Arbitration Agreement

Definition: An agreement by
the parties to submit to
arbitration all or certain
disputes which may have
arise between them in respect
of a defined legal relationship,
contractual or not.
Note: may be in a contract or
in a separate agreement.

Form
In writing
Considered in writing if:
a. Contained in a document signed by the
parties;
b. Any means of telecommunication which
provide a record of agreement;
c. Exchange of statements od claim and defence
in which the existence of an agreement is
alleged by one party and not denied by the
other.
Note: Art. 7 of the Model Law requires a written
agreement exist. The absence of such can be
cured by a partys submission to the proceeding
without a timely objection thereto .

Importance of an Arbitration
Agreement

An arbitration is a matter of contract,

and the parties are bound by the
arbitration award only if they agreed
to arbitrate the matter.
An agreement to submit a dispute to
arbitration generally produces effect
only upon the parties, their heirs and
assigns

Coverage: Present or Future

Controversy

The definition of an arbitration

agreement as one which the parties
submit present or future disputes
This accords with RA 876 which defines
arbitration as a contract to arbitrate a
controversy arising between the
parties or as a submission to arbitrate
an existing controversy.
In both cases the law requires the
agreement to be in writing

When the validity of an arbitration

contract may be question
1. When a contract containing an arbitration clause is
formed by one party sending written terms to the other,
which performs it bargain under the contract without
returning or making any other exchange in writing in
relation to the terms of the contract.
2. A contract containing an arbitration clause is formed
on the basis of the contract text proposed by one parte,
which is not explicitly accepted in writing by the other
party, but the other party refers in writing to that
contract in subsequent correspondence, invoice or
letter of credit by mentioning for example, its date or
contract number.

 3. A contract is concluded through the broker who

issues the text evidencing what the parties have
agreed upon, including the arbitration clause ,
without there being any direct written
communications between the parties
4. Reference in an oral agreement to a written set
of terms, which may be standard in form,
containing an arbitration agreement

When an agreement exist although not

signed by one or both parties
A party is bound by an arbitration agreement
although it has not been signed by him In
circumstances where:
1. Under the applicable law, such party is estopped
to assert the contrary.
Ex. When there is some form of assent to the agreement

2. When the party raising the issue of its existence

engage in activities consistent with the terms of
the arbitration agreement.
3. Where it is a customary practice in a particular
industry
ex. In the entertainment industry, actors perform under a
written contact although the contract itself is unsigned.

Some Cases
M&I Electric Industrial, Inc. v. Rapistan Demag Corp
An unsigned purchase order containing an
arbitration clause was held to be binding upon a
party who performed the work in the purchase
order, it having been determined that the purchase
order remains unsigned by the parties.
Hardin Constr. Group v. Strictly Painting, Inc.
When a subcontractor performed work on
previous projects each under a subcontract
containing an arbitration clause, in the last project
after the subcontractor commenced work but

 before an arbitration clause was signed a dispute

arose, the court held the parties are bound to
submit their dispute to arbitration
The Halogaland Court of Appeals held that there
was no expressed arbitration agreement signed
between the parties. It expressed doubts as to
whether e-mail transcripts satisfied the
requirements of a signed arbitration clause as the
contents of the e-mail appear obscure, incomplete
and reflect only fragments of an agreement. The emails exchanged were between the brokers but no
powers of attorney from their principals were
presented.

When an Arbitration Agreement is

Unenforceable

An arbitration agrement is null and

void when the competent arbitral
tribunal is neither unambiguously
determined nor unabiguously
determinable.

When Third Parties are Bound

General Rule: Only parties, their heirs and assigns are bound
by an arbitration agreement
Exception: Under the ADR Act, in a civil action involving
parties who are bound by an arbitration agreement and those
who are not, the Court is directed to refer to arbitration those
who are bound to an arbitration agreement and to continue
the suit as to those who are not
Rule 4.7 (Special Rules on ADR): The court may issue an order
directing the inclusion of those who are not bound to an
arbitration agreement PROVIDED they agree to be included
and those originally bound by the arbitration agreement do
not object to their inclusion.

Issues Whether a Third Person is

Bound by An Arbitration Agreement
1. 3rdP rights and obligations under arbitration agreements
in contracts which bestow benefits on 3rdP beneficiaries
or stipulations in favor of 3rdP. ( stipulation pour autrui)
2. 3rdP rights and obligations under arbitration agreements
or novation of the underlying contract to the 3rdp.
3. 3rdP rights and obligations where the 3rdP exercises
subrogated rights.
4. Rights and obligations under arbitration agreements
where the interest in contracts are asserted by successors
to parties, following merger or demerger of companies, so
that the companies entity is no longer the same

Incorporation by Reference
The reference in the contract to a document containing an
arbitration agreement constitutes an arbitration agreement
PROVIDED THAT the contract is in writing and the reference is
such as to make that clause part of the contract. ( Last
sentence Art. 7(2) Modal Law)
Incorporation by Reference Doctrine: For an arbitration
agreement to be incorporated by reference in a contract, it is
not required that it be make an explicit reference to the
document to be incorporated. It is sufficient that the reference
is such as to make the arbitration agreement part of the
contract.
* for there to be incorporation by reference, the parties
MUST HAVE INTENDED of the arbitration agreement to
form part of the contract.

When Members of Associations are Bound by Association

Rules

Issue: Whether a member of an association was bound by

association rules providing for arbitration as means of
settlement of disputes between the member and the
association?
1. By becoming a member of an association, a claimant MUST
BE DEEMED to have consented to them, regardless of
whether the claimant had seen the rules or had obtained a
copy of such rules.
2.

Only those who approve the amendment were bound by

it. The fact the plaintiff remained a member of the
association even after the amendment of its rules was not
deemed an acquiescence to the amendment since the
association was one in which the members are not free to
decide to joi or to resign after joining.

When condition Precedent is not Complied with

Westco Air Conditioning Ltd. V. Sui Chong Construction
& Engineering Co. Ltd
-Subcontract between the parties required certaqin disputes
to be refered first to the architect and later to arbitration if
either party disagreed with the conclusion of the architect.
-Westco commenced an action against Sui Chong, the latter
moved for a stay of the proceedings and prayed for an order
of a reference to arbitration.
-Westco alleged that the arbitration agreement was
inoperative since it required prior referal to the achitect
Ruling: HK High Court held the dispute was referable to
arbitration. Prior referal to the architect was a first instance
procedure and not inconsistent with the concept of arbitration.
The phrase refer the parties to arbitration may be construed
not necessarily to arbitrators but to the process of arbitration
the parties had agreed to undertake.

When a Party is Estopped to Assert the Contrary

production of a written contract, although unsigned by the
parties, coupled with letters of the defendant to the court in
China (demurred and informed the court that the parties had
an arbitration agreement) were sufficient to established the
requirements of a written arbitration agreement. Moreover,
the defendant was in estoppel and may not be allowed to
assert a fact contrary to it own representation. (Jiangxi
Provincial Metal & Mineral Import & Export Corp. v. Sulanser
Co., Ltd)

Enforcement of Settlement Agreement

Shanghai Foreign Trade Corp. v. Sigma Metallurgical Co. Pty. Ltd.
-Parties entered into a2 contracts for the supply of scrap iron, each
containing a clause for submission of disputes to arbitration.
-Shanghai Foreign alleged that it and Sigma has settled a claim for
damages for breach of contract and sought enforcement of settlement
agreement in Australia. Sigma admitted the settlement agreement argued
its consent was obtained thru coercion. It further argued the settlement
should be decided by arbitration in accordance to the contract.
-The settlement agreement did not contain an arbitration clause.
Held: The Supreme Court of New South Wales, Commercial Division
acknowledged that there was a connection between the supply contracts
and the settlement agreement. Although the arbitration clause in the
supply contracts provide for submission of disputes in connection with the
contract or execution thereof, it should be understood as having reference
to the making, validity and enforceability of each contract, and not go any
further as to apply to disputes regarding the validity or enforcement of
the settlement agreement reached by friendly negotiation.

Disputes Arising from Defined Legal

Relationship

the dispute submitted to arbitration must have arisen from a

defined legal relationship
need not be contractual nor required to be considered
commercial
(Should be given to a wide interpretation)
The phrase dispute must be interpreted to cover all noncontractual cases occurring in practice.
NOTE: the ADR Law limits the application of the Modal Law
ONLY to commercial disputes; Non-commecisal disputes may
be submitted to arbitration under RA 876