When negotiating international contracts, arbitration clauses typically receive less attention than commercial or financial aspects. However, the choice of seat of arbitration is one of the most important legal decisions for the parties, as it determines the legal framework applicable to the proceedings and the degree of intervention of the courts.
The seat must not be confused with the venue where the hearings take place, as the latter may also be held virtually. The main function of the seat is a legal one: it defines the lex arbitri, i.e. the procedural norms which regulate the arbitration proceedings. Furthermore, it determines which courts and tribunals will have jurisdiction to oversee the proceedings and actions, including interim relief, examination of evidence or overturning arbitration awards.
For companies, a suitable seat offers predictability, neutrality and legal certainty. For this reason, in cross-border transactions, the usual practice is to choose jurisdictions with a consolidated arbitration tradition and pro-arbitration courts and tribunals, such as Madrid, London, Geneva or Singapore.
In recent years, Madrid has established itself as an especially attractive seat for international arbitration proceedings, particularly for disputes connected to Europe and Latin America. Its main advantages are its modern arbitration legislation, expert tribunals and the strategic position as legal and corporate bridge between both continents. In addition, Madrid is home to prestigious arbitration institutions, such as the Centro Internacional e Iberomaericano de Arbirtraje de Madrid (CIIAM) and offers a wide range of specialised professionals, while costs are generally more competitive than other traditional seats such as Paris, London or Miami.
Choosing an unsuitable seat may entail significant risks, such as excessive intervention of the courts, procedural delays, uncertainty regarding the enforcement of the arbitration award or difficulties in obtaining procedural support. In addition to this, in some countries, the lack of specialisation of the courts could negatively affect the efficiency and confidentiality of the proceedings.
When defining the seat of arbitration, companies should assess at least four aspects: (i) whether the chosen country adheres to the New York Convention and how arbitration awards are recognised and enforced in practice, (ii) the quality and modernity of the local arbitration legislation, (iii) the standpoint of the national courts regarding international arbitration, and (iv) practical aspects such as language, accessibility, costs and availability of specialised professionals.
In practice, the negotiation of the seat should not be seen as a secondary or merely a standard issue. A carefully drafted arbitration clause can reduce risks in the future and contribute to managing potential disputes more effectively.