An arbitration agreement produces its effect only where it is valid and the dispute itself is arbitrable. The Law of Georgia on Arbitration regulates both questions precisely: Article 1 defines which disputes an arbitration tribunal may hear, Article 8 — the form of the agreement and the conditions of its operation, and Article 9 — the court's obligation to refuse a claim on the merits. These three provisions are examined in detail below.
The Boundaries of Arbitrability — Which Disputes Go to Arbitration
Under Article 1, an arbitration tribunal is competent to hear a property dispute of a private-law nature, based on the equality of persons, which the parties are able to settle between themselves. The tribunal is also competent for a dispute related to a public-private partnership contract provided for by the Law of Georgia on Public and Private Partnership. Everything that does not fall within this list remains within the jurisdiction of the courts: an agreement cannot transfer to arbitration a dispute which the law does not assign to the competence of arbitration.
Concept, Form and Conditions of Operation of the Agreement
Article 8 defines an arbitration agreement as an agreement by which the parties agree to submit to arbitration all or certain disputes which have arisen or may arise between them out of a contractual or other legal relationship. The agreement may be concluded in the contract as a clause or as a separate agreement, and a written form is required. The form is satisfied where the content is recorded in any form, including an electronic message, provided the information is accessible for subsequent use. Where formalised by an exchange of the arbitral claim and the statement of defense, when one party asserts and the other does not deny the existence of the agreement, it is likewise deemed concluded in writing.
Heightened Requirements Protecting the Weaker Party
For the operation of the agreement the final paragraphs of Article 8 are decisive. Where a party to the agreement is a natural person or an administrative body, the agreement must be concluded in writing, and the relaxed forms — recording of the content in any form, an electronic message, or an exchange of claim and defense — do not apply to it. Where both parties are natural persons, the agreement must also be signed by the parties' advocates or be notarised. The assessment of validity therefore always begins with the status of the parties.
The Court's Refusal to Accept the Claim — the Main Effect of the Agreement
Article 9 creates the strongest effect of the agreement: a court in which a claim is filed on the merits of a dispute that is the subject of an arbitration agreement is obliged, immediately upon receiving notice that arbitration has begun, to refuse to accept the claim or to terminate the proceedings. This obligation does not apply only where the court finds that the arbitration agreement is void, has lapsed or is incapable of being performed. A party to the arbitration proceedings must notify the court that the arbitration has begun, and until the question of jurisdiction is decided by the court, the arbitration may be commenced, continued and an award issued.
Voidness, Lapse and Impossibility of Performance
Article 9 names the only three situations in which the agreement no longer takes effect: it is void, it has lapsed, or its performance is impossible. On this depends whether the dispute survives in court despite the clause. The assessment of the agreement's operation therefore breaks down into two questions: whether the dispute is among the arbitrable disputes contemplated by Article 1, and whether the agreement satisfies the form requirements of Article 8.
Frequently Asked Questions
The following questions arise most often regarding validity and arbitrability.
May the parties refer any dispute to arbitration?
No. The tribunal may hear a property dispute of a private-law nature based on the equality of persons which the parties can settle between themselves, and a dispute related to a public-private partnership contract. Other disputes remain with the courts.
What happens if a claim is filed in court anyway?
Upon receiving notice that arbitration has begun, the court must refuse to accept the claim or terminate the proceedings — unless it finds that the agreement is void, has lapsed or is incapable of performance.
Which form defects matter for validity?
Where a party is a natural person or an administrative body, strict written form applies and the relaxed forms do not; where both parties are natural persons, advocates' signatures or notarisation is required.
May arbitration begin before the jurisdiction question is decided?
Yes. Until the court decides the question of jurisdiction, the arbitration may be commenced, continued and an arbitral award issued.
How We Help on Legal.ge
The legal team of Legal.ge will assess the validity of your arbitration agreement, determine the arbitrability of the dispute and build a position before the court based on the correct application of Article 9. Contact us on Legal.ge for a consultation.