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Arbitration Agreement Validity

Even if the contract as a whole is invalid under federal or state law, the arbitration clause may survive, the court said. Under the FAA, the arbitration provision is enforceable separately and the arbitrator has the right to hear claims regarding the validity of the contract. [Buckeye Check Cashing, Inc.c. Cardegna, No. 04-1264 (US Sup Ct, 21.02.06).] Arbitration is a contract.1 Like any other type of contract, it must meet a number of conditions to be valid.2 Without a valid arbitration agreement, no arbitration can take place or an arbitration award can be rendered.3 In other words, a valid arbitration agreement is the cornerstone of any arbitration. The plaintiff argued that the tribunal was not required to stay the arbitration under subsection 6(2) of the IAA because the defendants did not have locus standi because the plaintiff had never signed the arbitration agreement. This was an issue that could only be decided by the court after a full procedure using the usual standard of civil evidence, because if there was no arbitration agreement between the parties, no court could be formed to decide the issue. On the other hand, most national arbitration laws have a broad view of what constitutes a written document, including telex, e-mail and any other means of communication that leads to a protocol.15 The UNCITRAL Model Law takes a similar approach.16 After much uncertainty, it is now permanent law that, where the validity of the substantive contract between the parties is contested, the arbitration clause survives such a challenge and the arbitrators are free to decide on the validity or nullity of the contract. Only if the arbitration clause is challenged independently is the court itself empowered to intervene. In El Nasharty v. J Sainsbury plc (No. 2) [2007] EWHC 2618 (Comm), Tomlinson J. reiterated that the allegation that the main agreement was subject to coercion did not affect the arbitration clause contained therein, so that, pursuant to section 9 of the Arbitration Act 1996, a stay of judicial proceedings in which coercion was invoked, was almost inevitable.

The substantive requirements of each arbitration agreement are set out in section I (see paragraphs 2 (b) to 2 (e) above). The SCC`s interpretation was indeed helpful, but it did not trigger the case from its source – it could not amend the Arbitration Act. Thus, the third condition for the validity of the arbitration agreement remains. According to the SCC`s interpretation, many arbitration agreements were still declared invalid because they had not appointed an arbitration board. In Denmark, Skibstekniske Konsulenter A/S I Likvidation v Ultrapolis 3000 Investments Ltd [2010] SGHC 108, Belinda Ang J of the Singapore High Court followed the recent approach of the English Courts Authority to challenge the validity of an arbitral award in enforcement proceedings under the New York Convention. For example, Option I of the Hong Kong Arbitration Order, article 7 of the Model Law as a whole, contains the “Arbitration Agreement” defined as “an agreement between the parties to arbitrate all disputes or specific disputes that have arisen or may arise between them in connection with a defined legal relationship, contractual or not” and requires that the “Arbitration Agreement be in writing” (article 19). Singapore`s International Arbitration Act contains the same definition of “arbitration agreement” and the requirement that the “arbitration agreement must be in writing” (Articles 2A.(1) and 2A.(3)). In most cases, the question of the validity or scope of an arbitration clause is brought before the court where Party A initiates legal proceedings and Party B requests a stay on the basis of an alleged arbitration clause. In such cases, the permanent approach is that the court generally decides on the jurisdiction of the evidence at its disposal, rather than leaving it to the arbitrators. In British Telecommunications plc v. SAE Group Inc [2009] EWHC 252 (TCC), Ramsey J.

concluded that an equivalent approach should be taken when Party A requests a statement that there is no arbitration agreement. The tribunal considered whether, if the existence of an arbitration agreement is at issue, it is the arbitral tribunal or the tribunal. In doing so, the Court took into account the situation in English law and the decision of the English High Court on the same issue in Nigel Peter Albon (operating as N A Carriage Co) v. Naza Motor Trading Sdn Bhd et anor [2007] 2 All ER 1075. In that case, the English High Court concluded that the wording of the English equivalent of section 6 of the IAA (section 9(1) of the Arbitration Act 1996) meant that the court had to decide whether or not there was sufficient evidence to enter into an arbitration agreement. If, at the time of the application, it was not possible to resolve this issue on the basis of the available evidence, the tribunal could not grant a mandatory stay under section 9(1) of the Arbitration Act (but independently of that, it was free to exercise its inherent jurisdiction to stay the proceedings). The draft amendment had clearly taken a leap forward from the existing law and was much more in line with the “presumed validity” approach of the New York Convention and the Model Law. It is reasonable to expect that further arbitration agreements will enter into force from the courts of the PRC applying the new law (if the draft amendment is as is). According to article 21 of the draft amendment, the arbitration agreement includes “the arbitration clause contained in a contract and the arbitration agreement of the parties made in another written form before or after the dispute arises”.

In particular, the new definition contains only a substantive requirement (the intention of the parties to proceed with the arbitration) and a formality requirement (that the agreement must be in writing). It removed the other two legal requirements: the specific issue of arbitration and a designated arbitration commission. Following the SCC`s interpretation, the Beijing Dongcheng District Court concluded that the arbitration agreement was valid in a similar case in which the parties agreed to apply the ICC Arbitration Rules, as the Arbitration Commission (i.e. ICC) of the parties` agreement on the arbitration rules.4)Beijing Dongcheng District Court (2018) Jing 0101 Min Chu No.6973. The reforms implemented in the draft amendment follow current international practice. The Model Law and some national laws similar to the Model Law treat the validity of the arbitration agreement fairly generously, and the criteria applied are simple as to whether the parties clearly intended to arbitrate and whether the parties` arbitration agreement was formulated “in writing”. The decision is relevant to the conduct of international arbitration in Australia because: In Sheltam Rail Co (Pty) Ltd v. Mirambo Holdings Ltd [2008] EWHC 829 (Comm), the plaintiff commenced proceedings to challenge an arbitral award on grounds of jurisdiction and then attempted to terminate the proceedings by serving a notice of cessation and forbearance.

For Aikens J.A., the question arose as to whether the decision should be set aside in order for the validity of the award to be established by the English court, or whether the validity of the award should be left as an open question that could possibly be raised in enforcement proceedings abroad. The respondents argued that, in order to be satisfied that Article 6(2) was applicable, the Singapore High Court need only be satisfied on a prima facie basis that there was an arbitration agreement to grant a stay. For this reason, the defendant found that the Supreme Court of Singapore had no choice but to refer the matter back to court for decision, since the guarantee appeared to have been signed by the plaintiff. In addition to the liberal approach, the draft amendment also included a waiver clause similar to article 7, paragraph 5, of the Model Law and provides that if one party to the arbitration claims that there is an arbitration agreement and the other party does not contest it, the arbitration agreement is considered to exist between the parties (see article 21 of the draft amendment). .

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