Autonomy and Independence of the Arbitration Clause

The agreement may be drawn separately or may form part of the contract of the transaction between the parties. Where the arbitration clause is part of the contract, it is nevertheless regarded in law as a separate contract.


In the case of Heyman V Darwin  (1942) All ER 337 the court in considering the legal status of such a clause in a contract observed that:
"an arbitration clause in contract is quite distinct from other clauses. The other clauses sets out the obligations which the parties undertake towards each other, but the arbitration clause does not impose on one of the parties an obligation in favor of the other. It embodies the agreement of both parties that if any dispute arises with regard to the obligations which the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution".

Accordingly where there is a repudiation or total breach of a contract, the arbitral clause survives. Section 7 English Arbitration Act 1996 provides that:
"an arbitration clause will remain valid despite an allegation of illegality affecting the substantive agreement ( which allegation, if proved, would render the substantive agreement void). Similarly, a decision by an arbitral tribunal that the main agreement is null and void or the termination of the main agreement by performance, will not of itself entail a similar consequences of the arbitration clause. The validity of the latter as a separate collateral agreement, must be examined as a separate issue.

However if the arbitration clause itself is illegal, then it will be void. Thus in the case of Ertel V Bieber & Co V Rio Tinto Co ( 1918) AC 260 it was held that in the event of war, if the agreement would in the ordinary course of performance or resolution of disputes arising therefore involve interaction with the enemy, it would together with the arbitration clause be void.

In essence, the arbitration clause lives even after the end of the contract. This doctrine has been incorporated under Section 12 (2) of the Act which provides:
For the purpose of subsection ( 1) of this section, an arbitral clause which forms part of a contract shall be treated as an agreement independent of other terms of the contract and a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jute the validity of the arbitration clause.

It should be noted that the word "validity"  has been used in this article as used in the Act. In Article 16 (1) of the UNCITRAL Model Law containing the same provision uses "invalidity" which indeed is the right word and gives the correct understanding.

[bctt tweet="The essence of an arbitration clause is the settlement of disputes. "]

The difference between an arbitration clause and other clauses in the contract is found in the basic essence of an arbitration agreement, which is, the settlement of disputes arising from the contract. This therefore necessitates the doctrine of separability, this has been succinctly couched in the dictum of Udo Udoma JSC in the case of Royal Exchange Insurance V Benthworth Finance ( Nig) ( 1976) 10 NCC 648 at 657 as follows:
"It occurs to us from what has happened in this case on appeal that the true nature and function of an arbitration clause in an agreement does not appear to be fully appreciated. An arbitration clause in a written contract is quite distinct from the other clauses. Whereas, the other clauses in a written contract set out obligations which the parties undertake towards each other, the arbitration clause merely embodies the agreement of both parties that if any dispute should occur with regard to the obligations which the other party has undertaken to the other, such dispute should be settled by a tribunal of their own constituents and choice".

An important question that must be asked in separating the arbitration clause from the contract is whether the contract is determined by something out of itself. If this is answered in the affirmative, the clause stands. But if the clause is determined by something out of itself, the clause ends.

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