Arbitration clause

Contract law
Formation
Capacity Offer and acceptance Meeting of the minds2 Abstraction principle4,5 Posting rule1 Mirror image rule Invitation to treat Firm offer Consideration1,4 Implication-in-fact Collateral contract
Defences
Misrepresentation Mistake Threats and unequal bargaining power Illegality and public policy Unconscionability Culpa in contrahendo2 Force majeure Frustration of purpose Impossibility Impracticability Hardship Set-off Illusory promise1 Statute of frauds1 Non est factum1 Unclean hands1 Accord and satisfaction1 Exculpatory clause
Interpretation
Parol evidence3 Contract of adhesion Integration clause Contra proferentem UNIDROIT Principles
Dispute resolution
Choice of law clause Forum selection clause Hague Choice of Court Convention Arbitration New York Convention UNCITRAL Model Law Mediation Singapore Mediation Convention Enforcement of foreign judgments Hague Judgments Convention
Rights of third parties
Privity of contract1 Assignment Delegation Novation Third-party beneficiary
Breach of contract
Anticipatory repudiation Cover Exclusion clause Efficient breach Deviation Fundamental breach
Remedies
Specific performance3 Money damages Liquidated, stipulated, or penal damages3 Rescission
Quasi-contractual obligations
Promissory estoppel1 Quantum meruit1 Unjust enrichment Restitution Negotiorum gestio2
Duties of parties
Duty of honest contractual performance (or doctrine of abuse of rights)6 Duty of good faith (also implied covenant of good faith and fair dealing or duty to negotiate in good faith)7 Contract A and Contract B in Canadian contract law6
Related areas of law
Conflict of laws Commercial law
By jurisdiction
Australia Canada China (mainland) Ireland India Saudi Arabia United Kingdom England and Wales Scotland United States
Other law areas
Tort law Property law Wills, trusts, and estates Criminal law Evidence
Notes
1 Specific to common law jurisdictions 2 Specific to civil and mixed law jurisdictions 3 Historically restricted in common law jurisdictions but generally accepted elsewhere; availability varies between contemporary common law jurisdictions 4 Specific to the German Bürgerliches Gesetzbuch and other civil codes based on the pandectist tradition 5 Explicitly rejected by the UNIDROIT Principles of International Commercial Contracts 6 Specific to Canadian contract law both in Québec and in the country's common law provinces 7 Specific to civil law jurisdictions, the American Uniform Commercial Code, and Canadian jurisprudence in both Québec and the common law provinces pertaining to contractual and pre-contractual negotiation
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In contract law, an arbitration clause is a clause in a contract that requires the parties to resolve their disputes through an arbitration process. Although such a clause may or may not specify that arbitration occur within a specific jurisdiction, it always binds the parties to a type of resolution outside the courts, and is therefore considered a kind of forum selection clause.

Arbitration clauses are frequently paired with class action waivers, which prevent contracting parties to file class action lawsuits against each other. In the United States, arbitration clauses also often include a provision which requires parties to waive their rights to a jury trial. All three provisions have attained significant amounts of support and controversy, with proponents arguing that arbitration is as fair as courts and a more informal, speedier way to resolve disputes, while opponents of arbitration condemning the clauses for limited appeal options and allowing large corporations to effectively silence claims through "private justice".^[1]

Brazil has been very slow to adopt arbitration as its courts often refuse to enforce agreements to arbitrate, especially prior to the passage of Brazilian law number 9.307 (amended by Law No. 13.129 in 2017), the Brazilian Arbitration Act, which was passed in 1996, today considered to be the fundamental law for arbitration within Brazil. Since its passage, though, Brazilian courts have been more willing to enforce agreements to arbitrate, though precedent only stipulates that courts can compel arbitration in disputes involving what the law refers to as "arbitrable patrimonial rights", presumed to relate only to tangible and intangible property disputes. Brazil also requires all arbitrators to refer non-arbitrable disputes to the competent court. Brazil further restricts all arbitration proceedings to be decided by an odd number of arbitrators.^[2][3]

All provinces except for Quebec have adopted an arbitration code similar to the United Nations Commission on International Trade Law's Model Law. Quebec has opted instead to require that arbitrations would be subject to the province's own Civil Code, including Quebec's Code of Civil Procedure. Arbitration in Canada is primarily administered by the ADR Institute of Canada and the British Columbia International Commercial Arbitration Centre.^[4]

Class action waivers lack a uniform policy across Canada, as the Supreme Court of Canada has found that provincial legislation governed disputes, though in Seidel v. TELUS Communications, the court found that because a class action waiver was attached to an invalid arbitration agreement, the class action waiver was void. The province of Ontario, per the Consumer Protection Act of 2002, has banned class action waivers. A court of appeals in British Columbia also found that class action waivers were unenforceable and unconscionable in Pearce v. 4 Pillars Consulting Group due to the contract in question being a standard form contract written by 4 Pillars and giving little bargaining power to Pearce.^[5]

In Uber Technologies Inc v Heller (2020), the Supreme Court found an arbitration clause requiring a gig worker to litigate before the Dutch International Chamber of Commerce void due to unconscionability.^[6][7]

China allows arbitration clauses to exist, though the Supreme People's Court has found that an arbitration clause that does not specify an "arbitral commission" is invalid and unenforceable. An agreement to arbitrate in China, in addition to specifying a commission, must contain a declared intent to arbitrate as well as name the disputes to be arbitrated in order to be enforceable. In the event that one party questions the validity of an arbitration agreement and requests that a PRC court to determine the validity of the agreement, the court shall determine the validity of the agreement.^[8][9]

French law generally supports arbitration, though declares that capacity, marriage and divorce cannot be arbitrated.^[10][11]

German law excludes disputes over the rental of living space from any form of arbitration,^[12] while arbitration agreements with consumers are only considered valid if they are signed,^[13] and if the signed document does not bear any other content than the arbitration agreement.^[14]

In England and Wales it is not possible for parties to a contract to prevent courts from exercising their jurisdiction over contact disputes,^{[citation needed]} but through what is known as a Scott v. Avery clause they may require that a dispute be adjudicated by an arbitrator before submitting the matter to a court.^[15]

The United Arab Emirates generally supports arbitration clauses. The federation of kingdoms, however, poses limitations on their enforceability depending on the actions of the parties, and the UAE's courts have ruled that parties which engage in court proceedings waive their right to compel arbitration.^[16]

The federal government has explicitly allowed arbitration clauses. The relevant law is found in the Federal Arbitration Act, which permits compulsory and binding arbitration, under which parties give up the right to appeal an arbitrator's decision to a court.^[17] Historically, arbitration in the United States in the employment context was primarily used for disputes between unions and employers. Starting in 1991 with the Gilmer decision this changed dramatically, expanding from 2.1 percent of the employers subject to mandatory arbitration clauses in 1992^[18] to 53.9% in 2017.^[19]

In 2022, the U.S. Congress passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFASASHA), which excludes these types of complaints from arbitration clauses, including retroactively. Congress also included a ban on class action waivers for claims covered under the act.^[20]

The use of arbitration clauses has been criticized for its unfairness. In the US in 2020, workers who challenged their employers through forced arbitration won their cases just 1.6 percent of the time.^[21] This prompted members of the United States' Democratic Party to present bills limiting the scope of arbitration clauses, most notably the Forced Arbitration Injustice Repeal Act (which has yet to pass) and the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFASASHA), which was signed into law in 2022 by president Joe Biden.^[22]

A number of international arbitration bodies provide sample arbitration clauses for parties to use. Examples of these are:

In keeping with the informality of the arbitration process, the law in England and Wales is generally keen to uphold the validity of arbitration clauses even when they lack the normal formal language associated with legal contracts. Clauses which have been upheld include:

• "arbitration in London – English law to apply"^[26]
• "suitable arbitration clause"^[27]
• "arbitration, if any, by ICC Rules in London"^[28]

Courts in England and Wales have also upheld clauses which specify resolution of disputes other than in accordance with a specific legal system. These include provision indicating:

• that the arbitrators "must not necessarily judge according to the strict law but as a general rule ought chiefly to consider the principles of practical business"^[29]
• "internationally accepted principles of law governing contractual relations"^[30]

• Epic Systems Corp. v. Lewis, a United States Supreme Court case that considers whether arbitration clauses are legal under the National Labor Relations Act
• Class action waiver

• The Arbitration Database

• Gary Born. International Arbitration and Forum Selection Agreements: Planning, Drafting and Enforcing book (2010)