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What Is the Arbitration Clause and Its Enforceability?
The definition of Alternative Dispute Resolution
Alternative Dispute Resolution (ADR) is a category that contains methods alternative to court litigation to solve disputes. ADR comprises Arbitration, Mediation, Negotiation and Conciliation. These methods have different features that allow parties to choose the one most suitable for their needs, for instance, methods that involve a third person. Another distinction could be based on the fact that in arbitration, parties devolve the power to decide to a third party while in the other methods, the third party can only help or facilitate the disputing parties in finding an agreement.
What is arbitration?
Arbitration is an ADR method that involves a third person called arbitrator. In this proceeding, the third person is empowered by the disputing parties to decide their dispute issuing a final and binding decision called arbitral award. Compare to litigation in court, arbitration is very flexible since parties are free to decide the third person, its qualifications, the law applicable to the dispute and many other details.
How can parties devolve disputes to arbitration?
Courts are the place where disputes are usually brought to be settled, but court proceedings are not always the most efficient way to solve a dispute. In any relationship, the majority of people wants to settle disputes as quickly as possible, avoiding long and costly court proceeding. Arbitration is an effective alternative to court litigation for resolving disputes. In order to devolve a dispute to an arbitral tribunal instead of a court, an arbitration clause inserted in a contract is essential. The parties of a contract through this type of clause agreed on devolving disputes arising out or in connection to the contract to an arbitral tribunal. In this way, parties grant the arbitrator the necessary power to render a valid and binding decision that concludes the dispute.
What is an arbitration clause/agreement?
In the first place, the jurisdiction decides disputes belong to national courts. However, parties of a contract are free to agree to devolve the jurisdiction for deciding any dispute arising out or in connection to their contract to an arbitral tribunal. For switching the jurisdiction from a national court to an arbitral tribunal, the parties must demonstrate their will to move the jurisdiction. This act is represented by an agreement or a clause that contains the intention of the disputing parties to devolve the dispute to arbitration. An arbitration clause or agreement can be created from scratch or the parties can use the model clause provided by an arbitration center such as the Thailand Arbitration Center (THAC).
Is there any difference between an arbitration clause and an arbitration agreement?
The purpose of an arbitration agreement and an arbitration clause is the same, both contain the parties’ will to devolve disputes to arbitration instead of litigation. However, there is the main difference between these two: the arbitration clause, as the name suggests, is part of a contract that regulates the part concerning the “Dispute Resolution”; instead, the arbitration agreement is an independent document separate from a contract. It could be signed together with the related contract or subsequently, when a dispute arises, both as long as validly signed by the parties are binding and devolve the dispute to an arbitral tribunal.
Arbitration clauses are more common because it is easier to insert them in the contract before signing it. When the parties did not insert any dispute resolution clause in their contract or when the dispute resolution clause gives jurisdiction to courts and subsequently parties change their mind preferring arbitration, the easiest option is to sign a separate agreement that amends the contract previously signed.
Validity of the Arbitration Clause and Doctrine of Separability.
Despite being inserted in a contract, the arbitration clause could be considered “independent” from the contract, according to the “Doctrine of Separability”. The purpose of this doctrine is to preserve the arbitration clause valid when the validity of the whole contract is challenged. This means that when the contract is null, parties can still rely on the arbitration clause to solve dispute arising from the contract.
The arbitration clause also protects parties from potential abuse. If a party of the contract decides to bring the disputes to a court irrespectively from the arbitration agreement, the judge cannot disregard what parties agreed in the clause.
THAILAND ARBITRATION CENTER (THAC)
The Thailand Arbitration Center (THAC) is an institution that provides alternative dispute resolution services, comprising of arbitration and mediation, for cross-border disputes. It is established by the Act of Arbitration Center B.E. 2550 (2007). The THAC was first founded and commenced its operation in 2015, intending to promote and strengthen the alternative dispute resolution system and services in Thailand.
The Thailand Arbitration Center is located in the heart of Bangkok, one of the most international and vibrant cities in South-East Asia. The THAC is easily accessible with its convenient locale in the vicinity of international airports. It offers high-standard ADR services, affordable administration fees, and state-of-the-art facilities for in-person and remote hearings (https://thac.or.th/rooms/).
The latest service introduced by the THAC is the Online Dispute Resolution (ODR) platform for arbitration mediation and negotiation, called “TalkDD” (https://odr.thac.or.th/auth/login). This innovative service is easy to use, it can be accessed by laptops, smartphones and tablets with a simple login system.
For further information, please feel free to contact us at [email protected] or +66 (0)2018 1615. THAC is looking forward to helping you.
