E-briefing: Arbitrating Derivatives Disputes – A quick cheat-sheet for Corporate Counsel to the 2018 ISDA Arbitration Guide

E-briefing: Arbitrating Derivatives Disputes – A quick cheat-sheet for Corporate Counsel to the 2018 ISDA Arbitration Guide
14 Feb 2019

Why is this important? Dispute resolution concepts would likely be alien to many corporate counsels without a background in disputes. This piece serves as a quick cheat sheet to the 2018 ISDA Arbitration Guide (the “2018 Guide”). Our International Arbitration Of Counsel Shaun Leong will be discussing these and more as speaker at the upcoming conference, “Derivatives Disputes: Litigating and Arbitrating the ISDA Master Agreements”, which will be held on 21 February 2019 at Marina Mandarin.

The 2018 Guide has several model arbitration clauses. These include updates to the 2013 ISDA Arbitration Guide, as well as new model clauses. Counsels need not be daunted by the multiple options. Essentially, under the 2018 Guide, counsels need to make four key choices in drafting an arbitration clause.

To facilitate counsels in using the 2018 Guide, we set out in this piece a tabulated summary of these choices and the significance of each choice.

A quick overview of the four choices and their significance:

Law / Rule

Function / Description

How to Choose?

The Seat (Law Governing the Arbitration)

Gives the arbitration its nationality and legal validity. The Seat Court is the Court supervising and supporting the arbitration. It has powers over the birth, life and end of an arbitration:

  • Birth – Seat court hears jurisdictional challenges.
  • Life – Seat court grants interim emergency relief to protect assets.
  • End – Seat court decides applications to set aside an Award.

This should ideally be a neutral jurisdiction. Where bargaining power allows, it makes sense to consider selecting “home ground” jurisdiction as the seat.


Note that the seat is not the venue. In international arbitrations, the venue can be anywhere in the world, and arbitrations may even be conducted remotely through video-conferencing.


Law Governing Substantive Contract

Governs the substance of the contract, and not the process of arbitration. A Tribunal will apply this law to decide on the substantive questions arising from the parties’ contract.


This would usually be the law governing the performance of the contractual obligations at hand.

Law Governing Arbitration Agreement

Determines the formal validity and scope of the arbitration agreement, from which an arbitrator’s authority flows. In practice, parties rarely make express provision for this law - it is often the lex arbitri or the law governing the substantive contract.

This should ideally be a neutral law, aligned with the chosen seat.

Arbitral rules (institutional / ad-hoc)


Regulate the conduct of arbitration proceedings. This governs the process of an arbitration.

The 2018 Guide includes model clauses for the arbitral rules of various arbitral institutions (such as the SIAC, ICC, HKIAC and LCIA). Advice from an arbitration specialist can be sought on the impact of the differences between each set of rules.


Key things you should know

The Seat:

The choice of seat is arguably the most important consideration when drafting or selecting an arbitration clause due to the following reasons:

National and legal validity of arbitration: An arbitration will be conducted according to the law at the seat of arbitration. The law of the seat is the law that gives the arbitration its national and legal validity.

Significance of seat court: The seat court has supervisory jurisdiction over an arbitration. It is important to select a seat which exercises minimal curial intervention over an arbitration. “Arbitration-friendly” jurisdictions that allow parties a higher degree of party autonomy would generally be preferable.

The choice of seat has important consequences on the birth, lifetime, and end of an arbitration. For example, the seat court is the one that has the power to decide on jurisdictional challenges. If an “arbitration-unfriendly” seat is selected, parties’ arbitration agreement may not be given effect to. The dispute may even be heard in another forum that one party did not consent to in the first place.

Significantly, the seat court has powers to grant urgent interim relief to preserve assets from being dissipated. This is of utmost importance to parties to ensure that a party would be able to realise the fruits of its successful arbitration.

The importance of selecting a neutral seat cannot be overemphasized. The seat court hears applications to set aside an award. It has significant powers to determine the validity of an arbitral award.  

Law governing arbitration agreement:

The Singapore courts adopt a three-stage inquiry to determine the law governing an arbitration agreement[1], namely:

  1. The parties’ express choice
  2. The implied choice in the absence of an express choice
  3. In the absence of any express or implied choice, it is the law which the arbitration agreement has its closest and most real connection with.

There has been some debate in Singapore jurisprudence on whether, in the absence of parties’ express choice, the law governing the arbitration agreement should be the law of the seat.[2] The High Court decision of Assistant Registrar Shaun Leong in Firstlink suggests so. Indeed, the global trend shown in the jurisprudence by different courts (for example in China,[3] India,[4] Malaysia,[5] and HK SAR[6]) and arbitral institutions[7] signal a move towards this approach.[8]

The question of the applicable law is further complicated in cases involving multi-party and multi-contract situations. The growing sophistication of international commercial transactions has led to two-party dispute scenarios fast becoming the exception rather than the norm. Counsels may seek specialist advice to tactically navigate such cases.

Arbitral Rules:

Arbitral rules provide a procedural framework for the arbitration, including conferring procedural powers on the tribunal. With increased efforts by arbitral institutions to modernise their rules to stay competitive and relevant, there is now little difference amongst the rules of the major arbitral institutions. Specialist advice should be sought on considerations around the differences of the rules from different arbitral institutions.

What this means for parties:

The dispute resolution provision cannot be a last-minute default or standard choice for counsel. There are serious considerations to be had around the strategic impact counsel’s choices have, in relation to the arbitral seat, the governing laws, and the rules.

Eversheds Harry Elias has extensive experience advising and successfully representing commercial enterprises with respect to international dispute resolution and the conduct of commercial and investment arbitration (including enforcement and setting aside proceedings) both in South East Asia and throughout the world.

Our Shaun Leong was Magistrate and Assistant Registrar with the Supreme Court of Singapore for five years, hearing international commercial disputes and arbitration matters. Shaun went on to practice in offshore magic circle arbitration practices prior to becoming Of Counsel of the International Arbitration Team with Eversheds Harry Elias.



Francis Goh

Head, International Arbitration

Partner, Eversheds Harry Elias

Shaun Leong

Of Counsel, Eversheds Harry Elias

Janice Lee

Foreign Legal Associate, Eversheds Harry Elias

Chua Ting Fang

Legal Associate, Eversheds Harry Elias


[1] See Singapore High Court decision of Assistant Registrar Shaun Leong in FirstLink Investments Corp Ltd v GT Payment Pte Ltd and ors [2014] SGHCR 12 (Firstlink).

[2] See Singapore High Court decision of Justice Steven Chong in BCY v BCZ [2016] SGHC 249.

[3] See decision of the Supreme People’s Court in Min Si Ta Zi No. 1 [2006] and Art 16 of the Authoritative Interpretation of the Arbitration Law issued by the Supreme People’s Court in 2006.

[4] Enercon India v Enercon GMBH Civil Appeal No. 2086 of 2014, 14 February 2014.

[5] Government of the Lao People’s Democratic Republic v. Thai-Lao Lignite Co. Ltd., High Court (Kuala Lumpur), No. 24NCC(ARB)-7 of 2010.

[6] Klöckner Pentaplast Gmbh & Co Kg v Advance Technology (H.K.) Company Limited, 14/07/2011, HCA1526/2010.

[7] See HKIAC model clause, LCIA Rules 2014, Australian Centre for International Commercial Arbitration Rules 2016, and German Institute of Arbitration DIS Rules 2017.

[8] For further consideration on these points, see “The Evolving Role of the Singapore International Commercial Court, Jurisdictional issues and Enforcement perspectives”, co-written by Shaun Leong and Justice Bernard Eder, a chapter in Singapore International Arbitration: Law & Practice (2nd ed, LexisNexis).

For more information, please contact our Business Development Manager, Ricky Soetikno at rickysoetikno@eversheds-harryelias.com


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