Principles in Business Law: Arbitration Clause and Agreement

This assignment delves into the intricacies of arbitration clauses and agreements within the realm of business law. It begins by defining the arbitration clause as a contractual provision that outlines the rights and obligations of parties in the event of a legal dispute, emphasizing its role in resolving conflicts outside of civil court through a third-party arbitrator. The analysis covers essential elements of a well-drafted arbitration clause, including the identification of affected parties, effective dates, potential modifications, and consequences of breach. The assignment differentiates between arbitration and civil action, highlighting arbitration's flexibility in negotiating compensation. Furthermore, it outlines the purpose of an arbitration agreement, which is to create a framework for settling disputes without court intervention and discusses the elements that should be included in an arbitration agreement. The document also explores the use of model arbitration clauses provided by arbitral institutions and the importance of customizing these clauses to suit specific contractual needs. It mentions the London Court of International Arbitration (LCIA) as a source of model clauses and identifies key decisions parties must make when adopting a model clause, such as selecting the number of arbitrators, the seat of arbitration, and the governing law of the contract. The assignment concludes by referencing relevant legal literature on arbitration and commercial law.

Running head: PRINCIPLES IN BUSINESS LAW
QUESTION-ANSWER ON ARBITRATION
Name of the Student
Name of the University
Authors Note

1PRINCIPLES IN BUSINESS LAW
Answer- 1
The arbitration clause is regarded to be as a contract provision which deals with the rights
and obligations of the parties in the case of the arrival of legal conflict over the agreement. In the
majority of arbitration clauses, the parties decide not to sue each other. Instead of suing, they
want to settle conflicts by arbitration. Arbitration is a mechanism which requires a third party
known as an arbitrator to assist the parties in negotiating the disputed matter. An arbitration
clause needs to draft appropriately so that it can settle the dispute of the parties competently,
reasonably and successfully.
Instead of suing each other, during these arbitration meetings, the contractual parties
would have to recognize their disagreements and find a common consent about how the issues
can be fixed. The arbitration clause ultimately settles the conflicts by paying remedies. The key
difference between an arbitration clause and a civil action is that arbitration is more open and
relaxed and helps the parties to negotiate the amount of compensation (Laughlin, 2017).
Generally, an arbitration clause of the contract includes language like ‘Both the contractual
parties hereby agree to settle legal conflicts through arbitration instead of civil action’. Apart
from that, the following elements need to be included in an arbitration clause, such as:
i) Information relating to those parties who get affected by the clause;
ii) The time when the clause comes into effect and the time of its expiration;
iii) Whether there exist any chances to modify the clause in future; and
iv) Results of breaching the arbitration clause (Moses, 2017).

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Whereas, the essential purpose of an arbitration agreement is to provide a framework
which helps to settle the disputes without going court. The agreement will be drafted with proper
care to ensure that the framework operates appropriately. An arbitration agreement shall usually
be created when a conflict occurs between two parties concerning a contractual arrangement. It
helps the parties to settle the disputes through an arbitrator without going to the courts. In the
matter of an arbitration, an arbitrator performs its duties as a judge. An arbitration agreement
would usually include who will appoint the arbitrator, the arbitrator’s choice of venue, judgment,
and other matters. Therefore, the parties need to sign an arbitration agreement which is
enforceable by law (Bermann, 2017).
Arbitration agreements have a similarity with a contingent contract the meaning of which
is that the enforceability of it depends upon the arrival of a dispute. The following elements need
to be included in an arbitration clause, such as:
i) The seat of arbitration;
ii) Language of arbitration;
iii) Process of appointing an arbitrator;
iv) Types of arbitration;
v) Name and address of the arbitration institution;
vi) Regulating law;
vii) Number and qualification of arbitrators (Nazzini, 2017).
Answer- 2
Regular arbitral provisions for potential disputes and current legal disputes have been
provided by the arbitral institutions. A justifiable amount of classical wisdom argues that a short

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and simple arbitral clause is enough, and therefore a complicated or complex clause is not
required. For several arbitrations, the basic model clause suggested by the arbitral institutions
selected for the arbitration by parties would be enough. For implementation under the New York
Convention, a written form is usually required and is often required by various arbitration laws,
such as the UNICITRAL Model Law adopted as the rule of numerous nations. Revisions have
been put forward by the model of UNCITRAL and it also has proposed interpretations of some
dispositions of the New York Convention, which make it less important to comply with the
requirement of writing. Many scholars are of the view that it is best for those parties to use the
model arbitration clause in their contract, who select an institution to supervise their Arbitration
(Deane & Mason, 2015).
The London Court of International Arbitration (LCIA) always recommends adopting a
reasonable model clause. All conflicts arising out of or in association with the contract shall be
mentioned to and eventually determined by arbitration under the LCIA Rules, including any
issue about their scope, validity or expiration, and the Rules shall be considered to be integrated
with the clause by reference in that clause (Gotti, 2016).
Once the blanks of the model clause in the paragraph above are filled in, the parties must
take a variety of important decisions. Generally, the model clauses are listed alphabetically.
However, the decisions include the following things, such as:
i) The number of arbitrators (sole-arbitrator or three-members panel);
ii) The seat or legitimate place of the arbitration;
iii) The language needs to be used in the arbitral proceedings; and
iv) The controlling law of the contract.

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Reference
Bermann, G. A. (2017). International arbitration and private international law. Brill Nijhoff.
Deane, F., & Mason, R. (2015). The UNCITRAL Model Law on Cross-border Insolvency and its
Potential Role in Upholding the Rule of Law.
Gotti, M. (2016). Customising the Model Law on International Commercial Arbitration.
In Obscurity and Clarity in the Law (pp. 111-130). Routledge.
Laughlin, C. (2017). Arbitration clause issues in sharing economy contracts. J. Disp. Resol., 197.
Moses, M. L. (2017). The principles and practice of international commercial arbitration.
Cambridge University Press.
Nazzini, R. (2017). The law governing the arbitration agreement: a transnational solution?.
In Transnational Construction Arbitration (pp. 5-24). Informa Law from Routledge.