By Veronica Santa Cruz x CMBS Partners
We recently closed out two arbitrations on the same theme, in two very different rooms.
One was SIAC, acting for a UAE-based mineral trader. The other was HIAC, acting for a Singapore-based commodities trader. Different seats, different commodities, different counterparties, no connection between the two matters at all.
And yet reading the files side by side, you’d think they were drafted from the same template of mistakes.
Neither dispute started because someone acted in bad faith. In both cases, the contract was perfectly clear about the two things everyone negotiates hardest: price and volume. Where it went quiet was everywhere else. What counts as a shipment delay versus a shipment failure. What happens to a hedge position when the underlying trade unwinds early. What “performance” actually means when a counterparty does something, just not quite the thing you expected.
That silence is where the dispute lives. Not in the price clause. In the gaps around it.
Here’s what stood out from doing both matters back-to-back:
The arbitration clause is not boilerplate and treating it as one is expensive. Which seat you choose, which rules apply, SIAC, HIAC, ICC, or otherwise, changes the tempo of a dispute, the procedural tools available, and often the outcome itself. Parties sign off on this clause in about the time it takes to read it once. Then, eighteen months later, that same clause decides how fast they get relief and how much leverage they walk in with.
“Performance” needs a definition, not an assumption. Everyone assumes they know what it means until a shipment is late, a market moves, or a counterparty claims force majeure. If the contract doesn’t define the edge cases, you’re litigating definitions instead of facts, and that’s a slower, costlier fight.
Fixing this after the fact costs more than fixing it before. Both of these matters were resolved well for our clients. But “resolved well” still meant time, cost, and management attention that a sharper drafting process at the outset would have avoided entirely.
The lesson isn’t really about arbitration. It’s about where trading companies choose to spend their care. Most of the negotiating energy goes into the commercial terms, and understandably so. But the dispute resolution architecture, seat, rules, definitions of performance and default, gets signed off almost as an afterthought. It shouldn’t be. It’s the part of the contract that only matters once, but when it matters, it matters completely.
If you’re reviewing trading contracts this year, the arbitration clause and the performance definitions are worth a second look, before you need them, not after.
