Arbitration Agreements

Introduction

Law of Arbitration in India

Standard Arbitration Clauses
Standard Arbitration Clause for Domestic Commercial Contracts
Standard Arbitration Clause for International Commercial Contracts
Resolution Prior to Arbitration
Clause Providing for Negotiation in Advance of Arbitration
Clause Providing for Mediation in Advance of Arbitration
Arbitrator's Qualifications
Party Appointed Arbitators
Confidentiality
Fees and Costs to Prevailing Party

Introduction
In today's competitive marketplace, most companies either cannot
afford or do not wish to incur the time, expense and adverse business
consequences of traditional litigation. Unfortunately, in every business
relationship there is the potential for conflict over contractual
agreements or business operations. When such conflicts arise, there is
no need to incur the onerous expense and delays involved in
traditional litigation. There are readily available alternative dispute
resolution procedures that will enable you to resolve your disputes
relatively quickly, fairly and cost-effectively.

Planning is the key to avoiding the adverse effects of litigation. The

optimal time for businesses to implement strategies for avoidance of
those adverse effects is before any dispute arises. Therefore, that
whenever you negotiate or enter into a contract, you should carefully
consider and decide on the procedures that will govern the resolution
of any disputes that may arise in the course of the contractual
relationship. By doing this before any dispute arises, you avoid the
difficulties of attempting to negotiate dispute resolution procedures
when you are already in the midst of a substantive dispute that may
have engendered a lack of trust on both sides.

Law of Arbitration in India

Law of Arbitration in India is governed by-

Arbitration and Conciliation Act,1996

Section 7 of the Act defines the term, 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.

 
Templates offers sample dispute resolution clauses that may be
inserted into a contract prior to any dispute ever arising. These
sample dispute resolution clauses are set forth and, in some cases,
briefly discussed inside.

STANDARD ARBITRATION CLAUSES

Templates standard clauses separately providing for submission of

domestic and international disputes to arbitration. While these clauses
set forth no details as to procedures to be followed in connection with
any such arbitrations, they provide a simple means of assuring that
any future dispute will be arbitrated. An additional benefit is that it is
sometimes easier for contracting parties to agree to simple,
straightforward clauses than to some of the more complex provisions
that are set forth in subsequent sections of this page.

Standard Arbitration Clause for Domestic Commercial

Contracts
Any dispute, claim or controversy arising out of or relating to this
Agreement or the breach, termination, enforcement, interpretation or
validity thereof, including the determination of the scope or
applicability of this agreement to arbitrate, shall be determined by
arbitration in [insert the desired place of arbitration] before
[one/three] arbitrator(s). This clause shall not preclude parties from
seeking provisional remedies in aid of arbitration from a court of
appropriate jurisdiction.

Standard Arbitration Clause for International Commercial

Contracts

Any dispute, controversy or claim arising out of or relating to this

contract, including the formation, interpretation, breach or termination
thereof, including whether the claims asserted are arbitrable, will be
referred to and finally determined by arbitration in accordance with
the Arbitration Rules. The Tribunal will consist of [three arbitrators/one
arbitrator]. The place of arbitration will be [location]. The language to
be used in the arbitral proceedings will be [language]. Judgment upon
the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof.

RESOLUTION PRIOR TO ARBITRATION

It is common practice for a contract clause to provide for negotiation
and/or mediation in advance of arbitration. Such clauses represent the
most cost-effective means of resolving a dispute because they often
lead to an early settlement. Unless drafted with care, however, such
clauses can also have negative side effects since they can be a vehicle
for delay and can result in required but empty negotiations where one
or all parties have no intention of moving toward a settlement. Such
downsides can be greatly minimized by setting strict deadlines
marking the early ends of the negotiation and mediation periods.

Clause Providing for Negotiation in Advance of Arbitration

The parties shall attempt in good faith to resolve any dispute arising
out of or relating to this Agreement promptly by negotiation between
executives who have authority to settle the controversy and who are
at a higher level of management than the persons with direct
responsibility for administration of this Agreement. Any party may give
the other party written notice of any dispute not resolved in the
normal course of business. Within 15 days after delivery of the notice,
the receiving party shall submit to the other a written response. The
notice and response shall include with reasonable particularity (a) a
statement of each party's position and a summary of arguments
supporting that position, and (b) the name and title of the executive
who will represent that party and of any other person who will
accompany the executive. Within 30 days after delivery of the notice,
the executives of both parties shall meet at a mutually acceptable
time and place.
Unless otherwise agreed in writing by the negotiating parties, the
above-described negotiation shall end at the close of the first meeting
of executives described above ("First Meeting"). Such closure shall not
preclude continuing or later negotiations, if desired.
All offers, promises, conduct and statements, whether oral or written,
made in the course of the negotiation by any of the parties, their
agents, employees, experts and attorneys are confidential, privileged
and inadmissible for any purpose, including impeachment, in
arbitration or other proceeding involving the parties, provided that
evidence that is otherwise admissible or discoverable shall not be
rendered inadmissible or non-discoverable as a result of its use in the
negotiation.
At no time prior to the First Meeting shall either side initiate an
arbitration or litigation related to this Agreement except to pursue a
provisional remedy that is authorized by law  or by agreement of the
parties. However, this limitation is inapplicable to a party if the other
party refuses to comply with the requirements of Paragraph 1 above.
All applicable statutes of limitation and defenses based upon the
passage of time shall be tolled while the procedures specified in
Paragraphs 1 and 2 above are pending and for 15 calendar days
thereafter. The parties will take such action, if any, required to
effectuate such tolling.

Clause Providing for Mediation in Advance of Arbitration

If the matter is not resolved by negotiation pursuant to

paragraphs___above, then the matter will proceed to mediation as set
forth below.

Or in the Alternative

If the parties do not wish to negotiate in advance of arbitration, but do

wish to mediate before proceeding to arbitration, they may
accomplish this through use of the following language:

The parties agree that any and all disputes, claims or controversies
arising out of or relating to this Agreement shall be submitted to
mediation, and if the matter is not resolved through mediation, then it
shall be submitted to final and binding arbitration pursuant to the
clause set forth in Paragraph 5 below.
Either party may commence mediation by providing to the other party
a written request for mediation, setting forth the subject of the dispute
and the relief requested.
The parties will cooperate with  one another  in scheduling the
mediation proceedings. The parties agree that they will participate in
the mediation in good faith and that they will share equally in its
costs.
All offers, promises, conduct and statements, whether oral or written,
made in the course of the mediation by any of the parties, their
agents, employees, experts and attorneys, and by the mediator are
confidential, privileged and inadmissible for any purpose, including
impeachment, in any arbitration or other proceeding involving the
parties, provided that evidence that is otherwise admissible or
discoverable shall not be rendered inadmissible or non-discoverable as
a result of its use in the mediation.
Either party may initiate arbitration with respect to the matters
submitted to mediation by filing a written demand for arbitration at
any time following the initial mediation session or at any time
following 45 days from the date of filing the written request for
mediation, whichever occurs first ("Earliest Initiation Date"). The
mediation may continue after the commencement of arbitration if the
parties so desire.
At no time prior to the Earliest Initiation Date shall either side initiate
an arbitration or litigation related to this Agreement except to pursue
a provisional remedy that is authorized by law or by agreement of the
parties. However, this limitation is inapplicable to a party if the other
party refuses to comply with the requirements of Paragraph 3 above.
All applicable statutes of limitation and defenses based upon the
passage of time shall be tolled until 15 days after the Earliest Initiation
Date. The parties will take such action, if any, required to effectuate
such tolling.

ARBITRATOR's QUALIFICATIONS

It is common for a contract clause to require that one or more of the

arbitrators have certain specified qualifications. In drafting such a
provision, care should be taken that such necessary qualifications not
be too detailed and specific since a highly detailed list of required
qualifications can significantly narrow the number of available,
competent and qualified arbitrators.

Specification of arbitrator qualifications often works best in the context

of a three-arbitrator panel since it is possible in that setting to require
that one of the panelists have a certain technical expertise without
limiting the entire panel to so narrow an area of experience. In this
way, it is possible to ensure that the desired technical expertise is
represented on the panel while at the same time assuring that the
chair of the panel has extensive experience in the entire arbitration
process.

If the arbitration is to be conducted by a sole arbitrator, the contract

clause might provide that the arbitrator must be:

A retired judge from a particular court; or

A lawyer with 10 years of active practice in a specified area, such as
construction or computer technology.

If the arbitration is to be handled by a three-arbitrator panel, the

contract clause might provide:

That the Chair be an attorney with at least 20 years of active litigation

experience; or
That the Chair be a retired judge from a particular court; or
That one of the wing arbitrators be an expert in an area such as
construction or be an accountant or a particular type of engineer; or
That the Chair must previously have served as Chair or sole arbitrator
in at least 10 arbitrations where an award was rendered following a
hearing on the merits.

Note: The foregoing are just examples. The point is that the
qualifications of the arbitrator(s) should be considered at the time
when the contract clause is drafted. 

PARTY-APPOINTED ARBITRATORS

It is a common practice for each side to appoint an arbitrator and for

the two party-appointed arbitrators to then appoint the Chair of the
panel.The party-appointed arbitrators "shall be neutral and
independent of the appointing Party unless the Parties have agreed
that they shall be non-neutral." Set forth below is a clause that
effectively provides for party-appointed arbitrators:

Within 15 days after the commencement of arbitration, each party

shall select one person to act as arbitrator, and the two so selected
shall select a third arbitrator within 30 days of the commencement of
the arbitration. If the arbitrators selected by the parties are unable or
fail to agree upon the third arbitrator within the allotted time, the third
arbitrator shall be appointed by Court. All arbitrators shall serve as
neutral, independent and impartial arbitrators.
Optional

CONFIDENTIALITY

The arbitrator(s) must maintain the confidentiality of the arbitration

proceeding. If it is desired that the parties should also maintain the
confidentiality of the proceeding, this can be accomplished with the
following language: 

The parties shall maintain the confidential nature of the arbitration

proceeding and the Award, including the Hearing, except as may be
necessary to prepare for or conduct the arbitration hearing on the
merits, or except as may be necessary in connection with a court
application for a preliminary remedy, a judicial challenge to an Award
or its enforcement, or unless otherwise required by law or judicial
decision.

FEES AND COSTS TO PREVAILING PARTY

A "prevailing party" clause such as the following tends to discourage

frivolous claims, counterclaims and defenses, as well as scorched
earth discovery, in an arbitration:

In any arbitration arising out of or related to this Agreement, the

arbitrator(s) shall award to the prevailing party, if any, the costs and
attorneys' fees reasonably incurred by the prevailing party in
connection with the arbitration.

If the arbitrator(s) determine a party to be the prevailing party under

circumstances where the prevailing party won on some but not all of
the claims and counterclaims, the arbitrator(s) may award the
prevailing party an appropriate percentage of the costs and attorneys'
fees reasonably incurred by the prevailing party in connection with the
arbitration.

The arbitrator(s) must agree to the foregoing deadlines before

accepting appointment. 

Failure to meet any of the foregoing deadlines will not render the
award invalid, unenforceable or subject to being vacated. The
arbitrator(s), however, may impose appropriate sanctions and draw
appropriate adverse inferences against the party primarily responsible
for the failure to meet any such deadlines.

1 International Arbitration Rules and Procedures already precludes an

award of punitive damages "unless the parties agree otherwise…[or]
unless a statute requires that compensatory damages be increased in
a specified manner."

2 The law related to limitation of liability clauses varies significantly

from jurisdiction to jurisdiction. Parties wishing to include such a
clause in a contract should check the applicable law before doing so.
Introduction
Law of Arbitration in India
Standard Arbitration Clauses
Standard Arbitration Clause for Domestic Commercial Contracts
Standard Arbitration Clause for International Commercial Contracts
Resolution Prior to Arbitration
Clause Providing for Negotiation in Advance of Arbitration
Clause Providing for Mediation in Advance of Arbitration
Law of Arbitrator's Qualifications
Party Appointed Arbitrators
Confidentiality
Fees and Costs to Prevailing Party
 

Arbitration and Conciliation Act,1996