– Arbitration Agreement
Arbitration Agreement
I. Definition
An Arbitration Agreement is a contractual agreement between parties whereby they agree to submit to arbitration any disputes or differences arising out of their contract or relationship, instead of resorting to court litigation.
It is the cornerstone of arbitration because arbitration jurisdiction depends entirely on the existence of a valid arbitration agreement.
II. Legal Nature
The arbitration agreement is a special kind of contract focused solely on dispute resolution.
It can be:
A separate agreement (often called a "submission agreement"), or
A clause within a broader contract (arbitration clause).
III. Essential Elements of an Arbitration Agreement
Parties’ Consent
Clear and unequivocal intention to arbitrate disputes.
Scope of Disputes Covered
The agreement should specify which disputes are to be arbitrated.
Form of Agreement
Varies by jurisdiction but often must be in writing (or evidenced in writing).
Subject Matter
Must be capable of settlement by arbitration (certain disputes like criminal matters may be excluded).
IV. Types of Arbitration Agreements
Arbitration Clause: A clause in a contract mandating arbitration for disputes related to that contract.
Example: “Any dispute arising under this contract shall be referred to and finally resolved by arbitration under the Rules of [Institution].”
Submission Agreement: An independent agreement entered into after a dispute arises, referring existing disputes to arbitration.
V. Legal Framework and Requirements
Writing Requirement:
Most arbitration laws require the agreement to be in writing. For example, Section 7 of the Indian Arbitration and Conciliation Act, 1996 defines what constitutes a valid arbitration agreement.
Separability Doctrine:
The arbitration agreement is considered separate from the main contract. Even if the main contract is alleged to be invalid, the arbitration agreement may still be valid.
Case: Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40 — The House of Lords upheld the separability of arbitration clauses.
VI. Important Case Laws on Arbitration Agreement
1. Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40
The House of Lords held arbitration clauses should be interpreted broadly.
The court emphasized party autonomy and gave effect to arbitration agreements unless clearly excluded.
Reinforced the separability principle — arbitration agreements are independent of the main contract.
2. Dallah Real Estate & Tourism Holding Co v Ministry of Religious Affairs, Pakistan [2010] UKSC 46
The UK Supreme Court clarified that the court must first decide if an arbitration agreement exists before compelling arbitration.
Even if an arbitration agreement exists, it must be valid and binding between the parties.
3. Chloro Controls India Pvt Ltd v Severn Trent Water Purification Inc (2013) 1 SCC 641 (India)
Indian Supreme Court ruled that the arbitration agreement should be treated as an independent agreement and courts must refer parties to arbitration under Section 8 unless the arbitration agreement is null or inoperative.
VII. Importance of Arbitration Agreement
Foundation for Arbitration Jurisdiction: Arbitration tribunal’s jurisdiction depends entirely on this agreement.
Party Autonomy: Reflects parties’ freedom to choose dispute resolution method.
Efficiency and Finality: Encourages quicker resolution by avoiding courts.
Enforceability: Valid arbitration agreements are enforceable by courts through stay of litigation or referral to arbitration.
VIII. Challenges Related to Arbitration Agreement
Validity: Sometimes disputed if the agreement is forged, ambiguous, or obtained under duress.
Scope: Whether the dispute falls within the arbitration agreement.
Form: Some jurisdictions require strict adherence to written form.
Severability: Disputes about whether the arbitration clause stands even if main contract is challenged.
IX. Summary Table
| Aspect | Explanation |
|---|---|
| Definition | Contract/agreement to resolve disputes by arbitration |
| Forms | Arbitration clause (in contract), submission agreement (separate) |
| Legal nature | Separate and independent from main contract (separability doctrine) |
| Requirement | Usually must be in writing, depending on jurisdiction |
| Court’s role | Enforce arbitration agreement by referring disputes to arbitration |
| Key principle | Broad interpretation favoring arbitration (pro-arbitration approach) |
X. Conclusion
The Arbitration Agreement is the cornerstone of arbitration law. It embodies the parties’ intention to avoid courts and resolve disputes through arbitration. Courts respect and enforce these agreements rigorously to uphold party autonomy and ensure efficient dispute resolution.
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