Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the Arbitration Act 1996, which Rules are deemed to be incorporated by reference into this clause. The number of arbitrators shall be one. The seat, or legal place, of arbitration shall be London, England. The language to be used in the arbitral proceedings shall be English. The parties agree that the decision and award of the arbitrator shall be final and binding on the parties and shall not be subject to appeal.
Here is a plain English explanation of the suggested Arbitration - Dispute Resolution clause:
This clause specifies that any dispute related to the contract will be resolved through arbitration rather than going through the court system.
It states that arbitration will follow the rules laid out in the Arbitration Act 1996 in the UK. There will be one arbitrator who will make the final decision.
The arbitration proceedings will take place in London, England and will be conducted in English.
The parties agree to accept the arbitrator's decision as final and binding. There will be no option to appeal the arbitrator's award through the courts.
In simple terms, this clause requires any disputes related to the contract to be settled through arbitration in London according to a defined legal framework, rather than taking the dispute through the court system.
The parties must abide by the arbitrator's ruling.
Arbitration clauses have long been used in contracts to provide an alternative to resolving disputes through the court system.
Their origins can be traced back centuries in English common law, but became more formalized in the Arbitration Act 1889.
Prior to this Act, there was uncertainty around the enforceability of arbitration agreements in England. Courts were often hostile toward binding arbitration clauses, revoking arbitrator awards. The 1889 Act helped make arbitration agreements irrevocable and arbitral awards enforceable by courts.
In the late 19th and early 20th centuries, arbitration became a more popular option for commercial disputes as an alternative to slow, costly court proceedings. Parties preferred the privacy, flexibility and expertise of arbitration. International commerce drove further use of arbitration to avoid uncertainties of foreign courts.
Arbitration statutes emerged in other common law jurisdictions like the US in the 1920s. Then in 1979, England passed a new Arbitration Act that provided a comprehensive framework for arbitration, addressing issues like appointment of arbitrators, challenges, and appeal rights.
The Arbitration Act 1996, referenced in the sample clause, fully consolidated English arbitration law and implemented the principles of the UNCITRAL Model Law on arbitration. This provided a clear process for conducting arbitration seated in England under English procedural law.
Today, arbitration clauses allowing for binding arbitration are common in commercial contracts internationally. Parties appreciate avoiding slow court litigation, and have certainty around the arbitration procedures and limits on appeals.
The English 1996 Act made London a prime seat for international arbitration with clear modern rules.