Arbitration Agreement Not Registered: What You Need to Know
When it comes to disputes between two parties, arbitration is a popular choice as an alternative to litigation. In an arbitration process, a neutral third party, known as an arbitrator, is appointed to hear the case and make a decision. An arbitration agreement is the contract that outlines the details of the arbitration process in case of a dispute. However, if an arbitration agreement is not registered, it can have significant legal and financial consequences for both parties involved.
Why Register an Arbitration Agreement?
The registration of an arbitration agreement is critical in determining the enforceability of the agreement. It is the process of filing the arbitration agreement with a government agency, usually the local court or arbitration institution. Registration of an arbitration agreement is essential because it increases the credibility and validity of the agreement. Registering the agreement provides proof of the agreement`s existence, and it strengthens the arbitrator`s power to enforce the arbitration award.
Moreover, registering an arbitration agreement is necessary because it allows both parties to have equal access to the arbitration process. In case of a dispute, the registered arbitration agreement can be used as evidence in a court of law, and the parties can refer to it to avoid any legal dispute. Should one party choose to ignore or violate the agreement, the other party can use the registered agreement to take legal action against the defaulting party.
Consequences of Not Registering an Arbitration Agreement
When an arbitration agreement is not registered, it loses its legal validity, making it unenforceable. This means that if a dispute arises, the parties cannot resort to arbitration to resolve the conflict. Instead, the parties will have to settle the dispute through litigation, which can be a costly and time-consuming process.
Another consequence of not registering an arbitration agreement is that it weakens the parties` bargaining power. The parties involved in a dispute may not have equal bargaining positions, and if the arbitration agreement is not registered, the defaulting party may refuse to honor the agreement altogether. This can lead to an unfair or unjust ruling in favor of one party over the other.
In conclusion, registering an arbitration agreement is a crucial step that both parties should take to increase the agreement`s credibility and validity. The registration process ensures that both parties have equal access to the arbitration process and provides evidence of the agreement`s existence, strengthening the arbitrator`s power to enforce the arbitration award. Not registering an arbitration agreement can have serious legal and financial consequences for both parties, making it essential to complete the registration process at the earliest opportunity.