The business world has been progressively hesitant to dispute in courtrooms, that it becomes necessary to resort to the machinery of justice to settle a dispute connected with that contract.
Thus, it is not surprising that they have been turning with expanding recurrence to Arbitration as a quicker and less complex methods for settling universal business. The first step towards this is to create an Arbitration clause in the existing Business Contract or exclusive Agreement to settle future disputes through Arbitration.
WHAT IS AN ARBITRATION AGREEMENT?
For this purpose, Section 7 of the Arbitration act has laid us some assistance in understanding what an Arbitration Agreement is and what constitutes an agreement. Thus giving a multi-dimensional approach to the Arbitration Agreement.
As mentioned earlier, Arbitration Agreement may be in the form of an Arbitration clause in a contract or in the form of a separate agreement. It is also to be noted that an Arbitration is considered to be in writing if it is contained in a document signed by the parties or in a exchange of correspondence like emails, fax, letters or other means of telecommunication which provide a legit record of the agreement or an exchange of statement of claim as a proof to challenge the alleged non-existent claims by the other party. So, from the provisions of Section 7, it is to be understood that agreement need not be in writing signed by both parties and this could as well be made out from the acts of the parties to the agreement informally through exchange of letters and information through fax, e-mails, etc.
ESSENTIAL ELEMENTS TO BE INCLUDED:
For better understanding of the proceedings and to save the parties to the agreement from further confusion which is prevalent in people’s minds, following essentials are to be constituted in the Arbitration clause or exclusive Arbitration Agreement.
- Parties to be bound by the agreement
- Intention/circumstances/situations to take the disputes to Arbitration Tribunal
- Number of arbitrators to sit in Arbitral proceedings and mode of appointment of the members of arbitral proceedings.
- Place of Arbitration where the proceedings shall take place in case dispute arises.
- Procedural Law to be followed during Arbitral Proceedings, in case it’s an International Commercial Arbitrations.
- Procedure for challenging an Arbitrator.
- Drawing a line regarding the termination of mandate of an Arbitrator.
- Right to amend pleadings to augment claim or defence.
- Appointment of experts as Arbitrators as well as members, if any.
- Time limit regarding interpretation or correction or additional award.
- Conditions for terminating the proceedings.
- Maximum compensation one can claim.
- Security deposit in case of a dispute arises.
WHO CAN ENTER INTO ARBITRATION AGREEMENT?
Only competent person to a Contract can enter into an Arbitration Agreement, hence minors and lunatic persons cannot enter into or be a part of the Agreement. In case of Partnership or joint Hindu family or Company- partners, karta and directors can make a valid reference to the Arbitration and where they act bona fide and the award binds other members.
ADVANTAGE OF AN ARBITRATION AGREEMENT –
Arbitration Agreement enhances the potential and options available to the parties.
- The parties can enjoy cost cutting because - Attorneys need not be appointed; party can represent themselves in the complete proceedings.
- Parties possess the power to choose arbitrator for the proceedings.
- Also, Arbitration Clause survives the breach and even the termination of the Principle Agreement.
TERMINATON OF AN AGREEMENT-
MODES & WAYS:
Unless the parties mutually terminate the Agreement or Primary Contract, the Arbitration clause or Agreement continues to be in existence. Even when the primary agreement is breached or terminated by either of the parties without mutual consent- Arbitration clause or agreement can be invoked by affected party. Thus as long as the Primary Contract or Agreement is valid and legally binding, termination of Arbitration clause is not possible.