Arbitration agreement

An arbitration agreement may be particularly useful if your business gets involved in an international deal with a foreign business. Here is an international sale of goods example to illustrate the use of an arbitration agreement.

Example

You agree to sell parts that your company manufactures to another company (X) based in China. For one reason or another, the parts you send X are not fit for their common purpose. X may be able to sue you for breach of contract in China. You could incur huge losses as a result of this as you have to defend your case in a foreign jurisdiction, but you could avoid this by having an arbitration agreement with X.

In an arbitration agreement both parties agree to resolve their dispute by arbitration. So, in the example above, X would not be able to sue you in the Chinese courts as they would be contractually bound by the arbitration agreement. If they did want to take action against you, they would have to go through the arbitration process. So having an arbitration agreement in place could save your company a huge amount of time, expense and stress.

Let’s vary the above example. Say you did have an arbitration agreement in place with X but they still decided to seek redress through the Chinese courts. If this did happen, you may be entitled to counter-sue X for contractual damages for breach of the arbitration agreement.

If you would like to obtain legal advice and information on arbitration agreements, Contact Law can put you in touch with a local specialist commercial / arbitration solicitor free of charge. So, if you have any questions or would like our help in finding local commercial / arbitration solicitors please call us on 0800 1777 162 or complete the web-form above.