ARBITRATION AGREEMENT

ARBITRATION

Arbitration is a process of dispute resolution in which a neutral third party (Herein after called the arbitrator) renders a decision after a hearing at which both parties have an opportunity to be heard. It is the means by which parties to a dispute get the same settled through the intervention of a third person, but without having recourse to court of law.

WHAT IS AN ARBITRATION AGREEMENT?

1. Arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship whether contractual or not.
2. The parties make an agreement that instead of going to the court, they shall refer the dispute to arbitration.
3. The arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. Where an arbitration clause is included in a contract and the contract is avoided due to misrepresentation or fraud, the arbitration clause may still continue to be binding.
4. Where, however, there was no contract at all between the parties or contract was void ab initio, the arbitration clause cannot be enforced.
5. An arbitration agreement/clause must be in writing. Although no formal document is prescribed, however, it must be clear from the document that the parties had agreed to the settlement of dispute through arbitration.
6. Where the arbitration agreement or clause is contained in a document, the parties must sign the document. Besides, the arbitration agreement may be established by-
1. an exchange of letters, telex, telegram or other means of telecommunication; or
2. an exchange of statements of claim and defence in which the agreement is alleged by one party and is not denied by the other.

 

WHAT DISPUTES MAY BE REFERRED

 The parties to an arbitration agreement may refer to arbitration, a dispute which has arisen or which may arise between them, in respect of a defined legal relationship, whether contracted or not.

Thus, all matters of civil nature whether they relate to present or future disputes may form the subject matter of reference. The dispute, however, must be the consequence of legal relationship arising out of an obligation, the performance of which is a duty under the law and for its breach a remedy is provided.

BAR TO SUIT 

When the parties have entered into an arbitration agreement, they cannot file a suit in a court of law in respect of any matter covered by the agreement; otherwise the very purpose of arbitration will be frustrated. The court will normally not intervene except where so provided by the Act.