Arbitration is a popular method of resolving disputes outside of the court, especially in commercial contracts. It is a private and confidential process that allows the parties to avoid the time and expenses associated with litigation while obtaining a final and binding decision.
However, before entering into an arbitration agreement, it is essential to understand the applicable law and the legal requirements for enforcing the agreement. In this article, we will discuss the laws applicable to an arbitration agreement and their implications.
International Arbitration
International arbitration agreements are subject to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention). The Convention states that the enforcement of an arbitration award applies to all signatory states, making it easier to enforce international arbitration agreements.
When parties from different countries enter into an arbitration agreement, it is essential to consider the laws of the country where the arbitration is taking place. The choice of law is crucial as it determines the procedural and substantive rules that apply to the arbitration.
Domestic Arbitration
Domestic arbitration is governed by the laws of the country where the arbitration takes place. In the United States, the Federal Arbitration Act (FAA) governs arbitration agreements arising from interstate or foreign commerce. However, each state has its own arbitration laws that may vary from the FAA.
In most states, the Uniform Arbitration Act (UAA) governs arbitration agreements, which is based on the Model Law developed by the United Nations Commission on International Trade Law (UNCITRAL).
Enforcing an Arbitration Agreement
An arbitration agreement is a contract between the parties to submit their disputes to arbitration. To enforce such an agreement, the following requirements must be met:
1. Agreement in writing: The agreement to arbitrate must be in writing, signed by both parties, and may be included in the underlying contract or a separate agreement.
2. Valid and enforceable contract: The underlying contract must be valid and enforceable, and the arbitration clause must be an integral part of the contract.
3. Scope of the agreement: The arbitration agreement must cover the dispute at issue, and the parties must agree to submit their claim to arbitration.
4. Public policy: The arbitration agreement must not violate public policy or any statutory or common law provisions.
Conclusion
In summary, the law applicable to an arbitration agreement depends on the type of arbitration, the location of the arbitration, and the underlying contract`s governing law. Before entering into an arbitration agreement, it is essential to seek legal advice to ensure that the agreement meets the requirements for enforceability. With careful consideration, parties can avoid the complexities and costs of litigation and resolve their disputes efficiently and effectively.