Originally from Arbitration Law of Canada: Practice and Procedure, 3rd Ed

CHAPTER 3
THE ARBITRATION AGREEMENT

The essence of arbitration is that it is consensual.  In order to oust the jurisdiction of the court to hear and decide disputes, a party must be able to point to an enforceable agreement wherein the parties to the dispute have agreed to submit to another forum. If the parties have agreed to arbitrate using a broadly worded agreement then, under the theory that the parties have full autonomy to craft their own dispute resolution mechanism, all claims, whether sounding in contract, tort, equity or statute may be arbitrated. The arbitrators take their jurisdiction from the agreement of the parties to resolve their dispute using a third party, not from any State’s legislation, although legislation at the place of arbitration may take away or limit that jurisdiction.  In essence, if two parties have the right to settle a legal dispute as between them, they have the right to ask a third party to do it for them.
In Canada, this has been clearly set out by the Supreme Court of Canada in a number of decisions. In Dell Computer Corp. v. Union des Consommateurs,  Deschamps J., writing for the majority, noted that “[a]rbitration is part of no state’s judicial system” and “owes its existence to the will of the parties alone.” See also Desputeaux v. Éditions Chouette (1987) Inc.,  in which LeBel J., for the Court, wrote, “[i]n general, arbitration is not part of the state’s judicial system, although the state sometimes assigns powers or functions directly to arbitrators.”
It all starts with what the parties have agreed. As the agreement to arbitrate only becomes important once a dispute has arisen, the arbitration clause in a commercial contract may well become the most carefully scrutinized and dissected provision in it. For presumed tactical advantage, lawyers will engage in the most careful parsing of the words of an arbitration agreement to demonstrate why the particular dispute is or is not to be arbitrated.