Arbitration Agreement
Meaning, types, essential elements, format requirements, and a model arbitration clause — everything you need to know about arbitration agreements under the Arbitration and Conciliation Act, 1996.
Start Arbitration at Sandhee →Arbitration Agreement Meaning
An arbitration agreement is a written agreement between two or more parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship. It is the foundation of any arbitration — without a valid arbitration agreement, there can be no arbitration.
Under Section 7 of the Arbitration and Conciliation Act, 1996, an arbitration agreement must be in writing. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate submission agreement.
Types of Arbitration Agreements
Arbitration agreements come in two main forms — choose the right one for your situation.
Arbitration Clause (in Contract)
A clause included in a main contract (sale agreement, employment contract, loan agreement) that provides for arbitration of future disputes. The most common form.
Model Clause: "Any dispute arising out of or in connection with this Agreement shall be referred to and finally resolved by arbitration under the rules of Sandhee Dispute Resolution."
Submission Agreement
A separate agreement entered into after a dispute has already arisen, referring that specific dispute to arbitration. Used when the original contract had no arbitration clause.
Model Clause: "We, the undersigned parties, hereby agree to refer the dispute arising out of Invoice No. XYZ dated [date] to arbitration at Sandhee Dispute Resolution."
Essential Elements of a Valid Arbitration Agreement
In Writing (Section 7(3))
An arbitration agreement must be in writing — it can be a signed document, exchange of letters, telegrams, emails, or electronic communications.
Agreement to Arbitrate
A clear intention by both parties to resolve disputes through arbitration instead of courts — not just a vague reference to ADR.
Defined Dispute Scope
The agreement should specify what types of disputes will be referred to arbitration (e.g., 'all disputes arising out of this contract').
Legal Capacity of Parties
Both parties must be legally competent to enter into contracts — minors, persons of unsound mind, or insolvent parties cannot validly arbitrate.
Arbitrable Subject Matter
The disputes covered must be capable of settlement by arbitration under Indian law (e.g., criminal matters cannot be arbitrated).
Model Sandhee Arbitration Clause
Use this clause in your contracts to resolve all future disputes through Sandhee's ODR platform:
"Any dispute, controversy, or claim arising out of or relating to this Agreement, or the breach, termination, or invalidity thereof, shall be settled by arbitration administered by Sandhee Dispute Resolution in accordance with its Arbitration Rules. The arbitration shall be conducted online. The seat of arbitration shall be New Delhi, India. The language of the arbitration shall be English. The arbitral award shall be final and binding on the parties."
Note: This is a model clause. Consult a legal professional before including it in contracts.
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