- 15-Oct-2025
- public international law
In some cases, parties may not explicitly include an arbitration clause in their contract, yet courts may still find that an implied arbitration agreement exists between them. An implied arbitration agreement arises from the conduct, actions, or circumstances of the parties involved, where their actions indicate a mutual intention to resolve disputes through arbitration, even if they have not expressly agreed to it in writing. The doctrine of implied contracts allows for flexibility in enforcing dispute resolution methods when there is a reasonable inference that the parties would have agreed to arbitration had they addressed the issue explicitly.
Courts may infer that an arbitration agreement exists if the conduct of the parties shows an intention to arbitrate. Even in the absence of an express clause, if the parties' actions suggest that they intended to resolve disputes through arbitration, an implied arbitration agreement may be formed. For example, if the parties consistently engage in arbitration for resolving disputes under the same or similar circumstances, the court may determine that the parties have implicitly agreed to arbitrate future disputes as well.
If two companies repeatedly resolve issues via arbitration despite the contract not having an arbitration clause, a court could imply that the parties have an understanding or agreement to arbitrate disputes.
Often, standard terms and conditions (e.g., in consumer contracts, business contracts, or even employment agreements) include an arbitration clause. If one party consistently adheres to these terms without objecting or raises no issue with arbitration proceedings, a court may imply consent to arbitration. This is especially true where the party has knowingly accepted such terms, either by signing the contract or through consistent conduct after receiving notice of those terms.
If a party continues to conduct business under the terms of a contract that includes an arbitration clause, it may be considered to have implicitly consented to arbitration. This is because by continuing with the contract, the party is deemed to have agreed to its terms, including the dispute resolution mechanism.
Courts often rely on principles of contract law to interpret whether an implied arbitration agreement exists. The principle of autonomy in arbitration dictates that once the parties have agreed to arbitrate, they are bound by that agreement. If there is ambiguity in the contract or if the parties’ actions suggest an understanding that disputes would be resolved through arbitration, a court may imply the existence of an arbitration agreement.
Courts may imply terms into a contract where the parties’ conduct or the nature of their relationship suggests that arbitration was intended. This is based on the idea that the parties, by their actions, have created a relationship where arbitration is the most logical or intended method of dispute resolution.
In international commercial arbitration, parties may enter into agreements that do not explicitly include arbitration clauses but where the nature of the relationship, business practices, and industry norms suggest that the parties would have agreed to arbitrate. Courts often infer the existence of such agreements in international arbitration settings, especially when the parties have engaged in arbitration in similar contracts or have a history of arbitration in resolving disputes.
In international trade or business, arbitration is often the preferred dispute resolution mechanism. If a party is involved in multiple cross-border transactions where arbitration is commonly used, a court might imply the presence of an arbitration clause based on the parties’ longstanding industry practices.
Even when there is no express agreement to arbitrate, courts may find an implied agreement if the parties voluntarily participate in arbitration proceedings. If one party initiates arbitration and the other party does not object or raises an objection to the process, this may be seen as the implied acceptance of arbitration as the chosen forum for dispute resolution.
If a dispute arises between two parties, and despite no explicit arbitration agreement, both parties submit to the jurisdiction of an arbitral tribunal, this may create an implied arbitration agreement. Participation in the arbitral process, especially without contesting jurisdiction, can indicate acceptance of arbitration.
An implied arbitration agreement differs from the implied terms of an existing agreement. While the latter involves the addition of terms into an agreement that the parties did not expressly address, an implied arbitration agreement arises when the parties, by their conduct or industry practices, show that they intended for arbitration to apply to their disputes.
These are terms that courts will read into a contract based on its overall nature and purpose, even if not explicitly included. In contrast, an implied arbitration agreement is one where the agreement to arbitrate arises from the parties' behavior or general understanding, even though no formal or written clause exists.
In this case, the Supreme Court of India held that a party could be impliedly bound by an arbitration agreement even if the contract does not expressly state one. The court observed that the actions and conduct of the parties could indicate consent to arbitrate, especially in the context of ongoing business relationships where arbitration was regularly used to resolve disputes.
In this international arbitration case, the Supreme Court of India emphasized that arbitration agreements could be implied in situations where the conduct of the parties suggested that they had agreed to resolve disputes via arbitration, even if no formal agreement was present. The Court emphasized the importance of the kompetenz-kompetenz doctrine, where the arbitral tribunal has the authority to decide on its jurisdiction, and this extends to implied agreements.
The U.S. Supreme Court in this case reinforced that an implied agreement to arbitrate could exist even if there was no explicit arbitration clause, particularly if a party’s actions showed an acceptance of arbitration. The Court ruled that an arbitration clause could be implied from the contractual relationship and the parties' consistent engagement in arbitration proceedings.
Company A and Company B have a long-standing business relationship. In the past, when disputes arose, both companies used arbitration to resolve issues. In their most recent contract, neither party explicitly included an arbitration clause. However, when a dispute arises between them, Company A requests arbitration.
Company B does not object to arbitration and participates in the arbitration process without raising any concerns about jurisdiction or the lack of an arbitration clause.
Based on the conduct of both parties, the arbitral tribunal may find that there was an implied arbitration agreement, given their past behavior of resolving disputes through arbitration, and the fact that neither party objected to the initiation of arbitration in the current dispute.
While arbitration agreements are typically express, they can also be implied from the parties' conduct, practices, and the nature of their relationship. If the actions of the parties suggest that they intended to resolve disputes through arbitration, even without an explicit agreement, a court or arbitral tribunal may imply the existence of an arbitration agreement. This principle ensures that arbitration can be used effectively as a dispute resolution mechanism even in the absence of a formal, written clause.
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