In the Previous article, we discussed what the nature of arbitration is https://letranlaw.com/insights/the-nature-of-international-arbitration-part-1/

In this article we consider the nature of an arbitration agreement.

Critical Element of Consent

 One of the key aspects of an arbitration agreement is consent from the parties.

Without consent to an existing or future dispute the tribunal would have no jurisdiction or power to hear the dispute.

It is possible that parties may agree to arbitrate after a dispute has commenced, by consent in a submission to the tribunal.

However, the vast majority of the time, the parties are bound by the prior agreement to have a tribunal hear their matters outlined in the arbitration agreement.

Form of an Arbitration Agreement

 As you’re reading this, you may ask: Where would an Arbitration Agreement be located?

Often inserted as a clause in an agreement, it may also be a separate, appendix or addendum to a series of contracts.

The form of an arbitration agreement can be elaborate, or it can be very simple.

The majority global of states having adopted the New York Convention and United Nations Commission on International Trade Law (UNCITRAL) Model Law and Arbitration Rules require the arbitration agreement to be:

• in writing
• dealing with existing or future disputes
• which are derived from a legal relationship
• which concern the matter capable of being settled

The New York Convention provides within Article II(2) that States which have adopted the convention, must recognize an agreement in writing to submit to arbitration to settle disputes.

Article 7 of the Model Law further defines arbitration agreement as:

… an agreement by the parties to submit to arbitration all or certain disputes which … may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

Separability

Importantly, should the main contract be found void or deficient for some reason, the arbitration agreement, or clause will standalone and be treated as an independent contract because of the concept of separability.

Simply put, separability will mean that arbitration clause, or agreement will stand alone as distinct from the main overarching contract. One way to put it is that an arbitration clause or agreement is a contract within a contract.

Article 16(1) of the Model Law provides further support for this proposition:

…an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract.

What should I include in my Arbitration Agreement

Avoiding the “Midnight Clause”

Often considered at midnight prior to a deadline, it is an afterthought which if avoided can provide much more security and confidence in an agreement.

Parties engaging early on in the crafting of an arbitration agreement can avoid pitfalls which are often discovered too late and lead to avoidable litigation.

What else can be specified in an Arbitration Agreement?

Parties may wish to include such things as the language of the arbitration hearing, the type of arbitrator, for example, someone familiar with construction or intellectual property.

Also, details, such as the rules of evidence and procedure, how many arbitrators may be hearing the proceeding and where it is to be located.

Parties may also consider a mandatory mediation clause.

Key Takeaway: craft a solid and robust Arbitration Agreement early on in negotiations, reflecting your wishes and strategy.

If you have any questions or concerns about Arbitration Agreement, please contact us at info@letranlaw.com