«ICCA’S GUIDE TO THE INTERPRETATION OF THE 1958 NEW YORK CONVENTION: A HANDBOOK FOR JUDGES INTERNATIONAL COUNCIL FOR COMMERCIAL ARBITRATION ICCA’S ...»
(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.
(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.” 36 ICCA Guide to the NYC
REQUEST FOR THE ENFORCEMENT OF AN ARBITRATION AGREEMENTPrior to the rendering of the award, there are situations in which a court may confront a challenge to the validity of an arbitration agreement. The most frequent circumstance will be when, as stated in Article II(3), a matter in respect of which the parties have made an arbitration agreement is nonetheless brought to court, and the respondent requests the court to refer it to arbitration. In addition, an application may be made for a declaration that a specific arbitration agreement is valid or invalid. Similarly the court may be seised of a request for an antiarbitration injunction or asked to take measures in support of arbitration proceedings – such as making default appointment of an arbitrator – that will be opposed by the other party on the ground that the arbitration agreement is invalid.
When faced with these kinds of situations, courts should adhere to the purpose of the Convention and the best practices developed in the Contracting States during more than fifty years.
II. BASIC FEATURES OF THE CONVENTION’S REGIME ON
II.1. ARBITRATION AGREEMENTS ARE PRESUMED VALIDThe drafters of the Convention intended to eliminate the possibility for a party to an arbitration agreement to go back on its commitment to arbitrate and instead submit the dispute to State courts. Accordingly, the Convention sets forth a “pro-enforcement”, “pro-arbitration” regime which rests on the presumptive validity – formal and substantive – of arbitration agreements (“Each Contracting State shall recognize an agreement in writing...”). This presumptive validity can only be reversed on a limited number of grounds (“... unless it finds that the said agreement is null and void, inoperative or incapable of being performed”).
ICCA Guide to the NYC CHAPTER II
The pro-enforcement bias means that the New York Convention supersedes less favourable national legislation. Courts may not apply stricter requirements under their national law for the validity of the arbitration agreement (such as, for example, the requirement that the arbitration clause in a contract be signed separately).
Conversely, a number of courts increasingly hold that Article II(2) allows them to rely on more favourable national legislation. If the law of the State allows an arbitration agreement to be concluded orally, or tacitly, this law applies. (See also Chapter I at V.1.) This aspect is discussed in this Chapter below at IV.2.
II.2. THE PARTIES TO A VALID ARBITRATION AGREEMENT MUST BE
REFERRED TO ARBITRATIONWhen the court finds that there is a valid arbitration agreement, it shall refer the parties to arbitration, at the request of one of the parties, instead of resolving the dispute itself. This enforcement mechanism is provided for by Article II(3). The Convention was intended to leave no discretion to courts in this respect.
II.3. HOW TO “REFER” PARTIES TO ARBITRATION The “referral to arbitration” is to be understood as meaning either a stay of the court proceedings pending arbitration or the dismissal of the claim for lack of jurisdiction, in accordance with national arbitration or procedural law.
II.4. NO EX OFFICIO REFERRALA court shall only refer the parties to arbitration “at the request of one of the parties”, which excludes this being done on the court’s own motion.
III. GENERALLY ACCEPTED PRINCIPLESThe Convention has not explicitly endorsed the “competencecompetence” principle, the limited review of arbitration agreements by courts at a pre-arbitration stage or the severability principle.
Nevertheless, its object and purpose are better fulfilled if those principles are actually followed.
III.1. ARBITRATORS HAVE JURISDICTION TO DETERMINE THEIR OWN
JURISDICTIONThe “competence-competence” principle (also sometimes referred to as Kompetenz-Kompetenz) permits arbitrators to hear any challenge to their jurisdiction and even reach the conclusion that they do not have jurisdiction.
This power is actually essential if the arbitrators are to carry out their task properly. It would be a major impediment to the arbitral process if the dispute must be remanded to the courts simply because the existence or validity of an arbitration agreement has been questioned.
The Convention does not explicitly require the application of the competence-competence principle. However, it is not neutral on the matter. Articles II(3) and V(1) of the Convention do not prohibit that both arbitral tribunals and courts may rule on the question of the arbitrator’s jurisdiction to deal with a particular dispute. In addition, the provisions of Articles V(1)(a) and V(1)(c) – dealing with recognition and enforcement of awards – imply that an arbitral tribunal has rendered an award despite the existence of jurisdictional challenges.
III.2. SCOPE OF JUDICIAL REVIEW OF CHALLENGES TO THE ARBITRAL
TRIBUNAL’S JURISDICTIONThe “competence-competence” principle has been interpreted by several courts, especially in the United States, in the light of the pro-enforcement bias of the Convention. Thus, priority has been given to the determination of the arbitral tribunal’s jurisdiction by the arbitral tribunal itself and the courts’ scrutiny of an arbitration agreement that is purportedly null and void, inoperative or incapable of being performed has remained superficial (or prima facie) at the early stage of a dispute.
These courts have found that the arbitration agreement is invalid only in manifest cases.
Following this approach, the courts would only be empowered to fully review the arbitral tribunal’s findings on jurisdiction when seised of a request for enforcement of an arbitral award or at the setting-aside stage (the latter not being regulated in the Convention).
This interpretation is not uncontroversial. While the position described above appears desirable in light of the object and purpose of the Convention, no explicit provision within the Convention prevents courts from making a full review of the arbitration agreement and issuing a final and binding judgment on its validity at an early stage of the dispute.
III.3. ARBITRATION CLAUSES ARE NOT USUALLY AFFECTED BY THE
INVALIDITY OF THE MAIN CONTRACTClosely intertwined with the principle of “competence-competence” is the principle of the severability of the arbitration clause from the main contract (also referred to as “separability” or the “autonomy of the arbitration clause”).
This principle implies that, first, the validity of the main contract does not in principle affect the validity of the arbitration agreement contained therein; and second, the main contract and the arbitration agreement may be governed by different laws.
III.4. TIMING OF THE REFERRAL REQUEST IN THE COURSE OF COURT
PROCEEDINGSThe Convention does not set a deadline for requesting the referral to arbitration. Should this request be filed before the first submission on the merits, or may it be filed at any time? Failing a provision thereto in the Convention, the answer lies in national arbitration or procedural law. If a party fails to raise the request in a timely manner, it may be considered that it has waived the right to arbitrate and that the arbitration agreement becomes inoperative.
Most national laws provide that the referral to arbitration must be requested before any defence on the merits, i.e., in limine litis.
III.5. NO CONSIDERATION NEEDED FOR CONCURRENT ARBITRATION PROCEEDINGS
The admissibility of a request for referral and the court’s jurisdiction over it should be decided regardless of whether arbitration proceedings have already been initiated, unless national arbitration law provides otherwise.
Although this is not provided for in the Convention, most courts hold that the actual commencement of arbitration proceedings is not a requirement for asking the court to refer the dispute to arbitration.
When seised of challenges to the validity of an arbitration agreement for the purposes of Article II of the Convention, the court should ask itself
the following questions:
1. Does the arbitration agreement fall under the scope of the Convention?
2. Is the arbitration agreement evidenced in writing?
3. Does the arbitration agreement exist and is it substantively valid?
4. Is there a dispute, does it arise out of a defined legal relationship, whether contractual or not, and did the parties intend to have this particular dispute settled by arbitration?
5. Is the arbitration agreement binding on the parties to the dispute that is before the court?
6. Is this dispute arbitrable?
The parties must be referred to arbitration if the answers to these questions is in the affirmative.
IV.1. DOES THE ARBITRATION AGREEMENT FALL UNDER THE SCOPE OF THECONVENTION?
For an arbitration agreement to benefit from the protection of the Convention, it has to come within its scope (see Chapter I at II.2).
IV.2. IS THE ARBITRATION AGREEMENT EVIDENCED IN WRITING?Article II(1) states that the arbitration agreement should be “in writing”.
This requirement is defined at Article II(2) as including “an arbitral
clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams”.
IV.2.1. Theoretical Background Enforcement of an arbitration agreement cannot proceed under the Convention if the writing requirement set out in Article II is not met.
The Convention sets a uniform international rule. Its drafters sought to reach consensus on a matter on which national legislations had – and still have – different approaches, by establishing a comparatively liberal substantive rule on the writing requirement which prevails over domestic laws.
Article II(2) thus sets a “maximum” standard that precludes Contracting States from requiring additional or more demanding formal requirements under national law. Examples of more demanding requirements include requirements that the arbitration agreement be of a particular typeface or size, made in a public deed or have a separate signature, etc.
In addition to establishing a maximum standard, Article II(2) used to be construed as imposing also a minimum international requirement, according to which courts were not entitled to require less than provided for the written form under the Convention. However, this is no longer the general understanding.
Following current international trade practices, Article II(2) has been increasingly understood as not precluding the application of less stringent standards of form by Contracting States.
This reading finds support in Article VII(1) which states that “[T]he provisions of the present Convention shall not... deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or
the treaties of the country where such award is sought to be relied upon.” This clause is intended to allow the application of any national or international provisions that may be more favourable to any interested party. Although Article VII(1) was adopted in relation to the enforcement of arbitral awards, a trend may be noted to also apply it to arbitration agreements (see on Article VII(1), Chapter I at V.1).
This approach, however, is not universally accepted. Many courts have sought to meet the modern demands of international trade not by dispensing with Article II(2) altogether but rather by interpreting it expansively – readily accepting that there is an agreement in writing – or reading it as merely setting out some examples of what is an agreement “in writing” within the meaning of Article II(1).
Both of these approaches have been endorsed by the United Nations Commission on International Trade Law (UNCITRAL) in its Recommendation of 7 July 2006 (see Annex III). UNCITRAL recommended that “article II, paragraph 2, of the [Convention] be applied as recognizing that the circumstances described therein are not exhaustive” and that “article VII, paragraph 1 of the [Convention] should be applied to allow any interested party to avail itself of rights it may have, under the law or treaties of the country where an arbitration agreement is sought to be relied upon, to seek recognition of the validity of such an arbitration agreement”.
IV.2.2. Practice As mentioned above, there is a widespread trend to apply the “in writing” requirement under the Convention liberally, in accordance with the pro-enforcement approach and current international practices where contracts are executed through different means. An inflexible application of the Convention’s writing requirement would contradict the current and widespread business usages and be contrary to the pro-enforcement thrust of the Convention.