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• Arbitration Agreement

Section 2(a) of the Arbitration Act of 1940 states that,

Arbitration Agreement means a written agreement to submit present or future differences to

arbitration, whether an arbitrator is named therein or not.

The arbitration agreement or the arbitration clause in an agreement is called ‘Submission’.

An arbitration agreement is a written contract in which two or more parties agree to settle a

dispute outside of court.

The arbitration agreement is ordinarily a clause in a larger contract. The dispute may be about

the performance of a specific contract, a claim of unfair or illegal treatment in the workplace,

a faulty product, among other various issues. People are free to agree to use

arbitration concerning anything that they could otherwise resolve through legal proceedings.

An arbitration agreement can be as simple as a provision in a contract stating that bysigning that contract you are agreeing to arbitration in the case of any future disputes.

For example, a business owner can ensure that potential dispute costs remain low by requiring

anyone doing business with them to sign an agreement to arbitrate instead of litigate--to settle

the matter out of court.

In the case of more complicated business matters, a mandatory arbitration clause may be

necessary.

• Principal Characteristics of Arbitration

The principal characteristics of Arbitration are:

1. Arbitration is consensual: Arbitration can only take place if both parties have agreed to it. In the

case of future disputes arising under a contract, the parties insert an arbitration clause in the relevant

contract. An existing dispute can be referred to arbitration by means of a submission

agreement between the parties. In contrast to mediation, a party cannot unilaterally withdraw from

arbitration.

2. The parties choose the arbitrator(s): Under the WIPO Arbitration Rules, the parties can select a

sole arbitrator together. If they choose to have a three-member arbitral tribunal, each party appoints

one of the arbitrators; those two persons then agree on the presiding arbitrator.

3. Arbitration is neutral: In addition to their selection of neutrals of appropriate nationality, parties are

able to choose such important elements as the applicable law, language and venue of the arbitration.

This allows them to ensure that no party enjoys a home court advantage.

4. Arbitration is a confidential procedure: The WIPO Rules specifically protect the confidentiality of

the existence of the arbitration, any disclosures made during that procedure, and the award. In certain

circumstances, the WIPO Rules allow a party to restrict access to trade secrets or other confidential

information that is submitted to the arbitral tribunal or to a confidentiality advisor to the tribunal.

5. The decision of the arbitral tribunal is final and easy to enforce: Under the WIPO Rules, the parties

agree to carry out the decision of the arbitral tribunal without delay. International awards are enforced



by national courts under the New York Convention, which permits them to be set aside only in very

limited circumstances. More than 140 states are party to this Convention.

• Essential Elements of Arbitration

1. A valid arbitration agreement must fulfil all the essential elements of a valid contract. In

order it to be binding and accepted by law it must be in writing.

2. Though signatures of the disputed parties are not necessary but the document must show

mutual agreement to agree upon the settlement of disputes by arbitration.

3. The agreement may or may not have the name of the person, working as the arbitrator

mentioned.

4. The agreement may be to refer present difference or possible future differences to

arbitration.

5. If there is an arbitration clause in the arbitration contract and for some reason the contractcomes to an end due to frustration or some other form of fraud or misrepresentation, still the

arbitration clause may be binding in the eyes of law. If there is no clause then there is no

binding.

6. The agreement to refer disputes to arbitration is not valid if it lacks the essential elements

of a contract, that is, if it is done through fraud or coercion.

7. The construction of an arbitration agreement cannot be thwarted by narrow pedantic

interpretation.

• Who can & cannot refer disputes to Arbitration

An arbitration agreement is a valid contract, thus it can only be referred for dispute resolution by

arbitration by persons who is capable of forming a contract.

The persons who can refer to arbitration are enumerated in the following:

1. A partner with the proper authority by the other partners can refer disputes to arbitration.

2. The manager of a Hindu joint family can submit for arbitration for the petition of joint

family property.

3. A trustee may refer disputes to arbitration

The persons who cannot refer to arbitration are as follows:

1. A minor or a lunatic cannot refer disputes to arbitration.

2. In a suit or proceeding, the next friend or guardian cannot enter into any compromise on

behalf of a minor without the courts permission.

3. An agent cannot refer disputes to arbitration unless especially authorised

4. Solicitors and advocates have no implied authority to submit arbitration on behalf of their

clients.



5. An insolvent cannot submit to arbitration.

• Matters which can be referred to Arbitration

All disputes which can be decided by the civil suit can also be decided by arbitration.

Following matters can be referred to arbitration:

1. Disputes relating to money or property.

2. Amount of damage payable for breach of contract.

3. Maintenance payable to the wife after divorce.

4. Terms of separation between husband & wife.

5. Questions of law.

• Matters which cannot be referred to Arbitration

As per general practice, matters involving personal rights, disputes regarding compliments or

dignity, moral questions or questions of public law cannot be resolved by arbitration.

Following matters cannot be referred to arbitration:

1. Matrimonial matters, like divorce or conjugal rights.

2. Insolvency matters, Ex- declaring a person insolvent.

3. Criminal offences.

4. Dissolution or winding up of a company.

5. Matters relating to guardianship of minors or lunatics.

6. Testamentary matters like validity of a will

• Types or Methods of Arbitration

The Arbitration Acts states that’s there is 3 types or methods of Arbitration. They are:

1. Arbitration without the intervention of the court.

2. Arbitration through the court when no suit is pending.

3. Arbitration a suits

• Arbitration without the intervention of the court

This is a case where the arbitration proceedings take place outside the court and there is no suit

pending but the award of the arbitrator can be filed in court and executed through the court as if it is a

decree of the court. Section 3 to 25 of the Act relates to such types of Arbitration



• Arbitration through the court when no suit is pending

If there is an arbitration agreement, the parties may proceed with the arbitration independently of any

court. Though in section 20 of the Act, certain other alternative procedures are also stated.

When there is an arbitration agreement and no suits pending, then any party is free to apply to the

court for filing the arbitration agreement. The court then issues a notice asking the parties to show

cause as to why the agreement should not be filed. If no sufficient cause is present the court then

orders to file the agreement and an arbitrator is appointed by the parties or in case of disagreement, by

the court.

• Arbitration a suits

In section 21 to 25 of the Act, if there is a suit pending, then the parties may decide to settle the matter

by arbitration.

In any suit if the parties agree to resolve the matter through arbitration, the parties may at any time

before the judgement is preannounced apply in writing to the court for an order of reference.

With the order of reference, the arbitration takes place in the same manner as an arbitration without

the intervention of the court

• Statutory Arbitration

Some statues provide for compulsory arbitration in dispute arising out of matters concerning the Co-

operative Societies Act, 1912, The industrial relation Act etc. These are called Statutory arbitration.

In such cases the statues concerned generally provides for the procedures according to which the

compulsory arbitration is conducted.

In cases where the procedures are not mentioned, it will follow the rules stated in the Arbitration Act.

• Advantages of Arbitration

Parties often seek to resolve their disputes through arbitration because of a number of

perceived potential advantages over judicial proceedings. Such as:

1. When the subject matter of the dispute is highly technical, arbitrators with an appropriate

degree of expertise can be appointed (as one cannot "choose the judge" in litigation).

2. Arbitration is often faster than litigation in court.

3. Arbitration can be cheaper and more flexible for businesses.

4. Arbitral proceedings and an arbitral award are generally non-public, and can be made

confidential.

5. Due to the provisions of the New York Convention of 1958, arbitration awards are

generally easier to enforce in other nations than court judgments.

6. In most legal systems there are very limited avenues for appeal of an arbitral award, which

is sometimes an advantage because it limits the duration of the dispute and any associatedliability



• Disadvantages of Arbitration

Some of the disadvantages include:

1. Cost: Although parties generally pay for the services of the arbitrator and/or an arbitration

agency, if one is selected, the speed, efficiency and reduced formality and procedures

associated with arbitration leads to a process that is quicker and cheaper than litigation.

2. Limited rights of appeal: Arbitration statutes provide for limited grounds of appeal and

fewer means to delay, challenge or overturn an arbitrator’s claimed mistake or error.

3. Lack of full formal discovery: In arbitration, all the procedural discovery methods available

in a judicial proceeding, such as, depositions, written interrogatories, requests for admissions

and the like are available only if it is specifically provided for by the agreement of the parties

or by the rules adopted.

4. Waiver of right to jury: The constitutionally protected right to a jury trial is a fundamental

and valuable right that is waived when parties select arbitration.

An Arbitration Agreement, unless a different intention is expressed within, shall be deemed to

include the provisions set out in the following:

** 8 points in the book. Pg-492

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