A basic guide for those just getting acquainted with arbitration
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Have you heard of arbitration — but don’t understand why you can’t simply go there and file a claim without a special agreement?
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Do you know that after the amendments of July 2024 it has become easier to conclude an arbitration agreement — and how exactly?
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How does an arbitration agreement differ from an arbitration clause — and does a separate document need to be signed?
A businessman wanted to turn to the arbitration court. There was no contract with an arbitration clause. He called the arbitration court and asked: “Can I simply file a claim?” The answer surprised him: no. Without an agreement to submit the dispute to arbitration, the arbitration court may not hear the case.
This is a fundamental difference from a state court. And it is the first thing to understand when dealing with arbitration.
What is an arbitration agreement:
An arbitration agreement is an agreement between two or more parties to submit their dispute for consideration to an arbitration court instead of a state court. Without this agreement, the arbitration court has no authority to hear the case — even if the amount is obvious and the debt undisputed.
This is a fundamental difference from a state court: a state court is obliged to accept a claim in accordance with jurisdiction regardless of the defendant’s wishes. An arbitration court — only if the parties have previously agreed to it.
Two forms: a clause and a separate agreement
An arbitration clause is a point within the main contract. For example, point 12.1 of a supply contract: “All disputes arising from this contract shall be heard by the Riga Arbitration Court”. This is the most common and convenient form — the agreement is concluded at the same time as the main contract.
A separate arbitration agreement is an independent document concluded before or after a dispute arises. This is convenient if the main contract has already been signed without a clause, or if a dispute already exists but the parties are ready to agree on arbitration proceedings.
What changed in July 2024
Until the amendments of 4 July 2024, an arbitration agreement required a strict written form with handwritten or qualified electronic signatures. This created difficulties in the case of remote transactions.
After the amendments, Article 12 of the Arbitration Courts Law directly states: an agreement concluded by exchanging postal items or electronic messages shall also be considered a written agreement. Correspondence by email or messaging apps containing both parties’ consent to arbitration is now recognized as a valid arbitration agreement.
A third option: if one party claims in a lawsuit that an agreement exists, and the other party does not deny it — the agreement is considered concluded.
What an arbitration agreement must contain
Minimum required elements: an indication that the parties submit disputes for consideration to arbitration, and the name of the specific arbitration court (Riga Arbitration Court, registration number 40003756873).
It is additionally recommended to specify: the language of the proceedings, the type of proceedings (written or oral), the number of arbitrators (one — for most commercial disputes), and the applicable law.
Ready-made wording:
“Any dispute, disagreement or claim arising out of or in connection with this contract, including its breach, termination or invalidity, shall be finally resolved by the Riga Arbitration Court (reg. No. 40003756873) in accordance with its Rules, by a sole arbitrator in written proceedings, or in a court of the Republic of Latvia at the claimant’s choice. The applicable law is that of the Republic of Latvia.”
Three steps to take right now
First: check all your existing contracts — whether they contain an arbitration clause. Especially contracts with business partners for amounts of 3 000 euros and above.
Second: the next time you conclude a contract — add the wording mentioned above to the dispute resolution section.
Third: if there is no contract or no clause, but a dispute has already arisen — offer your partner to sign a separate arbitration agreement. Sometimes this is simpler than turning to a state court.
Arbitration is a powerful instrument. But it only works if you have opened the door to it in advance.
This article is intended for informational purposes only and should not be considered legal advice.