The roots of this distinction date back to the beginning of the 20th century with the promulgation of the Protocol on Arbitration Clauses of 24 September 1923. According to article 1 of the Protocol, „each State Party recognizes the validity of an agreement, whether it relates to existing or future disputes between parties under the jurisdiction of different States Parties with which the Parties agree to have all or part of the differences that may arise with respect to such a treaty in commercial matters or in any other matter subject to arbitration; submit to arbitration; whether or not the arbitration is to take place in a country whose jurisdiction is not subject to either party.  The Court therefore found that G had complied with the obligation to establish the existence of an arbitration agreement and granted G`s request for suspension. If the dispute is submitted by a party to the People`s Court, the arbitration clause will be declared invalid because it allows for both arbitration and litigation, and the dispute can only be heard and settled by the People`s Court. All rules and regulations relating to civil proceedings would apply to the dispute. Current practice shows that arbitration clauses are the most common basis for initiating arbitration, eclipsing submission agreements. However, this cannot be regarded as precluding the conclusion of such agreements after the dispute has arisen; This possibility remains quite possible, although it is largely ignored. In Hearn v. Comcast Cable Commons., LLC, 2019 U.S. Dist.
LEXIS 1811430 *23 (21. October 2019), the court found that a plaintiff`s right of recourse under the Fair Credit Reporting Act (FCRA) did not relate to the service contract between the plaintiff and the defendant and therefore did not fall within the scope of its arbitration agreement. If an arbitration clause allows disputes to be resolved by arbitration or litigation, it is invalid by its nature. The legal effect of this nullity is that it does not exclude the jurisdiction of the People`s Court. Accordingly, the jurisdiction of the Arbitration Commission could be excluded if one party submits the dispute to a people`s court, and the jurisdiction of the people`s court could be excluded if one party chooses arbitration to settle the dispute and the other party does not object to the validity of the arbitration clause before the first hearing of the arbitral tribunal. Arbitration through a submission agreement is, in fact, the apotheosis of consensualism, as the parties accept arbitration with full knowledge of the scope of an existing dispute. Thus, while it may seem that an invalid arbitration clause is equivalent to not having an arbitration clause, this is not the case. Indeed, articles 7 and 18 of the judicial interpretation of the Arbitration Act provide for two circumstances in which an arbitration clause is considered invalid: in deciding on the case, the court took into account whether the arbitration clause continues to bind the parties after the termination of the agreement and whether the plaintiff`s FCRA claim falls within the scope of the arbitration clause. The court stated that, based on the plain language of the contract, „the parties intended that the arbitration clause would survive the termination” of the agreement. However, the tribunal ultimately dismissed the arbitration because the claimant`s claims did not arise from the agreement and therefore did not fall within the scope of the arbitration clause. It is generally accepted that an arbitration agreement can take different forms.
The Tribunal therefore disagreed with K`s argument that such a requirement made the subcontract „impracticable”. The tribunal noted that if it had been true that the AAA`s arbitrators had indeed been required to make a binding decision, clause 7.7 would have constituted an arbitration agreement, regardless of the term „non-binding.” The defendants also argued that clause 7.7 proved that it was agreed between the parties not to enter into litigation before the conclusion of the aaa process. They argued that under English law there is an authority that requires courts to respect the decisions of the parties to participate in pre-litigation proceedings. On this basis, the defendants requested the stay of proceedings under the inherent jurisdiction of the court under section 49(3) of the Higher Courts Act 1981. The plaintiff, an English financial services company, and the defendants, a group of affiliates, were parties to an exclusivity agreement. That agreement was part of a series of documents relating to a contract of sale between third parties. Clause 7.7 of the Purchase Agreement provided that all disputes relating to the Purchase Agreement „shall first be submitted to non-binding arbitration in Florida in accordance with the American Arbitration Association (AAA) Commercial Arbitration Rules.” It is clear from this decision that an agreement to be submitted to „non-binding” arbitration is not an arbitration agreement enforceable under the law. If the parties intend to settle their dispute through arbitration, the clause must provide for a binding decision to obtain the protection afforded to the arbitration under the law.
The first and best known form is an arbitration clause, which is included in the main contract between the parties and provides for the settlement of all potential disputes by arbitration. The court rejected the defendant`s argument and held that clause 7.7 did not constitute an express promise between the plaintiff and the defendant (neither of whom was a party to the purchase agreement) to participate in the AAA process before they pleaded in the English court for breach of the exclusivity agreement. Another factor that challenged the defendants was that it had made an offer to stay the aaa proceedings in favour of the English dispute in the letter preceding the action and which the plaintiff had accepted. Article 58 of the Arbitration Act stipulates that there is no arbitration clause to justify the annulment of an arbitral award by a people`s court. (3) In addition, article 18 of the judicial interpretation of the Arbitration Act provides that an arbitration clause which a court declares invalid or repeals is to be considered „not an arbitration clause” within the meaning of article 58. However, for parties facing the possibility of litigation before an overburdened court system, it is often in the interest of both parties to agree to arbitration once a dispute has arisen in order to avoid lengthy legal proceedings that are not in the interest of both parties. The respondents argued that subsection 58(1) supports the validity of non-binding arbitration because it allows the parties to agree that an arbitral award is not binding until an appeal has been exhausted. Baker J. rejected this proposal without going into detail, arguing that the clause could not be interpreted as supporting the argument that the parties could agree that an arbitral award would never be binding. This is consistent with berkeley Burke`s  conclusion EWHC 2396 (Comm), in which Teare J. noted that subsection 58(1) presupposes the existence of a valid arbitration agreement and applies to cases that provide for a graduated arbitration panel. (1) In this Part, „arbitration agreement” means an agreement between the parties to submit to arbitration any particular dispute or dispute that has arisen or may arise between them in connection with a defined contractual or non-legal relationship.
This case is a useful reminder of the need to: (i) correctly identify the preferred method of dispute resolution in contract negotiations; and (ii) draft dispute settlement provisions, including but not limited to arbitration agreements, with care. Plaintiff Michael Hearn entrusted services to the defendant Comcast Cable Communications (Comcast). The parties entered into an agreement that included a binding arbitration clause, an opt-out provision and a survival clause stating that „the parties` arbitration agreement shall survive the termination of the agreement.” After some time, the plaintiff terminated his use of the defendant`s services. The plaintiff then filed a lawsuit for various violations of the FCRA, arguing that Comcast had received its consumption report for inappropriate purposes. Comcast countered that the plaintiff`s claims were covered by the arbitration agreement in the parties` contract. David Alderson, LL.B, LL.M (Commercial and Corporate), a lawyer, qualified arbitrator and mediator, has served for over 38 years as a commercial and commercial litigation lawyer in various cases before the courts and in domestic and international arbitration in Ontario, England and Wales, Bermuda and Dubai. Also approved in New York. The ADR Institute of Canada has accredited David as a qualified arbitrator.
He accepts an appointment as a commercial, commercial, construction, real estate, condominium, technology, franchise, labor and marine arbitrator and organic mediator | Lawyer| | arbitrator| The court found that Company A had not challenged the validity of the arbitration clause or the jurisdiction of the Arbitration Commission for the dispute within the binding time limit set out in Article 20(2) of the Arbitration Act, which had been heard and decided by the court. (c) an exchange of pleadings and defences alleging the existence of the agreement by one party and not contested by the other. On the other hand, the second form of arbitration agreement, called a „submission agreement” or a compromise agreement, is concluded for the purposes of a particular dispute after such a dispute has already arisen […].