Arbitration is a creature of contract.1 As with every other type of contract, it must satisfy a number of conditions in order to be valid.2 Without a valid arbitration agreement, no arbitration can take place or award can be rendered.3 In other words, a valid arbitration agreement is the cornerstone of any arbitration proceedings.
The starting point to analyze the conditions that any arbitration agreement must fulfill to be valid is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1959 (the “NY Convention”). Under the NY Convention, the contracting States undertake to recognize an arbitration agreement when the following requirements are complied with:
The UNCITRAL Model Law on International Commercial Arbitration 1985 with amendments adopted in 2006 (the “UNCITRAL Model Law”)9 lists the exclusive grounds for annulment of an award. It is particularly important for the purpose of this commentary to refer to Article 34.2(a)(i), which establishes that an arbitration award may be set aside if the party making the application furnishes proof that (i) he or she was under some incapacity,10 or (ii) the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the seat of the arbitration.11
II. Formal requirement for validity - in writing
III. Substantive requirements for validity
Generally applicable principles of contract law also apply to arbitration agreements.17 Thus, these agreements are subject to the substantive requirements for validity that are commonly applied to any type of contract. Article II.3 of the NY Convention provides that an arbitration agreement shall not be recognized or enforced if it is found that it is “null and void, inoperative or incapable of being performed.”
First, any valid arbitration agreement must reflect the conscious, mutual and free will of the parties to resort to arbitration and not to other means of dispute resolution, including State courts.18 The consent of both parties to submit their dispute to arbitration is the cornerstone of arbitration.19
In order to avoid potential lengthy discussions about the validity of an arbitration agreement, it is important that:
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