Arbitration is considered as another process of dispute resolution in which mediation and conciliation are involved. It is regarded as an international trade fair where two parties from two different countries consult an international arbitrator by mutual agreement or arbitration and settle their dispute accordingly. Another dispute resolution process has gained momentum over the past few years due to the increase in commercial market disputes and is a quick, inexpensive and effective way to resolve disputes.

The United Nations has given due recognition to the Model Law of International Commercial Arbitration and Conciliation issued by the United Nations Commission on Trade and Law (UNCITRAL). Model law and regulation played an important role in resolving trade disputes and provided laws in various countries. This can be changed and implemented in accordance with their by-laws as previously there was no unified trade-related law and your need was met for global trade which created controversy related to it.

An arbitration agreement is defined under Section 2 (b) read with Section 7 of the Act.
It can be defined as a written statement or exchange of communication between stakeholders and any statement made through the means of communication. It is not compulsory for the parties to sign or remove it. Even if an arbitration clause exists in the agreement, it can be regarded as an arbitration agreement.

Rickners Verwaltung Gmbh vs. Indian Oil Corporation, 1998 stated that the group’s purpose in resolving is to gather information in the form of speech and the meaning it conveys. A settlement agreement may be a statement made by one party concerning a disputed claim that may be rejected by the other party.

An Arbitration agreement is similar to a contractual agreement, which means that these agreements exist or have the power to adapt to the occurrence of a dispute between the parties. It only works if there is a conflict between the parties.


  • An Arbitration is usually faster and less expensive than litigation.
  • Arbitration is confidential, which means you will not be required to testify publicly. Details of your dispute will not be in the records of the public court.
  • In the settlement, you can choose who will decide your dispute. This can be especially helpful if you are looking for a decision maker with specialized technical knowledge or experience in your industry.
  • Some employers will not hire you if you refuse to sign an employment compensation agreement.


  • Arbitration Awards cannot be appealed. You must accept the judge’s decision as final order to be decided.
  • You cannot be tried by a judge. This can lead to serious consequences if you have a job dispute because the judges are often sympathetic to the employees.
  • Group information exchanges are very limited in arbitration. This can make it difficult to improve your case in the hiring process or in any other situation where someone else has a lot of knowledge and documents.
  • If you are asked to agree to a mediation before you have an argument, you may not know whether you want to mediate or not. If you sign the agreement and later decide that you would like to continue the claim in court, you will not be able to – or you will be accumulating legal fees to try to invalidate the arbitration agreement.
  • As with all contracts, an arbitration agreement can be one-sided and favour the parties to the agreement. You should look into this and make sure that the agreement gives you an equal say in choosing an attorney, does not limit you to the remedies you have, and does not restrict your right to a lawyer.


The essentials of an Arbitration Agreement are listed below –

  1. Arbitration form- An Arbitration agreement may be in the form of an arbitration clause in the agreement itself, or a separate agreement may be entered into.
  2. The Arbitration agreement must be in writing- The arbitration agreement must be in writing. The arbitration agreement is in writing, if:
    Both parties have signed the document.
    Letters, telex, telegrams, and other forms of communication are used for conformity.
    In case of exchange in arguments of defendants and claimants statements.
  3. A valid contract- The agreement must meet all the requirements of a valid contract as provided for in section 10 of the Indian Contract Act, 1872. The parties must be substantial, reasonable, non-liable, free of charge, and legal and considerate.
  4. Separate agreement- The arbitration agreement must be in the form of a separate agreement or subcontract.
  5. Intention- There should be a purpose for the parties to refer the dispute to the arbitrator.
  6. Conflict- For the dispute of the parties either in present or future, must go through the settlement.


In India, there are two types of arbitration agreement, namely-

  • Ad-hoc arbitration- arbitration procedures should be agreed upon by both parties and the arbitrator. This can be a problem in many cases, as there is a conflict between the parties and co-operation in resolving it may not be possible. Also, ad-hoc compensation may have legal or technical errors as well as prize errors, as arbitration procedures are not standardized. Therefore, the chances of having court interference are high in ad-hoc resolution.
  • Institutional Arbitration- The rules of procedure have already been established by the arbitration body. Therefore, the development of procedures and rules is not necessary, as the arbitration framework already exists. Also, arbitration centers have experienced arbitrators and a review committee for all arbitral awards. Therefore, the chance that the court will set aside the award is a mediation center.


The Arbitration and Conciliation Act does not provide for third parties or non-signatories to be bound by a compensation agreement. The arbitration agreement remains valid even if the original contract is assigned to a third party.
Section 37 of the Indian Contract Act 1872 provides that a contract may be made by the legal heirs of a person upon his death, unless the contrary purpose appears in the contract. The same principle will apply to arbitration agreements. In the event of a lack of funds, as mentioned above, the recipient may accept a contract that will be enforced by or against him.
The Amendment Act of 2015 provides for third parties to deal with a compensation agreement (domestic arbitrators residing in India) by amending section 8 to allow the parties, or those seeking a lawsuit or under that side, to apply to the court to refer the dispute to them. These amendments are the same as those contained in section 45 (international commercial arbitration), which provides for a party, any person applying through or under his or her own, to apply to a court to refer a dispute to a settlement.
Those who do not sign an arbitration agreement are also referred to the dispute resolution application under section 45 of Chloro Controls (I) P Ltd v Severn Trent Water Purification Inc and Ors (2013) 1 SCC 641, where the High Court ruled that any person is lodging a claim. through or under part of an arbitration agreement may also initiate arbitration.
The Amendment Act of 2015 now allows such indications in accordance with the language in section 45 and the decision of the Supreme Administrative Court Chloro. Recently, in its decision at Mahanagar Telephone Nigam Ltd v Canara Bank & Ors AIR 2019 SC 4449, the Supreme Court upheld a group of corporate teachings to allow non-signal opposition.
In the case of Rickitt Benckinser (India) Private Limited v Raynders Label Printing India Private Limited and another (2019) 7 SCC 62, the Supreme Court, while deciding on the application for section 11 of the appointment of arbitrators, considered the non-binding agreement. The Court in particular held that the intention of the non-signatory to agree to the agreement was significant and that the burden of proof lay on the party claiming that the signatory was bound by the agreement. As the burden was not removed from the case, the Court ruled that the plaintiff would not be liable for arbitration.


An arbitration agreement is accepted as a separate, separate agreement from the basic agreement – a concept defined as the principle of separation. This policy prevents the validity of one agreement from being affected by another; successfully establishes the complete independence of the arbitration agreement and the integrity of the arbitral process. However, the two can be tested together. However, it is important to consider, in view of the division of the arbitration agreement, that the legal options implied by the parties to the principal contract apply to the arbitration agreement. Therefore, dispute resolution and selection of legal provisions should be written with the utmost care and precision.


Where the dispute resolution process can have far-reaching consequences, it will be carefully worked out in detail. Arbitration agreements are a way of reducing the costs of litigation and keeping disputes confidential. But signing an arbitration agreement means giving up important rights. Prior to signing, it is advisable to read the arbitration steps and refrain from re-negotiating anything you are not comfortable with. The definitions of the various High Courts and the Honorable High Court highlight the need to carefully plan the arbitration clauses in the agreement. Treating it like another boilerplate clause can be like playing with fire.


Aishwarya Says:

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