A clause in a contract requiring the parties to refer their disputes to arbitration is not necessarily enforceable if the contract itself is invalid. Every arbitration clause should be coupled with a provision that the validity of the agreement may be determined by arbitration even though the existence of the agreement itself is being questioned. The related judgment of North East Finance v Standard Bank highlights that the parties must be explicit and clear on this point.
The clause could be to the effect that:
“If any dispute arises between any of the parties on any matter provided for or arising out of the main agreement or in regard to its interpretation, termination, validity or the circumstances giving rise to an allegation of invalidity, then that dispute must be submitted to and decided by arbitration.
This arbitration clause must not be regarded as invalid or ineffective because the main agreement is invalid or did not come into existence or became ineffective for any reason and the arbitration clause must be treated as a distinct agreement that survives that event.”