Sample Format of Arbitration Agreement

Narendra Kumar

28 Apr, 2018

What is Arbitration Agreement?

Arbitration Agreement is a form of Alternate Dispute Resolution wherein the parties can refer a dispute which arises during the course of a business transaction, to a third party who is neutral and preferably an expert in the subject matter and resolving them. The decision of such an arbitrator/s is final and binding upon the parties and the scope of its appeal to a higher authority is very limited.

Arbitration may be

1.      Ad-hoc arbitration: Here, the terms regarding a number of arbitrators, the principal seat of arbitration, language etc is set by the parties themselves. The parties are at an option to decide the terms as per their continence mutually.

2.      Institutional arbitration: There are established permanent arbitral institutions which are governed by their own set of rules and parties when referring their disputes to them are then governed by their formal terms. Example: International Court of Arbitration, London Court of International Arbitration, Federation of Indian Chamber of Commerce & Industry etc.

What are the advantages of Arbitration?

There are multiple advantages of resorting to arbitration:

• The dependency on the traditional litigation and Courts is considerably decreased.
• The time to resolve the dispute is reduced by choosing arbitration as a way to resolve the disputes. Arbitral Tribunal is more efficient and expedite than regular courts. The time presumably wasted in court procedures is better utilized
• Arbitration is a cost-efficient method in terms of court fee and also fee of an attorney engaged in the court proceedings.
• It is a confidential proceeding between the concerned parties only.

What is an Arbitration Agreement?

According to The Arbitration and Conciliation Act, 1996, Arbitration Agreement is an agreement between the contracting parties to resort to arbitration proceedings in case of all or certain disputes, which may arise in course of business and transactions. An arbitration clause in the primary agreement, instead of a separate agreement also serves the purpose, though a separate Arbitration Agreement is always a wise choice for being detailed and exhaustive.

It must be an agreement in writing reviewed and signed by authorized representatives of both the parties.

What are contents of an Arbitration Agreement?

• Details of the contracting parties: Legal Name, the address of operation or registered address
• Detail of nature of the relationship between parties.
• Nature of disputes which can be referred to the Arbitral Tribunal, the detailed subject matter
• The procedure of referring the dispute: Period of notice before Invocation of Arbitration
• The principal seat of arbitration (the city)
• The governing law for the arbitration
• Number of arbitrators, their qualifications, the process of their appointments & their powers
• Whether modification of the agreement is allowed, if yes, the procedure to be followed must be mentioned
• A statement that the Arbitration Agreement serves as a Bar to Suit the disputes. This implies that the disputes mentioned shall be taken to the Arbitral Tribunal only and not to the courts.
• May even mention, whether the cost to be borne by one party or by both. Commonly, the cost of Arbitration is split between the parties and may be claimed as a part of the award.
• A statement that the Arbitration Agreement shall stay in effect, in respect to the subject matter of the primary agreement, even after the primary agreement ends or stands terminated.
• Place and date of execution of the agreement
• The name, designation, and signature of the authorized representatives.

As per common law, the arbitral tribunal does not have the power to make modifications to the existing provisions of the primary agreement. It shall only interpret the clauses as per the given terms and not add or amend anything.

It is worthwhile to note that the award of the Arbitral Tribunal is legal and binding upon the parties and may only be challenged in the Courts if there is an error apparent on the face of it.

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