THE DOCTRINE OF COMPETENCE-COMPETENCE IN INDIA

INTRODUCTION

The doctrine of competence-competence has become a prominent characteristic of the

arbitration regime. It has been recognized by the arbitration legislations of many countries. 1 The
doctrine means that the arbitration tribunal has the power to decide its own jurisdiction. This also
includes the power of the arbitration tribunal to decide any objections on the existence or validity
of an arbitration agreement. This power has been statutorily conferred on the arbitral tribunal and
is subject to scrutiny by the courts.2 The doctrine is related to the rules pertaining to the issue of
jurisdiction between the arbitral tribunals and national courts and to the timing of challenges that
may be raised to the arbitral tribunal’s jurisdiction.3 While the doctrine is recognized in many
countries, there is a disagreement among scholars. It is debated that the doctrine comes with its
set of positive and negative impacts. In India, the discussion pertains to the scope of this doctrine
and the characteristic feature of minimum court intervention in arbitration.4 The general tenet of
competence-competence that the arbitrator can decide on their own jurisdiction does not suggest
as to who eventually decides the case. It only states that ‘the question of “who decides what”
may itself be addressed by the arbitrator.’5 Unless a court of competent jurisdiction decides to the
contrary, arbitration proceedings are not stopped merely because one of the parties challenges the
jurisdiction of the arbitral tribunal.
This project aims to study the doctrine of competence-competence in arbitration. It has
been divided into three parts. The first part elucidates the relationship of the doctrine with the
doctrine of severability and how the two, though distinct, are inter-dependent. The second part
discusses the doctrine in detail. It highlights the incorporation of the doctrine in the UNICTRAL

1
See Federal Code on Private International Law 1987, art 186 (Switzerland); International Arbitration Act 1974, art
16.1 (Australia); Arbitration Act 1996, sch 1, art 16 (New Zealand); The Swedish Arbitration Act 1999, art 2
(Sweden).
2
Arbitration and Conciliation Act 1996, s 16.
3
Pratyush Panjwani and Harshad Pathak, ‘Assimilating the Negative Effect of Kompetenz-Kompetenz in India:
Need to Revisit the Question of Judicial Intervention?’ [2013] 2(2) Indian Journal of Arbitration Law 24, 25.
4
ibid.
5
William W Park, ‘The Arbitrator’s Jurisdiction to Determine Jurisdiction’ 13 ICCA Congress Series 55 (ICCA
Congress, Montréal 2006) 4. Available at <http://www.arbitration-
icca.org/media/0/12409326410520/jurisdiction_to_determine_jurisdiction_w_w_park.pdf>
Model Law and the Indian Act. It also discusses way the Supreme Court of India has applied the
doctrine. Part three touches upon the two sides of the doctrine- the negative and the positive. The
scope of the project is limited to discussing the doctrine in the Indian context. References have
been made to the UNCITRAL Model Law wherever necessary.

I. SEVERABILITY AND COMPETENCE-COMPETENCE

To gauge a better understanding of the doctrine of competence-competence, it is pertinent
to study it simultaneously with another doctrine- the doctrine of severability. This doctrine states
that the arbitration clause is a separate agreement in itself. Its validity does not depend on the rest
of the clauses of in the contract. This autonomy of the arbitration clause enables it to survive any
invalidity in the main underlying contract.6 Though both the doctrines are distinct, their primary
aim is to give responsibility to the arbitral tribunal to determine its jurisdiction.7 The arbitral
tribunal derives its existence from the arbitration clause in a contract. In order to enable it to
decide the issue of its jurisdiction, the arbitration clause has to be valid. Severability rescues
arbitration agreements from failing merely due to the invalidity of the main contract.8
Severability, along with the doctrine of competence-competence is recognized in Article
16(1) of the UNCITRAL Model Law. It treats the arbitration clause as an agreement independent
of other terms of the contract. Severability originated in common law in the case of Heyman v
Darwins Ltd,9 where Lord MacMillan held that invalidity of the main contract would not affect
the efficacy of the arbitration agreement contained therein. It was codified in the English
Arbitration Act of 1996 under section 7.10 Under the Indian law, it is incorporated in section
16(1) on the lines of the UNCITRAL Model Law.

6
Amokura Kawharu, ‘Arbitral Jurisdiction’ 23 New Zealand Univ L Rev (December 2008) 238.
7
ibid.
8
Jack Tsen-Ta Lee, ‘Separability, Competence-Competence and the Arbitrator’s Jurisdiction in Singapore’ [1995] 7
Singapore Academy of Law Journal, Research Collection School Of Law, 421. Available at
<http://ink.library.smu.edu.sg/sol_research/575>.
9
[1942] AC 346, 374.
10
Separability of arbitration agreement: Unless otherwise agreed by the parties, an arbitration agreement which
forms or was intended to form part of another agreement (whether or not in writing) shall not be regarded as invalid,
non-existent or ineffective because that other agreement is invalid, or did not come into existence or has become
ineffective, and it shall for that purpose be treated as a distinct agreement.

1
 II. COMPETENCE-COMPETENCE EXPLAINED
As stated, the doctrine of competence-competence gives the arbitral tribunal the authority
to rule on its own jurisdiction and also on the existence and validity of an arbitration agreement.
If the arbitrators do not have this power, then it may be said that the arbitration proceedings
should stop automatically when a challenge is made to the jurisdiction of the arbitral tribunal and
the issue should be decided by the court.11 However, such a stance would defeat the advantage
associated with arbitration of expeditiously settling the disputes. A plea on the issue of
jurisdiction, which is capable of being settled at the beginning under the doctrine of competence-
competence, will be presented before the court which will result in a loss of time.12 Additionally,
it also serves a practical purpose. It does not allow a respondent with mala fide intentions to stall
the arbitration proceedings by simply raising a jurisdictional challenge. 13 On the other hand,
allowing the courts to review the decision of the arbitral tribunal on their jurisdiction allows a
genuinely aggrieved party to protect its interests.14 The original aim of the doctrine is to give
more power to the arbitral tribunal rather than curbing the powers of the courts.15
The doctrine of competence-competence has been incorporated in the UNCITRAL Model
Law in Article 16 in the following words:16
The arbitral tribunal may rule on its own jurisdiction, including any objections with
respect to the existence or validity of the arbitration agreement. For that purpose, an
arbitration clause which forms part of a contract shall be treated as an agreement
independent of the other terms of the contract. A decision by the arbitral tribunal that the
contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
This article highlights the severability of the arbitration clause where it says that the arbitration
clause shall be treated as an independent contract.

Like the UNCITRAL Model law, the doctrine has been incorporated in section 16 of the
Act.17 The Indian Act has adopted the doctrine in a way to minimise the intervention of courts in

11
ibid.
12
Gas Authority of India Ltd v Keti Construction (I) Ltd [2007] 5 SCC 38.
13
Park (n 3) 24.
14
Doug Jones, ‘Competence-Competence’ [2009] 75 ARB: The Int’l J of Arb, Mediation & Disp Mgmt 56.
15
Stavros Brekoulakis, ‘The Negative Effect of Compétence- Compétence: The Verdict has to be Negative’ Queen
Mary University of London, School of Law Legal Studies (Research Paper No. 22/2009) available at
<http://ssrn.com/abstract=1414325>.
16
UNCITRAL Model Law, Art 16(1).

2
the arbitration process and speed up the proceedings. Before the act of 1996 was enacted,
arbitration regime in India was governed by the Arbitration Act, 1940, the Arbitration (Protocol
and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, of
1961. Since the 1940 act was passed when India was still a British colony, it borrowed
immensely from the provisions of the English Arbitration Act, 1934.18 Under the Arbitration Act,
1940, the tribunal did not have the power to decide on its own jurisdiction or the validity of the
arbitration clause.19 It was to be decided by the courts. This was highlighted by the Supreme
Court in UP Rajkiya Nirman Nigam Ltd. v Indure Pvt Ltd.20 Here the court reiterated the
statutory position that the arbitral tribunal had no power to decide the existence or validity of an
arbitration agreement. Since this issue formed the basic foundation of arbitration proceedings, it
could only be decided by the courts. This position has been reversed by section 16 of the 1996
Act which grants the authority to the arbitral tribunal to decide its own jurisdiction.

Challenge to jurisdiction- The ‘who decides’ Question

The challenge to the jurisdiction of the arbitral can be of two types- partial or total. In a
partial challenge, it is asserted by one of the parties that certain (not all) claims or counterclaims
that are brought before the tribunal do not fall within its jurisdiction. Such a challenge is not a

17
Section 16: Competence of arbitral tribunal to rule on its jurisdiction—
(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the
existence or validity of the arbitration agreement, and for that purpose,—
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other
terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the
arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the
statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has
appointed, or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter
alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea
if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral
tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in
accordance with section 34.
18
LAW COMM’N OF INDIA, SEVENTY: SIXTH REPORT ON ARBITRATION ACT, 1940 [1978] [1.24].
available at <http://lawcommissionofindia.nic.in/51-100/Report76.pdf>
19
Arbitration Act 1940, s 31(2) and s 33. Under section 31(2), all questions regarding the validity or existence of an
arbitration agreement between the parties were to be decided by the court. Section 33 provided that any party
wishing to challenge the validity or existence of an arbitration agreement had to apply to the court and the court
would decide on the basis of affidavits.
20
[1996] 2 SCC 667.

3
fundamental attack on the jurisdiction of the tribunal.21 On the other hand, a total challenge
questions the entire basis on which the arbitral tribunal acts. It usually raises the question of
whether there is a valid arbitration agreement at all.22
Under the UNCITRAL Model Law, the arbitral tribunal can rule on the plea of jurisdiction
either as a preliminary question or in the award on merits. 23 If the tribunal rules that it has
jurisdiction on a preliminary question, then a party may apply to the competent court under
Article 6 to decide the issue. Such a decision is not further appealable. During the pendency of
such a request, the tribunal may continue to hear the dispute.24
Under section 16 of the Act, a challenge to jurisdiction of the tribunal ‘shall be raised not
later than the submission of the statement of defence.’25 If the tribunal rejects a plea made by a
party that challenges its jurisdiction, it shall continue with the arbitral proceedings and make an
award.26 The aggrieved party may then make an application for setting aside this award under
section 34 of the Act.27 This indicates the purpose of having minimal court intervention while the
arbitration proceedings are going on.
One pertinent difference between the UNCITRAL Model Law and the Act is that under the
former, the tribunal’s decision accepting or rejecting a challenge to its jurisdiction can be
appealed in court. But under the latter, a party can appeal in court only if the tribunal accepts the
jurisdictional challenge.28 If the challenge is rejected, the arbitration proceedings continue and
the tribunal proceeds to make an award. The party aggrieved by the award can later approach the
court to set it aside.
The Indian Supreme Court recognized the doctrine of competence-competence in Shin Etsu
Chemical Co. Ltd. v Aksh Optifibre Ltd.29 It held that the courts should satisfy themselves on a
prima facie basis if the arbitration agreement is not ‘null and void, inoperative or incapable of
being performed.’30 If the courts were to fully examine the arbitration agreement, then the

21
Allan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration (4th edn, Sweet and
Maxwell 2004) 296.
22
ibid.
23
UNCITRAL Model Law, Art 16(3).
24
ibid.
25
Arbitration and Conciliation Act 1996, s 16(2).
26
Arbitration and Conciliation Act 1996, s 16(5).
27
ibid, s 16(6).
28
Sumeet Kachwaha and Dharmendra Rautray, ‘Arbitration procedures and practice in India: overview’ available at
<http://uk.practicallaw.com/9-502-0625> (1 July 2014).
29
[2005] 7 SCC 234.
30
Requirements of a valid arbitration agreement under New York Convention, Article II(3).

4
arbitration proceedings would have to be stalled till the time the court decided the matter. This
would defeat the very objective of the Act to ensure a speedy arbitration process with minimal
intervention of the courts.31
However, the power of the tribunal under competence-competence was diluted by the
Supreme Court in SBP & Co v Patel Engineering Ltd32 (hereinafter Patel Engineering case).
Before this decision, the courts had been reluctant to rule on jurisdiction of the arbitral tribunal
and referred the dispute back to the tribunal after prima facie reviewing the procedural
compliances.33 In Konkan Railway Corp Ltd v Rani Construction Pvt Ltd,34 a Constitution Bench
of the Supreme Court held that all issues relating to jurisdiction of the tribunal and validity of the
arbitration agreement have to be taken before the arbitral tribunal. But in the Patel Engineering
case, the Court interpreted sections 11(6) and 11(7) in a manner that jeopardized the arbitral
tribunal’s power under competence-competence.
If the procedure to constitute an arbitral tribunal agreed to by the parties breaks down or
the parties cannot agree to any such procedure, then the court can intervene under sections 11(4),
11(5) and 11(6) of the Act. In such cases, the Chief Justice may be requested to appoint the
arbitrators. In the Patel Engineering case, it was held that this power exercised by the Chief
Justice under section 11 was judicial and not administrative.35 Under section 11(7), the decision
of the Chief Justice in the appointment of an arbitrator is ‘final.’ So the court held that in order to
appoint the arbitrators, the Chief Justice would have to look into the existence of arbitration
agreement and the tribunal’s jurisdiction and therefore, his decision with respect to the later two
cases will also be final under section 11(7).36 This means that in all the cases where the Chief
Justice has appointed the tribunal under section 11(6), the tribunal cannot rule on the issue of its
jurisdiction and the validity of the arbitration agreement if the Chief Justice has already made a
decision on the same. This renders section 16(1) redundant and is a clear encroachment on the

31
Emmanuel Gaillard and Yas Banifatemi, ‘Negative Effect Of Competence-Competence: The Rule Of Priority In
Favour of The Arbitrators’ in Enforcement of Arbitration Agreements and International Arbitral Awards The New
York Convention in Practice. Available at
<http://www.shearman.com/~/media/Files/NewsInsights/Publications/2008/07/Negative-Effect-of-
CompetenceCompetence-The-Rule__/Files/View-Full-Text/FileAttachment/IA_070208_01.pdf>
32
[2005] 8 SCC 618.
33
Panjwani and Pathak (n 2) 30.
34
[2002] 2 SCC 388.
35
Patel Engineering (n 19), [36].
36
ibid, [38].

5
powers conferred on the tribunal by the competence-competence doctrine.37 Justice Thakker, in
his dissenting opinion, stated that the legislative intent was to allow the tribunal to rule on its
jurisdiction38 and that section 16 was a ‘self-contained Code’ with respect to jurisdiction of the
arbitral tribunal.39

III. POSITIVE AND NEGATIVE EFFECTS OF THE DOCTRINE

The doctrine of competence-competence has two sides to it- the positive and the negative.
While the positive effect of the doctrine is that the arbitrators have the power to decide their own
jurisdiction, the negative effect states that to allow the arbitrators to rule on their jurisdiction first,
the intervention of the courts must be curtailed. It has been argued by many scholars that ‘the
arbitral tribunal should be able to decide [the jurisdictional issues] first, subject to a possible
judicial review of its decision.’40 This priority given to the arbitral tribunal also signifies that the
question of validity of the arbitration agreement will be first decided by the tribunal and then the
court.41 The impact of this negative effect is that the court that is consulted with the question of
validity of the arbitration agreement should refrain from deciding the substantive issues of the
arbitral tribunal’s jurisdiction until the tribunal has heard them itself.42
The Apex Court in the Patel Engineering case completely disregarded the implications of
the negative effect of competence-competence on the issues posed before it. As stated above, the
Court’s reasoning renders the arbitral tribunal’s power under competence-competence redundant.
This has subjected to the judgment to criticism by scholars and practitioners alike. In the UK, a
similar question arose in the case of Fiona Trust & Others v Yuri Privalov & Others.43 Here, the
court was mindful of the negative effect of the doctrine. The arbitral tribunal’s jurisdiction was
challenged on the ground that the main contract was procured by bribery. The Court of Appeals
declined to rule on the tribunal’s jurisdiction and referred the matter back to the tribunal itself.44

37
Vaishnavi Chillakuru, ‘The Rule of Competence-Competence: A Comparative Analysis of Indian and English
Law’ [2013] 6(1) Contemp Asia Arb J 133, 142.
38
Patel Engineering (n 19), [68].
39
ibid, [108].
40
Panjwani and Pathak (n 3).
41
ibid.
42
Gaillard and Banifatemi (n 29).
43
[2007] EWCA 20.
44
ibid; Panjwani and Pathak (n 2).

6
 CONCLUSION
The doctrine of competence-competence in India has been recognized on the premise of
allowing minimal court intervention in arbitration process. But it is dubious to point to a clear
stand maintained by the Indian judiciary on the application of the doctrine, given its conflicting
judgments. Nonetheless, the doctrine is a pertinent characteristic of the entire arbitration process.
The power given to the arbitral tribunal under the doctrine to decide its own jurisdiction is in
consonance with the overall objective of arbitration to allow for an expeditious dispute
settlement mechanism. While it gives power to the arbitral tribunal, it does not mean that the
power of the courts to review the decision is curtailed. The doctrine has been given statutory
recognition under the Act. It is only proper for the courts to apply the doctrine in accordance
with the overall objective of the Act and the intent behind incorporating the doctrine in the
Indian law.

REFERENCES

Legislations
 Arbitration Act 1940.
 Arbitration and Conciliation Act 1996.

UN Documents
UNCITRAL Model Law.

7
Books
 Justice Bachawat’s Law of Arbitration & Conciliation (vol 1), Wadhwa & Co., Nagpur.
 Redfern A and Hunter M, Law and Practice of International Commercial Arbitration (4th
edn, Sweet and Maxwell 2004).

Articles
 Brekoulakis S, ‘The Negative Effect of Compétence- Compétence: The Verdict has to be
Negative’ Queen Mary University of London, School of Law Legal Studies (Research Paper
No. 22/2009) available at <http://ssrn.com/abstract=1414325>.
 Chillakuru V, ‘The Rule of Competence-Competence: A Comparative Analysis of Indian and
English Law’ [2013] 6(1) Contemporary Asia Arbitration Journal.
 Jones D, ‘Competence-Competence’ [2009] 75 ARB: The International Journal of
Arbitration, Mediation & Dispute Management.
 Kawharu A, ‘Arbitral Jurisdiction’ 23 New Zealand University Law Review (December
2008).
 Panjwani P and Pathak H, ‘Assimilating the Negative Effect of Kompetenz-Kompetenz in
India: Need to Revisit the Question of Judicial Intervention?’ [2013] 2(2) Indian Journal of
Arbitration Law.
 Park WW, ‘The Arbitrator’s Jurisdiction to Determine Jurisdiction’ 13 ICCA Congress Series
55 (ICCA Congress, Montréal 2006). Available at http://www.arbitration-
icca.org/media/0/12409326410520/jurisdiction_to_determine_jurisdiction_w_w_park.pdf
 Tsen-Ta Lee J, ‘Separability, Competence-Competence and the Arbitrator’s Jurisdiction in
Singapore’ [1995] 7 Singapore Academy of Law Journal, Research Collection School Of
Law. Available at <http://ink.library.smu.edu.sg/sol_research/575>.

Cases

 Fiona Trust & Others v Yuri Privalov & Others [2007] EWCA 20.
 Gas Authority of India Ltd v Keti Construction (I) Ltd [2007] 5 SCC 38.
 Heyman v Darwins Ltd [1942] AC 346, 374.
 Konkan Railway Corp Ltd v Rani Construction Pvt Ltd [2002] 2 SCC 388.
 SBP & Co v Patel Engineering Ltd [2005] 8 SCC 618.
 Shin Etsu Chemical Co. Ltd. v Aksh Optifibre Ltd [2005] 7 SCC 234.
 UP Rajkiya Nirman Nigam Ltd. v Indure Pvt Ltd [1996] 2 SCC 667.

Law Commission Reports

Law Commission of India, Seventy: Sixth Report On Arbitration Act, 1940 [1978] available at
<http://lawcommissionofindia.nic.in/51-100/Report76.pdf>

8
Online Sources

 Gaillard E and Banifatemi Y, ‘Negative Effect Of Competence-Competence: The Rule Of

Priority In Favour of The Arbitrators’ in Enforcement of Arbitration Agreements and
International Arbitral Awards The New York Convention in Practice. Available at
<http://www.shearman.com/~/media/Files/NewsInsights/Publications/2008/07/Negative-
Effect-of-CompetenceCompetence-The-Rule__/Files/View-Full-
Text/FileAttachment/IA_070208_01.pdf>
 Kachwaha S and Rautray D, ‘Arbitration procedures and practice in India: overview’
available at <http://uk.practicallaw.com/9-502-0625>