Introduction
Many fail to realise that arbitration proceedings are entirely possible in the absence of an arbitration clause in an underlying contract.
The ability to launch arbitration proceedings depends exclusively on the parties’ will since this dispute resolution method is purely consensual. The required will (or consent to arbitration) is often, but not always, encompassed in the contract concluded between parties in the form of an arbitration clause.
After failing to insert such a clause in their contract, parties tend to resolve their disputes by resorting to other fora (State courts), despite the many potential advantages of arbitration as compared to litigation.
Often this is because the parties are unaware that arbitration remains possible in the absence of an arbitration clause.
Different Forms of Arbitration Agreements
It is generally recognised that an arbitration agreement can take different forms.
The first, and the best known, form is an arbitration clause included in the main contract concluded between parties, which anticipates resolution of all potential disputes through arbitration.
By contrast, the second form of arbitration agreement, the so-called “submission agreement” or the compromis, is concluded for the purposes of a specific dispute, after such a dispute has already arisen. This submission agreement allows the parties wishing to avoid State litigation to commence arbitration without an arbitration clause.
The roots of this distinction go back to the beginning of the 20th century with the promulgation of the Protocol on Arbitration Clauses of 24 September 1923. Pursuant to Article I of the Protocol “Each of the Contracting States recognises the validity of an agreement whether relating to existing or future differences between parties subject respectively to the jurisdiction of different Contracting States by which the parties to a contract agree to submit to arbitration all or any differences that may arise in connection with such contract relating to commercial matters or to any other matter capable of settlement by arbitration, whether or not the arbitration is to take place in a country to whose jurisdiction none of the parties is subject.”[1]
Current practice shows that arbitration clauses are the most common ground to initiate arbitration proceedings, leaving submission agreements in their shadow. However, this cannot be seen as preventing the parties to enter into such agreements after their dispute has arisen; this possibility remains perfectly possible, despite being largely ignored.
Distinction between Different Forms of Arbitration Agreements from a Historical Point of View
The distinction between the two above-mentioned forms of arbitration agreements is primordial from a historical point of view.
In this respect, several statutes considered in the past that only submission agreements were valid and enforceable agreements, even in the presence of an arbitration clause in the main contract.
This was the case, for instance, in Brazil before the Arbitration Law of 23 September 1996. As has been emphasised by scholars, the former Brazilian practice required that “even where an arbitration agreement [i.e. arbitration clause] existed, it was still necessary to enter into a submission agreement when the dispute arose. Further, if a party refused to enter into a submission agreement, it could not be compelled to do so.”[2]
Nowadays, this cleavage has generally been overrun in national laws, and both forms of arbitration agreements are generally enforceable. For instance, the above-referenced Brazilian Arbitration Law, in Article 3, today states that “The interested parties may submit the settlement of their disputes to an arbitral tribunal by virtue of an arbitration agreement, which may be in the form of either an arbitration clause or a submission to arbitration (acte de compromis).”[3] This distinction was not modified in the 2015 Arbitration Law[4].
This distinction also figures for example in Section 1029(2) of the German Code of Civil Procedure[5], Article 1442 of the French Code of Civil Procedure[6] or Article 7(1) of the UNCITRAL Model Law[7].
Practical Difficulties in Agreeing to Arbitration Once a Dispute Has Arisen
In practice, it is not always an easy matter to convince a business partner to agree to arbitration after a dispute has arisen, since the breaching party may wish to postpone the resolution of a dispute indefinitely.
For parties facing the possibility of litigation before an overburdened court system, however, it is often in the interests of both parties to agree to arbitration once a dispute has arisen, in order to avoid lengthy court proceedings that are neither party’s interest.
Moreover, many businessmen have managed to secure an agreement to submit to a dispute to arbitration, after a dispute has arisen, by making the offer to arbitration more palatable: for instance by suggesting mediation, to be followed by arbitration only if mediation is unsuccessful.
In sum, arbitration without an arbitration clause is a perfectly available dispute resolution method provided that the parties conclude a submission agreement once a dispute has arisen.
Arbitration by a submission agreement represents, in fact, the apotheosis of consensualism because the parties accept arbitration in full knowledge of the extent of an existing dispute.
[1]https://treaties.un.org/doc/Publication/UNTS/LON/Volume%2027/v27.pdf
[2] See E. Gaillard, J. Savage, Fouchard, Gaillard, Goldman on International Commercial Arbitration, Kluwer Law International, 1999, para.632. See alsoJ. D. M. Lew, ‘The Law Applicable to the Form and Substance of the Arbitration Clause’, in A. Van den Berg (eds), Improving the Efficiency of Arbitration Agreements and Awards: 40 Yeas of Application of the New York Conventions, ICCA Congress Series, Vol. 9, Kluwer Law International, 1999, p. 115.
[3] Law n° 9.307 of 23 September 1996, Article 3
[4] Law n° 13.129 of 26 May 2015
[5] German Code of Civil Procedure, Section 1029(2)
