Parties “May Be Referred to Arbitration” is Not a Binding Arbitration Agreement

CLAUSE STIPULATING THAT PARTIES “MAY BE REFERRED TO ARBITRATION” IS NOT A BINDING ARBITRATION AGREEMENT – GTL INFRASTRUCTURE v VODAFONE INDIA LTD

The Bombay High Court has held that a clause which contains the words “may be referred to arbitration” takes away from the mandatory and binding nature of an arbitration agreement.

Facts

GTL and Vodafone entered into a Master Services Agreement (MSA) on 15 November 2007. Disputes arose between them in relation to contractual dues under the MSA. GTL invoked arbitration against Vodafone and approached the Bombay High Court for interim relief and for the appointment of an arbitrator.

Bombay High Court

The Court relied on precedent[1] to hold that, as the arbitration clause contained words such as “may” and “if mutually agreed upon by the parties”, it indicated that the parties did not intend a
binding arbitration agreement. Such language contemplated future consent between the parties prior to a dispute being referred to arbitration and offered an option to a party not to arbitrate.

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