Arbitration clause in contracts.

An arbitration clause is a provision capable of being used by the parties in a contract or as a separate agreement to submit a dispute to an arbitration tribunal, by specifying therein the subject matter of the dispute or the legal relationship out of which the dispute has arisen or may arise. An arbitration clause is also referred to as submission to arbitrary tribunal.

Arbitration is a method of resolving a dispute between parties of a contract whereby the parties agree o dispute will be resolved by the decision of an independent arbitrator rather than by court proceedings. In addition, when applying an arbitration clause, the parties must bear in mind that an arbitral tribunal judgment or settlement reached before it has the same legal force as an award or settlement reached before a general court. An arbitral tribunal judgment or a settlement reached before it, regardless of the country in which it was issued, is subject to recognition or declaration of enforceability by a common court. The recognition or declaration of enforceability of an arbitral tribunal judgment shall be issued by a common court at the request of the party to whom the arbitral tribunal judgment relates.

Contractual form of arbitration provision.

An arbitration clause or a submission to arbitrary tribunal should be made in writing and specify the identity of the parties of the contract, in a manner enabling their identification, the expression of the will to submit a legal dispute to arbitration, the specification of the subject matter of the dispute or the legal relationship from which the dispute has arisen or may arise. In addition, the requirement concerning the form of the arbitration clause is also fulfilled if the clause is included in the written documents exchanged between the parties or in declarations made by means of remote communication which make it possible to record their content. Reference in a contract to a document containing a provision to submit a dispute to arbitration satisfies the requirements concerning the form of an arbitration clause if the contract is in writing and the reference is of such a nature as to make the clause an integral part of the contract. An arbitration clause may also be used in the contract of a commercial company. Such an arbitration clause concerning disputes with the company’s relationship binds the company, its partners and the company bodies and their members.

An arbitration clause, on the other hand, must not violate the principle of equality, i.e. such a clause cannot contain a provision stating that only one of the parties may bring an action before the arbitration court. Moreover, such a clause should not give the possibility to resolve the dispute before the arbitration court, but should represent the decision of the parties to resolve the dispute before the arbitration tribunal.

Proceedings before the arbitral tribunal.

Proceedings before the arbitral tribunal shall take place in an arbitral tribunal chosen by the parties. The proceedings shall be initiated by the submission of a lawsuit or a summons to arbitration to the arbitral tribunal. The proceedings shall take place in accordance with the rules of the arbitration court, unless the parties agree otherwise. The parties may include in the arbitration clause where the hearing will be held, how evidence will be taken, what language the proceedings will be conducted in. However, if the parties do not agree on this, the arbitral tribunal may conduct the proceedings in the manner it considers appropriate.

However, it should not be forgotten that the arbitral courts remain closely connected with the common courts, despite their independence. Arbitration courts are bound by the rules of common law. Moreover, a final judgment of an arbitral court may be appealed against. The action is brought before the court of appeal where the common law court with jurisdiction to hear the dispute is located, should the parties fail to apply the arbitration clause in the contract and resolve the dispute before the arbitration court.

Is the use of arbitration clauses in contracts beneficial?

The use of arbitration clauses in contracts may be attractive in view of a future dispute due to the quick and efficient proceedings, where the calendar of the proceedings is planned taking into account the time capabilities of the party, the possibility to choose arbitrators with expertise relevant to the merits of the dispute. Moreover, the proceedings themselves are significantly de-formalised and adjusted to the needs of the parties by leaving it to the parties’ choice whether the hearing is to be conducted in-person, online or in a hybrid formula, and whether the dispatch of documents is to be conducted electronically or in traditional form (unless electronic dispatch is prohibited by the court rules). In addition, the parties can decide where their arbitration hearing will be held, in which language it will be conducted and who will adjudicate the dispute.