I have a proprietor firm. I want to enter into a deal with a limited company which has a pre-prepared agreement that they have sent to me. This agreement mentions that the agreement shall be subject to arbitration. But, it also provides that the said company shall have the full right to appoint the sole arbitrator (i.e., there will be only one arbitrator and the company will appoint him). In this situation, how will my right be protected by the arbitrator? Should I agree to this type of arbitration clause?
Though it is your choice whether or not to agree to such arbitration clause, but generally speaking such type of arbitration clause may not be fair to you. Since the company has full discretion and full power to appoint the only or sole arbitrator, the possibility of the company appointing some person as arbitrator who would favour the company, cannot be ruled out. Once there is an arbitration clause, you will not be able to approach the regular civil court to resolve any future dispute, and if the arbitrator is also not an impartial and neutral person, it may mean that the dispute resolution may not be impartial.
Usually, the arbitration clause should be such that both parties to the dispute would appoint one arbitrator each and then the two arbitrators would appoint a third arbitrator. If a sole arbitrator is to be appointed, then it should be with the mutual consent of both parties.
Therefore, it is up to you to decide whether you would like to agree to such arbitration clause which may not be fair to you. It also depends on the nature of the contract / agreement, how valuable the contract is to you is, how much are the chances of a dispute arising in future, and also whether you can insist with the company for changing the arbitration clause without losing the business deal with it.
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