Dispute Resolution & Litigation

Arbitration Clause Drafting: Common Mistakes That Make Awards Unenforceable

Reviewed by CA Nikhil Gupta · Last reviewed 14 July 2026

CA Nikhil Gupta·July 2026· Arbitration and Conciliation Act, 1996 ARBITRATION

Most arbitration clause problems are invisible until a dispute actually arises — a poorly worded clause sits harmlessly in a contract for years, then becomes the subject of its own separate, expensive litigation the moment parties actually need to use it.

Confusing "seat" with "venue"

This is the single most consequential and common drafting error. The seat of arbitration determines which court has supervisory jurisdiction over the arbitration and which procedural law governs it — this is a legal concept, distinct from venue, which is simply the physical location where hearings happen to occur. A clause that only specifies a "venue" (say, "arbitration shall be conducted in Mumbai") without clarifying whether that also fixes the seat can leave genuine ambiguity about which court has supervisory jurisdiction, an issue that has generated significant, expensive satellite litigation in Indian arbitration practice.

⚠ Draft the seat explicitly, not just a hearing location: A well-drafted clause should state the seat unambiguously (e.g., "the seat of arbitration shall be Mumbai"), and can separately note that hearings may be held at a different physical venue for convenience if genuinely needed — conflating the two concepts, or using only "venue" language, is exactly the ambiguity that has led to litigation on this point.

No clear mechanism for appointing arbitrators

A clause that simply says disputes "shall be referred to arbitration" without specifying how the arbitrator(s) will be appointed — by mutual agreement, by a named appointing authority, or through a specified institution's rules — risks a genuine deadlock if the parties cannot agree once a dispute actually arises. While the Arbitration Act does provide a court-assisted appointment mechanism as a fallback (Section 11), relying on this fallback means additional time and cost that a properly drafted clause could have avoided.

Vague or overly narrow scope language

Clauses using unclear language about which disputes are actually covered ("disputes arising under this agreement" versus the broader, more commonly recommended "disputes arising out of or in connection with this agreement, including its existence, validity, or termination") can create arguments about whether a specific dispute is genuinely arbitrable under the clause at all — forcing a preliminary, wasteful battle over jurisdiction before the actual substantive dispute can even be addressed.

Not specifying the number of arbitrators clearly

Ambiguity about whether a dispute goes to a sole arbitrator or a three-member tribunal (and if three, how each side's nominee and the presiding arbitrator are selected) is another recurring, avoidable source of dispute — this should be stated explicitly, not left to be inferred or negotiated only after a dispute has already arisen and positions have hardened.

Failing to specify the governing law and language

Especially in cross-border contracts, failing to explicitly state the substantive governing law of the contract (distinct from the procedural law of the arbitration, tied to the seat) and the language of the proceedings can create additional preliminary disputes — particularly where the contracting parties are from different jurisdictions and might otherwise assume different defaults.

Why these mistakes matter so much more in arbitration than litigation

Unlike a court dispute (where jurisdiction and procedure are generally governed by well-established, publicly known civil procedure law), arbitration is fundamentally a creature of the parties' own contract — the clause itself is largely what defines the process. A defective clause doesn't just create inconvenience; it can genuinely undermine the enforceability of whatever award eventually results, or force costly preliminary litigation just to determine basic procedural questions before the real dispute can be addressed.

Frequently Asked Questions

If a contract doesn't specify the seat of arbitration, is the arbitration clause invalid? ▼

Not necessarily invalid, but genuinely ambiguous — courts have developed principles (following cases like BALCO v Kaiser Aluminium) for determining the seat where the clause is silent or unclear, often looking at the venue specified and other contextual factors, but this determination itself can become a contested, litigated question rather than something the clause resolves clearly on its own.

Can an arbitration clause be fixed or amended after a contract is signed, before a dispute arises? ▼

Yes — parties can amend an arbitration clause by mutual agreement at any point before a dispute crystallises, and periodically reviewing standard-form arbitration clauses in long-term or template contracts to fix known drafting weaknesses is a reasonable practice, since it is far easier to amend a clause proactively than to litigate its ambiguity after a dispute has already arisen.

Does using a standard institutional arbitration clause (like from ICC or SIAC) avoid these problems automatically? ▼

Using a recommended institutional model clause significantly reduces many of these risks (since institutions publish tested, standard clause language specifically designed to avoid common ambiguities), but parties should still ensure the specific institutional clause is correctly completed for their contract (correct seat, correct number of arbitrators, correct governing law) — even a good template clause can be filled in incorrectly.

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Primary category: Dispute Resolution & Litigation
Official starting point: www.incometax.gov.in

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