Arbitration is an out-of-court dispute resolution method that the parties must expressly agree upon. The arbitration agreement has to be made in writing and can take the form of an arbitration clause within the contract itself or as a compromise. In order for an arbitration to take place, the contract must meet certain conditions, such as the capacity of the parties, the arbitrability of the dispute, and the absence of exclusive court jurisdiction, etc. The arbitration agreement in Croatian legislation is governed by the Arbitration Act, passed by the Croatian Parliament in 2001. The formalvalidity of the arbitration agreement is governed by the Arbitration Act. The law applicable to the arbitration agreement will be the law chosen by the parties themselves. This often becomes one of the main problems and significant challenges related to arbitration, as parties often fail to make this choice. The question arises whether the possibility of an implied choice of applicable law for the arbitration agreement should be considered. This possibility varies between civil law and common law countries. Common law countries are more likely to accept the possibility of an implied choice, while most civil law countries do not recognize such a choice of law. Additionally, the difference between these two legal families is that common law is more inclined to apply lex contractus in favor of the arbitration agreement. Civil law countries are much more likely, in the case of a failure to make an explicit choice, to apply the subsidiary connection lex loci arbitri.