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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
Arbitration – Agreement to arbitrate – Incorporation of arbitration agreement by reference – Conditions required for valid incorporation
The Petitioner brought Commercial Action No. 1492-2012 against the Respondent to appoint an engineering and accounts expert who would inspect works completed for the Respondent and determine their type and value with a view to obtaining judgment based on the expert’s findings. The Court of First Instance refused to entertain the action due to the presence of an arbitration clause in the contract between the parties. The Petitioner appealed and the Court of Appeal upheld the primary ruling. The Appellant appealed to the Court of Cassation, contending that, contrary to what was stated in the Court of Appeal’s ruling, the Petitioner never asserted that the general conditions of contract did not include an arbitration clause but submitted that the reference in the subcontracts to the general conditions of contract was a general reference without specific reference to the arbitration clause such that the Petitioner was made aware of its existence as an exceptional clause among the general conditions of contract. This mistake prevented the trial court from examining the fundamental issue in the case, which is that the arbitration clause is not binding on the Petitioner who was not aware of its existence among the general conditions of contract. The Petitioner did not agree to the clause and is accordingly not bound by it.
The Petition to cassation was upheld.
Arbitration involves an explicit agreement to resolve a dispute through an arbitrator in place of the courts and whether the agreement is drafted as a clause or a submission agreement, it must be in writing, i.e. contained in a document signed by the parties or in an exchange of letters, telegrams or other means of written communication.
The reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is clear and explicit, i.e. with specific mention of the arbitration clause contained in the referenced document. A general reference to the terms of the document without specific reference to the arbitration clause such that parties are made aware of its existence would not extend to the clause and there would be no arbitration agreement between the parties to the contract.
In this case, the subcontracts did not contain any arbitration clause and referenced the general conditions of contract set out in a separate document. The reference, however, did not specifically mention the arbitration clause such that the Petitioner was made aware of its existence as an exceptional clause among the general conditions of contract and could then take a position, either accepting or rejecting the clause. The clause did not therefore constitute an agreement to arbitrate.
The reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is clear and explicit, i.e. with specific mention of the arbitration clause contained in the referenced document. A general reference to the terms of the document without [Page94:] specific reference to the arbitration clause such that parties are made aware of its existence would not extend to the clause and there would be no arbitration agreement between the parties to the contract.
The subcontract states that the general conditions of contract issued by the Respondent are available at the company’s head office and that they form an integral part of the subcontract and its documents. The general conditions of contract provide for the referral of any dispute between the parties to arbitration. Therefore, the arbitration clause is binding on the parties and precludes the courts from hearing the matter.
The subcontracts do not contain any arbitration clause and reference the general conditions of contract set out as a separate document. The reference, however, does not specifically mention the arbitration clause such that the Appellant is made aware of its existence as an exceptional clause among the general conditions of contract and can then take a position, either accepting or rejecting the clause. Moreover, the Petitioner had no access to the general conditions of contract despite its attempts to obtain a copy through email. Since the Appellant had no access, they were in no position to know at the time of concluding the subcontracts whether the general conditions of contract contained an arbitration clause.
The Court of Appeal ruled the action barred by the arbitration clause even though the reference to the general conditions of contract was not an explicit reference to the arbitration clause and in the absence of the parties’ express agreement there can be no arbitration. The Court of Appeal was wrong and its decision will be overturned, with remand.