When parties draft an arbitration clause, one of the first decisions concerns whether the arbitration will be administered or ad hoc — that is, a proceeding organised solely by the parties and the arbitrators, without the management of a specialised institution. The Georgian Law on Arbitration recognises both models equally, yet for each of them the law fills differently the gaps that remain undefined in the clause or agreement. On this page we explain Articles 2, 10 and 24 of the law: what legal effect the choice of an institution has, how the number of arbitrators is determined, and who sets the rules of the proceedings if the parties fail to agree.
The Choice of an Institution and the Incorporation of Its Rules (Article 2)
Paragraph 2 of the article contains the norm that gives institutional arbitration its decisive significance: an agreement of the parties on a specific arbitral institution comprises an agreement on the rules of that same institution. This means that when you indicate a specific arbitration institution in a contract, in the eyes of the law you agree not only on where the dispute will be heard, but also on the rules by which that institution administers its proceedings. In general, the parties may also agree on the rules of arbitral proceedings: such an agreement covers the rules indicated by the parties in the arbitration agreement. In ad hoc arbitration this norm works the other way round: no institution has been chosen, so the source of the rules is the parties’ direct agreement, and, in the event of a gap, the dispositive norms of the law and the arbitration’s own decision.
The Number of Arbitrators (Article 10)
Article 10 provides that the arbitration consists of one or several arbitrators. The number of arbitrators and the procedure for their appointment are determined by the parties, and the parties appoint an equal number of arbitrators unless their agreement provides otherwise. Where the arbitration agreement defines the number of arbitrators as an even number, the arbitrators already appointed are obliged, within 10 days of the appointment, to appoint one more arbitrator, so that the panel can reach a decision. If the number of arbitrators is not determined by the parties’ agreement, the arbitration must be composed of three arbitrators — this default matters for cases where the number was left imprecise in the clause. In institutional arbitration this issue is usually resolved by the institution’s rules, while in ad hoc arbitration one runs into precisely this norm at the moment a gap appears.
Determining the Rules of the Proceedings (Article 24)
Article 24 establishes that the rules of the arbitral proceedings are determined by the parties in compliance with the requirements of the law. This is a norm of procedural self-determination: the parties may write rules that fit their dispute better, though they cannot go beyond the mandatory limits set by the law. If no agreement exists between the parties on the rules of the proceedings, the dispute is examined under the rules determined by the arbitration, in compliance with the requirements of the same law. It is precisely this default that distinguishes the ad hoc model: when an institution is chosen, the rules arrive automatically, by way of incorporation together with the clause, whereas in ad hoc arbitration the rules are either written by the parties or, absent their agreement, determined by the arbitration itself. Leaving procedural blanks in an ad hoc clause is therefore risky — it provokes undesirable dispute before or during the proceedings.
Frequently Asked Questions
Below we answer the questions most frequently raised when choosing between institutional and ad hoc arbitration.
What does a reference to an institution in an arbitration clause mean?
Under paragraph 2 of the article, an agreement of the parties on a specific arbitral institution comprises an agreement on the rules of that same institution. The rules of the indicated institution become an integral part of your clause.
How many arbitrators will hear the dispute if the clause is silent?
If the number of arbitrators is not determined by the parties’ agreement, the arbitration must be composed of three arbitrators. The parties are free to determine the number and the appointment procedure.
What happens if the number of arbitrators is even?
The arbitrators already appointed are obliged, within 10 days of the appointment, to appoint one more arbitrator, unless the parties’ agreement provides otherwise.
Who sets the rules in ad hoc arbitration?
The parties, in compliance with the requirements of the law. Absent an agreement, the dispute is examined under the rules determined by the arbitration itself — which is why it is better to specify the basic parameters of the procedure in an ad hoc clause in advance.
How We Help on Legal.ge
The advocates of Legal.ge help you make a calculated choice between the institutional and the ad hoc model: we will draft an arbitration clause with the correct formulation of the incorporation of an institution, clarify the mechanism for the number and appointment of arbitrators, and write procedural rules for the ad hoc variant, so that a gap does not surface in the middle of the proceedings. Contact us for a consultation — we will review your contract and plan the optimal arbitration configuration for the specifics of your dispute.