Centrocon Clause Legal Definition:

A clause in an arbitration agreement which bars a claim if not made in writing and an arbitrator appointed within a set time frame.

A Centrocon clause within an arbitration agreement (or even arbitration rules, if the latter apply) applies to bar a claim for arbitration if a claim is not made in writing and the claimant's arbitrator not appointed within a set deadline.

Often, the Centrocon Clause will refer to the claim for which arbitration would have been the sole avenue for redress, is deemed to be waived and absolutely barred in the event of noncompliance with the stated formalities.

In Tradax, the arbitrator was not appointed within three months and so the entire claim itself fell, all because of this Centrocon Clause:

"Any claim must be in writing and claimant's arbitrator appointed within three months of final discharge and where this provision is not complied with the claim shall be deemed to be waived and absolutely barred."

It may appear to be harsh justice, but the court's seek to leave businessmen to their own bargains.

In Law and Practice of Commercial Arbitration in England, the authors write:

"Under the Centrocon Clause, two acts must be performed within the time limit: the making of a written claim and the appointment of the arbitrator. Omission of either act bars the claim.

"The objects of such a clause are ... to provide some limit to the uncertainties and expense of arbitration and litigation; to facilitate the obtaining of material evidence; and to facilitate the settling of accounts ....

"There is no trace in the authorities of any notion that such a short time limit offends against public policy. The three month time limit fixed by the Centrocon clause has been repeatedly upheld. Moreover, much shorter periods than this have been enforced without comment."

REFERENCES:

  • McEwan, J. K. and Herbst, L., Commercial Arbitration in Canada (Toronto: Canada law Book, 2004).
  • Mustill, M. and Boyd, S., The Law and Practice of Commercial Arbitration in England (London: Butterworths, 1982), pages 168-169.
  • Sutton, D. and Gill, J., Russell on Arbitration, 22nd Ed. (London: Sweet & Maxwell, 2003).
  • Tradax Export SA v Volkswagenwerk AG [1970] 1 All ER 420

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