Margaret L, Moses The Priatiples mack Practice of Internationa | cuapren two Cowneretel Arbitration Corbridge 20/2, The Arbitration Agreement A. FUNCTION AND PURPOSE ‘When parties agree to arbitrate thei disputes, they give up the right those dispuces decided by a national court. Instead, they nd creates other rights. The rights it ‘creates are the rights to establish the process for resolving the dispute. In their acbiteation agrcement, matter of the parties’ dispute. The parties’ arbitration agreement give arbitrators the power to decide che dispute and defines the scope of power. In essence, the parties create their own private system of justice. 11. Arbitration Clauses and Submission Agreements The parties’ arbitration ageeement is frequently contained in a clause or ‘contract. The agrec- nt to arbitrate is intended to provide a m: does arise. However, if there is no arbitration and a dispute arises, at that time the parties can nonetheless enter into agseement to arbitrate, if both sides agree. Such an agreement is generally referred to as a submission agreement. However, submission agreements are much less common than atbitration elauses in contracts, because once 2 dispute arises, the parties often cannot agree on ig For that generally better for the parties to agree to a the begin jonship, when they are still on good terms. 8, VALIDITY 19 2, Separabllity Even though the arbitration clause is most often contained within the con- (0 hear and decide the dispute even if one side claims, for example, that the contractis terminated, oris i was fraudulently induced. Such claims would not deprive the arbitrators fiction because they pertain to the main contract and nor specifi- * Because the arbic laws and rules 8. VALIDITY In light of the important rights that are extinguished when th to arbitrate, the question of the arbitration agreement's cal. A n isa creature of c and competently gi establish that parties have actually consented, many national laws, as well as the New York Conven- tion, require that an arbitration agreement be in writing.’ In addition, the20 ‘THE ARBITRATION AGREEMENT ‘Convention requires that in some circumstances, the written agreement be Sianed by both pats ® ing, signed, and therefore hough the party may have agreed to arises it may decide that it would rather go to court, and commence litigation. In addition, the issue of the arbitration agreement's applicability to specific parties may arise when, for example, one party asserts that it never signed the agceement, or when a nonsignatory tries to enforce the agreement against a signatory. In these situations, a party may call on the court for assistance. agreements are enforceable under the New York does not mention agree- mn agreements in Arti must cecognize arbitration agreements in writing, Ifthe court is seized of a ‘matter that is in fact the subject matter of a binding arbitration agreement, the court must stay the proceedings and refer the partis to arbitration.? NEW YORK CONVENTION Articte W x. Each Contracting State shi der which the parties un any differences which have arisen or which may arise between them in respect ofa defined legal relationship, whether contractual concerning 2 subject matter capable of settlement by arbi 2. The term “agreement in writing” sh in a contract or an arbitration agreement, signed by che patties or contained in an exchange of letters or 3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreemer lat the request of one of said agreement is m performed. 8, VALIDITY at From Article Il, @ number of the requirements for the validity of an arbi- that to be enforced, the dispute that arises must be “in respect ter must be capable of being settled by arbitration. Paragraph two defines “agreement in writing,” including, in some circumstances, a signature requirement by the part Paragcaph the court to refer the parties to arbitration, unless the agecement is null and void, inoperative, or incapable of being performed, ‘These cequirements will be discussed in the following sections. 1. The Writing Requiroment Today, cont without mach at If an arbitration agreems ly entered into oral Tn many co id under the pertinent national cases, courts have strictly enforced the writing requirement, invalidating arbitration agreements even though parties may have reached agreement by conduct or trade practice. When this happens, the Convention becomes a less effective means of enforcing parties’ arbitration agreem: gh an amendment to make the writing requicement less rigid may be in order, mal convention that has more than 145 some other ways, which will be discussed in - y following, of trying to ensure that the purpose of the Convention ~ to provide for prompt enforcement of arbitration agreements and awards ~ is not undermined by an insistence upon formalities that appears inconsistent with the realities of today's transactions. First, it is necessary to understand what the Convention requires with respect toa writing. Whereas Article Is) sets forth the writing requirement, Article Il(2) defines what “in writing” means, The writing requirement may bbe met either by a clause in the contract or a separate agreement to arbitrate (a submission agreement), “signed by the partes,” or it can be satisfied by an exchange of letters or telegrams.® A number of interpretive issues are presented by the language of paragraph 2. First, does the signature requirement apply to both the contract containing the clause, as well as to the submission agreement, or only co the submission agreement? Second, does the signature requirement also apply to the exchange of letters or telegrams? Different courts have taken different positions. The U.S. Fifth2 THE ARBITRATION AGREEMENT the sepa arbitration clause? On Circuit Court of Appeals has suggested that onl be signed, and not the contract con the other hand, the U.S. Second and Third Circuits have interpretation, stating that the signature requirement applies to both. With respect to the exchange of leters and telegrams, a Swiss court has held that if the parties expresse: sntion to enter into an arbi ageeement by an exchange of documents, signatures were not necessery."* Similarly, the U.S. Thicd Circuit has held that the arbitral agreement “may be unsigned the rule today in ‘most jurisdictions that the contract cont: use, oF the ent, must be signed, but there is no signature requirement for the exchange of documents." fer, however, on how st expret che Conven ing requirement to invalidate an arbitration ageeement. Some are in following the letter of the law: the arbitration agreement nly if it is in a contract or in a separate agreement signed by the parties, or in an exchange of documents."* In some instances, courts : S witten acceptance, even if denying validity of the arbitra normally arises when one party y come UP a prevent ent tion agree! an agreement to arbitrate. However, the is award enforcement stage, when one party asserting thae the agreement to arbitrate was invalid."* ig 16 F.3d 666, 659-70 US.81 ° Soe Sphere Drake Ins. PLC v. Marine Ton ‘denied, Marine Towing v.S ke pd 210421718 Fad 440, 449 {2005} “Compagnie de Navigation et Transports S.A. MSC (Moditeranean Shipping Com- pany) SA. (Seis Federal Tribunal, Jauary 16, 1995) YEARBOOK COMMERCIAL ratrxation XXI (1996). Standard Ben Glass Corp. v, Glassobots 07 tance of Dordrecht, North American Soc- ational Markesing and Ts a a9 re contesting abiteation agreement's valid ity is contrary to good faith) * See discussion inf in Chapter 20 8. VALIDITY 7 Perhaps the most common situation that produces a divergent judicial when there is clearly a cont in that contract does tion, For example, assume that parties reach an oral agreement | One of the parties sends a written confirmation, which contains an arbitra- tion clause. The other party performs under the contract ~ for exampl ips goods, but it never sends a written response to the first party’s 0 confirmation. Most courts would have no difficulty finding that a contract was formed. But quite a few would say thatthe arbitration clause was not valid.2? There was no “exchange” of documents, because only one document was sent, Some commentators believe that tacitly concluded jeements to arbitrate are simply not enforceable under the New York Convention. ** ‘On the other hand, pret such an arbi- tration agreement as law. Assuming the agreement falls under the Convention, Article II should supersede domestic law regarding the proper form of an arbitration agreement.’ However, State their domes- courts have not always viewed the Convention as superse tic law.?® Moreover, even when a court appl its interpretation may be influenced by its na domestic | fect a national court's the Convention to be silent, ambiguous, or out of ted, “Many national courts... intezpe ) of the Model Law and their more Article 1(2) in the light of Art liberal national arbitration la Nonetheless, although acceptance of a more lenient definition of “agree ‘ment in writing” under national law makes sense in terms of the purpose and language of the Convention and in terms of accommodating more modern communication than letters and telegrams, there still are courts the Convention. fing an international Cucaro e Figli, kaly, Yeansoox Commesciat ARBITRATION I, 2t re performed, court only enforced arbitration two, because only two were sgnad and eturned) See Di Pietro 8 Plt, supra note 7, at 75-78.