ARBITRATION AGREEMENTS ND REGULATION OF INTERNATIONAL
Due to the changes in economic policies of different countries, globalisation has taken place
and resulted in a tremendous growth in the international trade between various countries. But
in the case of trade and commerce disputes are inevitable. In international trade and
commerce, disputes occur more frequently because each country have their own set of laws
and own ways of interpreting those laws. Every activity relating to trade is ordinarily
preceded by a legal contract to avoid legal disputes. No matter how carefully and clearly the
contract is written, breach of contract is bound to happen if one party interprets the
obligations differently from the other. These disputes occur in day to day commercial trade
In international trade, parties involved in the trading belong to different countries whose legal
systems differ in many ways. The national courts of each country are not competent to handle
international commercial disputes as they have jurisdiction only within the territorial
boundaries of a particular country. As international trade transactions extents over various
countries, litigation would be time consuming, tedious as well as expensive. Moreover if
traders engage in litigation there is possibility of poisoning the business relations between
two countries. Hence litigation is discarded from the purview of dispute resolution.
So there was a need for a dispute resolution mechanism for international trade disputes and
hence Arbitration slowly entered in the alternative dispute resolution arena. Arbitration is far
more better than litigation. It played an efficient role is resolving disputes where there is
diversified legal concepts and rules among different countries.
Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one
or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the
parties opt for a private dispute resolution procedure instead of going to court.1
If the parties to arbitration are nationals of different countries then it is said to be an
international commercial arbitration. Following is the definition given by UNCITRAL model
law of International commercial arbitration under under Article 1(3):-
An arbitration is international if:
(a) the parties to an arbitration agreement have, at the time of the conclusion of that
agreement, their places of business in different States; or
(b) one of the following places is situated outside the State in which the parties have their
places of business:
i.the place of arbitration if determined in, or pursuant to, the arbitration agreement
ii. any place where a substantial part of the obligations of the commercial relationship is to
be performed or the place with which the subject-matter of the dispute is most closely
(c) or the parties have expressly agreed that the subject-matter of the arbitration
agreement relates to more than one country.2
From the above Article it is clear what an International commercial arbitration is about. The
above definitions and the Article of the UNCITRAL Model law points evidently at the
‘Arbitration Agreement’. Without an arbitration agreement or an arbitration clause it is
difficult to carry out the arbitration proceedings as the agreement reflects the aims as well as
the objectives of the parties who are party to the arbitration.
Further arbitration agreements are discussed broadly.
SIGNIFICANCE OF AGREEMENTS IN ARBITRATION
Agreements are an important aspect of the arbitral proceedings. Arbitration agreements can
be in the form of arbitration clause or a different agreement. Under the UNCITRAL Model
law Article 7 defines an arbitration agreement as follows:-
(1) "Arbitration agreement" is 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. An arbitration agreement may be in the form
of an arbitration clause in a contract or in the form of a separate agreement.
(2) The arbitration agreement shall be in writing. An agreement is in writing if it is contained
in a document signed by the parties or in an exchange of letters, telex, telegrams or other
means of telecommunication which provide a record of the agreement, or in an exchange of
statements of claim and defence in which the existence of an agreement is alleged by one
party and not denied by another. The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement provided that the contract is in
writing and the reference is such as to make that clause part of the contract.3
From the above definition it is quite evident that an arbitration agreement an indispensible
part of any arbitration. It provides the basis for any arbitration. It is the agreement which
states that the disputes between the parties would be solved through arbitration. An
arbitration agreement is made by those parties who agree to resolve their disputes through
arbitration. More precisely arbitration agreements are made to be certain about the decision to
resolve disputes through arbitration. If there is no agreement of arbitration, the arbitration
cannot be enforceable. Moreover arbitration agreements contains all the necessary details like
▪ the place of arbitration
▪ the no. Of arbitrators
▪ the disputes which are to be resolved through arbitration
▪ the governing law
▪ and the language of the arbitration.
Hence a well constructed arbitration agreement gives a roadmap for implementing a smooth
The main importance of having an arbitration agreement before the dispute arises is that
when the dispute actually arises, one party can compel the other party to enforce the
agreement and resolve their disputes through arbitration. It therefore saves the time, energy
and money which is wasted in litigation. Hence having a proper arbitration clause or
agreement is necessary.
The Model Law insists that the arbitration agreement shall be in writing though some national
laws recognized in practice the oral arbitration agreements.
Let us discuss some advantages of having an arbitration clause or arbitration agreement so
that we can understand the significance of these arbitration agreements:-
▪ Arbitration is faster than litigation
As discussed earlier that arbitration is more convenient than litigation, it is better to have an
agreement of arbitration beforehand so that when the disputes arises, parties do not have to
think about how to resolve the disputes. Moreover arbitration is preferred over litigation so
there is no harm in including an arbitration clause if the parties have already decided to go in
Disputes are resolved between the parties in arbitration by an arbitrator hence there is secrecy
and confidentiality in arbitration unlike litigation. This also helps to protect business relations
▪ Framing of disputes
The parties are free to decide at their own will that what disputes are to be resolved through
arbitration. Those issues are to be specifically mentioned in the arbitration clause or
agreement. This brings a clarity to the parties to arbitration that what issues need to be
▪ Choice of law
Generally there are a wide number of domestic as well as foreign awards whose laws may be
applicable to a particular dispute. The parties in an commercial arbitration can use their
discretion to decide the seat as well as the jurisdictions of those laws which govern the
▪ Selection of arbitrator
The most important aspect which the arbitration agreement contains is who would be the
arbitrator to the dispute. The parties to the dispute who decide to go for arbitration to resolve
their disputes can select their arbitrator. There are several components for the selection of
arbitrators like the number of arbitrators, qualifications, method of selection and any other
condition which the parties may put.
▪ Seat of arbitration
The seat of arbitration is the place at which the arbitration would be carried out. The seat
means which law should govern the arbitration proceedings. The selection of the seat is of
vital importance because the Courts of the seat of arbitration gets supervisory jurisdiction of
the arbitration proceedings. The Supreme Court in its decision given in the case of Bharat
Aluminium Company Ltd v. Kaiser Aluminium Technical Service Inc4 held that the choice of
another country as the Seat of Arbitration inevitably imports an acceptance that the law of
that country relating to the conduct and supervision of Arbitrations will apply to the
proceedings. Hence it becomes very important to mention the seat of arbitration in the
arbitration agreement or clause.
▪ Language of the arbitration agreement
In international commercial arbitration the parties belong to different countries and may not
understand the same language. Hence the arbitration agreement should be in such a language
which both the parties can understand clearly.
FORMS OF ARBITRATION AND ARBITRATION AGREEMENTS
▪ Domestic arbitration
Domestic arbitration means that arbitration which takes place between nationals of one
country. In a domestic arbitration, parties do not belong to different countries. The parties
belong to the same country and the dispute is governed by the substantive law of that
particular country. The arbitration agreement in a domestic arbitration will not consist of the
law which would be governing the parties as they belong to the same country and the
arbitration laws would be applicable to them. For example:- In India, arbitration is governed
4 (2012) 9 SCC 552
by the Arbitration and Conciliation Act, 1996. So, arbitration which takes place within India
wherein both the parties are Indians and the disputes are resolved by the substantive law of
India is said to be a domestic arbitration.
▪ International commercial arbitration –
In the picturesque language of Nani Palkhiwala, ‘International Commercial Arbitration’ ‘is a
1987 Honda car, which will take you to the same destination with far greater speed, higher
efficiency and dramatically less fuel consumption’5. In an international commercial
arbitration the parties belong to two different countries to resolve their trade disputes. In these
type of arbitration, the arbitration agreement is of significant importance as the agreement
contains all the essential rules and regulations which are required to proceed with the arbitral
proceedings for dispute resolution. The arbitral tribunal decides the disputes in accordance
with the proper law which are designated the parties themselves. The agreement of the
international commercial arbitration needs to be drafted very cautiously as parties belong to
different nationals and may not interpret or understand the contract in the similar way. It is
the agreement which the parties would obey to.
▪ Institutional arbitration-
The arbitration which is carried out by arbitral institute is called Institutional arbitration. The
parties who decide to arbitrate, specify in the arbitration agreement that the dispute resolution
is to be determined in relevance to the rules of institutional arbitration. One or more than one
arbitrators are appointed by the governing body of the institution in such arbitrations from a
selected panel of the institution. The parties can also select the arbitrators which would be
mentioned in the agreement. Some of the leading international institutions are as follows:-
✓ International Chamber of Commerce (ICC)
✓ Paris, London Court of International Arbitration (LCIA)
✓ London, London Maritime Arbitration Association (LMAA)
✓ International Centre for Settlement of Investments Disputes (ICSID)
✓ London, Grain and Feed Trade Association (GAFTA)
✓ London, and American Arbitration Association (AAA)
5 We The Nation, Chapter International Arbitration V. Litigation, p 205, 209
✓ New York. World Intellectual Property Organization (WIPO)
Generally the rules and regulations of these institutions follow a similar pattern.
▪ Ad hoc arbitration-
Russell on the definition of ad hoc arbitration: “The expression ‘Ad Hoc’, as in ‘Ad Hoc
Arbitration’ or ‘Ad Hoc Submission’ is used in two quite different senses: an agreement to
refer an existing dispute, and/or an agreement to refer either future or existing disputes to
arbitration without an arbitration institution being specified to supervise the proceedings, or
atleast to supply the procedural rules for the arbitration. This second sense is more common
in international arbitration.”6
If the parties to the dispute themselves arrange for an arbitrator then it is said to be an Ad Hoc
Arbitration. Ad Hoc arbitration can be of domestic, international or foreign. There are no
such rules in Ad Hoc Arbitration unlike the Institutional arbitration. They stipulate their own
rules. In short this kind of arbitration is a do it yourself arbitration. The rules which
regulates the arbitral proceedings is made and agreed by the parties themselves and
mentioned in the arbitration agreement. Hence the arbitration agreement is the vital document
in Ad Hoc Arbitration as the document binds the parties.
The agreement of an ad hoc arbitration will contain how the arbitral proceedings would be
carried out, how many arbitrators would be required for the arbitration, the seat of the
arbitration and the laws which would be governing them.
For example the seat of arbitration is in India, then according to The Arbitration and
Conciliation Act 1996,if the parties to arbitration fail to appoint any arbitration, then the
arbitral tribunal shall consist of one arbitrator. That arbitrator shall be appointed by the Chief
Justice of the Supreme Court of India or the Chief Justice of a High Court of India. If the
place of arbitration is to be Cairo, according to the Eygyptian Arbitration Law 1994, if the
parties to arbitration fail to appoint any arbitration , the number of arbitrators shall be three,
and the Court of Appeals of Cairo shall appoint the co arbitrator of the failing party. The two
co arbitrators will be given 30 days to agree on the third arbitrator, if they cannot, then the
Court of Appeals of Cairo shall appoint the third arbitrator.
▪ Statutory arbitration-
6 Russell on Arbitration, 21st Ed. 1997, p 42
When arbitration is conducted in accordance with the statutory provisions an Act, it is said to
be a Statutory Arbitration. In this type of arbitration proceedings, the parties are referred to
the arbitrator in terms of the provision made in a particular statute. There are a number of
Central and State Acts, which provide for such arbitrations.
▪ Specialized arbitration-
“Specialized Arbitration” is arbitration which is conducted under the aegis of arbitral
institutions which frames special rules to meet up particular needs for the conduct of
arbitration in respect of disputes of particular types, like, disputes as to commodities,
construction or specific areas of technology.
According to Russell, the rules of London Court of Arbitration authorize an arbitrator to
proceed on his own in quality disputes and also require him to do so in the attendance of all
parties. The London Chamber of Commerce maintains a Court of Arbitration, which has
great experience in settling commercial disputes. The rules of the court provide for informal
arbitration, where only the quality of the goods is in dispute, and give the arbitrators great
scope in ascertaining the price of goods in distant markets.7
Some of the institutions are specialized in special types of disputes such as building contracts,
maritime and commodity trade contracts, etc. Some such institutions are as follows:-
✓ Institution of Civil engineers (ICE)
✓ Royal Association of British Architects (RABA),
✓ London Maritime Arbitration Association (LMAA),
✓ Grain and Feed Trade Association (GAFTA).
These institutions have their own particular rules to meet the precise needs to conduct the
arbitration proceedings in their particular specialized areas. Such specialized institutions have
elaborated rules providing for expeditious and inexpensive arbitration. Such rules give wide
discretion to an arbitrator to find necessary, relevant evidence and information.
▪ Flip-flop arbitration
7 Russell on Arbitration, 19th Ed., p 121
Flip-flop arbitration is that in which the parties to arbitration prepare their own cases and then
request the arbitrator to decide one of them. The arbitrator on the proof given by the parties,
decides the correctness of their submissions and passes a relevant award in favour of the
party. Flip-Flop arbitration is also called as Pendulum Arbitration. This type of arbitration
have come from The United States to The United Kingdom. This system of arbitration is also
defined as ‘ arbitration under which the arbitrator bases his award on the submission he
considers most reasonable.’ This method is adopted on the basis that the parties should be
encouraged to be reasonable in the formulation of their cases.
▪ Fast track arbitration
As the arbitral process became more and more complex, the ICC court became more critical
about the usual arbitral process and started looking for less time consuming as well as cost
effective ways for resolving the disputes by arbitration as soon as possible by adopting an
accelerated procedure. This generated the notion of ‘Fast Track Arbitration’ or ‘Documents
Fast Track Arbitration also called as documents only arbitration is time bound arbitration,
with stricter rules of a procedure, which do not allow for any laxity or scope for extensions of
time and delays. Fast Track Arbitrations are best suited in those cases, which can be resolved
on the foundation of documents, and that oral hearings and witnesses are not necessary. In the
absence of an agreement by the parties that there shall not be oral hearings, the arbitral
tribunal may upon request, and put forth by a party shall permit oral hearing during the
appropriate phase of the proceedings. Awards in this kind of arbitration are binding in nature
like Court decrees.
In the International context, example of ‘fast track arbitration’ are those arbitrations which
are conducted according to the rules of London Maritime Arbitrators Association.
▪ Arbitration clause
▪ Arbitration agreement(submission agreement)
Let us discuss in detail with the following:-
Arbitration clause is a section or part of commercial agreement which states that in the event
of any legal dispute between the two parties, the matter would be resolved by arbitration.
Arbitration clauses are mentioned in the contract because parties need not sue each other
when any dispute arises and reach at a mutual agreement. The clause regulates the method of
dispute resolution between the parties. These are standard clauses of the institution which the
parties have agreed to use to administer the future disputes. Generally the contents of these
clauses are minimum details of:-
▪ The arbitration rules that will govern the proceedings and the institution, if
any, which will administer the arbitration process.
▪ The seat of the arbitration.
▪ The number of arbitrators.
▪ And the language of the arbitration.
If any of the above particulars is missing from the arbitration clause and if no agreement is
made mentioning them then the arbitration may be inoperable.
Binding and Non- Binding arbitration clause
An arbitration clause can be either binding or non-binding. A binding arbitration clause is
that when the arbitrator’s decision on a specific dispute will be final and the courts will
enforce it and neither party can appeal or not follow the decision. A non-binding arbitration
clause gives the parties freedom to reject the arbitrators decision and take the dispute to court
to make a final determination. Usually parties use binding arbitration clauses since its more
decisive and certain.
Sample of Arbitration Clause
United Nations Commission on International Trade Law (UNCITRAL) – Ad Hoc
“Any dispute, controversy or claim arising out of or relating to this contract, or the breach,
termination or invalidity thereof, shall be settled by arbitration in accordance with the
UNCITRAL Arbitration Rules as at present in force.”
The parties should consider adding:
The appointing authority shall be _______________ (name of institution or person);
The number of arbitrators shall be _____ (one or three);
The place of arbitration shall be [Atlanta, Fulton County, State of Georgia, United States of
The language(s) to be used in the arbitral proceedings shall be ______________.
The ICC recommends that in the event if the parties seek to have the ICC serve as the
appointing authority, the following provision should be used in lieu of subclause (a) above:
“The appointing authority shall be the ICC acting in accordance with the rules adopted by the
ICC for this purpose.”
If the parties have not agreed on an appointing authority or if the appointing authority fails to
appoint within 60 days, the UNCITRAL Rules empower the Secretary-General of the
Permanent Court of Arbitration to designate an appointing authority.
International Chamber of Commerce (ICC)
“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.”
The parties may also wish to stipulate in the arbitration clause:
▪ the law governing the contract;
▪ the number of arbitrators;
▪ that the place of arbitration shall be [Atlanta, Fulton County, State of Georgia,
United States of America]; and
▪ the language of the arbitration.
If the parties do not want the Emergency Arbitrator Provisions of the ICC Rules to apply,
they must expressly opt out by using the following provision:
As discussed above arbitration clauses are made before any dispute arises, but submission
agreements are those arbitration agreements which are made after the dispute arises. They are
called Submission agreements because the parties decide to submit their dispute to arbitration
after the dispute arises.
Submission agreements are not popular choice of arbitration agreement unlike arbitration
clauses. They are generally longer and detailed than the arbitration clauses. Such agreement
will contain details of the dispute, the issues between the parties and clearly record that it is
being referred to arbitration. It will then contain the same important details as an arbitration
clause, such as the legal seat and number of arbitrators. It may be assumed that having an
arbitration clause means that there is no need for a submission agreement.
The purpose of a submission agreement is to define and specify the scope of arbitration so as
to enable the court later on to ensure that the arbitral award was issued within the limits
specified by the parties. Submission agreements are also made during litigation to remove the
jurisdiction of that particular Court if the Court is of First instance and has not given its
judgement yet on that issue i.e pleading stage is still taking place.
Hence it is suggested that apart from an arbitration clause, an arbitration agreement should be
signed by the parties while contracting with the other so that in the event of dispute the
parties can directly resolve the matter through arbitration rather than going to court and being
referred to arbitration.
Grounds on which agreement is void
A submission agreement which do not clearly state the details of the dispute being referred to
the arbitration may be declared later on as null and void, along with any award made pursuant
FUNCTIONS OF AN ARBITRATION AGREEMENT
The arbitration agreement is the foundation stone of commercial arbitration. It fulfils several
▪ Consent of the parties
The first and the most vital function of an arbitration agreement in the present context
is that it shows that the parties have consented to resolve disputes by arbitration. It establishes
the obligation to arbitrate. This consent is essential, because, without it there can be no valid
arbitration. Once parties have validly given their consent to arbitration, this consent cannot be
unilaterally withdrawn .
▪ Source of power to arbitrators
Secondly, the arbitration agreement is also the basic source of the powers of the
arbitrators. In principle, an arbitral tribunal or an arbitrator may only exercise such powers as
the parties confer upon it. The parties to an arbitration are 'masters’ to an extent impossible in
proceedings in a court of law. For instance, the parties may decide the number of arbitrators
to comprise the arbitral tribunal, how it should be appointed, what powers it should possess,
and what procedure it should follow. The arbitral tribunal owes its existence to the agreement
of the parties. If the parties are in agreement, the arbitrators must follow their reasonable
The method or procedure for appointment of the arbitrators could also be specified in the
arbitration agreement. In the case of a sole arbitrator, it may be joint appointment by parties
or by an appointing authority and in the case of three arbitrators, each party could appoint one
arbitrator and the two appointed will then appoint the third. In the case of multi-party
arbitrations (arbitrations between more than two parties), it is more useful for parties to agree
on an appointing authority.
Apart from the above, the level of qualification or expertise which the arbitrator or arbitrators
should have, time lines for conclusion of the arbitration and giving final award, and
governing law may be stipulated in the arbitration agreement. Parties can choose from a
variety of arbitration rules such as, ICC Rules, LCIA or other international rules. The
arbitration agreement should state whether the choice of law for the contract also applies to
the arbitration agreement.
▪ Jurisdiction to arbitral tribunal
Finally, an arbitration agreement establishes the jurisdiction of the arbitral tribunal. The
arbitration agreement is the main source from which this jurisdiction can come. It is different
to the ordinary legal process whereby disputes are resolved through the Court of law, where
jurisdiction may come from several distinct and different sources, of which an agreement by
the parties to submit to the jurisdiction will be only one. In the arbitral process, which is a
private method of resolving disputes, the jurisdiction of the arbitral tribunal is derived solely
from the agreement of the parties.
DEFINITIONS OF ARBITRATION AGREEMENT
Arbitration agreements also known as arbitration clause is a document which states that two
or more parties agree to arbitrate to settle their disputes through arbitration. It is generally a
clause under a bigger contract. An arbitration agreement is made by the parties so that in
future when any dispute arises then the parties can resolve their disputes through the way of
Article 7 of the UNCITRAL model law10 defines arbitration agreement as follows:-
(1) "Arbitration agreement" is 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. An arbitration agreement may be in the form of
an arbitration clause in a contract or in the form of a separate agreement.
(2) The arbitration agreement shall be in writing. An agreement is in writing if it is contained
in a document signed by the parties or in an exchange of letters, telex, telegrams or other
means of telecommunication which provide a record of the agreement, or in an exchange of
statements of claim and defence in which the existence of an agreement is alleged by one
party and not denied by another. The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement provided that the contract is in writing
and the reference is such as to make that clause part of the contract.
Article II New York Convention11
Each Contracting State shall recognize an agreement in writing under which the parties
undertake to submit to arbitration all or any differences which have arisen or which may arise
between them in respect of a defined legal relationship, whether contractual or not,
concerning a subject matter capable of settlement by arbitration.
2. The term “agreement in writing” shall include an arbitral clause in a contract or an
arbitration agreement, signed by the parties or contained in an exchange of letters or
3. The court of a Contracting State, when seized of an action in a matter in respect of which
the parties have made an agreement within the meaning of this article, shall, at the request of
one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null
and void, inoperative or incapable of being performed.
Section 7 in THE ARBITRATION AND CONCILIATION ACT, 199612
7 Arbitration agreement. —
(1) In this Part, “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 the 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, telegrams or other means of telecommunication which
provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence of the agreement is
alleged by one party and not denied by the 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 that
arbitration clause part of the contract.
REQUIREMENTS FOR A VALID ARBITRATION AGREEMENT
An arbitration agreement an indispensible part of any arbitration. It provides the basis for any
arbitration. It is the agreement which states that the disputes between the parties would be
solved through arbitration. An arbitration agreement is made by those parties who agree to
resolve their disputes through arbitration. More precisely arbitration agreements are made to
be certain about the decision to resolve disputes through arbitration.
General requirements of an arbitration agreements
Different countries adopt different requirements for arbitration agreement. In case of
international commercial arbitration it is on the parties to decide which institution’s rules they
want to follow for the sake of arbitration proceedings. The General essentials which is
required for an arbitration agreement to be valid are given below.
• Agreement should be in writing
• Should be valid according to the Contract Act
• Should contain all the essential details regarding the Arbitral process
• Should be signed by free consent of the parties
Discussed below is the requirements for a valid arbitration agreement adopted by various
The validity requirement of an arbitration agreement is (Section 7 of the Arbitration &
Conciliation Act, 1996):
(i) An arbitration agreement may be in the form of an arbitration clause in a contract
or in the form of a separate agreement
(ii) An arbitration agreement shall be in writing
(iii) An arbitration agreement is in writing if it is contained in-
a) A document signed by the parties,
b) An exchange of letters, telex, telegrams or other means of telecommunications
which provide a record of the agreement
c) An exchange of statements of claim and defence in which existence of the
agreement is alleged by one party and not denied by the other
(iv) 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 that arbitration clause part of the contract.
Article 203 of the UAE CPC requires that for an arbitration agreement to be valid it must be
in writing and specified.
The signatories to the agreement must also have the authority to bind the respective party to
undertaking arbitral proceedings and the dispute must be arbitrable.
It is in practice accepted by UAE jurisprudence that an arbitration clause encompassing all
disputes that may arise from or be related to the underlying contract is valid.
The need to specify the dispute arises only in instances where the arbitration agreement is
entered into after a given dispute has arisen.
The accepted position under UAE law is that only the person referred to as “General
Manager” in an entity’s trade licence or failing that, any other person empowered by the
General Manager through a duly notarised Power of Attorney, would have presumed
competence to bind the entity he or she represents to arbitration and to do so to the exclusion
In domestic arbitration, an arbitration agreement must be in writing to be valid (Article 1443,
In international arbitration, French law does not impose any formal requirements, and the
arbitration agreement does not need to be in writing or in any specific form (Article 1507,
CCP). However, it is easier to prove the existence of an arbitration agreement where there is a
For both domestic and international arbitration, there are no substantive requirements, apart
from the requirement that the underlying dispute be arbitrable.
Pursuant to Articles 807 and 808 CCP, an arbitration agreement is null and void if not
made in writing. An agreement to arbitrate may be in the form of a specific agreement
entered into by the parties once a dispute has arisen, or of an arbitration clause contained in a
contract. In addition, in the case of an agreement to arbitrate a dispute that has already arisen,
the parties must specify the object of the dispute (Article 807 CCP).
United States of America
Under the FAA, an arbitration agreement must be in writing. To be valid, however, a written
agreement need not necessarily be signed or incorporated in a signed contract. Beyond the
writing requirement, the only permissible validity requirements are those imposed upon all
contracts by the state law that governs the arbitration.
To fall within the scope of the Arbitration Act,1996, an arbitration agreement must be in
writing or evidenced in writing. This includes an oral agreement to arbitrate by reference to
‘terms which are in writing’ (sec.5(3) of the 1996 Act).
By section 1(1) of the ACA, an arbitration agreement, to be valid, must be in writing or
otherwise evidenced in writing. Further, both parties must have mutually agreed or consented
to the arbitration agreement and the arbitration agreement must be in respect of a commercial
relationship. The parties must have legal capacity to enter into the arbitration agreement as
with every other contract, the arbitration agreement must satisfy the basic legal requirements
of a valid contract of offer, acceptance, and consensus ad idem
An arbitration agreement must be made in writing, either set out in one document, or in
exchanged correspondence (inter alia letters, telefax and emails, section 1031 (1) ZPO). In
certain circumstances, an arbitration agreement is validly constituted by a document
transmitted by one party to another party, or by a third party to both parties, provided that no
timely objection was raised (section 1031 (2) ZPO).
The parties can also refer to an arbitration agreement contained in separate general terms and
conditions. Even if the arbitration agreement is included in the main contract itself, it might
be considered as a “standard term” (as per section 305 (1) of the German Civil Code
(Bürgerliches Gesetzbuch, BGB)). In that case, also in B2B-contracts, it may be subject to a
specific validity control (sometimes referred to as “fairness test”).
• The major requirement for an arbitration agreement according to the Local Law is that
the arbitration agreement must be in written form.
• Furthermore, Parties’ consent to solve the dispute through arbitration must be explicit
and devoid of any kind of doubt. The authorization of an arbitration centre or board
can be done through an arbitration clause in the main agreement between the parties
or a separate arbitration agreement.
• The authorization must be done by a written document executed by the parties or a
document mutually exchanged by the parties such as a letter, telegram, telex or fax; or
the defendant must not object to the existence of the arbitration agreement in case the
claimant claims that there is an arbitration agreement in its claim statement.
• Besides, in case the arbitration agreement is signed by a representative, there must be
a special authorization granted to the representative to execute the arbitration
AUTONOMY OF ARBITRATION AGREEMENTS
An arbitration agreement may be concluded as an arbitration clause in the
commercial contract, or as a separate agreement between two parties. Arbitration agreements
concluded within a contract are known as "arbitration clause". In practice almost all
arbitration agreements are concluded in the form of arbitration clauses.
Though the arbitration clause is a part of the contract, but the arbitration clause is essentially
independent from the contract. This is known as the separability, severability or autonomy
of the arbitration clause.
Principle of separability
The modem view is to consider that the arbitration clause is separable from the main contract
and that if one of the contracting parties challenges the validity of the main contract, the issue
ought to be detennined by the arbitrator rather than the court. In other words, the competence
of the arbitrator to decide all disputes, including a dispute about the validity of the main
contract, between the parties would stem from the arbitration itself rather than from the
contract in which the arbitration clause contained and the alleged invalidity of the contract
should be subject to arbitral settlement rather than judicial determination.
Most of the times, the question arises on the validity of the underlying contract, herein
after called as the main contract. For example, if one party claims non performance from the
other, the latter party would challenge the validity of the main contract. The modem view is
to consider that the arbitration clause is separable from the main contract and that if one of
the contracting parties challenges the validity of the main contract, the issue ought to be
determined by the arbitrator rather than the court.
In other words, the competence of the arbitrator to decide all disputes, including a dispute
about the validity of the main contract, between the parties would stem from the arbitration
itself rather than from the contract in which the arbitration clause contained and the alleged
invalidity of the contract should be subject to arbitral settlement rather than judicial
determination .But for dispute resolution the arbitration proceedings is to be conducted and
for that the arbitration clause should remain unaffected by the claim of invalidity.
According to this principle, the invalidity of the main contract will not have an impact on the
arbitration clause. On the other hand, the invalidity of the arbitration clause will not render
the main agreement invalid. In other words the requirement of both, the clause as well as the
main contract are different from each other and therefore one will not affect the other.
The principle of separability indicates that the arbitration clause and the main contract have
different qualities. The arbitration clause is juridically autonomous and shall not be affected
when the main contract is rendered invalid.
But at times, this principle does not apply. Some reasons invalidating the main contract may
affect the validity of the arbitration agreement .For example, where one of the party or both
the parties are found to be lacking the capacity to have entered into the agreement, both
agreements will be deemed invalid.
Thus, the arbitration clause and the main contract are two different agreements despite the
fact that both exist within one head. The main contract creates a relationship of obligation
between the parties, the arbitration agreement deals with the settlement of disputes between
Indian Position in autonomy of arbitration agreement
According to the above mentioned approach, the UNCITRAL Model Law on International
Commercial Arbitration incorporates the doctrine of Separability in Article- 16(1). It states as
(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with
respect to the existence or validity of the arbitration agreement. For that purpose, an
arbitration clause which forms part of a contract shall be treated as an agreement
independent of the other terms of the contract. A decision by the arbitral tribunal that the
contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.14
The Indian law of Arbitration i.e the Arbitration and Conciliation Act, 1996, which is based
on the UNCITRAL Model Law, also specifically adopts this approach in Section-16(1) (b).
As per this principle, an arbitration clause which is a part of the contract shall be treated as an
agreement which is independent of the other terms of the main contract. A decision by the
arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the
arbitration clause. The principle came to India due to the enactment of the Arbitration and
In National Agricultural Coop. Mktg. Federation India Ltd. v. Gains Trading Ltd.15, the
Supreme Court held that an arbitration clause is a collateral term in the contract, which relates
to resolution of disputes, and not performance. Even if the performance of the contract comes
to an end on account of repudiation, frustration or breach of contract, the arbitration
agreement would survive for the purpose of resolution of disputes arising under or in
connection with the contract.
The Hon'ble Bombay High Court in Mulheim Pipe coatings v/s Welspun Fintrade
Ltd and Anr16 held that Upon the termination of the main contract, the arbitration agreement
does not ipso facto or necessarily come to an end and would depend upon the nature of the
controversy and its effect upon the existence or survival of the contract itself.
Arguments against the Doctrine of separability
Dispute should not be sent to arbitration unless the parties have formed an enforceable
contract requiring arbitration of that dispute. Prior to contracting, parties start with a right to
litigate, rather than arbitrate, their disputes. The right to approach a court of law generally
exists in the domestic context but may be of less practical value internationally because there
comes the problems of jurisdiction of national courts.
Although the doctrine of separability enjoys considerable international support, it is not
applied evenly. Most nations distinguish between contracts invalid ab initio and contracts
which are allegedly nonexistent. A contract is invalid ab initio when, for example, it violates
public policy or it is characterised by fraudulent execution or flawed formation, even though
there has been 'meeting of the minds' between the contracting parties. A contract is
nonexistent when, for example, there has not same understanding and interpretation of the
contract or when the claimant or respondent was not a party to the contract.
Hence to sum up, as there many pending cases which are overburdening the Courts of law, it
is time that we think about the alternatives to resolve our disputes amicably without litigation.
Internationally litigation is almost not possible due to various matters such as jurisdiction of
national courts as the parties belong to different countries and other laws won’t be applicable
to them. So there is a immense need of arbitration and other alternative dispute resolution
techniques to come up and be given a priority over litigation. Arbitration can only take a
forefront when arbitration agreements or arbitration clauses a inserted into the underlying
contract. Arbitration agreements are the foundation stone of any international commercial
arbitration. It is that instrument by which the arbitration proceedings are carried out
smoothly. There is freedom and power given to the parties whose dispute it is. Therefore
arbitration rulings can be more creative than the civil ones and that is all because of a good
REGULATION OF INTERNATIONAL COMMERCIAL ARBITRATION
With the increasing burden on the national courts and the time consuming, costly and
complicated redressal system offered, a large number of disputes have been resolved by the
alternate dispute resolution mechanisms. Arbitration is the most sought after methods to
resolve the disputes in the recent times. Especially, with the increasing inter-country
transaction, international commercial arbitration has been developing its own legal
framework to ensure speedy and effective redressal to the parties. Hence, it is important to
know the jurisdiction of the tribunal, the appointment and powers and duties of the
DEFINITION OF INTERNATIONAL COMMERCIAL ARBITRATION-
Arbitration and Conciliation Act 1996 defines international commercial arbitration as-
“international commercial arbitration” means an arbitration relating to disputes arising out of
legal relationships, whether contractual or not, considered as commercial under the law in
force in India and where at least one of the parties is—
▪ an individual who is a national of, or habitually resident in, any country other than
▪ a body corporate which is incorporated in any country other than India; or
▪ a company or an association or a body of individuals whose central management and
control is exercised in any country other than India; or
▪ the Government of a foreign country;
INGREDIENTS OF ARBITRATION-
In general terms, arbitration includes-
1. A consensual process
2. In which a binding decision is taken
3. By a privately appointed decision maker
4. In accordance with the neutral procedures that give each party he opportunity for a
fair hearing and to present its case to the arbitrator(s).
TYPES OF INTERNATIONAL ARBITRATION-
International arbitrations may be either “institutional” or “ad hoc.”
Institutional arbitrations are conducted pursuant to institutional arbitration rules, almost
always overseen by an appointing authority with responsibility for various aspects relating to
constituting the arbitral tribunal, fixing the arbitrators' compensation and similar matters17 In
contrast, ad hoc arbitrations are conducted without the benefit of an appointing and
administrative authority or (generally) preexisting arbitration rules, subject only to the parties'
arbitration agreement and applicable national arbitration legislation.
TYPES OF ARBITRATORS-
1. Ad-hoc arbitrators- he is selected by the parties to hear only a specific dispute.
Advantages of appointing an ad-hoc arbitrator include the opportunity of selecting a
different arbitrator for each case. This is mostly utilized in commercial arbitration.
2. Permanent arbitrators- they are selected by the parties to hear all arbitration disputes
between them for a specified period. They are mostly used in labor arbitration where
parties mostly resort to arbitration.
LEGAL CONTEXT OF ARBITRATION-
17 Franck, The Legitimacy Crisis in Investment Treaty Arbitration: Public International Law Through Inconsistent
Decisions, 73 Fordham L. Rev. 1521 (2005)
Parties generally opt into arbitration and agree to refer disputes to arbitration as a matter of
contract. However, the agreement to arbitrate does not operate in vacuum but in a larger legal
context which comprises the following-
1. The agreement to arbitrate- due to the largely consensual nature of international
arbitration, the agreement to arbitrate is typically central to the conduct of arbitration.
It defines what disputes shall be referred to arbitration, powers and duties of
2. Applicable rules of arbitration- Parties often agree to arbitrate under a set of
arbitration rules, such as the rules published by the International Chamber of
3. Applicable national laws- national laws form a crucial part of the legal framework for
international commercial arbitration. The agreement to arbitration functions in context
of the national laws governing arbitration
4. Applicable treaties and conventions- a number of international treaties and
conventions may affect the rights and obligations of the parties to arbitration Eg. The
New York Convention.
APPOINTMENT OF ARBITRATORS
Selection of the arbitrators-
The choice of the arbitrators comprising the tribunal is a critical decision in any international
arbitrator as they render the award that ultimately decides the dispute. In most cases and
under most set of arbitration rules the tribunal has considerable autonomy and discretion in
determining the procedures for conduct of arbitration.
Procedure for selection
The procedure for selection of the tribunal may be defines in-
1. The agreement to arbitrate- the parties’ agreement to arbitrate may define the number
of arbitrators and the procedure for appointment of the same.
2. Any arbitration rules selected by the parties- the parties may incorporate by reference
a set of arbitration rules that itself define a default procedure for appointment and the
number of arbitrators. These rules shall apply where the parties have opted into such
arbitration rules unless the parties state otherwise. Thus where the parties select
arbitration rules but seek to vary the default procedure, this variation should be stated
expressly in the agreement. For example:
Article 8 of ICC Rules addresses the number of arbitrators and the procedure. Under Article
8(4): “where the dispute is to be referred to three arbitrators, each party shall nominate in
the Request and the Answer, respectively, one arbitrator for confirmation.”
“the third arbitrator, who will act as chair of the Arbitral Tribunal, shall be appointed by the
court, unless the parties have agreed upon another procedure for appointment, in which case
the nomination will be subject to confirmation pursuant to Article 9.”
The parties may wish to provide an alternative procedure for appointment of a chair to that
specified in the arbitration rules. For e.g. the parties may wish expressly to preserve the
opportunity to seek to reach agreement between themselves on the chair before any
appointment is made by the institution.
Some arbitration rules require confirmation of arbitrators by the relevant institution. For
Article 9 of the ICC Rules established a detailed procedure for the appointment and
confirmation of the arbitrators.
Article 5.5 of the LCIA Rules stipulates that the LCIA Court alone is empowered to appoint
arbitrators but it will appoint arbitrators with due regard for any particular method or criteria
of selection agreed in writing by the parties.
Arbitration rules may also require the prospective arbitrators to provide confirmation of their
independence and impartiality and declare any potential conflicts of interests. For example:
Article 5.3 of LCIA Rules requires that, before appointment by the LCIA Court:
“each arbitrator shall sign a declaration to the effect that there are no circumstances known to
him likely to give rise to any justified doubts as to his impartiality or independence, other
than any circumstances disclosed by him in the declaration.”
3. The laws of the seat of arbitration- the national law of the seat may specify the
number and procedure. Where the parties have opted for a seat of arbitration but have
not defined the procedure in the agreement, the law of the seat may provide a default
Many national arbitration rules enable a party to apply to a national court for the appointment
of arbitrators. This procedure may be able to be invoked if one party fails to appoint an
arbitrator according to the procedure in the agreement. For example:
Article 11 (3) of the UNCITRAL Model Law stipulates that a party may make an application
to a national court or appointing authority to make an appointment unless the agreement on
the appointment procedures provides for other means of securing the appointment.
Hence the agreement to arbitrate has to clearly specify the procedure as the best course as
ambiguity in the appointment procedure can lead to disputes in the initial state itself that may
delay the entire process.
Number of arbitrators-
An agreement to arbitrate in international arbitration shall usually provide for a tribunal
having one or three arbitrators. The odd numbers of arbitrators remove the risk of evenly split
decisions. Where there is only one arbitrator, he is referred to as the ‘sole arbitrator’. In a
tribunal of three the third arbitrator is often called the ‘presiding arbitrator’.
One consideration in choosing the number of arbitrators is cost. In a relatively low value
transaction it may in some circumstances be most efficient to agree to a sole arbitrator.
The agreement to arbitrate must contain the procedure to appoint the arbitrators. This
procedure may be to leave the choice to the chosen arbitration institution or appointing
authority, although parties usually prefer to play a role in the selection of the tribunal.
For a sole arbitrator-
1. The parties generally seek to reach an agreement on the identity of the sole arbitrator.
Under a few sets of arbitration rules, the parties’ nomination may be required to be
confirmed by the arbitral institution.
2. The parties must also provide for a default procedure to be followed in case they do
not reach an agreement. Where the parties have selected a set of arbitration rules, they
generally specify the default procedure.
For a tribunal of three arbitrators-
1. In general, where there are two parties, each party will nominate one arbitrator.
2. The presiding arbitrator can be appointed in a number of ways. The parties can
themselves reach to an agreement regarding the identity of the chair. Alternatively, it
can be agreed by the co-arbitrators after consultation with the parties. It can also be
appointed by the arbitral institution appointing other arbitrators.
Multi- party arbitrations-
The appointment procedure shall vary where there are more than two parties involved in the
arbitration. The parties can expressly stipulate in the agreement the procedure or it may be
determined by the set of arbitration rules that apply to it.
Strategic decisions to address in making a choice of arbitrators-
1. The qualifications of prospective arbitrators- it shall depend both on the specific
nature of the dispute and a range of practical considerations.
It is generally advisable to avoid detailed specifications regarding the arbitrator’s
qualifications because it may restrain the parties flexibility to select arbitrators once the
National laws may also lay down certain mandatory requirements regarding arbitrators’
qualifications by either stipulating specific qualifications or precluding consideration of some
characteristic like nationality.
Issues to be considered while assessing the qualifications are as follows-
• It is desirable to appoint an arbitrator qualified in the law that applies to the
substance of the dispute especially when it involves a complex question of law.
• It is also desirable for one or more arbitrators to be qualified in the law of the
seat, which provides the procedural laws that shall be applicable to the
• The language of arbitration is an important practical consideration for the choice
2. The arbitrators duty of independence and impartiality and the need to avoid conflict of
interest- To ensure the independence and impartiality, it is legitimate and customary
to conduct inquiries.
Part II of the IBA Guidelines address specific circumstances relevant to whether a conflict of
interest may exist and classify it as follows-
• “Non- waivable red list” includes circumstances that give rise to a non-waivable
conflict of interest such as shareholding by the arbitrator or a close family
member in a party or its affiliate.
• “Waivable red list” includes circumstances that give rise to justifiable doubts as
to the independence and impartiality of the arbitrators and are waivable by the
parties being aware of the conflict of interest situation.
• “Orange list” where depending on circumstances, there may be justifiable
doubts as to the independence and impartiality. However, a party will be held to
have waived any objection on the “orange list”, if, after disclosure, no timely
objection is made.
3. The nationality of the prospective arbitrators- Article 6.1 LCIA Rules specifies that-
“where the parties are of different nationalities, a sole arbitrator or chair of the
Arbitral Tribunal shall not have the same nationality as any party unless the parties
who are not of the same nationality as the proposed nominee all agree in writing
4. The timescale of the arbitration and the availability of the prospective arbitrators- any
procedural or evidentiary hearings need to occur at a time that is convenient not only
for the parties and their counsel but for all arbitrators. If an arbitrator has limited
capacity or availability, this may significantly delay the hearing of the dispute.
5. The legal background and cultural approach of the prospective arbitrators
6. The possibility of pre- appointment interviews with the potential candidates.
7. Costs payable to arbitrators- under different arbitration rules, arbitrators are
compensated in different ways. For example:
Under the ICC Rules, arbitrators are compensated by reference to the amount in dispute.
Appendix III of the ICC Rules contain a detailed schedule explaining how the costs and fees
of the arbitration are to be established. Article 2(1) of Schedule II establishes a presumption
that the fees will be calculated by reference to a published scale based on the amount in
Pre- appointment interviews with prospective arbitrators-
Parties sometimes conduct interviews with prospective arbitrators prior to making an
appointment to enable a party to have a better understanding about the prospective
arbitrator’s qualifications, availability, prior experience etc.
The Chartered Institute of Arbitrators has published Guidelines on the Interviewing of
Prospective Arbitrators. It endorses the following issues for discussion with potential
• The name of the parties in the dispute
• The general nature of the dispute
• Sufficient detail of the subject matter of the dispute, but not more than necessary
• The expected timetable of the proceedings
• The language, governing law and seat of arbitration
The issues which should not be discussed are-
• The specific circumstances or facts giving rise to the dispute
• The positions or arguments of the parties
• The merits of the case
The Guidelines are not necessarily binding on parties in absence of an express agreement, but
may provide as a useful reference point.
The choice of presiding arbitrator/ chair-
In a three member tribunal, the chair plays an important role as he casts the deciding vote in
case the two arbitrators adopt different positions, he plays crucial role in drafting the
procedural orders, he typically takes the lead in drafting the award.
Procedure for appointing the chair-
As with other aspects of international arbitration, parties are afforded considerable freedom to
choose the procedure that will apply to the choice of chair. When parties cannot agree on the
procedure, the arbitration rules come to the recourse. For Example:
Article 8(4) of the ICC Rules provide-
“if a party fails to nominate an arbitrator, the appointment shall be made by the Court. The
third arbitrator who will act as the Chairman of the Arbitral Tribunal, shall be appointed by
the Court, unless the parties have agreed upon another procedure for such appointment…
Should such procedure not result in a nomination within the time limit fixed by the parties or
the Court, the third arbitrator shall be appointed by the Court.”
Restrictions upon the choice of chair-
Some arbitration rules impose restrictions concerning the nationality of the chair. For
Article 9.5 of the ICC Rules stipulates that
“the sole arbitrator or the Chairman of the Arbitral Tribunal shall be of a nationality other
than those of the parties. However in suitable circumstances and provided that neither of the
parties objects within the time limit fixed by the Court, the sole arbitrator or the chair of the
Arbitral Tribunal may be chosen from a country of which any of the parties is a national.”
Party’s input into the choice of chair-
The parties can be involved in the appointment of the chair in different ways, depending on
the appointment procedure:
1. The parties’ legal counsels may communicate directly with each other to shortlist the
proposed candidates and then seek to reach an agreement upon a candidate who is
accepted on both sides.
2. Where the chair is to be nominated by the co-arbitrators, they may also refer to their
counsels to nominate the potential candidate.
3. Where the chair is to be appointed by the arbitral institution, the parties may typically
make written representations to the institution about the qualifications and
characteristics they consider the chair should have.
Termination of arbitrators
The performance of arbitrator’s duty terminates his authority. This is referred to as the
doctrine of functus officio. The authority of arbitrators is terminated by
1. The completion and delivery of the award
2. Prior to the delivery, by their inability to make an award or by a revocation of the
In the absence of a statutory authority, a contract provision, or a provision in the arbitral rules
to the contrary, the termination of authority leaves the arbitrators without further power to do
any acts with respect to making or changing the award. However, Courts have recognized
certain exceptions to it as follows-18
1. An arbitrator can correct a mistake such as a clerical mistake or obvious error of
arithmetic computation which is apparent on the face of the award
2. Where the award does not adjudicate on an issue that is submitted, then as to such
issue the authority of the arbitrator is not exhausted and it remains open to the
determination of the arbitrator.
3. Where the award, although seemingly complete, leaves doubt whether the submission
has been fully executed or contains an ambiguity.19
Grounds for removal of arbitrators-
A party may be able to challenge an arbitrator prior to his appointment. For example: a party
may be able to challenge an arbitrator when he provides a declaration of independence and
An arbitrator can be removed by an agreement between the parties as well. However once the
adversarial stage of the arbitration has commenced, it may be difficult in practice to reach
such an agreement.
National arbitration laws define the circumstances in which the arbitrator can be removed.
Under Article 14(1) of the UNCITRAL Model Law, the appointment of an arbitrator is
terminated if he “de jure or de facto unable to perform his functions or for other reasons fails
to act without undue delay.”
JURISDICTION OF THE TRIBUNAL
18 Glass, Molders, Pottery, Plastics and Allied Workers Intern. Union, AFL-CIO, CLC, Local 182B v. Excelsior
Foundry Co., 56 F.3d 844
19 Teamsters Local 312 v. Matlack, Inc., 118 F.3d 985
Jurisdiction is an important issue in international arbitration at both a conceptual and practical
level. At a practical level, the tribunal’s jurisdiction determines the scope of the disputes that
it is empowered to resolve. At a conceptual level, it is closely connected with the contractual
nature of international commercial arbitration.
Sources of jurisdiction-
1. The parties’ agreement to arbitrate- it is typically the starting point in terms of
defining the jurisdiction of the tribunal. In most of the cases, the arbitration clause
will be broad and encompasses all the disputes “in connection with” or “in relation to”
a particular contract.
2. Applicable national laws shall also be relevant to the scope of the tribunal’s
• One or more national laws may affect the validity of the agreement to
arbitrate, including whether the parties had the capacity to enter in that
agreement. Under most national laws, the agreement to arbitrate is severable
from the rest of the agreement. However if the agreement to arbitrate is itself
unenforceable under the law applicable to it, this may deprive the tribunal of
• National laws may be relevant to interpret the scope of the agreement
• Mandatory provisions of national law may stipulate that some categories of
disputes are not arbitrable.
Grounds for challenges to jurisdiction-
1. Lack of an agreement to arbitrate
2. Agreement to arbitrate is void or unenforceable-although the agreement to arbitrate is
severable from the rest of the agreement, the extent to which the principle of
severability applies and the specific consequences of that principle will depend on the
law applicable to the agreement to arbitrate.
3. Arbitration agreement is invalid- an arbitration agreement may be invalid because it is
insufficiently clear that the parties intended to refer their disputes to arbitration.
4. Termination of the agreement to arbitrate
5. Failure to satisfy formal requirements in relation to the agreement to arbitrate- the
formal requirement shall vary according to the law applicable. For example:
UNCITRAL Model Law requires that the agreement to arbitrate shall be in writing
6. One or more parties not bound by the agreement to arbitrate
7. Dispute falls outside the scope of the agreement to arbitrate
8. Illegality- A party may challenge jurisdiction on the basis that the contract containing
the agreement to arbitrate is illegal and cannot be enforced. Example: a contract
violating the trade embargoes imposed by applicable national law.
Types of challenges to jurisdiction-
1. Partial challenge- a party will accept that the arbitral tribunal has jurisdiction over
some disputes but is not empowered to deal with all the issues.
2. Total challenge- one party will submit that the arbitral tribunal is not empowered to
decide any issues in dispute between the parties.
Procedures for challenging jurisdiction-
Under some arbitration rules, a party may raise preliminary objections with the arbitral
institution administering the arbitration, before the tribunal that is constituted. However, this
generally requires only a prima facie showing of jurisdiction. If the relevant institution
concludes that there is a prima facie case for jurisdiction, it will allow the tribunal to be
constituted and the tribunal will then decide on its own jurisdiction.
After a tribunal is constituted, the jurisdictional challenge can be directly brought before the
tribunal. If the claim is well founded, the tribunal voluntarily declines jurisdiction. If the
tribunal wrongfully rejects a challenge, then the decision may then be challenged in a
national court after an award is issued. If the tribunal erroneously concludes that it has
jurisdiction, this may provide a basis later to either of the parties to apply to set aside the
Principle of Competence- Competence
Under most national laws and international rules, an arbitral tribunal is empowered to decide
upon its own jurisdiction. This principle is called kompetenz- kompetenz or competence-
competence. As a result of this, any objection that an arbitral tribunal lacks jurisdiction is
typically made to the tribunal itself in the first instance.
The scope and application of this principle shall depend upon the applicable national law and
arbitration rules. For example:
Article 23(1) of UNCITRAL Arbitration Rules provide that-
“the arbitral tribunal shall have the power to rule on objections that it has no jurisdiction,
including any objections with respect to the existence or validity of the arbitration
Article 6(2) of the ICC Rules provide that once the ICC Court has determined that it is prima
facie satisfied that an arbitration agreement under the ICC Rules may exist and that
arbitration should proceed “any decision as to the jurisdiction of the Arbitral Tribunal shall be
taken by the Arbitral Tribunal itself”.
Waiver of jurisdictional objections-
Under many set of national laws, right to challenge the jurisdiction of the arbitral tribunal
may be lost if the challenge is not raised at the earliest opportunity. For example:
Article 25(2) and 25(3) of the UNCITRAL Arbitration Rules provide that any objections to
the jurisdiction of the arbitral tribunal shall be dealt with at an early stage and as a
Article 23.2 of LCIA Rules specify that-
“a plea by a respondent that the Arbitral Tribunal does not have jurisdiction shall be treated
as having been irrevocably waived unless it is raised not later than the Statement of Defense;
and a like plea by a respondent to Counterclaim shall be similarly treated unless it is raised
not later than the Statement of Defense to Counterclaim.”
Consequences of challenges to jurisdiction-
The consequences of challenge to the jurisdiction of the arbitral tribunal shall depend upon
the forum before which it is brought:
1. If the challenge is addressed by the arbitral tribunal the arbitral tribunal shall rule on
its own jurisdiction in an award. Depending on its conclusion, it shall issue a partial or
a final award. The tribunal may confirm in a final award that it lacks jurisdiction over
all claims. Alternatively, the tribunal may conclude in a partial award that it has
jurisdiction over all claims or some of the claims. After the tribunal has rendered the
award on the jurisdiction that award may then be subject to challenge in national
courts, including an action to annul or set aside the award in the courts of the seat of
2. If the challenge is addressed to a national court the consequence will depend on the
finding and the relied that is sought. The relief granted may also vary according to the
law applied. The court may grant a declaration that it either has or does not have
jurisdiction over some or all claims. The court may in some circumstances grant
injunctive relief restraining a party from proceeding with the arbitration.
Strategy in challenging jurisdiction-
Before commencing any jurisdictional challenge the party should give careful consideration
to the consequences of succeeding. Even a successful jurisdictional challenge will not always
lead to the desired result as it does not mean that the claim itself is dismissed and cannot be
pursued in another forum. The counter party can recommence the same proceeding in the
national courts. This may be less productive and hence the challenge may turn out to be
counter-productive. Moreover, if some claims remain in the arbitral proceeding, the party
may therefore face the costs and other inefficiencies arising from multiple proceedings.
POWERS AND DUTIES OF ARBITRATORS
The powers and duties of arbitrators shall influence the arbitrators approach to the procedural
conduct of arbitration and their substantive determination on the merits of a dispute.
Sources of powers and duties of arbitrators-
There is no one comprehensive or definitive source of the powers and duties of an arbitrator.
An arbitrator derives his or her authority from different sources that inter relate with each
1. Applicable arbitration rules- when the parties have selected arbitration rules, they
shall typically contain detailed provisions regarding the arbitrators powers, duties and
terms of appointment. The issues addressed by it are-
• Duties of independence/ impartiality- most arbitration rules impose a duty of
independence/ impartiality on arbitrators. For example: Article 5.2 of LCIA
Rules provides that “all arbitrators conducting arbitration under these Rules shall
be and remain at all times impartial and independent of the parties. Article 5.3 of
the LCIA Rules contains a similar requirement for an arbitrator to sign a
declaration of independence prior to appointment.
• Procedure for conduct of arbitration
• Arbitrator’s remuneration- arbitration rules will typically define the basis on
which arbitrators appointed pursuant to those rules are to be remunerated.
(Article 31(1) and 31(2) of ICC Rules and Article 28(1) of LCIA Rules).
• Immunity of arbitrators from suit- some rules expressly specify that arbitrators
are immune from liability, although many rules are silent and national laws vary.
For example: Article 34 of the ICC Rules stipulates that-
“neither the arbitrators nor the Court and its members, nor the ICC and its employees, nor the
ICC National Committee shall be liable for any act or omission in connection with the
Article 31 of the LCIA Rules makes similar provisions for exclusion of liability of arbitrators.
In some circumstances and subject to mandatory provisions, the parties may be able to vary
by agreement the powers and duties of arbitrators under specific arbitration rules.
2. Applicable national laws- these are also relevant in defining the powers and duties of
arbitrators. For example-
Section 18 of the UNCITRAL Model Law stipulates that “the parties shall be treated with
equality and each party shall be given a full opportunity of presenting his case.”
Article 14(1) of the UNCITRAL Model Law specifies that- “if an arbitrator becomes de jure
or de facto unable to perform his functions or for other reasons fails to act without undue
delay, his mandate terminates if he withdraws from office or if the parties agree on the
3. International treaties and conventions- they may also have implications for the powers
and duties of arbitrators such as the New York Convention. For example, two of the
limited grounds on which recognition and enforcement of an arbitral award can be
refused under the New York Convention are that the arbitration procedure was not “in
accordance with the law of the country where the arbitration took place or that the
party was otherwise unable to present his case.
4. International standards and guidelines- in 1987, the IBA published its Ethics for
Arbitrators in International Commercial Disputes (IBA Code of Ethics). It sets forth
general principles regarding the ethical obligations of international arbitrators.
Powers of arbitrators-
The precise scope of an arbitrator’s power will depend on the parties’ agreement to arbitrate
any terms of appointment, applicable arbitration rules and national law. However, arbitrators
are given a broad discretion with respect to conduct of arbitration and forms of relief that can
Arbitrator’s control over the arbitration procedure-
Most arbitration rules or national laws do not contain detailed mandatory procedural steps
and therefore do not expressly limit the scope of the arbitrator’s control over the procedure.
One of the distinguishing characteristics of international arbitration is that both parties and
arbitrators are granted greater procedural flexibility than in many national court systems. For
Article 14.1 of the LCIA Rules specifies that- “the parties may agree on the conduct of their
arbitral proceedings and they are encouraged to do so, consistent with the Arbitral Tribunal’s
general duties at all times.”
In turn, Article 14.2 states that- “unless otherwise agreed by the parties under Article 14.1 the
Arbitral Tribunal shall have the widest discretion to discharge its duties allowed under such
law(s) or rules of law as the Arbitral Tribunal may determine to be applicable; and at all
times the parties shall do everything necessary for the fair, efficient and expeditious conduct
of the arbitration.”
Additional specific rules conferred upon arbitrators-
In addition to the arbitrator’s general powers with respect to the conduct of the arbitration,
most arbitration rules and national arbitration laws confer specific powers upon arbitral
tribunal. For example:
LCIA Rules confer power upon the tribunal, unless otherwise agreed by the parties, including
the power to order conservatory and interim measures (Article 25.1), appoint experts (Article
22) and order the production of documents or classes of documents in the possession, custody
or control of any party. (Article 22.1(e))
The UNCITRAL Model Law confers extensive powers upon on arbitral tribunal including the
powers to order interim measures (Article 17), order disclosure of documents (Article 17) and
determine whether to hold or dispense oral hearings (Article 24).
Duties of an arbitrator-
The specific duties owed by an arbitrator may vary according to the terms of the agreement to
arbitrate and the applicable national laws. Nevertheless, there are various underlying duties
that are common to most national laws and arbitration rules.
The obligations of the arbitrators are non-delegable. Arbitrators may obtain a range of
assistance in the performance of their duties (including clerical and research assistance).
a) The duty of independence and impartiality-
This is an integral part of arbitrator’s decision making function. “Independence” is
understood as lack of any relationship or connection or dependence between the potential
arbitrator and the parties or counsel. “Impartiality” is understood to refer to a lack of bias or
neutrality, which could arise from a lack of independence or from another basis. It has been
laid down in most arbitration rules and national laws. For example:
Article 7.1 of the ICC Rules stipulates that “every arbitrator must be and remain independent
of the parties in the arbitration./;
b) Duty to disclose conflicts of interest-
An important obligation, closely related to the obligation of impartiality, is that an arbitrator
must disclose any conflicts of interest that give rise to justifiable doubts as to their
impartiality. This ongoing duty is expressly stated in many sets of arbitration rules:
Article 7(3) of ICC Rules states that “an arbitrator shall immediately disclose in writing to the
Secreteriat and to the parties any facts or circumstances” which might be of such a nature as
to call into question the arbitrator’s independence in the eyes of the parties.
Article 5.3 of LCIA Rules states that each arbitrator shall assume a “continuing duty
forthwith to disclose” to the LCIA Court, the other members of the tribunal and the parties
any circumstances known to him or her to be likely to give rise to any justifies doubts as to
his other impartiality or independence.
In general, many potential conflicts of interest may be waived if the circumstances that give
rise to a conflict are disclosed to all parties and no party challenges the appointment.
c) The duty to treat parties equally and to give each party a reasonable opportunity to
present its case
The obligation to treat the parties equally, and to give each party a reasonable opportunity to
be heard, is also at the core of arbitrator’s role. An arbitrator is appointed to reach a neutral
determination on issues in dispute between the parties.
Many sets of arbitration rules require that the parties shall be treated equally and that all
parties shall have the opportunity to present their case. For example:
Article 15(2) of ICC Rules provides that-
“in all cases, the Arbitral Tribunal shall act fairly and impartially and ensure that each party
has a reasonable opportunity to present its case.”
Article 14.1 of the LCIA Rules defines the arbitrator’s general duty (i): “to act fairly and
impartially as between all parties, giving each party a reasonable opportunity of putting its
case and dealing with that of its opponent.”
And (ii): “to adopt procedures suitable to the circumstances of the arbitration avoiding
unnecessary delay or expense so as to provide a fair and efficient means for the final
resolution of the parties’ dispute.”
Article 18 of the UNCITRAL Model Law provides that- “the parties shall be treated with
equality and each party shall be given a full opportunity of presenting his case.”
d) Duty to provide reasoned award
Most national laws and arbitration rules require that an arbitrator issue a reasoned award. The
award must contain the reason that has led the arbitrators to that decision. The arbitrators
must engage with the arguments advanced by the parties and explain the conclusion they
have reached. For example:
Article 25(2) of ICC Rules expressly mandates that an award shall “state the reasons on
which it is based”. Under Article 27 of the ICC Rules, prior to signing, any award must be
submitted in draft form to the ICC Court for scrutiny. Among other thing, the ICC Court will
review the award in order to ensure that it is adequately reasoned and meets the requirements
of Article 25(1). The ICC Court will advice the tribunal of any issues it identifies, although it
remains the tribunal’s obligation to ultimately render the award as it deems appropriate.
Article 26.1 of the LCIA Rules states that “unless all parties agree in writing otherwise” an
award “shall state the reasons upon which the award is based.”
e) Duty to complete mandate
An arbitrator is typically under a duty to complete the mandate which he has accepted, unless
circumstances exist that justify the termination of that mandate. Because an arbitrator is
appointed by the parties to undertake a specific mandate, he is under a contractual obligation
to complete it.
Article 32(3) of UNCITRAL Model Law expressly provides that “the mandate of the arbitral
tribunal terminates with the termination of the arbitral proceedings, subject to the provisions
of articles 33 and 34(4).”
f) Duty of reasonable skill and care in the conduct of the appointment
As with other contracts of professional services, an arbitrator is typically under an implied
duty to exercise reasonable skill and care in the performance of their express duties. For
Article 1 of the IBA Code of Ethics specifies that “arbitration shall proceed diligently and
efficiently provide the parties with a just and efficient resolution of their dispute.”
The duty of reasonable skill and care has also been interpreted as requiring an arbitrator to
decline an appointment for which he is unsuited to act.
Article 2(2) of the IBA Code of Ethics specifies that a prospective arbitrator should accept an
appointment” “only if he is fully satisfied that he is competent to determine the issues in
dispute, and has adequate knowledge of the language of the arbitration.”
g) Duty to take steps to issue an enforceable award-
Under some arbitration rules, the arbitrators are under an express duty to take reasonable
steps to render an award that is enforceable. For example:
Article 35 of the ICC Rules provides that- “in all matters not expressly provided in these
Rules, the Court and the Arbitral Tribunal shall act in the spirit of these Rules and shall make
every effort to ensure that the Award is enforceable at law.”
h) Duty to apply the law chosen by the parties
Under most arbitration rules and national laws, the arbitrators are under a duty to apply the
law chosen by the parties. For example:
Article 22.3 of the LCIA Rules provides that: “the Arbitral Tribunal shall decide the parties’
dispute in accordance with the law(s) or rules of law chosen by the parties as applicable to
the merits of their dispute.”
Article 28(1) of UNCITRAL Model Law states that: “the arbitral tribunal shall decide the
dispute in accordance with such rules of law as chosen by the parties as applicable to the
substance of the dispute.”
i) Duty of confidentially-
An arbitrator will often be under a duty of confidentiality. A general obligation of
confidentiality applicable to both the parties and the arbitrators is set forth is some arbitration
rules or national arbitration statutes.
The ICC Rules do not make express provisions for confidentiality of arbitration. However,
some arbitration rules do expressly provide for the confidentiality of arbitral proceedings
such as Section 43.1 of the DIS Arbitration Rules or Article 34 of AAA International
j) Duty to propose settlement-
Under some national laws and arbitration rules, an arbitrator is under a positive obligation to
promote settlement between the parties:
Section 32 of the DIS Arbitration Rules stipulates that: “at every stage of the proceedings, the
arbitral tribunal should seek to encourage an amicable settlement of the dispute or of
individual issues in dispute.”
Remedies for breach of arbitrator’s duties-
A party faced with a breach of their duties by an arbitrator(s) has a number of potential
1. Raising objections directly with the arbitrators- A party objecting to a particular
action or decision by an arbitrator may raise those objections directly with the
tribunal. This will give the arbitrators the opportunity to address and rectify any defect
in a prior decision while continuing with their mandate. The tribunal will typically
invite all parties to make submissions and proposals and reach a decision as to how to
proceed on the basis of those proposals and submissions.
2. Seeking the removal of an arbitrator- an attempt to seek the removal of one or more
arbitrators is a relatively extreme measure. This can delay the conduct of the
arbitration or prevent the arbitrators from proceeding to an award altogether. When
the parties cannot agree to the removal of an arbitrator, one or more parties may apply
to the tribunal itself for one or more of the arbitrators to be removed. In addition, in
some circumstances, a party may apply to a national court or the relevant arbitral
institution for removal.
3. Challenge to an award- a failure by an arbitral tribunal to comply with its duties to the
parties may provide a basis to challenge the arbitral award. Not every breach by a
tribunal of its duties will create a right of challenge. The precise circumstances in
which an award may be challenged will vary according to the law of the seat of
4. Civil/criminal liability- an arbitrator’s failure to comply with his or her contractual
obligations may, in principle, give rise to civil liability to one or both the parties to the
arbitration as it entails a breach of contract. However, an arbitrator is sometimes
immuned from civil claims arising out of his conduct in arbitration
5. Loss of remuneration- a failure by an arbitrator to fulfill his or her mandate, or
comply with other duties, may also create a basis for the parties to refuse to
remunerate the arbitrator. This follows from the contractual nature of the arbitrator’s
Replacement or substitute arbitrators-
Arbitration rules and national laws often start from the position that an arbitrator who has
been successfully challenged, has resigned or is otherwise unable to continue his or her role
will be replaced in accordance with the procedure agreed in the agreement to arbitrate. For
Article 10 of the AAA International Arbitration Rules states that “if an arbitrator withdraws
after a challenge, or the administrator determines there are sufficient reasons to accept the
resignation of an arbitrator, or an arbitrator dies, a substitute arbitrator shall be appointed
pursuant to the provisions of Article 6, unless the parties otherwise agree.”
INDIAN LAW APPLICABLE AS LAW OF THE SEAT FOR ARBITRATION
The provisions of Arbitration and Conciliation Act, 1996 is applicable to the conduct of
arbitration when the seat of arbitration is chosen as India by the parties.
Appointment of arbitrators-
In India, the provisions for appointment of arbitrators is mainly borrowed from the
UNCITRAL Model Law20. Under the Arbitration and Conciliation Act, 1996 a person of any
nationality can be appointed as arbitrator unless contrary intention is expressed by the parties.
In this regard the intentions of the parties are given primacy21. Regarding the procedure for
appointing the arbitrator, the parties are free to agree on a procedure, however, if they fail to
agree on a procedure, then the procedure prescribed under the Arbitration and Conciliation
Act, 1996 comes into operation and in an arbitration with three arbitrators, each party shall
appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who
shall act as the presiding arbitrator.22
In India, nothing has been specified regarding the age of the arbitrators who can be appointed
as well as the disqualification of arbitrators who can be debarred from arbitrating any
proceeding. As regards the age of arbitrators, it can be said that minors cannot be the
arbitrators because they do not have the capacity to enter into a contract with the disputing
Default procedure for appointment in India-
Default procedure comes into picture where the parties fail to agree upon a procedure for
appointment of an arbitrator. If the parties fail to agree on the appointment of the tribunal, the
arbitration agreement usually provides that those powers of appointment are exercisable by a
third party known as the appointing authority.23 In India, prima facie, the parties are free to
agree on a procedure for appointing the arbitrator or arbitrators. But where under an
appointment procedure agreed upon by the parties:
20 Article 11 of UNCITRAL Model Law
21 Section 11(1) of Arbitration and Conciliation Act 1996
22 Section 11(3) of Arbitration and Conciliation Act 1996
23 David St. John Sutton, et al., Russel On Arbitration, 125 (2009)
a) A party fails to act as required under the procedure
b) The parties, or the appointed arbitrators fail to reach an agreement expected of them
under that procedure
c) A person, including an institution, fails to perform any function entrusted to him
under that procedure.
a party may request the Chief Justice or any person or institution designated by him to take
the necessary measure, unless the agreement on the appointment procedure provides other
means for securing the appointment.24
Where the parties are free to agree on a procedure under the Act for the appointment of
arbitrator, no time limit is imposed by the Act. In such situations if one party makes a
demand on the opposite party to appoint an arbitrator and the opposite party does not make an
appointment within 30 days of the demand, the right to appointment does not automatically
get forfeited after the expiry of 30 days. But such an appointment has to be made before the
first party makes application under section 11(6) before the Chief Justice or any person or
institution designated by him seeking appointment of an arbitrator.
Second, where the parties failed to reach any agreement on a procedure for appointing the
arbitrators, then in an arbitration with a sole arbitrator, if the parties fail to agree on the
arbitrator within 30 days from receipt of a request by one party from the other party to so
agree the appointment shall be made, upon request of a party, by the Chief Justice or any
person or institution designated by him.25
In arbitration with three arbitrators, each party shall appoint one arbitrator, and the two
appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
The presiding arbitrator generally acts as the chairman of the tribunal. But in such cases if:
a. A party fails to appoint an arbitrator within 30 days from the receipt of the request to
do so from the other party
24 Section 16 of Arbitration and Conciliation Act 1996
25 Section 11(5) of Arbitration and Conciliation Act 1996
b. The two appointed arbitrators fail to agree on the third arbitrator within 30 days from
the date of appointment
the appointment shall be made, upon request of a party, by the Chief Justice or any person or
institution designated by him.
Nature of function of the Chief Justice
The Supreme Court of India in Konkan Railway Corporation Ltd. and Anr v. Rani
Construction Pvt. Ltd 26 held that the order of the Chief Justice or his designate under section
11 nominating an arbitrator is not an adjudicatory order and the Chief Justice or his designate
is not a tribunal. Such an order cannot properly be made the subject of a petition for special
leave to appeal under Article 136.
Removal of arbitrators-
The Act provides the parties with the liberty to agree on a procedure for challenging an
arbitrator.27 However, on failure to reach an agreement, a party who intends to challenge,
within 15 days after becoming aware of the constitution of the tribunal or the circumstances
that lead to justifiable doubts of the arbitrator’s independence or impartiality send a written
statement with reasons for the challenge. The arbitral tribunal then decides on the challenge,
if the arbitrator does not withdraw from his office or the other party does not agree to the
challenge. In case of failure of challenge, the arbitral tribunal shall continue the arbitral
proceedings and issue an arbitral award. Later on, the party challenging the arbitrator may
make an application for setting aside such an award under Section 34 of the Act and if the
award is set aside on such an application, the Court may decide as to whether the arbitrator
who is challenged is entitled to any fees.
26 AIR 2000 SCC 778
27 Section 13 of Arbitration and Conciliation Act 1996