When drafting an arbitration clause, a professional and competent lawyer or legal advisor should clarify to the parties the nature of the arbitration agreement, its terms, and the arbitration procedures in both domestic and international contracts. The lawyer or legal advisor must also inform the parties in advance about the advantages of arbitration, the pros and cons of resorting to a sole arbitrator, a permanent arbitration center, or arbitration by an independent panel. This understanding will aid in choosing the method that best serves the interests of the parties.

Moreover, the lawyer or legal advisor must consider several essential precautions when drafting the arbitration agreement and determine the format it will take. The arbitration agreement may be incorporated as a clause within a contract or as a separate agreement that may be executed later, referred to in this case as an arbitration agreement. Alternatively, it may refer to a prior contract between the parties or to a standard contract or general terms commonly recognized in their dealings, which would help fill in gaps or address deficiencies in their contract.

If this standard contract or general terms contain a provision requiring disputes arising from it to be settled through arbitration, then the effect of this clause extends to the original contract, and the parties are bound by it. Thus, disputes arising from that contract must be settled through arbitration, and the parties cannot evade this obligation by claiming that the original contract is independent of the contract or general terms that include the arbitration clause, a situation referred to as an “arbitration clause by reference.”

Furthermore, when drafting the arbitration clause, the lawyer or legal advisor should pay careful attention to the wording used. The formulation of the arbitration clause is crucial, and clarity is essential to avoid any ambiguity or misinterpretation. The parties may adopt one of the model clauses recommended by international permanent arbitration centers.

Additionally, the lawyer or legal advisor should explain to the parties that if they wish to name specific arbitrators in the arbitration agreement, it is preferable to do so after a dispute has arisen rather than in the arbitration clause itself. This is because the parties might agree to name an arbitrator or specific person without their knowledge or understanding of the nature of the dispute. Furthermore, the chosen arbitrator may be ill, unavailable, or deceased by the time the dispute arises.