A basic guide for those new to arbitration
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You’ve heard of arbitration, but don’t understand why you can’t just show up and file a claim without a special agreement?
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Did you know that, following the July 2024 amendments, 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 is it necessary to sign a separate document?
An entrepreneur wanted to go to arbitration. There was no agreement with an arbitration clause. He called the court and asked, “Can I just file a lawsuit?” The answer surprised him: no. Without an agreement to refer the dispute to arbitration, the arbitration court has no authority to hear the case.
This is a fundamental difference from a state court. And this is the first thing to understand when working with an arbitration court.
What is an arbitration agreement?
An arbitration agreement is an agreement between two or more parties to submit their dispute to an arbitral tribunal instead of a state court. Without this agreement, the arbitral tribunal has no authority to hear the case—even if the amount is clear and the debt is undisputed.
This is a fundamental difference from a state court: a state court is obligated to accept a claim based on its jurisdiction, regardless of the defendant’s wishes. An arbitration court accepts a claim only if the parties have agreed in advance.
Two forms: a clause and a separate agreement
An arbitration clause is a clause within the main contract. For example, clause 12.1 of a supply contract states: “All disputes arising out of this contract shall be resolved by the Riga Arbitration Court.” This is the most common and convenient form—the agreement is concluded simultaneously with the main contract.
A separate arbitration agreement is a standalone document entered into before or after a dispute arises. It is convenient when the main contract has already been signed without a clause, or when a dispute already exists but the parties are willing to agree to arbitration.
What changed in July 2024
Prior to the amendments of June 4, 2024, arbitration agreements required strict written form with handwritten or qualified electronic signatures. This created difficulties in remote transactions.
Following the amendments, Article 12 of the Arbitration Courts Act explicitly states that an agreement concluded by postal mail or electronic messages is also considered a written agreement. Correspondence via email or instant messaging containing both parties’ consent to arbitration is now recognized as a valid arbitration agreement.
Third option: if one party claims in the claim that an agreement exists, and the other does not deny it, the agreement is considered concluded.
What should be included in an arbitration agreement?
The minimum required elements are: an indication that the parties are submitting their disputes to arbitration, and the name of the specific arbitration court (Riga Arbitration Court, registration number 40003756873).
Additionally, it is recommended to indicate: the language of the process, the type of process (written or with a hearing), the number of judges (one for most commercial disputes), and the applicable law.
Ready-made formulation
“Any dispute, controversy, or claim arising out of or in connection with this Agreement, including those relating to its breach, termination, or invalidity, shall be finally settled by the Riga Arbitration Court (registration no. 40003756873) in accordance with its Rules, before a single arbitrator in written proceedings, or by a court of the Republic of Latvia, at the applicant’s option. The applicable law shall be that of the Republic of Latvia.”
Three steps to take now
First, check all current contracts to see if they contain an arbitration clause. This is especially true for contracts with commercial partners for amounts over €3,000.
Second: the next time you sign a contract, add the above wording to the dispute resolution section.
Third: If there’s no contract or stipulation and a dispute has already arisen, offer your partner a separate arbitration agreement. Sometimes this is easier than going to court.
Arbitration is a powerful tool. But it only works if you open the door early.
This article is for informational purposes only and does not constitute legal advice.