The purpose of this bulletin, the ninth in our “Dispute Resolution Clauses - Two Minute Drafting Tips” series, is to provide parties involved in negotiating commercial agreements with quick, actionable tips for crafting effective dispute resolution clauses. This bulletin explains why drafting a contract to include both an “attornment” clause and an arbitration clause can lead to problems in the event of a dispute.
It is not uncommon for the boilerplate clauses at the end of a commercial agreement to include a clause stating that the parties “attorn” to the jurisdiction of the courts of a particular place. But when parties want disputes to be addressed through arbitration, including an “attornment” clause can be problematic.
What Is an Attornment Clause?
A typical “attornment” clause will include language such as “The parties attorn to the courts of Ontario”. By “attorning”, parties are effectively agreeing that disputes will be decided in a particular court (in our example, the courts of Ontario). These “attornment” clauses can serve an important function in litigation-based dispute resolution by avoiding a dispute over where a lawsuit should be heard. This is particularly important where parties and/or the subject matter of the contract are located in different jurisdictions.
Attornment Clauses Can Conflict with Arbitration
However, contracting parties that want disputes to be resolved by arbitration should avoid a boilerplate “attornment” clause. When a dispute arises, the inclusion of both an “attornment” clause and an arbitration clause can result in disagreements over the proper forum for resolving the dispute. Unless the parties can agree on the proper forum at that point, there is a high potential for delay and additional cost while the parties argue jurisdiction before an arbitrator and/or a judge.
The inclusion of an arbitration clause that specifies the “seat” or “place” of arbitration is already sufficient to incorporate the arbitral procedural law of that jurisdiction. As we explained in a prior bulletin, the designation of a “seat” or “place” of arbitration in an arbitration clause implies that the arbitration will be governed by the arbitration legislation in that jurisdiction (e.g., a domestic arbitration seated in British Columbia will be governed by the British Columbia Arbitration Act, and an international arbitration seated in British Columbia will be governed by British Columbia’s International Commercial Arbitration Act). The arbitration legislation will specify when and how the courts of that jurisdiction can intervene in an arbitration or set aside an award.
Various arbitral institutions, such as the Vancouver International Arbitration Centre (VanIAC), ICC Canada, the ADR Institute of Canada, and the International Centre for Dispute Resolution (ICDR), offer sample arbitration clauses that are clear and concise.
In Case You Missed It
For more insights, check out our previous bulletins in the "Dispute Resolution Clauses - Two Minute Drafting Tips" series:
- Bulletin #1 - Using Model Arbitration Clauses and “Administered” Arbitrations
- Bulletin #2 - Addressing Panel Size and Arbitrator Qualifications
- Bulletin #3 - Mandating Arbitration and Clarity of Scope
- Bulletin #4 - Establishing Clear Procedures for the Appointment of Arbitrators
- Bulletin #5 - The Importance of Considering Emergency Measures in Dispute Resolution Clauses
- Bulletin #6 - When Should Your Contract Contemplate Expedited Arbitration Procedures
- Bulletin #7 - The Pros and Cons of Multi-Tiered/Escalating Dispute Resolution Clauses
- Bulletin #8 - The “Governing Law” of a Contract is Distinct from the Procedural Law of an Arbitration
