THE parties to any contract, even a tenancy agreement, may agree and include a term providing that in the event of a dispute arising between them in connection with the performance or interpretation of the terms of the contract, it shall be referred to arbitration for resolution in accordance with the provisions of the Arbitration Law, Cap.4. Such a term is valid, binding on the parties and in the case of a tenancy agreement that has expired and the tenancy has become statutory, it continues to apply. Article 27(1) of the Rent Control Law, L.23/83, provides that as long as the tenant remains in possession of the residence or shop and observes all the terms and conditions of the last tenancy agreement, even if it has expired, he is entitled to the benefits deriving from them as long as they are in accordance with the provisions of the Law. Therefore, this clause to refer the parties’ dispute to arbitration survives and continues to bind them during the term of the statutory tenancy and is enforceable.

The dispute may consist of a claim by the landlord against the tenant for an amount owed by the tenant for rents in arrear and accrued on the basis of the tenancy created under the tenancy agreement. The landlord, in such a case, must show readiness and willingness to resolve the dispute by referring it to arbitration invoking the arbitration clause. If he fails to do so and proceeds to Court with an application to the Rent Control Court, the tenant is entitled to seek an order for stay of the proceedings invoking the arbitration clause and an order referring the dispute to arbitration. The tenant who wishes a stay of the proceedings must, after filing an appearance and before submitting his reply or taking any other procedural step, submit an application requesting stay of the proceedings and the dispute to be referred to arbitration in accordance with the provisions of article 8 of Cap.4. He must state that when the proceedings commenced, he was and still is ready and willing to do whatever is necessary for the proper conduct of the arbitration. The Court has a discretion to issue the order if it is satisfied that there is no reason to justify not referring the dispute to arbitration in accordance with the relevant term of the tenancy agreement.

The possibility of invoking the arbitration clause in statutory tenancy was examined by the Rent Control Court in a judgment issued on 30.5.2022 following a relevant application of the tenant in the context of the main application of the landlord who claimed an amount for accrued and due rents. The tenancy agreement which had expired, contained a term that in the event of a dispute, it would be referred to arbitration in accordance with the provisions of the Arbitration Law, Cap.4. The landlord filed an objection claiming that the tenancy agreement between the parties expired including the arbitration clause, the dispute was not covered by the tenancy agreement, the tenant is statutory and the dispute is now regulated by the Rent Control Law.

The Court, analysing the legal aspect of the issue, stated that the main dispute between the parties is whether the provision for referral to arbitration, which was included in the original tenancy agreement, is still in force. It referred to article 27(1) of the Rent Control Law and case law, concluding that the provision in the original tenancy agreement to refer the parties’ dispute to arbitration survived the expiry of the agreement and continues to bind the parties during the term of the statutory tenancy. In considering whether the exercise of the Court’s discretion to stay the proceedings and refer the dispute to arbitration was justified, it held that no good cause had been shown by the landlord for the Court not to refer the parties’ dispute to arbitration. Consequently, the Court issued the orders sought by the tenant with costs against the landlord.

The landlord’s legal argument was that the rental agreement had expired and the tenancy became statutory and that the arbitration clause did not extend beyond the time period covered by the agreement. The Court held that this argument is overturned by law and case law. The arbitration clause does not remove the jurisdiction of the Court, but gives any party, subject to conditions, the right to apply for a stay of proceedings and to refer the dispute to arbitration.