The Arbitration Agreement: What Makes One, and What Breaks One

In one line

An arbitration agreement is a written agreement between parties to send their disputes to arbitration, and without one there can be no arbitration at all.

In exam wording: section 7 of the Arbitration and Conciliation Act 1996 defines an arbitration agreement as an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

Why everything rests on this section

Arbitration is consensual. A judge's authority comes from the State; an arbitrator's comes from the parties' agreement and from nowhere else. So section 7 is the foundation of Part I: no agreement, no tribunal, no award, nothing to enforce.

It is also the section that is litigated first, because a party who does not want to arbitrate attacks the agreement before anything else.

Section 7(1): the definition, taken apart

An arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

"All or certain disputes." The parties may send everything to arbitration or only some categories. A clause covering "any dispute regarding payment" does not cover a dispute about the quality of goods.

"Which have arisen or which may arise." Both are covered. An agreement made before any dispute, which is the ordinary arbitration clause, and an agreement made after a dispute has already arisen, sometimes called a submission agreement.

"In respect of a defined legal relationship." There must be an identified relationship. Two people cannot agree that any dispute they ever have about anything goes to arbitration.

"Whether contractual or not." The relationship need not be a contract. A relationship arising from a trust deed, or from a statutory arrangement, can be the defined legal relationship.

Section 7(2): a clause or a separate agreement

An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

Both forms are equally valid. The everyday form is the clause; a separate agreement is common where the dispute has already arisen.

Section 7(3) and (4): it must be in writing, and what counts as writing

Section 7(3): an arbitration agreement shall be in writing. This is mandatory. An oral agreement to arbitrate is not an arbitration agreement under this Act.

Section 7(4) then defines writing generously. An agreement is in writing if it is contained in:

• (a) a document signed by the parties;
• (b) an exchange of letters, telex, telegrams or other means of telecommunication, including communication through electronic means, which provide a record of the agreement; or
• (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.