Resolution Clause](https://contracko.com/clause-library/dispute-resolution)
- [Governing Law Clause](https://contracko.com/clause-library/governing-law)
- [Confidentiality Clause](https://contracko.com/clause-library/confidentiality)

## Related terms

- [Arbitration](https://contracko.com/glossary/arbitration)
- [Jurisdiction](https://contracko.com/glossary/jurisdiction)
- [Governing law](https://contracko.com/glossary/governing-law)

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## Frequently asked questions

Common questions about this clause.

- **Q:** Is an arbitration award easier to enforce abroad than a court judgment?
  **A:** Often yes. The New York Convention requires its 170+ member states to recognise and enforce foreign arbitral awards with limited refusal grounds.

- **Q:** Can you appeal an arbitral award?
  **A:** Generally not on the merits; challenges are limited to narrow grounds such as procedural irregularity or lack of a valid arbitration agreement.

- **Q:** Is arbitration always more expensive than litigation?
  **A:** Not necessarily. For straightforward commercial disputes a single-arbitrator proceeding can be faster and cheaper than multi-year litigation; costs depend on the institution, the amount in dispute and the complexity of the case.

- **Q:** What makes an arbitration clause "pathological"?
  **A:** A clause is pathological if it is internally inconsistent, names a non-existent institution, or creates uncertainty about whether the parties intended arbitration at all, making it likely to be unenforceable.

- **Q:** Can interim measures be obtained during arbitration?
  **A:** Yes. Most arbitration rules allow emergency arbitrator proceedings for urgent relief; parties can also approach a Dutch court for provisional measures without waiving the arbitration agreement.

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