An Arbitration Agreement is a contract by which the parties agree to resolve disputes without filing a suit or case in court.
Such agreement is deemed to be an ‘agreement within an agreement’, which means that it is essentially a clause in a larger contract. These agreements are usually a few sentences long and could be located under keywords such as ‘Arbitration’ or ‘Dispute Resolution’, though not necessarily.
The Characteristics of an Arbitration Agreement
- Such agreements must mandatorily be in writing.
- It may be a part of or be a separate clause of the larger contract.
- It may not be separately signed.
- It may cover all kinds of disputes which can be taken to court.
Advantages of an Arbitration Agreement
- It renders a faster result and is less expensive.
- It is more flexible to the need of the parties.
- The parties have the liberty to choose the Arbitrator.
- The parties also have the liberty to choose the governing law.
- Even if there is a breach or termination of the larger contract, the Arbitration Agreement will still be valid.
The Essentialities of an Arbitration Agreement
As aforementioned, the Arbitration Agreement should be in writing. There is no specific form for formation of such an agreement and the relevant authority would consider the language of the agreement to ascertain the intention of the parties to enter into an Arbitration Agreement. Therefore, the usage of words such as ‘Arbitration’, ‘Arbitrator’ or ‘Arbitral Tribunal’ is not needed for it to be deemed as a valid Arbitration Agreement.
Enforceability of an Arbitration Agreement
In India, a quasi-judicial tribunal deals with disputes brought up through Arbitration Agreements. Significantly, a policy of strict non-intervention of courts is in place to aid the said authority.
There is an approach of pro-arbitration adopted by the Judiciary in India and the authorities are eagerly enforcing valid Arbitration Agreements. However, if the Tribunal finds prima facie that an Arbitration Agreement doesn’t exist, or the dispute is non-arbitrable consequently it cannot be enforced.
More Key Points
- None of the parties can unilaterally terminate the Arbitration Agreement.
- If an Arbitration Agreement is not explicitly mentioned, it could be included after the signing of the larger agreement as the former need not be signed as mentioned earlier. In such cases, the validity of an Arbitration Agreement could be determined by the conduct of the parties.
- Opting for Arbitration is only an alternate remedy, the parties have the right to approach the courts even if they are bound by such an agreement.
- Also, an appeal to the court can arise out of a decision given by the Tribunal.
- A party can contest their case themselves without the need of appointing an Advocate.
- There is no need for any fee to be submitted to the Tribunal.