Arbitration agreement: types, forms and conditions of conclusion

In the world of actively developing business and business production, a special place is given to the conclusion of contracts. No self-respecting businessman will not enter into a deal with a partner, relying on a trusting relationship. All business transactions occurring inside his firm or company must be supported by legal grounds. Therefore, it is not surprising that each agreement between two entrepreneurs, large, medium or small, is executed by the conclusion of a contract. But it is interesting that in the list of conditions of the contract there can be a lot of ambiguous and opaque phrases, which, upon first reading, the party accepting the terms of the contract do not pay due attention. Often, such clauses are arbitration agreements. What it is?

The concept

Commercial activity is rapidly expanding its influence in all areas of society. Today, the sale of goods, the provision of services, rental and sale of movable and immovable property are gaining new momentum, more confident, more powerful, more amplitude. Entrepreneurs of all kinds of activities agree on joint projects and work for the benefit of society, not forgetting, of course, first of all, about their own benefits. But all partnerships in any case are protected by the legal conditions of the contract. In the event of any debate of the parties, any emerging conflict is eliminated by referring to the clauses of the contract. If there is no specific clause allowing to resolve the disputed issue on your own in the contract, then the parties resort to the proceedings at a higher level to which they are referred by the arbitration (arbitration) agreement.

To understand what this concept means, it is necessary to understand the meaning of the word “arbitration”. Arbitration refers to the proceedings, clarification of circumstances, analysis of the essence of the matter by the participants of independent representation - arbitrators - to identify the right side between several (often two) opposing opponents. Very often, this concept is linked to legal proceedings, forming an additional definition - arbitration court. Today, this term means nothing more than a procedural and legal body that presumes the procedure for meetings and hearings regarding entrepreneurial debates between business entities. It is called differently in different countries: in the Russian Federation - an arbitration court, in Ukraine - an economic court, in Belgium - a constitutional court, and in most foreign countries - an arbitration court.

The arbitration agreement in the arbitration process is the basis of the competence of commercial litigation, without which the case is simply not accepted by the court for production. It is the decision of the entrepreneurs who entered into the contract to give up the dispute that arose between them for the independent arbitration. The consensus concluded between the parties and the documented registered consensus cannot be canceled by the court of general jurisdiction or revised by it in essence. In other words, the terms of the arbitration agreement stipulate proceedings exclusively in the relevant departmental division of legal proceedings regarding business and economic debate - that is, in an arbitration court.

Based on the definition that is enshrined in the legislation of the Russian Federation, such an agreement may involve various disputes: all under the main contract or only some of them, of a contractual or non-contractual nature, that have already arisen or are expected to arise in the future. To dig deeper into the essence of the arbitration agreement in the arbitration process, you must have an idea of ​​its types.

Kinds

International Commercial Arbitration (ICA), as a special mechanism for litigation in an international debate of an entrepreneurial and economic nature, is the highest instance for the consideration of commercial disputes. It is also called an arbitration court - it differs significantly from a state court of general jurisdiction in that it is non-state in nature. That is, the state institution or subordinate organization may be a party to the arbitration agreement, but the person in private law is the other party in any case. In proceedings on commercial disputes, the so-called state party cannot invoke the law and rely on the jurisdiction of state proceedings.

For this, the arbitration agreement is concluded so that in the event of a confrontation between the parties, the case should be referred exclusively to the arbitration, and not filed with the courts of general jurisdiction. One way or another, the arbitration court is of a private law nature, since it is elected by the parties to consider their internecine commercial disagreements in a free manner, in free will. Based on such a decision, the parties may conclude an arbitration agreement in the form of one of three possible options.

1. Arbitration clause. This is one of the most common types of arbitration agreements, since its legal nature is designed for the future, for possible debate in the future. It is concluded by entrepreneurs in order to prevent possible conflict situations and business misunderstandings. Thus, they insure themselves against possible disputes and subsequent losses in connection with this. It is noteworthy that this type of agreement is introduced into the main contract as a kind of adjustment. That is, a model of an arbitration agreement in the form of an arbitration clause may be one of the many clauses of the main contract - this is a kind of footnote informing the parties that possible disputes will be referred to the appropriate court, namely, a specific arbitration court in a particular region.
2. Arbitration record. This type of arbitration agreement is not so in demand among entrepreneurs as a reservation, since it is of a retrospective nature. The arbitration record provides for mutual agreement of the parties regarding the transfer of their disputes for consideration to the arbitration court in view of the disagreements that have already arisen during the cooperation. Such an agreement is less popular in the world of entrepreneurship, since it is difficult to reach a consensus among already hostile businessmen.
3. Arbitration agreement. Many modern authors do not accept this type of agreement as a separate version of the official agreement between the parties, since it, like the arbitration clause, provides for the possibility of debate in the future, but, in contrast to it, is drawn up as a separate full-fledged agreement, which has its own legal distribution to the main contract or group of contracts in this regard.

Forms

In addition to the existing types of arbitration agreements between business entities, special attention is paid to the form of their presentation. International commercial arbitration secures for each state and its legislation the possibility of regulation, due to which the form for submitting the arbitration agreement to the arbitration court is determined. The legislation of the Russian Federation provides for the generally accepted requirement in the world workshop to submit an agreement concluded between entrepreneurs.

• Writing form.For consideration by the arbitration court of the arbitration agreement filed for consideration by the parties, it must be executed as a documentary transaction, the terms of which are specified in the contract. This form must be adhered to by all business entities, without exception, under the threat of invalidation otherwise. But this does not mean that other states have the same severe regulatory framework regarding the submission of an arbitration agreement to the court: for example, the Swedish arbitration laws provide for the oral form of such agreements, but this is rather inconvenient due to the constant disagreement in their interpretation and, accordingly, the threat invalidation of such.
• Exchange form - provides for the filing by one party of a statement of claim on the existence of an arbitration agreement between partners in commercial business, as well as the preparation by the other side of a response to the lawsuit in which he does not object to the existence of this agreement.
• Fixed communication form - assumes that the parties have agreed among themselves by exchanging SMS messages, electronic mail, by telegraph or written mail, as well as by other means that can be provided as evidence in an arbitration court.
• The link form in the contract - determines the possibility of fixing an arbitration clause in this way, but it must be submitted in writing and defines such a link as an integral part of this contract.

Thus, international private law (MPE) provides for specific formal arbitrability of such arrangements. In other words, the form of the arbitration agreement must have the proper form in accordance with the specific legislation of a particular state.

Principal Features

Speaking about the fundamental differences of this kind of treaties and reservations, the following can be distinguished:

• legal autonomy - this principle of constructing an arbitration agreement assumes its individual isolation from the main contract and states legal independence, that is, if the main contract is declared invalid, the arbitration agreement is not considered invalid;
• voluntary beginning of agreements - one of the basic principles of legal relations stipulated in the arbitration agreement is the fact that the parties themselves, at their own request, submit cases of their disputes to arbitration for proceedings;
• “Competence of competence” - the theory of the isolation of an arbitration clause gives arbitration participants the right to independently decide on their own competence or incompetence, that is, the arbitrators themselves can declare their status and also cast doubt on the validity of the arbitration agreement (agreement);
• “Doctrine of arbitrability” - this principle implies compliance of the agreement concluded by the parties for submission to arbitration in accordance with the established norms of the law in the proper form.

Speaking of arbitrability, we can distinguish its formal, objective and subjective variations. The forms of concluding an arbitration agreement have already been mentioned above (written, exchange, fixed, by reference). Objective arbitrability was negotiated when it came to varieties of these agreements (arbitration, reservation, contract). And finally, subjective arbitrability determines the ability of a business entity to be a party to the agreement, while receiving the right to voluntarily express an arbitration record for consideration by the arbitration, protecting itself from threats of fraud, error or misrepresentation.

Conclusion conditions

To understand the conditions under which the parties enter into an amicable agreement in the arbitration process, as well as the conclusion of such a transaction within the state, it is worth paying attention to the procedure for concluding an ordinary civil transaction. The terms of its drafting are the starting point in drawing up the arbitration agreement, but it still has its own characteristics.

• Firstly, the agreement is fixed in writing and signed by both parties, whether it is a separate arbitration agreement, an arbitration record or a clause within the main contract.
• Secondly, a transaction is considered officially completed if the parties reach a compromise regarding absolutely every clause and the subclause of the contract relating to it.
• Thirdly, a specific arbitration court is prescribed in the contract without fail - its name and region are indicated. In the event of a dispute, the parties apply to this court, and not to any other arbitration.
• Fourthly, the body of the ICP arbitration agreement provides for a statement of all existing or emerging disputes that the parties wish to submit to arbitrators.
• Fifth, the procedure for drawing up an agreement is purely procedural in nature - it is understood that the purpose of its creation is the desire of the parties to protect themselves and their property from unfair or improper fulfillment of the terms of the contract by the second party. Actually, like related civil contracts.
• Sixth, institutional (within the state) and international arbitration agreements are exclusively legal in nature, despite all its non-statehood. The parties are liable for relevant offenses or non-compliance with the terms of the transaction specified in the contract.

Content

If an ordinary civil contract or contract has specific blocks in its structure, then the arbitration agreements also have a set of standard conventions, which are listed in the body of the transaction recorded on paper. The content of the arbitration agreement includes the following mandatory information:

• method of proceedings in the debates of the parties: conciliation methods, negotiations or mediation;
• determination of a specific arbitration court: international, if required by the contract, or institutional, but with the indication of the obligatory exact name;
• the location of the arbitration proceedings - if the arbitration is not isolated, then the exact location of its implementation is not necessary, the consideration of the case will be carried out in its official institutional residence;
• language of arbitration - if it is a court within the state, this is not necessary: ​​it is clear that the court will be conducted in the state language; if it is a matter of international arbitration, a reference to a specific language is mandatory, and the translation services used by the parties in the course of the business are paid by them personally from their own pockets;
• the choice of the number of arbitrators present at the trial - this may be one member of the court or three;
• procedural procedure of the arbitration procedure - involves the mandatory fixing of the conditions for the selection, appointment and removal of representatives of the arbitration, the moment the commencement of the consideration of the case, the nature of the filing of documentary and other evidence, the oral presentation of the case file or the provision of written documents.

It is important to note that, unlike international arbitration, institutional involves the procedural conduct of proceedings in an arbitration court in compliance with the rights and norms prescribed in the legislation of the relevant state.

Samples of arbitration agreements vary by variety.It is clear that the arbitration agreement has a longer form and is a separate document with a list of specific clauses in the body of the agreement, while, for example, the arbitration clause is limited to a few proposals that are included in the main contract as a clause. But this does not in any way detract from its semantic and legal significance, based on the principle of its autonomy.

Termination

Separation from the main contract and individual autonomy, as a fundamental feature of the arbitration agreement, does not mean its unwaveringness. Like any other contract, it can be terminated. The question is different: the termination of the arbitration agreement is not provided for by law unilaterally. Often this happens only in case of mutual agreement of the parties regarding the termination of the spread of its legal significance to their internecine agreement. The main reasons for breaking the arbitration agreement between entrepreneurs may be the following:

• the revealed incompetent attitude of the arbitrators to the procedural performance of duties;
• serious financial costs required by the arbitration;
• loss of confidence of business parties to the arbitration parties, arbitrators;
• lack of need to continue litigation.

The legislation of the Russian Federation does not provide for the termination of arbitration agreements. And even in a court of law, the legal regulation does not stipulate the conditions for terminating such a transaction. But nevertheless, there are certain options that can contribute to turning the matter into the right direction for the party wishing to break the contract. To do this, she needs to have in her hands the arbitration agreement itself, as well as a statement of claim for the state court. If the other party to the arbitration agreement does not submit an application with an objection to the consideration of the case in the arbitration court no later than on the day the first claim is submitted on the merits of the dispute, the state court may accept the application submitted by the first party to the proceedings. Such acceptance excludes those cases when the arbitral tribunal has already established the recognition of the arbitration agreement as invalid or found it impossible to execute it.

Benefits of Peaceful Procedures

The law provides for an alternative solution to the problem regarding disagreements that arose at the time of the arbitration agreement between the parties. In the conditions of mutual desire to smooth out possible omissions, entrepreneurs-parties to the case under consideration may not bring it to court, but settle their problematic issues on a contractual basis, through conciliation procedures. The settlement agreement in the arbitration process, as well as the institutional one, may not be submitted to arbitration, or, if it has already been submitted, be withdrawn in view of the resolution of disagreements independently. This is a fairly convenient and peaceful way to resolve disputes and debates between the parties, which allows them to subsequently coexist quietly and calmly in the labor market, the provision of services or in any other field of activity, where they cooperate under the contract on a contractual basis. The universality of such procedures lies in the fact that they can be carried out absolutely at any stage of the proceedings - both before the trial, and during the trial, and out of it, and in the after-event.

What are the main advantages of conciliation procedures?

• Peace agreements are much more effective in action than decisions made by the arbitral tribunal.
• Voluntary mutual reconciliation does not incur any financial costs, in contrast to the conduct of judicial measures, which are manifested in substantial financial investments necessary to submit the case to arbitration.
• Self-regulation of their own problematic issues between the parties is much faster than official arbitration.
• Unlike judicial debate, conciliation proceedings can maintain favorable relations between business partners.
• For the more vulnerable side, which has less ability to attract highly qualified specialists in the person of lawyers in the part of the proceedings, reconciliation procedures are practically a "life buoy".
• Mutual conciliation agreements always have a predicted result, more or less favorable for both parties, while in the case of litigation one of the parties will inevitably fail.
• The parties can come to a common denominator on their own without involving arbitration in full confidence, without attracting the attention of third parties as the same arbitrators.
• The informal atmosphere in which conciliatory negotiations between the parties can take place is much more comfortable than holding meetings in the company of bailiffs in appropriate uniforms.

Varieties of Peaceful Procedures

The peaceful settlement of disputes between the parties is the best alternative to litigation, invalidation of the arbitration agreement or termination of arbitration agreements. Indeed, in any case, it is always better to come to a mutual agreement on your own, rather than sticking each other with wheels in the wheels and proving that you are right. There are several possible options for moving towards this very agreement through a loyal approach to resolving disputes.

• Settlement agreement. This type of conciliation procedure involves a written form of signing by the parties or their proxies of an agreement on a debate arising in the course of a case. The practice of a global arbitration agreement has long been applied in the vastness of economic activity. Having a documentary form, such a conciliation act implies the availability of information about the conditions, amount and timing of fulfillment of certain obligations to each other. Often, such a document contains information on the installment plan or the deferral of obligations imposed on the defendant, as well as on the complete or partial liquidation of the debt, on assignment of claims, on the allocation of expenses allocated to the court. The execution of the settlement agreement in the arbitration court is subject to approval and it is signed in several copies, providing for the transfer of one for each party to the agreement and one more attached by the court to the case file.
• Conversation. This is one of the most convenient, efficient, quick and painless methods for the parties to resolve disagreements arising in the course of conducting general cases, which are provided for by conciliation procedures of arbitration. Against the background of other alternative to judicial debates ways to resolve the conflict, negotiations are distinguished by their simplicity, the possibility of non-disclosure of information, and the absence of the need to involve a third party. They can be either oral or written. A feature of written negotiations is the possibility of choosing a claim form. Often in the practice of business litigation there is such a form of conciliation procedures, which involves a list of claims recorded on paper from a dissatisfied party with respect to the other side. Accordingly, the other party becomes familiar with this list and gives its written answer. Moreover, the claim form can be both voluntary and mandatory. In the case of a voluntary party, they themselves determine their necessity.In the case of the mandatory, the arbitral tribunal does not accept the case for consideration until the parties describe the essence of the case in written claims negotiations.
• Mediation This type of conciliation procedure provides for the possibility of the parties to come to a common denominator with the help of an intermediary - a mediator. The parties can choose this person on their own, based on personal interests and needs. Its task is to negotiate between the parties so that they reach a compromise. This type of conciliation procedure also has the principle of confidentiality, since the mediator is not entitled to disclose the information received during the negotiations.

Arbitration agreement in international commercial arbitration

Speaking of arbitration agreements at the world level, one can note the format of the diversity of possible nuances. Indeed, be that as it may, each state with its approved legislation provides for specific legal norms, the nature of their distribution and regulation. Based on the fact that often the foreign factor in arbitration arrangements is represented by parties that have different state and national affiliations, the issue of the corresponding legal personality of the parties to the case should be regulated taking into account applicable national law. Based on the most well-known conflict rules, the legal personality of entrepreneurs-parties as individuals is determined by their state law (at the place of residence or citizenship), and the parties as legal representatives - by the law of the place of incorporation or business.