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The Arbitration Agreement: Recognition, Effects, and Validity

This article explores the basis for a tribunal's jurisdiction, recognition and effects of arbitration agreements, and the determination of their validity under the New York Convention. It also examines the development of state laws in relation to arbitration-friendly standards.

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The Arbitration Agreement: Recognition, Effects, and Validity

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  1. International Business LawSciences Po ParisSpring 2017 The arbitration agreement Giuditta Cordero-Moss, Ph.D., Dr.Juris Professor, Oslo University

  2. Arbitration agreement • Basis for the arbitral tribunal’s jurisdiction

  3. Recognition and effects • New York Convention Article II 1. Each Contracting State shall recognize an agreement […] under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration. 2. […] 3. 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.

  4. Still no EU Regulation • Brussel I: Arbitration exception • Proposal: All courts stay once proceeding initiated in the court of the arbitration’s seat • Recast: • Recital 12: Brussles I not applicable to court rulings on existence or validity of arbitration agreement (whether as incidental question or principal issue) • Court decision on the merits is subject to Brussles I even if based on jurisdiction following a decision that the arbitration agreement was invalid • Recognition and enforcement of awards under New York Convention takes precedence (possible conflict with previous paragraph) • Brussles I not applicable to ancillary actions or proceedings

  5. Recgnition and effects II • UNCITRAL Model law art 8, vogl § 7 (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.

  6. Which law determines the validity of an arbitration agreement? • New York Convention art V 1. Recognition and enforcement of the award may be refused […] only if […] : (a) The […] agreement referred to in article II […] is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made;

  7. Formal validity • New York Convention article II 1. Each Contracting State shall recognize an agreement in writing […] 2. The term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.

  8. UNCITRAL Recommendation of 7.7.06 on the interpretation of article II(2) 1.Recommends that article II, paragraph 2, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done in New York, 10 June 1958, be applied recognizing that the circumstances described therein are not exhaustive;

  9. UNCITRAL Model Law, article 7 Option I (2) The arbitration agreement shall be in writing. (3) An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means. (4) The requirement […] is met by an electronic communication if the information contained therein is accessible so as to be useable for subsequent reference; […] (5) Furthermore, […] if it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other. (6) The reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is such as to make that clause part of the contract.

  10. UNCITRAL Model Law, article 7 Option II (vogl § 10) “Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

  11. Development • Traditionally: New York Convention art II preferred as a uniform standard which is arbitration-friendly • Now: state law may be more arbitration-friendly • State law may be applied under New York Convention article VII

  12. Substantial validity • Any dispute “arising under” this contract: • Only disputes on contractual rights and obligations • Any dispute “in relation to” this contract/ “connected with” this contract • Also tort, statutory or other non-contractual claims connected with the contractual relationship Overseas Union Insurance Ltd v AA Mutual International Insurance Co Ltd [1988] 2 Lloyd’s Rep 63

  13. Fiona Trust & Holding Corporation and others v Privalov and others [2008] 1 Lloyd’s L Rep 254 • These fine distinctions reflect no credit upon English commercial law • The time has come to draw a line under the authorities to date and make a fresh start • If the parties wish to have issues as to the validity of their contract decided by one tribunal and issues as to its meaning or performance decided by another, they must say so expressly

  14. Model arbitration clauses • Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination http://www.lcia.org/Dispute_Resolution_Services/LCIA_Recommended_Clauses.aspx • Any dispute, controversy or claim arising out of or in connection with this contract, or the breach, termination or invalidity thereof http://sccinstitute.se/engelska-16.aspx

  15. Model clauses • Any dispute, controversy or claim arising out of or in relation to this contract, including the validity, invalidity, breach or termination thereof https://www.swissarbitration.org/sa/download/SRIA_english_2012.pdf • Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof http://www.uncitral.org/pdf/english/texts/arbitration/arb-rules-revised/arb-rules-revised-2010-e.pdf

  16. Arbitration clause • Sufficiently precise to permit identifying the scope of the dispute and the type of arbitration

  17. Separability • UNCITRAL Model Law art 16 vogl § 18 (1) For [the] purpose [of determining jurisdiction], an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract

  18. Separability • The arbitration agreement is not affected if the main contract is void, terminated, illegal etc.

  19. Legal capacity of the parties New York Convention article V: 1. Recognition and enforcement of the award may be refused […] only if […]: (a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity […];

  20. Legal capacity • Dallah Real Estate & Tourism Holding Co v Ministry of Religious Affairs, Government of Pakistan, [2010] UKSC 46 • State of Ukraine v Norsk Hydro ASA, Svea Hovrätt, 17 December 2007, T 3108-06

  21. Arbitrability • UNCITRAL Model Law art 1(5) • This Law shall not affect any other law of this State by virtue of which certain disputes may not be submitted to arbitration or may be submitted to arbitration only according to provisions other than those of this Law. • Vogl § 9 • Disputes on matters within the parties’ free disposal are arbitrable, including private law effects of competition regulation

  22. Arbitrability: • From second look doctrine • Mitsubishi Motors Corp v Soler Chrisler-Plymouth, Inc., 473 U.S. 614 (1985) and Scherk v. Alberto-Culver Co., 417 U.S. 506, to • To ensuring application of rules • Belgium, Cass., 16.11.06, Germany, OLG München, 17.5.06, U.S., Thomas v Carnival Corp, England, High Court 30.10.09

  23. Kompetenz-Kompetenz • Model Law art 16 (1)The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement

  24. The ultimate decision is of the courts • Model Law art 8 vogl § 7 • A court before which an action is brought in a matter which is the subject of an arbitration agreement shall […] refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed. • Negative Kompetenz-Kompetenz: the court must accept the arbitral tribunal’s evaluation (France) • The court revises the matter independently (Germany)

  25. The ultimate decision is of the courts • Model Law art 34 vogl § 43 (2) An arbitral award may be set aside by the court […] : • (i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not is not valid […] […] (b) […] (i) the subject-matter of the dispute is not capable of settlement by arbitration • Model Law art 36 Vogl § 46 • Recognition and enforcement of an award may be refused […]: • (i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not is not valid […] […] (b) […] (i) the subject-matter of the dispute is not capable of settlement by arbitration

  26. The ultimate decision is of the courts • New York Convention art V 1. Recognition and enforcement of the award may be refused if […]: (a) The parties to the agreement […] were, under the law applicable to them, under some incapacity, or the […] agreement […] is not valid […]; […] 2. […] (a) The subject matter of the difference is not capable of settlement by arbitration […]

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