The two primary forms of international commercial arbitration references are Ad hoc and Institutional.
Matters affecting the arbitrator’s contract and the contract with the institution are engaged under both references.
The parties to the arbitrator’s contract are different in both forms of arbitral reference. Under both forms of arbitral reference, the provisions of national arbitration laws and arbitration rules are relevant and govern various aspects of the relationships between the parties to these contracts.
Ad hoc Arbitration
This refers to an international commercial arbitration reference not held under the auspices or rules of any arbitration institution. Under ad hoc references, the parties opt to create their own procedural rules for the particular arbitration reference. Where the parties fail or neglect to agree on a set of arbitration rules to apply, the arbitration law of the juridical seat will apply by default and also as a gap- filler.
Arbitration institutions are not actively involved in ad hoc arbitration references so that parties do not pay fees for their administration of the arbitration as in institutional references. However, arbitration institutions may play minimal roles in ad hoc arbitration references. Examples of such roles are where ad hoc proceedings are held in the premises of an arbitration institution (with the disputing parties paying for its administrative assistance and facilities) and/or the parties nominate an arbitration institution as its appointing authority.
The involvement of arbitration institutions in this capacity in ad hoc arbitral references does not thereby transform such references into institutional ones neither does it affect the formation of the arbitrator’s contract under ad hoc or institutional references.
The major limitation on the parties of arbitrating disputes ad hoc arises from the inability of the disputing parties to provide for all eventualities that may occur after the dispute arises and during the arbitral proceedings, so that recourse is made to the arbitration law of the seat of arbitration.
Institutional Arbitration
Institutional arbitration refers to an international commercial arbitration reference held under the auspices of the arbitration rules of a particular institution. The parties incorporate by reference the arbitration rules of an identified arbitration institution into their arbitration agreement.
For an effective incorporation of the arbitration rules, parties may adopt the model arbitration clauses of the identified institution either with or without modification, or simply correctly identify or describe the institution and its arbitration rules.
The important point to note here is that the incorporation of the rules of the arbitration institution must be effective.
The major drawback of institutional arbitration to the disputing parties is the additional cost they pay to the arbitration institution for its services.
The procedure for arbitration adopted under institutional arbitration references lends full support to the proponents of both autonomous and delocalized theories of arbitration. These theories become very persuasive where the national laws (and possible interests) of the seat or place of arbitration are neutral (as it affects the dispute, parties or subject matter of the arbitration) without any connection to the dispute or even the disputing parties.
However, it must be recognized that the arbitration proceeding becomes automatically linked to a state or jurisdiction once a seat is determined. This connection exists irrespective of the fact that the parties (and arbitral tribunal) may not have any recourse to the courts at the seat throughout the arbitral proceedings.
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