TITLE

1- Definition of Arbitration Agreement

2- Essentials of an Arbitration Agreement
3- Attributes of Arbitration Agreement
4- Constituents of Arbitration Agreement
5- Important Provisions on Essentials of Arbitration
Agreement
6- Conclusion
INTRODUCTION
The essentials of arbitration agreement hold the key to its
validity and effectiveness. From the presence of a genuine
dispute to the manner of its documentation, each facet
plays a pivotal role in shaping the course of arbitration.
The arbitration agreement stands as a cornerstone for
resolving disputes outside the traditional court system.
Crafted with precision, this agreement not only delineates
the framework for conflict resolution but also sets the
stage for a smoother and more efficient process.

Definition of Arbitration Agreement

As per Section 7 of The Arbitration and Conciliation Act,
1996, an “arbitration agreement” means a promise by
parties to settle any disputes between them about a
specific legal relationship using arbitration. This applies
whether the disputes are mentioned in a contract or not.
This type of agreement is also called a submission
agreement.
An arbitration agreement is a legal contract made by two
or more parties. It states that if any disagreements or
conflicts arise between them, they will use arbitration to
solve the issues instead of going to court. This is an
agreement where all parties decide to present their
disagreements to an arbitrator or an arbitration panel.
These arbiters will make a final and binding decision
based on the facts and arguments from both sides.
Usually, an arbitration agreement explains the terms for
taking disputes to arbitration. It might cover things like
the types of disputes that can be addressed, the rules for
the arbitration process, how the arbitrator(s) will be
chosen, where the arbitration will happen and any other
important things the parties agree on.

Essentials of an Arbitration Agreement

An arbitration agreement involves several key conditions
that must be met for it to be valid and effective. These
conditions ensure that the agreement serves its intended
purpose and guides the arbitration process fairly.

Presence of a Dispute
For an arbitration agreement to hold weight, a dispute
between the involved parties must exist. This is a
fundamental requirement for the agreement to come into
effect. If no dispute is present, the arbitration clause
cannot be used to challenge a settlement that has already
been reached by the parties.
Written Agreement
An arbitration agreement must always be documented in
writing. It can take various forms to qualify as a written
agreement:
Document with Signatures: The agreement is valid when
it’s a signed document by both parties.
Written Communications: Communications such as telex,
letters or telegrams that record the agreement for
arbitration also suffice.
Exchange of Statements: When parties exchange
statements outlining their claims and defences and one
party acknowledges the existence of an arbitration
agreement while the other party doesn’t dispute it, the
agreement is considered valid.

The intention of the Parties

The intention of the parties involved is a pivotal aspect of
the agreement. While specific terms like “arbitrator” or
“arbitration” need not be explicitly stated, the intention of
both parties to abide by the terms of the arbitration
agreement is crucial. The agreement’s validity is based on
the shared intention to utilise arbitration for dispute
resolution.
Signatures of the Parties
The signatures of the parties play a crucial role in forming
a valid arbitration agreement. There are two scenarios:
Mutual Signatures: The agreement can be a document
signed by both parties, outlining all terms and conditions.
Unilateral Signature: Alternatively, one party can sign the
document containing the terms and the other party can
express acceptance. In this case, the agreement becomes
valid upon the acceptance.

Attributes of Arbitration Agreement

In the notable legal case of K.K. Modi v. K.N. Modi and
Ors. (1998) 3 SCC 573, the Hon’ble Supreme Court
highlighted several crucial attributes that must be present
in an arbitration agreement:
Binding Decision: The agreement should explicitly state
that the tribunal’s decision will be legally binding on both
parties involved.
Jurisdictional Consent: Both parties must mutually agree
on the tribunal’s jurisdiction to arbitrate the matters
concerning their rights. This consent can either arise from
a consensual decision or from a court order directing that
the proceedings proceed through arbitration.
Fair and Impartial Determination: The tribunal holds the
responsibility to impartially determine the rights of the
parties, ensuring a fair judgment.
Legally Enforceable: The agreement’s terms, which
outline the parties’ commitment to arbitration, must
adhere to the legal framework and be enforceable by law.
Timely Formulation: The agreement should specify that
any decisions rendered by the tribunal on the dispute
must be formulated prior to the commencement of the
arbitration process.

Constituents of Arbitration Agreement

While not deemed essential, certain essential elements
can be included in an arbitration agreement based on the
parties’ preferences. These elements provide further
clarity and structure to the arbitration process. Here are
some common optional components:
Seat of Arbitration
The “seat” refers to the location where the arbitration
proceedings are based. Specifying the seat is particularly
crucial in international commercial arbitration. It
determines the procedural laws governing the arbitration.
Notably, the seat need not coincide with the hearing
location; it’s where the arbitration process is
administered.
Procedure for Appointing Arbitrators
The procedure for selecting arbitrators follows guidelines
outlined in the Arbitration Act. Generally, any qualified
person, regardless of nationality, can be appointed as an
arbitrator unless the parties agree otherwise. Parties can
also mutually decide on the arbitrator’s appointment.
Language
Language plays a vital role in an agreement. The chosen
language should be understood by all parties involved to
prevent misinterpretations. Clarity is essential to ensure
both parties comprehend each clause. Opting for a
mutually understood language can reduce translation
costs.
Number and Qualifications of Arbitrators
The Arbitration Act permits parties to determine the
number of arbitrators. However, an odd number is
required to prevent deadlock. This allows decisions to be
reached even in the presence of disagreements among
arbitrators.
Type of Arbitration
Parties can select between institutional arbitration, which
follows established arbitration institution rules and ad hoc
arbitration, which is designed specifically for the dispute
at hand. Institutional arbitration involves adhering to
established arbitration institution rules, while ad hoc
arbitration involves arranging an arbitrator privately.
Governing Law
Specifying the substantive law governing the agreement is
crucial. Failing to do so can lead to complications in future
disputes. Clearly mentioning the governing law ensures a
solid legal foundation for resolving disagreements.

Important Provisions on Essentials of Arbitration

Agreement
An arbitration agreement contains crucial provisions that
guide the arbitration process. These provisions play a
significant role in ensuring a fair and effective resolution
of disputes. Here are the important provisions outlined:
Written Agreement
An arbitration agreement must be documented in writing,
as emphasised by Section 7(4) of the Act. This can be in
the form of a written document or any form of
communication, including telegrams or telex, as long as
there’s a record of the communication.
Appointment of Arbitrators
Section 11 grants parties the freedom to select
arbitrators. If parties can’t agree on an arbitrator, the
Chief Justice of the High Court (for domestic arbitration)
or the Chief Justice of the Supreme Court (for
International Commercial Arbitration) can be approached
for appointment.
Interim Relief
Sections 9 and 17 of the Act address interim relief orders
related to arbitration. Section 9 permits relief petitions if
there’s prima facie evidence of an arbitration agreement.
Parties can approach the Court before or after arbitration
proceedings start, but before award enforcement (as per
Section 36). Section 17 empowers the tribunal to grant
interim measures upon party request.
Finality of Arbitration Award
Section 34 establishes the finality of an arbitrator’s award,
which is binding on the contracting parties. Once a court
decree is granted, it becomes enforceable under Section
34.
Appeal
Section 37 provides avenues for appeal if parties are
dissatisfied with arbitrator decisions. Appeals can be
made against orders under Section 9 (granting/refusing
interim measures), setting aside or refusing to set aside an
award and decisions on pleas referred to in Section 16.
However, no appeal is permitted against arbitrator
appointments under Section 11.

Conclusion
The essentials of arbitration agreement include a genuine
dispute, a written agreement, parties’ intent to arbitrate
and their signatures. These essential conditions of an
arbitration agreement help to define its validity.
Understanding the essential elements and optional
provisions of an arbitration agreement is pivotal for
creating effective and enforceable contracts that promote
fair and efficient dispute resolution between parties.