Do you often deal with parties established outside of the European Union? Or do you wish experts in a specific area to rule on your dispute? In that case, arbitration might be interesting for you. For more information on what arbitration exactly entails and the advantages thereof, we refer you to our overview article on this subject. In this article, we will explain how you can opt for arbitration as your dispute resolution mechanism.
Arbitration is of a voluntary nature. This means that a dispute can only be resolved by means of arbitration if parties agreed to this beforehand. Therefore, if you are considering arbitration as a (standard) dispute resolution mechanism, you need to explicitly agree on this with your counterparty.
When do you agree on arbitration?
It is recommended for parties to make clear agreements on how to deal with a commercial dispute before they actually start working together (and there is no conflict yet). When the relationship between parties is still good, it will usually be easier for them to agree to clear arrangements. In practice, it usually comes down to one party suggesting an arbitration clause as part of the contract negotiations, or an arbitration clause is included in standard terms and conditions that one of the parties wants to apply to the commercial relationship (please note however that in the Netherlands you can only include an arbitration clause in general terms and conditions if you are not dealing with consumers).
In the event that a dispute already arose between the parties before they agreed on a dispute resolution mechanism, it can still be possible to agree on arbitration. In that case, parties can conclude an ‘ad hoc’ arbitration agreement. Parties then agree in writing that they wish to resolve their dispute by means of arbitration. This ad hoc arbitration agreement can be agreed upon independent from any other commercial agreements between the parties: it qualifies as an entirely separate agreement. Again, consent of both parties is required – one party cannot unilaterally decide that disputes will be resolved by means of arbitration.
How do I agree on arbitration?
It is important that an arbitration clause is agreed in writing. This means that the arbitration clause is in a written document, but also that it can be demonstrated that the other party agreed to this clause. Is the arbitration clause included in a commercial contract that was signed by both parties? Then the arbitration clause will be deemed valid.
However, when an arbitration clause is included in general terms and conditions, these general terms will usually not be signed. In that case, you will still have to be able to demonstrate the other party’s approval with the application of the general terms and conditions before there can be a valid arbitration agreement. If you have correctly declared your general terms and conditions applicable to the relationship with your counterparty, such consent will be deemed to be present.
What do I agree on in an arbitration clause?
In an arbitration clause, the arbitration proceedings can already be shaped to a great extent. For example, you can agree on the arbitration institute to administer the arbitration, how many arbitrators you want to decide on the matter (one or three), in what language the proceedings will be conducted, what law should be applied to the dispute and what should be the seat (city) of the arbitration.
Should you want to decide on a case-by-case basis whether you want to opt for arbitration and want to keep the option of ‘regular’ court proceedings open, then it is also possible to include this in a dispute resolution clause.
In short: if you want to use arbitration as a dispute resolution mechanism, a written arbitration clause with your counterparty is required. Do you want to know if arbitration could be interesting for you, whether a valid arbitration agreement was concluded with your counterparty, or do you wish to receive advice on agreeing on an arbitration clause? You can contact our specialist Céline Goedhart.
