LITTLE ROCK The city of Clarksville can terminate a contract that required it to buy electricity from Independence County, the state Supreme Court ruled Thursday.

LITTLE ROCK The city of Clarksville can terminate a contract that required it to buy electricity from Independence County, the state Supreme Court ruled Thursday.

The Supreme Court upheld a ruling by Johnson County Circuit Judge William Pearson denying a motion by Independence County to compel arbitration between the western Arkansas city and the northeastern Arkansas county.

A clause in the contract that requires arbitration of disputes is invalid, the high court said.

Clarksville and Independence County entered into the contract in 2005. The city agreed to purchase all electricity to be generated by a hydroelectric plant that would utilize a series of locks and dams on the White River.

Independence County financed the project by issuing bonds that were to be retired with money that Clarksville paid for the electricity. The project experienced operational and financial difficulties, however, and in August 2010 Clarksville sent the county a letter saying it was terminating the agreement because the plant had never achieved the level of output the county had promised.

Independence County filed a motion to compel arbitration, arguing that the contract required arbitration of disputes, and Pearson denied the motion.

In its unanimous opinion Thursday upholding that ruling, the Supreme Court said the contract states that disputes are to go to an arbitration panel that has no authority to impose monetary damages against the city. If one party is shielded from damages, the requirement to arbitrate is not mutual to both parties, the court said.

A lack of mutuality to arbitrate in an arbitration clause renders the clause invalid, Justice Courtney Henry Goodson wrote in the opinion.