What is business arbitration?
‘Arbitration’ means settling disputes through negotiation. Its long tradition helps settle civil (business) cases through persons (arbitrators), the choice of whom may be influenced directly or indirectly by the parties to the dispute. For a property conflict to be settled by a court of arbitration, the parties of a legal relation must consent to the solution in the form of a contract featuring a clause called an arbitration court clause.
- Arbitration Court Clause
The basis for arbitration is the contract between the parties, the so-called “arbitration court clause”:
a) made as a compromise – when the parties make the arbitration clause to refer to a dispute already existing between them.
b) made as an arbitration clause – it becomes a part of the main contract and represents the parties’ agreement regarding a situation when in the case of a future dispute the parties will settle it before a court of arbitration constituted as provided for in the arbitration clause.
The contract causes two main legal effects: the first one consisting in entrusting the court of arbitration with competence to settle a dispute resulting from the contract and the second one: the exclusion of state judiciary.
Content: the contract should contain exact specification of the subject of the dispute or the legal relation from which the dispute may arise. A valid provision is one included in a particular contract and stating that all disputes which may arise between the parties in relation to this contract shall be settled by a court of arbitration. In no case can such provisions violate the unquestionably binding legal regulations.
Clause: “All disputes concerning property rights which may arise in relation to the conclusion, performance or termination of this Contract shall be settled by… (please insert the full name of the court of arbitration you choose), according to the regulations of this Court.”
Form: Both in domestic and international economic relations the written form must be observed.
- Permitted Scope of Arbitration