HomeFWJ TakeawayResourcesAgreement to Arbitrate

Arbitration can be a brilliant way of resolving disputes without the cost and expense of formal litigation. Our superb team can see whether arbitration can work for you - whichever side of the dispute you are on. Call us today.

Arbitration, despite being a dispute resolution procedure, requires an agreement to arbitrate from all sides to a dispute.  You cannot force a party into arbitration proceedings, although conversely a party can be required to engage in Arbitration if they are contractually bound to do so.

An Arbitration Tribunal has no inherent jurisdiction to decide a dispute.

How do parties agree to arbitrate?

Often it is the case that parties to a dispute have already sat down and tried to resolve a dispute, only to find that they become deadlocked. This in turn can lead to each side instructing lawyers and other professionals to enter into quasi-arbitration.  This may lead to threats of litigation and increase the overall prospects of formal legal proceedings.

For some disputes this may be the appropriate route.  For others it is not – court proceedings are expensive and can make the dispute more painful, time consuming and costly.

Instead the parties could agree to arbitrate.  There are generally two ways to agree to arbitrate, both of which are consensual, as follows:

  1. arbitration clauses within commercial agreements.
  2. voluntary arbitration

In either of the above scenarios, there must be an element of consensual agreement, a will to settle the dispute and ultimately a likely acknowledgement of some (but not all) of the issues in dispute).

Arbitration clauses

Most commercial agreements, particularly those where disputes may arise during an ongoing business relationship, contain an arbitration clause.  The commercial agreement is entered into voluntarily by both parties, who consent (in advance) for any future dispute to be subject to arbitration.

This agreement to arbitrate is a clause that survives the initial contract, and unless there is inconsistency, uncertainty or inoperability, will be binding and effective on the parties in their consequential dealings.

These consequential dealings could include

  • future commercial dealings (unless the contract itself, including the arbitration clause, is brought to an end) or
  • associated contracts, including settlement agreements which do not necessarily require an express arbitration clause (if one is embedded in the original contract which provided for arbitration).

If the existence of an arbitration clause is disputed, most national courts will however try to give meaning to an arbitration clause in an attempt to try to uphold it, by reference to what they consider the true intention of the parties. 

The ideal of arbitration as a consensual, neutral forum (which incidentally is also self-funding) is of great appeal to the courts, in todays’ justice system where increased engagement in mediation, negotiation and, ultimately, arbitration are encouraged to mitigate the inexhaustive demand for use of the Courts.

Voluntary arbitration

There is no requirement for a pre-existing agreement, with an arbitration clause, to exist for parties to engage in a dispute resolution process which is efficient and likely less contentious.

If you have a dispute with another, whether that be in terms of the amount owed or any incidental terms of agreement (and whether any such terms were agreed) then you may wish to consider arbitration as a way to resolve this dispute.

However,

  • the parties must consent to arbitration. 
  • an Arbitration Tribunal does not have authority to decide any dispute without the authority of both or all parties. 

If the parties can agree on this, and the practical aspects of the Arbitration (including identification of the Arbitrator) then once agreed matters proceed – facts are submitted, evidence is presented and an Arbitrator ultimately makes his decision on the basis of the information before him.

  • the identity of the Arbitrator is something often of great importance and at Francis Wilks & Jones we can assist with this with this important part of the process. 
  • in addition, if you are currently involved in legal proceedings relating to a dispute and want a swifter resolution to these proceedings, you may wish to consider Arbitration. 

The court can be required (providing both parties consent) to suspend the litigation proceedings (as with all forms of ADR, including for mediation) to enable Arbitration to occur.

Drafting arbitration clauses and disputes

It is not unusual for one party to have agreed to an arbitration clause in a commercial agreement without properly understanding what they are committing to.  Alternatively, they may dispute that such a clause was relevant to the dispute at hand.

These defects are most often raised when one party tries to litigate the dispute, and the other party instead seeks to rely on the arbitration agreement.

It is vitally important therefore that any arbitration clause is drafted in clear and concise ways. For example,

  • the London Court of International Arbitration has as selection of recommended clauses that may be appropriate to your agreement.
  • alternatively, you may have a demand for a bespoke arbitration clause that is more relevant to your industry or the circumstances of your business arrangement.

If you are considering relying on an arbitration clause, or seeking assistance with drafting one, and have concerns as to whether or not it is effective, at Francis Wilks & Jones we can assist you with understanding the risks or finding the resolution to this dilemma.

Contact us in confidence