Most commercial lawyers treat the dispute resolution clause as boilerplate — the last provision negotiated, if it is negotiated at all. That is a mistake. A defective arbitration clause can expose a party to litigation in a foreign court, make the award unenforceable, create threshold jurisdictional battles that consume years and millions, and eliminate the confidentiality that arbitration is supposed to provide.
The six decisions discussed below — seat, governing law, institution, number of arbitrators, language, and scope — are not interchangeable defaults. Each has strategic and practical consequences that vary depending on who the counterparty is, where they have assets, and what kind of dispute might arise.
The Seat of Arbitration: Where the Arbitration Is Located Legally
The seat (also called the place) of arbitration determines which country's courts have supervisory jurisdiction over the arbitration, which procedural law governs the proceeding in the absence of party agreement, and in which jurisdiction the award can be challenged.
For contracts between U.S. and Latin American parties, common seats include New York, Miami, and, in some cases, neutral international seats such as London, Paris, or Geneva. Miami has the practical advantage of being the commercial hub for U.S.-LATAM business and being within the Southern District of Florida, which has an established body of law on both arbitration procedure and New York Convention enforcement.
The seat is distinct from the location of hearings — parties can agree to a seat in New York while holding all hearings in Miami, Bogotá, or wherever is most convenient.
Governing Law: Separating the Contract's Law from the Arbitration's Law
Two bodies of law govern an international arbitration: the law governing the main contract (substantive law) and the law governing the arbitration agreement and the arbitration procedure (lex arbitri). These can differ, and the distinction matters. A contract may be governed by Florida law while the arbitration is seated in Switzerland, making Swiss arbitration law the procedural framework. More commonly, parties choose a seat whose arbitration law they trust — which means the choice of seat is often a proxy for the choice of procedural law.
The arbitration clause should specify both the law governing the contract and the law governing the arbitration agreement, if they differ. Silence on this issue leads to threshold disputes about which law applies to the validity of the arbitration clause itself.
Institutional Rules vs. Ad Hoc Arbitration
Institutional arbitration is administered by a standing institution — ICC, ICDR, JAMS, LCIA — that appoints arbitrators when parties cannot agree, manages the case file, reviews awards for formal defects, and sets its own schedule of fees. Ad hoc arbitration is governed only by the rules the parties agree on — typically the UNCITRAL Arbitration Rules — with no institution playing an administrative role.
For most commercial disputes, institutional arbitration is preferable. The institution provides a structured framework for case management, an established procedure for arbitrator appointment and challenge, and the credibility that comes from a recognized set of rules. Ad hoc arbitration can be more flexible and cheaper for smaller disputes, but it requires the parties to manage logistics that an institution would otherwise handle.
The ICC is the most widely used institution globally and is often the default choice for significant cross-border contracts. The ICDR (the international division of the AAA) is more common for U.S.-centric disputes and for contracts with U.S. parties who prefer the AAA infrastructure. JAMS International is gaining ground for complex commercial disputes. For contracts involving Latin American parties, regional institutions may also be worth considering depending on the jurisdiction.
Number of Arbitrators: Sole Arbitrator vs. Three-Member Tribunal
Smaller disputes (generally under $1–2 million) are typically handled by a sole arbitrator, who is cheaper and faster. Larger and more complex disputes typically use three-member panels — one arbitrator nominated by each party and a third (the presiding arbitrator) either agreed upon by the two party nominees or appointed by the institution.
The three-member panel provides more checks against an arbitrator with undisclosed conflicts or unexpected views, but it increases cost and time significantly. The clause should specify the number of arbitrators, or at minimum a default rule, to avoid a threshold dispute on this issue.
Language of the Arbitration
The language of the arbitration determines the language of all pleadings, witness examinations, expert reports, procedural orders, and the award itself. For contracts between English and Spanish-speaking parties, this decision is significant — it affects which party bears the cost and burden of translation, which party's lawyers can most effectively advocate, and how the award will be read by an enforcing court.
Designating English as the arbitration language is standard for contracts involving U.S. parties and provides the practical advantage of access to a larger pool of international arbitrators and counsel. Designating Spanish may favor a LATAM party in a domestic context but typically disadvantages both parties in complex international proceedings. Some clauses designate both languages — which sounds accommodating but often creates practical problems.
Scope: What Disputes Are Covered
The clause should be written broadly enough to cover all disputes arising out of or relating to the contract, including disputes about the contract's formation, validity, and termination. A narrow clause — one that covers only "disputes under this contract" — can create arguments that certain claims (like fraud in the inducement or post-termination obligations) fall outside the arbitration clause and belong in court.
Standard institutional clauses (the ICC model clause, the ICDR model clause) are drafted to achieve broad scope and are a useful starting point. They should be adapted to include the specific seat, governing law, number of arbitrators, and language provisions described above — not used verbatim without modification.
A Note on Pathological Clauses
A pathological arbitration clause is one that is defective in a way that makes it difficult or impossible to enforce as written. Common defects include: naming a non-existent arbitral institution, failing to specify which of several possible ICC institutions applies, using contradictory language about whether disputes will go to arbitration or to court, and providing a seat in a country whose courts will not recognize the clause.
Courts interpreting pathological clauses generally try to give them effect if possible, but threshold disputes about clause validity waste time and money before the merits are ever reached. Getting the clause right at the drafting stage eliminates this risk.