Arbitration means a written agreement to submit present or future disputes to arbitration regardless of whether or not an arbitrator is named in the agreement .The person appointed to determine a dispute is called an Arbitrator. The proceedings before an Arbitrator is called an Arbitration and the decision of an Arbitrator is called an Award
EFFECTS OF ARBITRATION CLAUSE
Where the partners agree to submit their disputes to arbitration before commencing any legal proceedings in court, it is the duty of the court to ensure that the arbitration agreement is respected. In this case, if a party to the arbitration agreement commences legal proceedings in court on any matter covered by the arbitration agreement, then the other party may apply to the court for an order to stay (Stop) the proceedings and require the dispute to be settled by arbitration. However before a court can grant a stay order, the following conditions must be satisfied:
- There must have been a valid written arbitration agreement in place between the parties before the date of the commencement of the legal proceedings
- The dispute in question before the court must be one which is covered by the Arbitration agreement.
- The application to stay the proceedings must have been made by a person who is a party to the arbitration agreement or has legal representatives
- The person making the application must not have taken any steps to participate in the legal proceedings and the application must have been made at the earliest stage of the legal proceedings
- The application to stay the proceedings must be made to the judicial authority or court before which the case is pending.
- The applicant must satisfy that court that he is ready and willing to do all things necessary for the proper conduct of the arbitration.
- The court must ensure that there is no other sufficient reason why the dispute should not be referred for Arbitration.
It is important to note that even if all the above conditions are met or fulfilled the court still has powers to decide on Whether or not to grant a stay order.
ESSENTILAS OF AN ARBITRATION AGREEMENT
- An Arbitration agreement must have be made in Writing and even though the signatures of the parties to the agreement is not necessary, it must be shown that they have agreed to settle their disputes by Arbitration.
- Being a contract, an Arbitration agreement must contain all essential elements required of an ordinary contract such as Offer and Acceptance, Capacity to Contract, Lawful Objectives, Free consent and so on.
- The agreement must be to refer present/future disputes between parties to Arbitration.
- In case a contract containing an arbitration agreement is terminated for any reason, the Arbitration agreement remains valid and binding between the parties.