Drafting an arbitration clause that will hold
An arbitration clause usually sits at the end of a contract and is read faster than anything else in it, although it decides where a dispute will end up — and it carries one deadline which, once missed, no amount of good drafting will repair.
What counts as an arbitration agreement
Section 11 of the Arbitration Act B.E. 2545 (2002) defines an arbitration agreement as one by which the parties agree to settle all or part of a dispute, whether already arisen or possibly arising in future, and whether or not arising from a contractual relationship, by arbitration. It may be a clause within the main contract or a separate agreement. The words whether or not arising from a contractual relationship give it a reach wider than contract disputes alone.
Form, and what counts as writing
The second paragraph requires the agreement to be evidenced in writing signed by the parties, but then adds exceptions wider than one might expect: where the clause appears in documents the parties exchanged by letter, fax, telegram, telex, data interchange bearing an electronic signature, or other means recording the clause; or where the clause is asserted in a claim or a defence and the party who did not assert it does not deny it. In those cases an arbitration agreement is taken to exist.
Incorporating a clause by reference
The third paragraph provides that a contract evidenced in writing which refers to a document containing an agreement to arbitrate, with the intention that the agreement form part of the main contract, is itself taken to be an arbitration agreement. This matters wherever standard conditions or annexes are incorporated, because the test lies in the intention that it form part of the main contract, not in a bare mention of the document.
The deadline that cannot be missed
Section 14 provides that where a party sues on a dispute covered by an arbitration agreement without having submitted it to the tribunal, the defendant may apply to the competent court, no later than the date of filing the defence or within the period allowed by law for filing it, for an order striking the case out. That period runs alongside the time for the defence, and so arrives sooner than many parties expect.
When the court will strike the case out
On inquiry, if the court finds no ground rendering the arbitration agreement void, unenforceable, or incapable of being performed, it shall strike the case out. Those three grounds frame the argument on both sides. The second paragraph adds that while the application is pending, either party may commence arbitration, and the tribunal may carry on and make an award.
PREPARE
What to bring
- The main contract and every document it refers to
- Correspondence that may itself carry the agreement
- The summons and the date the defence falls due
- The institution named and the rules it applies
- The agreed language, seat and number of arbitrators
QUESTIONS
Questions this raises
I filed a defence before noticing the arbitration clause.
Section 14 fixes the point at no later than the date of filing the defence, or within the period allowed for filing it. Where a defence has gone in without the application, the first thing to check is whether the period for filing the defence is still running, because the wording gives two alternatives rather than tying the matter to the filing date alone.
Is a bare agreement to arbitrate enough?
Under section 11 those words alone may satisfy the definition, but what makes a clause work in practice is what follows: the institution or rules, the number of arbitrators, the language and the seat. Where none of that was agreed, each becomes a first round of argument before the dispute itself is reached, and that round costs the most time.
LAW
The legislation
- Arbitration Act B.E. 2545 (2002), section 11
- Arbitration Act B.E. 2545 (2002), section 14
ENQUIRIES
