Arbitration clause

An arbitration clause (also known as a compromissory clause) is a contractual provision — included in a SPA, shareholders' agreement or commercial contract — by which the parties agree in advance to submit any future disputes to arbitration rather than to state courts. Its drafting requires precision: the arbitration institution, seat, number of arbitrators, language and applicable law must be clearly specified. Poorly drafted arbitration clauses can be declared null or pathological, leaving parties without the dispute resolution mechanism they intended. In Franco-Swiss transactions, the clause must be consistent with both French and Swiss arbitration law.

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Example: a SPA between a French buyer and a Swiss seller includes the following arbitration clause: "Any dispute arising from this agreement shall be finally resolved under the ICC Rules by a sole arbitrator, seated in Geneva, with French as the language of proceedings and Swiss law as the governing law." This clause is enforceable in both jurisdictions and provides a clear, workable dispute resolution pathway.

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Hectelion reviews arbitration clauses from a financial perspective to ensure that dispute resolution mechanisms are adapted to the valuation complexity of each transaction.