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Arbitration in Malta:

The Prerequisites of a Valid arbitration under Maltese Law
© 2002 Dr Maria Chetcuti Cauchi. All Rights Reserved.

Arbitration has been defined as a mode of settlement by referring a dispute to a tribunal of the parties’ own choice without them having to resort to a court of law.[1]  Arbitration as an alternative means of dispute resolution is not alien to Maltese law. The aim of successive governments has always been to reduce the burden of cases encumbering Maltese Courts, hence to strive to find a substitute for the customary mode of dispute settlement[2]. Yet, at the outset, one must admit that the development of the institute of arbitration in this country has been less rapid than in our European counterparts.

Possible reasons for our dragging of feet include the inadequacy of the domestic legal regime regulating the institute and the absence of a body which could promote arbitration and support litigants in the conduct of arbitral proceedings. These deficiencies have been addressed by the Arbitration Act of 1996.[3] Under this new piece of legislation, the legal framework for arbitration has been established and an overseeing institution has been set up.

In this article, two of the legal prerequisites for an arbitration to be successful are discussed, namely arbitration agreements and the filing of the notice of arbitration with the Malta Arbitration Centre.

An arbitration agreement

An arbitration agreement is “an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.  An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.” Such is the definition of ‘arbitration agreement’ provided by Article 7 (1) of the UNCITRAL Model Law on International Commercial Arbitration[4] to which the Malta Arbitration Act refers.

Thus, arbitration agreements are generally divided into two types. The first type, which is the most common, is the clause inserted in a contract by which the parties consent to submitting any future disputes (under that particular contract) to arbitration. This pre-dispute form of arbitration agreement is known as an arbitration clause.  The second type of arbitration agreement is one whereby the parties to an existing dispute agree to submit such existing dispute or disputes to arbitration. This post-dispute form of arbitration agreement is sometimes referred to as a ‘submission agreement’ or ‘ad hoc’ submission.[5]

Prior to the enactment of the 1996 Act, due to the absence of specific provisions in Maltese law on arbitration agreements, considerable uncertainty as to the real nature of arbitration agreements prevailed. This uncertainty was completely contrary to the general principle that the arbitral process should be regulated by unequivocal rules. Under the present Act, our Courts of Law have no competence to decide matters which are subject to arbitration and  therefore, the whole arbitral process must satisfy a number of legal criteria to make it worthy of recognition by the State.  Hence, the importance of the conditions which ensure the legal recognition of an arbitration agreement, in the absence of which, the arbitral process would be deemed invalid.

The law requires that the arbitration agreement be in writing. An arbitration agreement denotes a renunciation of one’s right to normal recourse to the Courts of Law. Arbitral agreements concluded verbally are more difficult to prove than an arbitration agreement reduced in writing.  Thus, the written form is essential not so much as a condition for the validity of the agreement but as proof of the obligation itself. However, the law also considers references to arbitration clauses contained in other documents as constituting a valid arbitration agreement.

Article 7 of the UNCITRAL Model law gives a wide interpretation to the concept of an arbitration agreement, including advanced communication devices – “an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement”. The phrase “other means of telecommunication” seems to include any electronic recording, even computer recordings. However, it is important that the entire agreement is contained in the communication.

It is also essential that both parties accept the arbitration agreement by means of a positive act. Failure to respond to a party’s claim of an arbitration is not tantamount to the acceptance of such arbitration agreement. On the other hand, an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another constitutes a confirmation of the existence of an arbitration agreement.  Therefore if the respondent fails to refer to the arbitration agreement when responding to a claim and he fails to deny the arbitration agreement, then such agreement is deemed to be valid.[6]

As in any other contract, the parties signing the contract that contains an arbitration clause, have to have the capacity to enter such deed, otherwise the agreement would be invalid. Matters of personal civil status comprising questions of personal separation and annulment of marriage cannot be settled by means of arbitration.[7]

Filing of the Notice with the Centre

The Act creates an institution vested with a number of powers and responsibilities relating to the running of arbitrations. This authority is known as the Malta Arbitration Centre (MAC) and it has defined powers which are vital to a proper functioning of the whole arbitral process. An arbitration in Malta will not be valid if it is not carried out under the auspices of the MAC. The introduction of this requisite in our law has resulted in the ‘institutionalisation’ of the whole process. Prior to the enactment of the present Act, it was sufficient to register an arbitral award in Court for the arbitration process to be deemed binding.

Hence, it is at this stage that the necessity to acknowledge the overseeing authority of the MAC emerges. The law requires the initiator of an arbitration, i.e., the claimant,  to file  the relative notice of arbitration with the registrar of the MAC and this same notice shall be transmitted to the other party, the respondent.[8] It is of the utmost importance to comply with this requirement as failure to submit such notice to the MAC would render any procedure throughout such arbitration and any award pursuant thereto null and void and unenforceable.[9]  

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