Arbitration Law: Validity of Agreements

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Questions and Answers

What is required for an arbitration agreement to be considered valid under Article II(1) of the NY Convention?

A verbal commitment

An email exchange

An agreement in writing (correct)

An oral agreement

An arbitration clause can be invalid if the parties have not agreed on the applicable law.

True

Name one ground that can be used to challenge the substantive validity of an arbitration agreement.

Fraud

The arbitration clause in the given contract specifies that disputes shall be settled according to _________ Rules.

ICC Signup and view all the answers

Match the following types of invalidity with their definitions:

Incapacity of the parties = Parties lack the legal ability to enter the agreement Mistake = Incorrect understanding of agreement terms Duress = Pressure or threats influencing the agreement Fraud = Deceit used to secure the agreement Signup and view all the answers

What does the phrase 'scope' in the context of arbitration agreements refer to?

Whether the parties agreed to arbitrate only some disputes Signup and view all the answers

An arbitration agreement can be valid even if it is not in written form, as long as it is implied.

False Signup and view all the answers

What must be conducted to confirm the validity of an arbitration clause?

A legal analysis based on applicable law Signup and view all the answers

Disputes relating to a lease agreement cannot be arbitrated if the arbitration agreement covers only _________ disputes.

commercial Signup and view all the answers

Which factor does NOT contribute to the invalidation of an arbitration agreement?

Incapsulation of terms Signup and view all the answers

What does the efficacy of an arbitration agreement depend on?

The parties ability to enforce the agreement Signup and view all the answers

Every arbitration agreement guarantees that arbitration will occur in case of a dispute.

False Signup and view all the answers

What are the two types of validity that international arbitration agreements must satisfy?

Formal and substantive validity Signup and view all the answers

Arbitration agreements may face challenges related to existence, validity, or _____ of the agreement.

scope Signup and view all the answers

Match the following terms with their definitions:

Existence = Claim that no agreement to arbitrate exists Validity = Claim that an arbitration agreement is invalid Formal Validity = Requirement for an agreement to be in writing Substantive Validity = Validity based on the merits of the agreement Signup and view all the answers

What is a possible reason a party may claim that there is no arbitration agreement?

The party claims it never consented to the agreement Signup and view all the answers

An arbitral clause signed by the parties qualifies as an 'agreement in writing'.

True Signup and view all the answers

What must be demonstrated for an arbitration agreement to be considered valid?

It must satisfy requirements of formal and substantive validity. Signup and view all the answers

The term 'agreement in writing' includes an arbitral clause in a contract or an __________ agreement.

arbitration Signup and view all the answers

Under the New York Convention, what must each Contracting State recognize?

Agreements to submit to arbitration differences in a defined legal relationship Signup and view all the answers

Study Notes

Validity of International Arbitration Agreements

The effectiveness of an arbitration agreement relies on enforceability by the involved parties.
Post-dispute reconsideration may lead parties to prefer local courts over arbitration.
Challenges to international arbitration agreements can stem from issues related to existence, validity, or scope.

Existence Challenges

Claims of non-consent can assert that no arbitration agreement exists between parties.

Validity Challenges

Validity can be contested on two bases:
- Formal Invalidity: Failure to meet required written standards or forms.
- Substantive Invalidity: Grounds include unconscionability, termination, frustration, or fraud.
Formal and substantive validity are key considerations for international arbitration agreements.

Legal Framework and Requirements

Article II(2) of the New York Convention mandates recognition of written arbitration agreements by States.
Written agreements can include clauses in contracts, signed agreements, or exchanges of letters/telegrams.
Contracting State courts must refer parties to arbitration unless the agreement is proven null, inoperative, or unperformable.

Formal Validity Criteria

The written form requirement applies exclusively to "agreements in writing" as defined by NY Convention Article II(2).

Substantive Validity Criteria

Substantive challenges include:
- Incapacity of the parties involved.
- Issues arising from duress or misrepresentation.
- Fraud or mistakes affecting the agreement.

Determining Validity

The applicable law influences the validity of arbitration agreements.
Potential applicable laws include:
- Law chosen by the parties.
- Law relevant to the overall contract.
- Lex arbitri, referring to the law of the arbitration seat.

Grounds for Invalidity

An arbitration agreement may be invalid under applicable law if:
- Parties lack capacity.
- The agreement does not meet written form requirements.
- There’s evidence of duress, misrepresentation, fraud, or mistake.
- Problems arise concerning standardized terms and necessary elements in the arbitration clause.

Scope Challenges

Disputes over the scope arise when an agreement covers certain disputes but not others, such as a lease agreement excluding claims of libel or unfair competition.

Example

In a contract between a Saudi Arabian company and a French company for exclusive construction materials, the arbitration clause specifies resolution under ICC Rules seated in Paris, with a unique selection process for arbitrators requiring unanimous decisions.

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Description

This quiz explores the efficacy of international arbitration agreements and the legal framework surrounding them. It raises critical questions about the enforceability and implications of these agreements in dispute resolution. Test your understanding of arbitration law and its application in international contexts.