Very often we are faced with questions about what to do when a dispute arises and one of the parties to the transaction wants to file a claim with the arbitration court. Answering such questions during the conversation it turns out that there is no arbitration agreement between the parties, i.e. the parties have not agreed on the resolution of the dispute in the arbitration court. What should be done in such a situation and what is meant by an arbitration agreement?
An arbitration agreement is a written agreement between the parties to submit a dispute that has already arisen or that may arise in the future to an arbitration court. An arbitration agreement may be concluded by a capable natural person regardless of citizenship and place of residence, a legal entity registered in Latvia or abroad, or another subject of private law.
When concluding an arbitration agreement, the parties may additionally agree on the number of arbitrators, the procedure for conducting arbitration proceedings: oral or written, the place of arbitration, the language of the arbitration proceedings, the procedure for reimbursement of the costs of proceedings, the applicable law and other issues that the parties consider important.
The arbitration agreement as a separate clause in the contract
An arbitration agreement may be included in a contract (arbitration clause) as a separate provision (contractual clause) and include an obligation in connection with which a civil law dispute has arisen or may arise.
An arbitration clause (clause) is a clause in a document (contract, consignment note, agreement) which stipulates that in the event of a breach of the terms of the concluded contract between the parties, i.e. in the event of a dispute, the dispute will be resolved in an arbitration court. In other words, the parties must stipulate and include in the text of the document the procedure for resolving any dispute in advance. In practice, there are three arbitration clauses most commonly used by parties in their contracts, which you can read here.
Arbitration agreement as a separately concluded agreement
An arbitration agreement can be entered into as a separate contract or separate agreement. Such an arbitration agreement may be entered into and signed in addition to the main contract if the contract does not provide for arbitration of disputes. The parties also agree that if there is a disagreement, the dispute will be resolved in arbitration. This type of contract is usually entered into when the main contracts were entered into some time ago, such as ten or twenty years ago, and the main contract did not specify a dispute resolution procedure.
How to conclude an arbitration agreement if a dispute has already arisen
How to proceed if the signed contract does not include an arbitration clause? At the same time, you want to maintain good relations with your business partner and also protect yourself if the partner turns out to be unscrupulous. In such a situation, we recommend you to conclude a debt payment agreement with your partner (debtor), which means that you give an opportunity to fulfill your obligations and at the same time additionally protect yourself. In this document, include a clause on the consideration of the dispute in the arbitration court!
For example, you enter into an agreement on gradual repayment of debt with a repayment schedule, dividing the debt in writing into parts and setting deadlines for repayment of the debt. This type of agreement provides that if the Debtor fulfills the obligations specified in the agreement in full and within the agreed time, the Creditor waives the collection of part of the contractual penalty. In case the Debtor fails to fulfill this agreement in the specified amount and within the specified term, you have the right to demand payment of the entire amount of the principal debt and contractual penalty without waiting for the expiry of the specified final payment term by filing a claim with Riga Arbitration Court.
Remember - there are no unsolvable situations! Protect yourself and your business by putting your company's documents in order!
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