Determination of the competent arbitration in cases of defective arbitration clauses

Arbitration, as known, has become a popular method of dispute resolution. However, in practice, during the contract formation, the arbitration may be indicated incorrectly. 

For example, when the arbitration naming is ambiguous, or does not even exist. The arbitration clause can become “defective”. 

Such cases occur not only in contracts between the local parties, but also in cross-border transactions with foreign contractors for the supply of goods, where the cost of the contract may exceed hundreds, and even millions of US dollars.

In result, arbitrations with the similar naming do not recognize their competence in disputes (since their naming is not directly mentioned in the clause). While state courts are obliged to return claims under contracts, which include the arbitration clause. Thus, the parties get deprived of the right to protection of their breached or disputed right. 

However, there is a solution.

First way: Appointment of a competent arbitration body in accordance with the European Convention on International Commercial Arbitration.

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Authors:

Maxim Burak, Partner

Nurlibek Sultan Nusipzhanov, Associate