Author

Mr Tim Smyth

Associate in International Arbitration - Arnold & Porter

Editors
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Arbitration Contracts

I. Definition

1.

There are two main categories of arbitration contract: (1) the parties’ original arbitration agreement—i.e. that disputes between them may be submitted to arbitration—, sometimes referred to as the “continuous arbitration contract”; and (2) a second, separate contract that arises following one party’s submission of a particular dispute to arbitration, sometimes referred to as the “individual arbitration contract,”1 or the “arbitrator’s contract.”2

II. Arbitration agreement/continuous arbitration contract

2.

The arbitration agreement or continuous arbitration contract allows parties to commence arbitration to resolve disputes that fall within its scope. It may constitute a standalone agreement, or a clause contained in a wider contract between the parties. In an investment treaty context, a dispute settlement clause providing for arbitration is typically seen as a unilateral consent to arbitrate on the part of the host State. That consent is then perfected, and the arbitration agreement formed, when the investor invokes its right to commence arbitration under the dispute settlement clause.3 Most legal systems­—and indeed the UNCITRAL Model Law— recognize the parties’ arbitration agreement as presumptively separable from the contract in which it is contained.4 One of the important consequences of such separability is that it allows an arbitrator or tribunal to find that the underlying agreement in which the arbitration clause is contained is invalid without at the same time invalidating the arbitration clause itself and thereby depriving the arbitrator or tribunal of jurisdiction.5 An arbitration agreement is characterized under some legal systems as akin to an option, exercisable by either party, to submit disputes between the parties to arbitration.6 Common elements of such contracts include the choice of seat, method of appointing the arbitrators, governing law and (if applicable), the parties’ choice of arbitral institution.

III. Individual arbitration contract/arbitrator’s contract

3.

When a party commences arbitration, a separate individual arbitration contract arises between the parties that applies only to the arbitration that ensues. This is sometimes referred to as the “arbitrator’s contract”, because once the arbitrators are appointed, they become parties to that same contract between the parties.7 While some commentators have taken the view that, when appointed, the arbitrators become parties to the original arbitration agreement between the parties (the “continuous” arbitration contract referred to above), this would lead to the conceptual problem that, if the arbitrators hold that the arbitration agreement is invalid, the contract between them and the parties would fall away.8 An arbitrator’s contract is rarely recorded in a single document; rather, it will develop incrementally and be embodied in a series of documents and applicable rules, e.g. terms of reference, institutional rules and provisions of national law.9 The individual arbitration contract is also generally considered to be separable both from any main contract that contains the parties’ arbitration agreement and from the arbitration agreement or continuous arbitration contract discussed in Section II above. This is known as the doctrine of “double-separability”.10

IV. Nature and key features of the individual arbitration contract/arbitrator’s contract

4.

The main theories as to the nature of an arbitrator’s contract are that it is: (i) a contract of agency, whereby the arbitrator acts as the parties’ agent in fulfilling a specified function; (ii) a service contract, for the provision of dispute resolution services by the arbitrator(s); or (iii) a sui generis contract that does not fit neatly into any given category, due to the unique, quasi-judicial role that an arbitrator performs and the lack of any subordination between the parties and the arbitrator.11 The third of these theories receives substantial support from leading commentators and was also approved by the UK’s Supreme Court in Jivraj v. Hashwani.12 Key rights and duties of the arbitrators under an individual arbitration contract/arbitrator’s contract include, among others: (i) a duty of independence and impartiality; (ii) a duty to issue an enforceable award within any applicable time limit; (iii) a duty of confidentiality; (iv) a right to receive remuneration; and (v) immunity from suit, to the extent permitted under national law.13 See further Arbitrator duties.

5.

An arbitrator’s contract will terminate either when the arbitrator or tribunal has issued a final award and becomes functus officio, or when an arbitrator is removed or resigns, but certain provisions of the contract, for example confidentiality and immunity, will survive termination.14

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