A valid “Arbitration Clause” is a prerequisite to invoke
Arbitration under any Rules of the Arbitration, whether it is Arbitration under Arbitration and
Conciliation Act, 1996 ( amended in 2015) or under ICC Rules/ Singapore
International Arbitration Rules/ Dubai International Arbitration Rules or
London Court of International Arbitration Rules ( LCIA Rules).
Section 7 of the Arbitration and Conciliation Act, 1996 defines
“Arbitration Agreement” as under:
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. An Arbitration agreement may be in form of an arbitration
clause in a contract or in the form of a separate agreement.
3. An arbitration Agreement shall be in writing.
4. An Arbitration agreement is in writing if it is contained
in-
a) a document signed by the parties;
b) an exchange of letters, telex, telegram or other means of
telecommunication which provide a record of the agreement; or
c) an exchange of statement of claim and defence in which the
existence of the agreement is alleged by one party and not denied by other.
5. The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement if the contract is in
writing and the reference is such as to make the arbitration clause part of the
contract.
Under section 7 of Arbitration and Conciliation Amendment Act, 2015 an
Arbitration Agreement containing in the form of communication through
electronic means shall also be treated as an “ Arbitration Agreement”
Parties are free to agree on an arbitration agreement, they
can refer all or any dispute to the arbitration. If the parties agree to refer
only specific dispute (s) to the Arbitration then other disputes shall come
under the category of exempted matter and can’t be referred to the Arbitration.
Similarly, parties are free to agree on the number of Arbitrators, place of
Arbitration, language of the Arbitration and cost of the Arbitration.
While drafting an Arbitration clause care must be taken to avoid
any risk of ambiguity and there must be clarity regarding reference of the
disputes, number of Arbitrators and their appointment, place of Arbitration and
language of the Arbitration and Rules of the Arbitration. Unclear wording in
the Arbitration clause will cause uncertainty and delay and can hinder dispute
resolution process.
Standard Arbitration Clause under ICC Arbitration Rules is as
under:
“ All disputes arising out of or in connection with the
present contract shall be finally settled under the Rules of Arbitration of the
International Chamber of Commerce by one or more arbitrators appointed in
accordance with the said Rules”
If parties wish to appoint Sole Arbitrator, they may agree to
the appointing authority also failing which Sole Arbitrator will be appointed
by the Court as per applicable Rules. In case of three Arbitrators, each party
may appoint one Arbitrator and the third Arbitrator shall be appointed by the
two Arbitrators so appointed by the parties, failing which the third Arbitrator
shall be appointed as per applicable Arbitration Rules. Under ICC Arbitration
Rules ICC Court will appoint third Arbitrator. In domestic Arbitration third
Arbitrator shall be appointed by the Chief Justice or any person or institution
designated by him. If parties fail to appoint their respective Arbitrator
within a stipulated period under applicable rules the similar procedure will be
applicable in those cases also.
Under ICC Arbitration parties can also agree to exclude any
recourse to the Emergency Arbitrator, in that case following wording can be
added;
The Emergency Arbitrator Provisions shall not apply.
Similarly, under ICC Rules parties can agree to include the
expedited procedure clause as follows;
The Parties agree, pursuant to Article 30(2) (b) of the Rules
of Arbitration of the International Chamber of Commerce, that the Expedited
Procedure Rules shall apply irrespective of the amount in dispute.
Further, if the parties wish to adopt ADR system before
invocation of the Arbitration they can add the same in the Arbitration
Agreement. Parties should also clearly agree on the applicable law and
jurisdiction of Court.
For further assistance feel free to write to azeez_nazar@rediffmail.com
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