Arbitration Clause
The arbitration clause requires the parties to resolve disputes under an international policy or reinsurance contract through private arbitration with an agreed seat and procedural rules, rather than before national courts.
- Clause type
- Condition
- Origin/Market
- London Market (LMA/NMA/Lloyd’s)
- Favours
- Neutral
- Negotiability
- Negotiable
Purpose
In international programmes and reinsurance contracts involving parties from different jurisdictions, participants often want a neutral, confidential dispute resolution process independent of the particularities of any single national court. The arbitration clause fixes the seat of arbitration (often London), the applicable procedural rules (such as ARIAS or LCIA), and the number and appointment of arbitrators for this purpose.
Effect and limits
An arbitral award is generally final and subject to only limited judicial review, which provides legal certainty but largely excludes recourse to ordinary courts. Enforcement of foreign awards is, thanks to the New York Convention, considerably easier in most states than enforcement of foreign court judgments, which makes the clause particularly attractive in cross-border programmes. In some jurisdictions, however, mandatory rules restrict or exclude arbitration clauses for certain classes of insurance relationship.
Negotiation and practice
When drafting, clear provisions on the language of proceedings, the applicable substantive law (which may differ from the seat of arbitration), and allocation of costs are important. In group programmes it is advisable to align the arbitration clause between the master and local policies and with a separate choice of law and jurisdiction clause to avoid inconsistencies.