Arbitration is a creature of an agreement. It is not possible for two parties to arbitrate if they have not entered into a valid arbitration agreement. It begets the question of what constitutes a valid arbitration agreement?
The Arbitration Act defines an arbitration agreement as an agreement between the parties to submit to arbitration disputes in respect of a defined legal relationship. Confusing, isn’t it? The purpose of this article is to break down to the readers what all is required to be there in your agreement to make sure you can submit your disputes to an arbitral tribunal.
First and foremost, the arbitration agreement is not required to be in any particular form. The sole thing which has to be seen while examining the agreement between the parties is the intention of the parties. If the parties have agreed that the disputes shall be referred to arbitration, such an arrangement would spell out an arbitration agreement.
At this juncture, it is pertinent for the author to list the essentials of a valid arbitration agreement as explained by Courts of the country in various judgments. These essentials are as follows:
A. The agreement should be in writing
An arbitration agreement consists of four elementary parts. It consists of arbitral clause in the following forms:in a contract containing an arbitration clause signed by the parties
- an arbitration agreement signed by the parties
- an arbitral clause in a contract contained in an exchange of letters or telegrams
- an arbitral agreement contained in an exchange of letters or telegrams.
If an arbitration clause falls in any one of these four categories, it must be treated as an agreement in writing.
B. There has to be an intention to arbitrate
Such intention to refer can be spelt out expressly or can be implied by the words of the agreement. The intention of the parties has to be gathered from the terms of the agreement. While there are no strict rules for the words of the agreement, the words used must disclose an obligation and determination to go for arbitration. There must be no ambiguity.The parties should have agreed to refer any disputes (present or future) between them to the decision of a private tribunal.
C. The private tribunal should be empowered to adjudicate upon the disputes in an impartial manner, giving due opportunity to the parties to put forth their case before it.
D. The parties should have agreed that the decision of the private tribunal in respect of the disputes will be binding on them. For example, where an agreement requires or permits an authority to decide a claim or dispute without hearing, or requires the authority to act in the interests of only one of the parties, or provides that the decision of the authority will not be final and binding on the parties, or that if either party is not satisfied with the decision of the authority, it cannot be termed as an arbitration agreement.
E. There should be a conclusive intention to arbitrate. No scope for further or fresh consent
If the intention to refer the dispute to arbitration is clear and categorical then even if Arbitration agreement clause uses word adjudication then also the wordings of the relevant clauses indicate that the parties intended to have their disputes resolved by arbitration.
