Coercion in Reac​hing an Arbitration Agreement

Coercion in Reaching an Arbitration Agreement

According to the Arbitration Law, an arbitration agreement shall be reached out of the free will of both parties rather than under coercion. And an arbitration agreement reached by a party under coercion by the other party shall be held invalid.

What is coercion and under what circumstances an arbitration agreement will be held invalid?

Coercion means the use of or the threat to use coercive measures against the other party in order to force the other party to perform or refrain from performing a specific act. In the context of reaching an arbitration agreement, the purpose of coercion is to force the other party to conclude an arbitration agreement against his true intention.

The said coercive measure include the use of or the threat to use force, economic sanctions, psychological pressures, or social ostracism, etc.

It is necessary to distinguish between such coercive measures and persuasive techniques. In the case of the former, the other party is under threat or pressure and may not choose to act freely. In the case of the latter, the other party is only appealed to follow a particular course of action or behaviour but still has the right of freedom.