How to draft an Arbitration Agreement?

Arbitration is the dispute settlement process between two agreeable parties to appoint an arbitrator to give a binding solution on the dispute. It is a way to settle disputes outside the courts thereby saving time and resources at the same time.

Section 7 of the Arbitration and Conciliation Act defines arbitration agreement.

An Arbitration Agreement is formed when two parties enter into a contract and agree in writing that any disputes arising between them out of that contract will have to be resolved without going to the courts and with the assistance of a neutral person: a third party appointed by both of the parties, known as the Arbitrator, who would act as a judge and whose decision will be binding upon the parties. 

The arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement.

That the jurisdiction of the tribunal to decide the rights of the parties must derive from their consent, or from an order of the Court or from a statute, the terms of which make it clear that the process is to be arbitration.

The agreement must contemplate that substantive rights of the parties will be determined by the arbitration tribunal.

That the tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal being fair and equal to both sides.

The agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law.

The agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal.

A clear and effective arbitration agreement is essential to the success of any arbitral proceedings; it is the source of the tribunal’s authority and a pre-requisite to the enforcement of an award .

The seat of the arbitration is where the proceedings take place, or rather where they are considered to take place legally. In practice, parties may choose to physically hold hearings in other locations and the tribunal may decide the case from a variety of physical locations. The place at which hearings or deliberations happen does not impact on the legal “seat” of the arbitration.

To draft a valid arbitration agreement, parties should also be conscious of the requirements imposed on specific parties or the inarbitrability of certain disputes.

Determining the number of arbitrators will be particularly important when the arbitration agreement does not refer to institutional rules, which usually contain an appointment mechanism.

If parties fail to determine a number of arbitrators or identify an appointing authority (in the event of not choosing institutional arbitration), they may have to resort to the support of domestic courts to appoint the arbitral tribunal, which can considerably increase the length of proceedings, as well as their cost.

The arbitration agreement is also an opportunity for the parties to decide the language or languages in which they wish the proceedings to take place. An early determination will save translation costs. It will also ease the selection of counsel and an arbitral tribunal with the adequate language skills.

Where parties choose to resort to institutional arbitration, they should anticipate that they may be subject to specific mechanisms aiming at facilitating an efficient conduct of the proceedings, unless they opt out from them.

Parties should be prepared to consider issues such as health and safety restrictions, impediments to the transmission of physical documents and overall restrictions of in-person meetings, which may affect the efficiency of arbitration proceedings.

To do so, parties should avoid imposing mandatory paper notifications or in person meetings in the cooling off provisions of dispute resolution clauses. Remote meetings should be made possible to avoid delays.

Parties should also avoid resorting to domestic courts by making sure that their arbitrator appointment mechanism is well-designed. In many instances, this involves considering the involvement of an appropriate appointing authority.

Not all jurisdictions or institutional rules will ensure default confidentiality of arbitration proceedings. If confidentiality is important for the parties, they should consider making this clear in their arbitration agreement if this is not something already provided for in the chosen arbitration rules.

In addition to an arbitration agreement, dispute clauses can also provide for pre-litigation mechanisms. Before resorting to arbitration, parties may for example choose that they wish to have an attempt at settling or mediating their dispute by adding a cooling off period in their arbitration agreement.

Parties should also consider expressly choosing the law applicable to the arbitration agreement, as that can avoid unintended consequences or expensive satellite litigation on the issues later down the line. Separate from the law applicable to the arbitration agreement, parties should also choose the law applicable to the dispute.

Draft of an Arbitration Agreement

Arbitration Agreement

This Arbitration Agreement ( the “Agreement”) is made and entered into on ………………………..( the Effective Date) , by and between

1. ABC, A company incorporated under the Companies Act, 2013 with CIN…………………….., PAN…………………….. and its registered office located at……………………(hereinafter called the “Company”/First Party); and

2. ………………………., an individual person, aged……………, Son of ……………..with PAN……………………..and place of residence located at…………………………..(hereinafter called as the “Employee”/ Second Party).

The Company and the Employee are hereinafter individually referred to as a “Party” and collectively as the “Parties”.



A. The employee is employed with the Company as…………………..(position) with effect from……………..

B. During the employment period, disputes may arise between company and Employee related to employment.

C. The Parties have agreed to resolve any such disputes privately and without recourse to courts and government department, as much as possible, through a fair, impartial, faster and cost-effective process.

NOW TEHREFORE,  in consideration of the mutual covenants and conditions hereinafter set forth, the  Parties agree as follows:

1. Claims covered by this Agreement:  This Agreement applies to all disputes between the Parties, arising out of Employee employment with Company or the termination thereof, whether asserted during employment with Company or after it has ended, or during an pre-employment processes in which Employee may participate ( referred to as Claims).

2. Internal grievance procedure: The Employee understands that before commencing arbitration under this Agreement, he may attempt to resolve a claim through Company’s internal procedure for resolving Employee grievances in effect at that time.

3. Arbitration:

3.1 If any claim cannot be resolved through the internal grievance procedure, if applicable, or another mutually acceptable voluntary dispute resolution method such as mediation, the claims must be resolved through final and binding arbitration conducted under Indian Arbitration and Conciliation Act, 1996.

3.2 The venue for arbitration shall be in …………………………….., unless the parties otherwise agrees.

3.3 The Arbitration shall be administered in conformity with the provisions of Indian Arbitration and Conciliation Act, 1996 and any other applicable rules; provided, however, that where such procedure are inconsistent with the procedures set forth below, the procedures set forth below shall govern.

4. Arbitration procedure:

4.1  Any request for arbitration by either Party shall be served and filed within the statue of limitations applicable to the claims upon which arbitration is sought or required.

4.2 Each party is expected to respond  with in thirty (30) calendar days to each communication regarding the selection of an arbitrator and the scheduling of a hearing.

4.3 The Parties shall select a mutually-agreeable neutral arbitrator who shall be a retired judge of Chennai High Court.

4.4 The arbitrator shall be bound by the law applicable to the claims asserted by either Party and/or any defenses thereto and shall have jurisdiction to award all relief available in law or equity that is requested by the Parties and supported by credible, relevant and admissible evidence.

4.5  The arbitrator may rule on pre-hearing disputes and hold such prehearing conferences by telephone or in person as he or she may determine.

4.6 Either Party may submit, or the arbitrator may order either or both Parties to submit, a brief prior to the arbitration proceeding.

4.7  Either Party, at its own expense, may arrange for a court reporter to provide a stenographic record of the proceedings at the  hearing.

4.8 Upon request  at the close of the arbitration  hearing, either  Party may file a post-hearing brief within the  time set by the arbitrator.

4.9 The arbitration award will be final and binding on the Parties to the Arbitration.

5. Arbitration Cost

5.1 Each Party shall bear their own standard arbitration and litigation type costs.

5.2 Notwithstanding Clause 5.1, the arbitrator may award the fees and costs to the prevailing Party under and applicable statue or written agreement to the same event.

6. Alternative Dispute Resolution Process:-

The Parties understand that they are agreeing to substitute one legitimate dispute resolution forum (arbitration) for another litigation because of the mutual advantages this  forum offers. This substitution involves no surrender, by Party, of any substantive, statutory or common law benefit, protection or defence.

7. Governing Law and Conflict of Law:-

7.1 This agreement shall be governed by and construed and enforced pursuant to the procedural and substantive provisions of applicable Indian Laws.

7.2 Regardless to any conflict of law analysis: (a) Where the Parties have agreed to a choice of Law, the arbitrator(s) shall honor that choice, and (b) Where the Parties have not agreed to a choice of Law, the arbitrator(s) shall apply and follow the applicable laws under which the claim arose. 

8. Severability:- If any provision  of the Agreement is or becomes illegal, invalid or unenforceable in any jurisdiction, the illegality, invalidity or unenforceability of that provision will not affect the validity of any other provision of this Agreement.

9. Waiver:- No failure to enforce any of its right by a Party shall not constitute waiver of such right.

10. Third Party Beneficiaries:- For purpose of this Agreement, each Party’s subsidiaries and affiliates are deemed to be intended third-party beneficiaries and they may fully enforce the terms of this Agreement. For the avoidance of the doubt, any person or entity other than such subsidiaries and affiliates will not be treated as a third-party beneficiary under this Agreement and shall not have any right to enforce any provision of the Agreement and authority to act as a Party to this Agreement.

11. No Aggregate claims:- Any arbitration under this Agreement must be on an individual basis. No Party may aggregate claims with others and/or bring or participate in  a collective, class, or other representative action.

12. Interpretation: This Agreement shall be interpreted in favor of arbitration. No rule of construction shall be applied to undermine any presumption in favor of enforcement of this Agreement or in favor of arbitration.

13. Enforceability:- This Agreement contains a binding arbitration provision that may be enforced by either party.

14. Entire Agreement:- This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.

15. Amendment:- No amendment, supplement, modification or restatement of any provision of this Agreement shall be binding unless it is in writing and signed by each Party.  

16. Notice:- Notices permitted or required under this Agreement shall be in writing and delivered personally (including courier service), by certified or registered mail, return receipt , or by confirmed facsimile transmission or by electronic communication including WhatsApp, telegram etc.  Notice shall be effective upon receipt.

17. Counterparts:- This Agreement may be executed simultaneously in one or more counterparts, each of which is deemed an original and all of which together constitute one and the same instrument.

18 Address:- The Communication Address of the First Party is

The communication Address of Second Party is

IN WITNESS WHEREOF,  the Parties have executed this Agreement by their duly authorised officers to be effective as of the effective date.

Company/First Party                                                                                           Employee Second Party




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