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

Alpha Ltd and Beta Inc signed a supply contract containing a clause that any dispute must be referred to arbitration. A dispute arises and Alpha Ltd starts court proceedings instead. Beta Inc applies for the court action to be stopped. Which statement best describes the likely outcome?

The court will usually stay the court proceedings and refer the parties to arbitration, because they contractually agreed to arbitrate. Courts generally respect valid arbitration agreements, so a party cannot ignore the clause and litigate instead.

  1. AThe court will usually stay the proceedings and refer the parties to arbitration, because they agreed to itCorrect
  2. BThe court must hear the case, because parties can never exclude the courts' jurisdiction
  3. CThe court will decide the case and then send only the remedy to the arbitrator
  4. DThe court will appoint itself as arbitrator and decide the matter informally

Explanation

An arbitration agreement is binding, and courts will generally stay court proceedings brought in breach of it so that the dispute goes to arbitration. The option saying courts can never be excluded is wrong because parties may validly agree to arbitrate.

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