In commercial disputes, parties often choose arbitration as an alternative method of resolving their disputes outside of traditional court proceedings. Despite the existence of an arbitration agreement, it is widely accepted that a party’s right to arbitrate may be waived by either an explicit contractual provision or its subsequent conduct. The courts have taken different approaches to this issue in different jurisdictions, however.
Most jurisdictions recognize the right to arbitrate and allow parties to waive this right through various means:
- By explicit contractual provision: the parties can include an explicit waiver clause within a contract that is subsequently signed. Such a clause should state that any disputes arising out of the contract will be resolved exclusively through litigation and, preferably, include the explicit waiver of the right to resort to arbitration;
- By the parties’ subsequent conduct during proceedings: the parties may unintentionally waive their right to arbitrate by commencing and/or participating in court litigation without raising the arbitration agreement as a defence or requesting a stay of the court proceedings.
What Is a “Waiver”?
Waiver generally refers to the “voluntary relinquishment” or “abandonment of a known right, claim, or privilege”. In the context of arbitration, waiver occurs when a party consciously and intentionally gives up its right to arbitrate a particular dispute, thereby choosing litigation as the preferred method of dispute resolution. One type of common law waiver is “waiver by election”, which applies where a choice has to be made between two mutually exclusive courses of action. The party asserting waiver has to show that:
- The other party knew the facts that led to the need to elect one of the choices available, and
- That the other party knew of its legal right to elect, and
- Regardless of this knowledge, in fact and in law, that party still elected to go down one road rather than the other.
Certain commentators emphasize that the term “waiver” is used imprecisely in common law jurisdictions in this context, whereas, in certain instances, cases of a waiver are really cases of estoppel or election. The term “waiver” is most commonly used in cases of waiver of “arbitration cases” or “arbitration clauses”, even though, upon closer examination, these may fall under the doctrines of “election” or “estoppel”. Even though these doctrines largely overlap, their common denominator is that they involve the relinquishing or divestiture of a legal right or a claim by a party, which conduct binds the other party.
Waiver and Its Consequences on the Arbitration Agreement
A waiver has legal consequences on the arbitration agreement, in most cases rendering it “inoperative”, i.e., ceasing to have contractual effect under the general law of contract.
In the context of arbitration, waiver falls within Article II(3) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). Article II(3) of the New York Convention provides:
The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. (emphasis added)
As Gary Born explains, an arbitration agreement becomes “inoperative”, inter alia, in cases of waiver, revocation or repudiation of the arbitration agreement:
It also appears reasonably clear that Article II(3) [of the New York Convention], which permits non-enforcement of “inoperative” agreements, refers to agreements that were at one time valid, but which thereafter ceased to have effect (or ceased to be “operative”). In one commentator’s words, “the word ‘inoperative’ refers to an arbitration agreement which has ceased to have effect.” […] That would include cases of waiver, revocation, repudiation, or termination of the arbitration agreement, and of failure to comply with jurisdictional time limits prescribed by the arbitration agreement.
Thus, an arbitration agreement may become “inoperative” where the parties actively pursued litigation, rather than arbitration, resulting in a waiver or abandonment of the right to arbitrate under the applicable law. An arbitration agreement may also become “inoperative” if the parties mutually agree to litigate their dispute (or to submit it to a different form of dispute resolution), or where a party repudiated the arbitration agreement.
Although waiver is generally regarded as an instance where the arbitration agreement becomes “inoperative”, occasionally it has been held that waiver could make the arbitration agreement “null and void” or “incapable of being performed”. Another possible basis for waiver is that a party has, by litigating a dispute comprehended by an arbitration agreement, committed a breach or anticipatory breach of a core term (a condition) of that agreement, thereby entitling the other party to rescind, as held by English courts.
Courts have taken different approaches to waiver in different common law jurisdictions. A brief overview of the most relevant court decisions is provided below.
Waiver of Arbitration in the United States
In the United States, there is considerable jurisprudence on waiver and the right to invoke an arbitration agreement. In Ivax Corp v. B Braun of America Inc., the court set out a test for a waiver, indicating that “[i]n determining whether a party has waived its right to arbitrate, we have established a two-part test. First, we decide if, ‘under the totality of the circumstances’, the party ‘has acted inconsistently with the arbitration right’, and second, we look to see whether, by doing so, that party ‘has in some way prejudiced the other party’.” Until recently, U.S. courts held that a waiver of the right to arbitrate required prejudice. This is not the case anymore. In the most recent decision of the Supreme Court, Morgan v. Sundance, Inc., the court expanded the circumstances under which a party may waive its right to arbitrate. Before Morgan v. Sundance, most federal circuits adopted an additional requirement for waiver of the right to arbitration which was based upon the strong policy in favour of arbitration. Those courts held that the party invoking waiver must, in addition to showing an intention to waive the right to arbitration, also demonstrate prejudice. The U.S. Supreme Court has now rejected that requirement and reasoned that the Federal Arbitration Act’s policy favouring arbitration “does not authorize federal courts to invent special, arbitration-preferring procedural rules”. The Supreme Court held that the policy favouring arbitration is merely an acknowledgement that arbitration agreements are contracts, and enforceable as any other contracts. Instead, as the Supreme Court held, the right to arbitration can be waived like any other contractual right, even if the other party was not prejudiced by the delay.
Waiver of Arbitration in Australia
Several Australian courts have held that a party can waive its right to arbitrate disputes, and it would seem that waiver will render an arbitration agreement “inoperative”.
In Comandate Marine Corp v. Pan Australia Shipping Pty Ltd, the Australian Federal Court clarified the circumstances in which Australian courts will recognize whether a party to an international commercial dispute has, by involvement in litigation, waived the right to arbitrate the dispute. The judge found that Comandate, by starting litigation, without placing the writ on its intention to seek a stay, elected not to arbitrate. The court held that, as a result, the arbitration agreement was either “incapable of being performed” or “inoperative”, which mirrors Article 8(1) of the UNCITRAL Model Law.
In La Donna Pty Ltd v. Wolford AG, the court recognized that an arbitration agreement became inoperative as the right to arbitrate had been waived by “unequivocal choice” to pursue litigation and the consequent abandonment of arbitration.
The jurisprudence on the topic of waiver continues to grow in Australia. Interesting analysis and application of the principles concerning waiver as a ground for finding that an arbitration agreement is “null and void”, “inoperative”, or “incapable of being performed” may also be found in Roy Hill Holdings Pty Ltd v. Samsung C&T Corp  WASC 458, John Holland Pty Limited v. Kellogg Brown & Root Pty Ltd  NSWSC 451, and Zhang v. Shanghai, Wool and Jute Textile Co Ltd (2006) 201 FLR 178.
Waiver of Arbitration in the United Kingdom
U.K. courts have taken a different approach to the same issue. Certain English courts have held that an arbitration agreement, like any other contract, can be repudiated by a party which engaged in litigation. If the repudiation is accepted, the arbitration agreement becomes inoperative. In Downing v. Al Tameer Establishment, the English Court of Appeal resolved a claim of waiver by reference to a repudiation of contract analysis. The Court of Appeal affirmed that an arbitration agreement can be repudiated like any other contract when the repudiation is accepted, and that, in that case, the claimant had accepted the defendant’s repudiation when issuing court proceedings.
A further theoretical basis for determining that arbitration waiver has occurred is contractual. The question that arises is: can the parties, by litigating, be viewed as having contracted to vary or annul the arbitration clause or agreement? This analysis was carried out in the English case The Elizabeth H, where a submission of waiver was made a year and a half after the commencement of litigation. The court considered that the parties had, by their conduct, agreed to accept the court’s jurisdiction and to vary the arbitration clause.
Waiver of Arbitration in Singapore
Waiver of the right to arbitrate is also recognized by Singapore courts. In Aero-Gate Pte Ltd v. Engen Marine Engineering Pte Ltd, the court described waiver as a “voluntary or intentional relinquishment of a known right, claim or privilege” and an “informed choice manifested in unequivocal conduct”.
In BMO v. BMP, the High Court held that waiver by election requires “a choice between two concurrent inconsistent rights”. The High Court cited to the leading authority on waiver by election, Motor Oil Hellas (Corinth) Refineries SA v. Shipping Corporation of India, in which the court held: “It is a commonplace that the expression ‘waiver’ is one which may, in law, bear different meanings. In particular, it may refer to a forbearance from exercising a right or to an abandonment of a right. Here we are concerned with waiver in the sense of abandonment of a right which arises by virtue of a party making an election. Election itself is a concept which may be relevant in more that [sic] one context.” The above passage was cited with approval by the Court of Appeal in Chai Cher Watt (trading as Chuang Aik Engineering Works) v. SDL Technologies Pte Ltd and another appeal  1 SLR 152.
Waiver of the right to arbitrate signifies a conscious decision to forego the advantages of arbitration in favour of litigation. Parties must understand the implications of waiving this right and carefully consider their options before deciding on the most suitable method for resolving their disputes. Whether through contractual provisions, conduct during proceedings, or consistent behaviour, the waiver of the right to arbitrate is a significant choice that can have consequences for the arbitration clause in a contract and, thus, must be carefully approached.
 Wilken, K. Ghaly, The Law of Waiver, Variation and Estoppel (OUP, 2012), para. 3.14.
 P. Gilles, A. Dahdal, Waiver of a Right to Arbitrate by Resort to Litigation, in the Context of International Commercial Arbitration, 73(4) Arbitration: The International Journal of Arbitration, Mediation and Dispute Management, p. 362.
 P. Gilles, A. Dahdal, Waiver of a Right to Arbitrate by Resort to Litigation, in the Context of International Commercial Arbitration, 73(4) Arbitration: The International Journal of Arbitration, Mediation and Dispute Management, p. 363.
 Gary Born, International Commercial Arbitration (3rd ed., 2021), Chapter 5, pp. 902-903.
 M. Pryles, Chapter 3: When Is an Arbitration Agreement Waived? (Third Kaplan Lecture, 9 December 2009)(2018), para. 3.04.
 Ivax Corp v. B Braun of America Inc., 286 F.3d 1309 .
 Morgan v. Sundance, Inc., 142 S. Ct. 1708, 1711 .
 9 U.S.C. § 2; Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213  at –.
 Morgan v. Sundance, Inc., 142 S. Ct. 1713 .
 Morgan v. Sundance, Inc., 142 S. Ct. 1713 .
 Morgan v. Sundance, Inc., 142 S. Ct. 1713 .
 Roy Hill Holdings Pty Ltd v. Samsung C&T Corp WASC 458 ; AED Oil Limited v. Puffin FPSO Limited VSC 534 ; Comandate Marine Corp v. Pan Australia Shipping Pty Ltd FCAFC 192 ; Zhang v. Shanghai, Wool and Jute Textile Co Ltd 201 FLR 178 ; ACD Tridon Inc. v. Tridon Australia Pty Ltd NSW SC 896 ; Eisenwerk Hensel Bayreuth GmbH v. Australian Granites Ltd Qd R 461 .
 Comandate Marine Corp v. Pan Australia Shipping Pty Ltd  F.C.A.F.C. 53.
 (1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
 La Donna Pty Ltd v. Wolford AG  VSC 359 at .
 Downing v. Al Tameer Establishment  EWCA Civ 721.
 The Elizabeth H  1 Lloyd’s Rep. 172.
 The Elizabeth H  1 Lloyd’s Rep. 172.
 Aero-Gate Pte Ltd v Engen Marine Engineering Pte Ltd  SGHC 148 at .
 BMO v. BMP  SGHC 127 at .
 Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India,  1 Lloyd’s Rep. 391 at -.