The 5 Worst Arbitration Clauses (And Why They Set You Up for Failure)

Arbitration clauses are supposed to make dispute resolution faster, cheaper, and more efficient—but badly drafted clauses do the exact opposite.

Here are five real-world examples of horrible arbitration clauses that cause endless delays, legal chaos, and unenforceable awardsWorst

Clause No. 1: The Ping-Pong Clause: Court or Arbitration? No One Knows.

"This agreement is governed by the Laws of Dubai and the Federal Courts of the UAE applicable to the Emirate of Dubai. Subject to clause 17.2, the parties agree that any legal action shall be subject to the jurisdiction of the Courts of Dubai, UAE."

"17.2 The parties shall use their best endeavours to settle the dispute amicably. If not settled within 30 days, the dispute shall be resolved by arbitration under the DIAC Rules."

Why It’s a Disaster:

• Contradictory jurisdiction: Courts or arbitration? The clause gives both simultaneous authority, leading to years of procedural fights before the case even begins.
• Judicial ping-pong: I’ve seen disputes bounce between courts and arbitration, with neither forum wanting to take control. Huge delays. Massive costs.

How to Fix It

✅ Choose one forum. If arbitration is the goal, make it exclusive and explicitly waive court jurisdiction.

Worst Clause No. 2: The Ghost of Arbitration Past: Using a Repealed Law

"If the dispute cannot be resolved amicably within 15 days, it shall be referred to arbitration under the Arbitration Act 1940."

Why It’s a Disaster:

• The "Arbitration Act 1940" is outdated and no longer in force.
• Two arbitrators? Terrible idea. If they disagree, an “umpire” has to decide, meaning the case is re-heard from scratch—doubling time and costs.
• High risk of court intervention. If an umpire rules without hearing evidence firsthand, the award is open to legal challenge.

How to Fix It:

✅ This one is simple: Read the law,  Arbitration gives flexibility to choose the arbitration law of any jurisdiction in the world, independent of the law of contract subject to dispute. Make use of that flexibility if your country of business is still living in 1940s.

✅ Stick to one or three arbitrators, never two. The correct language is "Each party shall appoint one arbitrator. The two arbitrators thus appointed shall choose the third arbitrator who will act as the presiding arbitrator."

Worst Arbitration Clause No. 3: The Dictator Clause: One Party Picks the Arbitrator

"The dispute shall be resolved under the DIAC rules by a sole arbitrator appointed by the First Party."

Why It’s a Disaster:

• Unilateral control = biased decisions. Arbitration is supposed to be neutral—if one party controls the arbitrator, it’s legally challengeable.
• High risk of annulment. Courts regularly strike down awards where arbitrator selection is unfair.

How to Fix It:

✅ Both parties should have an equal say in appointing arbitrators.

✅ Use a neutral institution (like DIAC, ICC, or LCIA) to appoint the arbitrator.

Worst Arbitration Clause No. 4: Courts who? "The Judge is dead" Clause

"The Tribunal has the sole power to grant precautionary confiscation, sequestration, and will be the only authorized body to confirm the disputed right and validity of the confiscation."

Why It’s a Disaster?

• Because arbitration cannot oust (it can put condition precedents) powers inherently vested in state courts.
• Arbitrators don’t have enforcement power. They can issue awards, but they cannot enforce confiscations—only courts can.
• Application for interim measures expands beyond boundaries: Arbitration tribunals can issue preliminary measures (e.g., injunctions or orders preserving assets) but they cannot practically or legally execute actions such as confiscation or sequestration, which require the cooperation of courts or enforcement authorities.
• Overreaching jurisdiction. This clause assumes the tribunal has more power than the law allows.

How to Fix It

✅ If you need preliminary relief (like asset freezing), state that parties can seek court assistance alongside arbitration.

5. The Arbitration Agreement That Cancels Itself

"If the dispute is not settled amicably within 20 days, arbitration may be requested within 20 days of the notice being given."

Why It’s a Disaster:

The arbitration clause, as drafted, can never become operational because the conditions required for invoking arbitration contradict each other.

• There is no time to file: If arbitration is requested during the first 20 days (days 1-20), the request would be premature, because the arbitration agreement is only going to trigger (become operative) if at least 20 days have passed trying to resolve amicably.
• But, once the twenty days are over, so is the window to commence arbitration. If arbitration is requested after day 20, the request is too late, as the 20-day window has closed, rendering the arbitration clause inoperative.
• Result: No dispute can ever qualify for arbitration. Either it’s too early or too late.

How to Fix It:

✅ Remove conflicting deadlines. Make it simple: “If the dispute is not resolved within 30 days, either party may commence arbitration.”

Final Thoughts

Bad arbitration clauses don’t just slow down cases—they kill them before they even start.

✔ If you’re drafting a contract, double-check the arbitration clause. ✔ If you’re reviewing an agreement, make sure you’re not walking into a legal trap.

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