Where to argue: courts, arbitration and the clause nobody reads

Every contract has a clause specifying where disputes are resolved. It is usually the last thing agreed, by people who are tired, and it is the provision that determines your position if anything goes wrong.

Ukrainian courts

Cheaper, faster than their reputation suggests in commercial matters, and conducted in Ukrainian with Ukrainian procedure. Judicial reform has improved the commercial courts materially, and a straightforward debt claim is a reasonable thing to bring here.

The disadvantage for a foreign party is unfamiliarity and the perception of risk, which affects how a dispute is viewed by your own board and insurers regardless of the actual quality of the court.

International arbitration

The usual choice for cross-border contracts of any size. Neutral forum, arbitrators the parties select, proceedings in a language both understand, and — the decisive advantage — an award enforceable in most countries under the New York Convention, to which Ukraine is a party.

The disadvantage is cost. Arbitration is expensive enough that it is not worth invoking below a certain claim value, which means a badly drafted clause can leave you with a theoretical remedy you cannot afford to use.

The practical drafting points

Name the institution and its rules precisely. Specify the seat, the language and the number of arbitrators — one for smaller contracts, three for large ones. State the governing law separately from the forum; they are different things and are frequently confused.

And consider a tiered clause: negotiation, then mediation, then arbitration. Most disputes settle, and a structure that requires a conversation before an escalation saves a great deal of money.

The point

Draft the clause as though you will lose the argument on the merits. That is the only way to find out whether it protects you.

I stopped discussing this clause in the last ten minutes of a negotiation years ago; it now goes into the first draft and I do not leave it open. The reason is simple: this clause determines how much the rest of the contract is worth. A receivable you cannot enforce is not a receivable — learning that once is expensive enough.