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Anticipating or settling a dispute: the arbitration agreement explained

By Yasmine EDDAM4 April 2025

As we saw in our previous article, commercial arbitration relies entirely on the will of the parties. Without their agreement to submit a dispute to private judges, the arbitration route remains closed. This fundamental agreement takes the form of an "arbitration agreement". But how do you actually commit to arbitration? What form does this commitment take? And above all, what rules must be observed to ensure that the agreement is valid and produces the desired results? An agreement that is poorly drafted or entered into under the wrong conditions may prove ineffective, or even a source of new disputes. The aim of this article is to explain in detail the two main forms of arbitration agreement - the arbitration clause and the arbitration agreement - as well as the essential conditions for their validity and their immediate legal consequences.

Choosing arbitration: two moments, two conventions

The Code of Civil Procedure distinguishes between two main ways of agreeing to arbitration, corresponding to two different stages in the life of a contractual or commercial relationship.

La arbitration clause is the agreement by which the parties to a contract decide, even before a dispute arisesto submit disputes to arbitration future which may arise from or relate to that contract. Article 1442(1) of the Code of Civil Procedure defines it as follows. It is inserted directly into the body of the main contract (contract of sale, contract for the provision of services, partnership agreement, etc.). Its main advantage is that it anticipates and sets out the method for settling disputes at a time when relations are, a priori, calm. This avoids having to negotiate an agreement on the procedure once tensions have arisen. The disadvantage is that it commits the parties to disputes whose nature and scope are not yet known at the time of signing.

Le compromisefor its part, intervenes after when a dispute arises. It is the agreement by which the parties to a dispute already in existence decide to submit it to arbitration, as specified in article 1442, paragraph 3, of the Code of Civil Procedure. This is a separate contract, entirely dedicated to the organisation of arbitration for this specific dispute. The advantage is that the parties make their decision with full knowledge of the facts, since the dispute has already been identified. The major disadvantage is that it requires the agreement of all the parties involved after that the disagreement has broken out. Achieving this consensus can be difficult if relations have deteriorated.

What conditions must be met for an arbitration agreement to be valid?

Whether in the form of a clause or a compromise, an arbitration agreement must comply with certain conditions of form and substance if it is to be legally effective. Failure to comply with these rules may render the agreement null and void.

Firstly, the requirement for a writes is imperative, as emphasised by article 1443 of the Code of Civil Procedure, which punishes its absence by nullity. This requirement does not necessarily mean that the clause or compromise must be contained in a single document signed by all the parties. It may be the result of an exchange of letters, e-mails or any other written document that unambiguously expresses the common desire to have recourse to arbitration. Validity may also derive from an express and clear reference in the main contract to a separate document containing the arbitration agreement (for example, general terms and conditions of sale or a standard contract). However, the mere presence of an arbitration clause in general terms and conditions that have not been specifically accepted, or in a voluminous set of documents, may be deemed insufficient if there is no proof that the party against whom the clause is being invoked was actually aware of it and accepted it.

Secondly, the compromise (since it relates to an existing dispute) must, on pain of nullity, define the subject of the dispute submitted to the arbitrators, in accordance with article 1445 of the Code of Civil Procedure. The points on which the arbitrators disagree must be clearly identified. A vague or overly general description could render the arbitration agreement ineffective. In the case of arbitration clauses covering future disputes, this requirement is logically absent.

Thirdly, the arbitration agreement (clause or arbitration agreement) must, as stated in Article 1444 of the Code of Civil Procedure, either directly appoint the arbitrator(s)which is more common and often preferable, provide for the terms and conditions of their appointment. These procedures may be varied: each party appoints an arbitrator and the arbitrators choose the chairman of the arbitral tribunal, reference is made to the rules of an arbitration centre which will organise the appointment, appointment is made by an agreed third party, etc. If the agreement is silent on this point or if the mechanism provided for is blocked (for example, a party refuses to appoint its arbitrator or the arbitrators do not agree on the chairman), a safety net is provided: the most diligent party may refer the matter to the "juge d'appui" (generally the President of the Tribunal Judiciaire, under article 1459 of the Code of Civil Procedure), who will make the necessary appointments (article 1452 of the Code of Civil Procedure).

Finally, as with any contract, the parties must have the necessary legal capacity to make a commitment. In principle, natural persons of full age and capacity, as well as legal entities (companies, associations, etc.) may enter into an arbitration agreement. Protected persons (minors, adults under guardianship or trusteeship) are subject to certain conditions. For companies, particular vigilance is required in the event of collective procedure (safeguard, reorganisation or judicial liquidation). Depending on the stage of the proceedings and the powers retained by the director or devolved to the administrator or liquidator, the ability to enter into a new arbitration agreement may be limited and require the authorisation of the juge-commissaire (see in particular articles L622-7 and L642-24 of the French Commercial Code).

Can any dispute be submitted to arbitration?

While arbitration is largely open in commercial and professional matters, it is not possible to submit every type of dispute to private judges. The scope of what can be arbitrated - arbitrability - is governed by law.

The general principle, set out in Article 2059 of the Civil Code, is that a party may only compromise (i.e. have recourse to arbitration) in respect of the rights of which it is the guardian. free disposal. This immediately excludes matters relating to the status and capacity of individuals (marriage, divorce, parentage, nationality, etc.).

L'public order is another essential limitation, recalled by article 2060 of the Civil Code. Certain matters, because of their importance to social or economic organisation, are considered to fall exclusively within the jurisdiction of the state courts. This traditionally concerns disputes relating to public authorities and public establishments (although there are specific derogations), as well as certain matters relating to criminal or tax law. Economic public policy also plays a role: a dispute relating to a prohibited anti-competitive practice or to certain mandatory rules of consumer law could be deemed inarbitrable, or at least the award rendered could be set aside if it violates these rules.

Subject to these reservations, the validity of the arbitration clause is widely accepted in the business world. Article 2061 of the Civil Code validates it in contracts "entered into by reason of a professional activity". This wording is broad and covers both commercial and civil contracts where they relate to the exercise of a profession (for example, between self-employed professionals). Article L.721-3 of the French Commercial Code also confirms the validity of the clause for disputes relating to commitments between traders, commercial companies and commercial deeds. The situation of 'mixed' contracts (between a professional/trader and a non-professional) is more nuanced and often depends on the nature of the act and the link with the professional activity.

Finally, certain laws attribute a exclusive competence to state courts for specific disputes, making arbitration impossible for these matters. This is the case, for example, for most individual disputes arising from employment contracts, which are handled by the Conseil de Prud'hommes, or for patent or trademark invalidity actions, which are often reserved for the courts.

What are the immediate effects of a valid arbitration agreement?

As soon as a valid arbitration agreement exists between the parties, it produces major and immediate legal effects, even before the start of any arbitration proceedings.

The first effect, and probably the best known, is to make the incompetent state courts to decide the dispute covered by the agreement. This is what is known as the negative effect of the "Jurisdiction-Competence" principle, enshrined in article 1448 of the Code of Civil Procedure. If a party brings a case before a state court despite the existence of an arbitration agreement, the other party may (and must, in order for the objection to be admissible) raise the lack of jurisdiction of that court at the outset of the proceedings (in limine litis). The court hearing the case must then declare that it does not have jurisdiction and refer the parties to arbitration. The only exception to this rule is if the court finds that the arbitration agreement is clearly none or clearly inapplicable to the dispute. This review is very limited: mere doubt as to the validity or applicability is not sufficient to rule out the lack of jurisdiction of the national court.

The second major effect is theautonomy of the arbitration agreement in relation to the main contract containing it (in the case of an arbitration clause). Article 1447 of the Code of Civil Procedure sets out this principle: the arbitration agreement is considered to be an independent agreement. In practical terms, this means that even if the main contract is declared null and void (for example, due to a defect in consent or an unlawful purpose), the arbitration clause it contains remains valid and enforceable in principle. The arbitrators appointed under this clause will therefore remain competent to settle disputes arising from the performance or non-performance of the main contract, including the question of its nullity. Conversely, the possible nullity of the arbitration clause does not affect the validity of the rest of the contract.

Finally, the principle of "Competence-Competence in its positive effect, set out in article 1465 of the Code of Civil Procedure: it is for the arbitral tribunal to decide, as a matter of priority, on disputes relating to its own jurisdictional powers. In other words, if a party challenges the validity of the arbitration agreement, its applicability to the dispute, or more generally the jurisdiction of the arbitrators, it is for the arbitrators themselves to decide this question first. The national court must wait until the arbitrators have ruled on their own jurisdiction, barring the exceptions of nullity or manifest inapplicability described above.

The validity and scope of an arbitration agreement therefore depend on precise rules, which it is essential to master in order to secure your contractual and commercial relations. A well-drafted clause or arbitration agreement is the first step towards effective dispute resolution. When it comes to drafting your arbitration agreements or analysing existing clauses in your contracts, our team is at your disposal to provide you with appropriate advice.