The Cautionary Tale Of Pathological Clauses

In the new age, arbitration has gained popularity as a robust mechanism to resolve disputes in a time bound efficient manner. However, if an arbitration agreement is poorly drafted or has any discrepancies, the objective of the mechanism fails. In 1974, Frédéric Eisemann coined the term “pathological clauses” more commonly known as champagne clauses or midnight clauses, which refer to clauses that suffer from defects which can disrupt the process of arbitration.¹ The extent of deficiency of the clause is inversely proportionate to the enforceability of the clause. The purpose of arbitration is likely to be defeated, if any party is a signatory to arbitration agreement containing such clauses. This article discusses the common errors faced by practitioners while partaking in arbitrations day in day out, and provides suggestions to address these issues from the get go. The author will scrutinize pathological clauses, their validity and the lastly the interpretation and