IS AN ARBITRATION AGREEMENT CONCLUDED BY AN UNAUTHORIZED PERSON VALID?

In the practice of resolving disputes by arbitration, a common issue arises when the person signing the arbitration agreement lacks authority. This factor directly affects the validity of the agreement – a prerequisite for the commercial arbitral tribunal to accept the case. The question, therefore, is whether such an agreement can still be regarded as valid.

According to Clause 2, Article 18 of the Law on Commercial Arbitration 2010, an arbitration agreement shall be invalid if “the person concluding the arbitration agreement has no authority as prescribed by law”. The term unauthorized person refers to:

                        1. A person who is not the legal representative;

                        2. A person who is not a duly authorized representative; or         

                        3. A person who acts beyond the scope of authority granted.

As a general principle, if an arbitration agreement is signed by a person without authority, such agreement is legally invalid. In that case, the parties cannot rely on this agreement to submit the dispute to arbitration and must instead resort to court proceedings.

However, the law is not applied in an overly rigid manner. It allows a degree of flexibility to preserve the parties’ true intention in choosing arbitration. Pursuant to Clause 2, Article 3 of Resolution No. 01/2014/NQ-HDTP dated 20 March 2014 of the Council of Judges of the Supreme People’s Court, which provides guidance on the implementation of certain provisions of the Law on Commercial Arbitration, an arbitration agreement concluded by a person without authority may, in exceptional cases, still be considered legally valid if:

                         1.The person with authority subsequently ratifies the arbitration agreement; or

                      2.The person with authority is aware of the signing of the agreement but raises no objection                          during the performance of the contract or in the course of arbitral proceedings.

Accordingly, an arbitration agreement concluded by a person without authority is invalid, unless it is ratified or not objected to by the person with authority. To minimize risks in contract formation, the parties should carefully verify the signatory’s authority before incorporating an arbitration clause into the contract.

This article, published by MCAC, provides a detailed analysis of the legal question: “Is an arbitration agreement concluded by an unauthorized person valid ?” For more information, please contact us through our hotline 0935 925 068 or via email at contact@mcac.vn.

See also: Trọng tài theo thủ tục rút gọn tại mcac như thế nào? (How does expedited arbitration work at MCAC?)