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Arbitration agreement: form and rules for concluding it
The Law “On Arbitration” defines an arbitration agreement as a written agreement of the parties to refer to arbitration a dispute that has arisen or may arise from civil law relations. Without it, arbitration does not hear the dispute. If a contract was signed without a clause, the parties may conclude a separate agreement. Below are the rules without which it may not work.
When an agreement can be concluded
At any time: when signing the contract, while it is in force, or after a dispute has arisen. If the dispute is already before a state court, the agreement can be signed before the court renders its decision. In that case, the court will leave the claim without consideration, and the dispute will be heard in arbitration.
There is an exception. For contracts of adhesion, whose terms one party has set in standard forms, and for loans by a commercial organization to an individual who is not an individual entrepreneur, the agreement is valid only if it was concluded after grounds for a claim arose. Arbitration cannot be written into such a contract in advance.
What form the agreement takes
The Law requires written form and recognizes several ways to comply with it. Besides a separate document and a clause in the contract, an exchange of letters, including electronic ones, is sufficient if it shows who the parties are and what they agreed on. A reference in a contract to a document containing an arbitration condition, for example general terms of supply, also counts as an agreement if the reference makes that condition part of the contract. Finally, an agreement arises when the claimant refers to an arbitration agreement in the statement of claim and the respondent does not object in the statement of defense.
Agreement or clause
| Arbitration clause | Separate agreement | |
|---|---|---|
| Where it is | In the text of the contract | A stand-alone document |
| When it is concluded | When signing the contract | At any time, including after a dispute arises |
| Which disputes it covers | Usually all future disputes under the contract | All disputes under the contract or one specific dispute |
| Typical situation | A new contract | The contract was signed without a clause, and a dispute has already arisen |
Disputes that cannot be referred to arbitration
The Law excludes the following from arbitration:
- disputes affecting the interests of minors and of persons declared legally incapable or of limited legal capacity;
- disputes between state bodies and quasi-public sector entities, including disputes among themselves;
- disputes of banks, organizations carrying out certain types of banking operations and microfinance organizations with individual borrowers over loans not related to business activity; the same rule applies to collection agencies for such loans;
- rehabilitation and bankruptcy cases;
- disputes between natural monopoly entities and consumers;
- disputes arising from personal non-property relations not connected with property relations.
Disputes of private companies with state bodies, state enterprises and companies in which the state directly or indirectly holds 50% or more of the voting shares may be referred to arbitration only with the consent of the authorized body of the relevant sector or of the local executive body. The consent is stated in the agreement itself. How to obtain it is described on the arbitration clause page.
The agreement stands apart from the contract
An arbitration agreement is independent of the main contract. If the contract has expired, been terminated or been declared invalid, a dispute about this is still heard in arbitration. The parties may terminate the agreement by agreeing to do so in the same form in which it was concluded.
If the counterparty has filed a claim in court
Inform the court of the arbitration agreement no later than your first submission on the merits of the dispute. The court will refer the parties to arbitration unless it finds that the agreement is invalid, has lost force or cannot be performed. While the court is considering the matter, arbitration may be commenced or continued.
If the agreement does turn out to be invalid and the arbitral tribunal has made an award, this is a ground for the court to set the award aside. That is why the wording is worth checking before signing, not after a dispute arises.
Questions and answers
What is an arbitration agreement?
A written arrangement between the parties to refer a dispute to arbitration instead of a state court. It can be a clause in a contract, a separate document or correspondence.
Who may sign the agreement on behalf of a company?
The same person who may sign contracts: the head of the company or a representative acting under a power of attorney. It is better to state the authority to conclude an arbitration agreement expressly in the power of attorney.
Who decides whether the agreement is valid?
The arbitral tribunal itself decides this first. It rules on its own jurisdiction, including when a party argues that the agreement is invalid. The objection must be raised before the first submission on the merits of the dispute.
Does the agreement need a company seal?
The Law does not require it. Written form and the signatures of authorized persons are sufficient; a seal is affixed if the company’s charter requires it.
Does the agreement need to be notarized?
No, the Law does not require it.