Arbitration clauses in general conditions which are not signed by both parties are void, according to the Supreme Court.
This decision affects arbitration clauses in consumer contracts and in regular commercial contracts between businesses.
It involves a restrictive interpretation of the Arbitration Act, which requires arbitration clauses to be in written form. This is accomplished only if the arbitration agreement is:
- incorporated in a document signed by the parties
- in mutually exchanged letters
- agreed by fax or other telecoms device that record both the agreement and specify the parties
The Supreme Court construed “incorporated in a document signed by the parties” strictly to mean that the document containing the arbitration clause must be signed by the parties. It was not enough for it to be in an annex, even one that was firmly attached to the contract and referred to by the parties before signing.
This is a questionable decision as it would invalidate arbitration clauses in annexes which are expressly identified in the signed agreement and declared by the parties to constitute an inseparable part of the agreement. The Supreme Court’s approach clearly accepts that the parties in the case proceeded this way and referred to the general terms and conditions as being part of the agreement.
The ruling would also invalidate all arbitration clauses in template FIDIC contracts which are routinely annexed to and incorporated into engineering agreements as general conditions.
Given the problems created by this decision, the safest course of action is for all arbitration clauses now to be included directly in the agreement to be signed.
Law: case No. 2 Cdo 245/2010