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ACCA Applied Skills · Corporate and Business Law (Global) · Alternative dispute resolution mechanisms

A contract between Epsilon Ltd and Zeta Ltd contains a valid arbitration clause covering all disputes arising from it. Epsilon starts court proceedings over a payment dispute. Zeta applies promptly for the court proceedings to be stayed. What is the most likely outcome in a typical jurisdiction that supports arbitration?

The court will normally stay the proceedings and refer the parties to arbitration. A valid arbitration clause is upheld in supportive jurisdictions, so the parties must use the agreed method rather than litigate, though courts keep a supervisory role.

  1. AThe court will hear the case because parties cannot oust the jurisdiction of the courts
  2. BThe court will normally stay the proceedings and refer the parties to arbitrationCorrect
  3. CThe court will order mediation instead of arbitration
  4. DThe court will decide the case and the arbitration clause will be void

Explanation

Courts generally uphold valid arbitration agreements and stay proceedings so the dispute goes to arbitration, while keeping supervisory powers. The idea that the clause is void is wrong because agreeing to arbitrate is not an unlawful ouster of jurisdiction.

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