Dissertation paper plan – Livia Draghici

Arbitrability of disputes: principles and methods for its determination in international

arbitration
(arbitrability as a matter to be determined by the arbitrators during the proceedings, but also
as a post-award stage issue, in connection to the setting aside of the award)
Books:
1. Julian Lew, Comparative International Commercial Arbitration
2. Loukas Mistelis, Arbitrability. International and Comparative Perspectives
3. Gary Born, International Commercial Arbitration
Preliminary table of contents/ideas:
1. The law applicable to arbitrability
a) Subjective arbitrability – the international practice varies regarding the applicable
law to the arbitrability
b) Objective arbitrability
 Before the arbitral tribunal
 If one of the parties concurrently the national court and deems the dispute
non-arbitrable
 Before the court of annulment or of enforcement – arbitrability under the
New York Convention
2. Lack of arbitrability
THE PLAN:
The plan has to include an introduction, the content structured in chapters and the
conclusions. The titles must not be the same as the title of the thesis. The plan will not be
changed after the professor approved it.
Loukas Mistelis, Arbitrability. International and Comparative Perspectives
Read the seminal decision of the U.S. Supreme Court in Mitsubishi Motors Corp v.
Soler Chrysler Plymouth Inc.
The author says that the problem of arbitrability has been in general solved, but there
are some aspects which still need analysis. Firstly, he argues that public policy is effectively
irrelevant for the discussion of arbitrability, because inarbitrability relates to the natural
limitations of arbitration as a dispute resolution mechanism of consensual character. Secondly,
he argues that arbitrability is rather a problem of jurisdiction than a problem of validity of the
arbitration agreement. The discussion pertains to the much debatable matter of which forum,
the national court or arbitral tribunals, should have priority in determining whether a dispute
is arbitrable or not.
1. The limited relevancy of public policy
Various court decisions stated that arbitrators should not be excluded from applying
national rules of public policy nature. Arbitrators might not only examine, but also
apply national provisions of public policy.
However, the view that inarbitrability is founded upon public policy persistently
prevails in international arbitration, especially because it is said that public policy
disputes must respect the principle of due process. The author argues that arbitration is
not a compromised dispute resolution mechanism in terms of due process and it
respects the art. 6 of ECHR, which is not limited to public policy disputes. Plus,
parties to non public policy disputes are not permitted to waive fundamental due
process guarantees.
Another problem is that the ability of arbitrators applying public policy rules seems to
be under question.
The third objection is the most valid one. It is feared that choice-of-forum clauses
operating in tandem with choice-of-law clauses can be used as a vehicle for the parties
to escape the public policy of a specific state. – Mitsubishi v. Soler case scenario. The
author continues with an argumentation related to the enforceability of an arbitral
award.
2. Inarbitrability and inherent characteristics of arbitration: redefining the theory of
inarbitrability
The question to be answered: Why does state laws still restrict arbitrability? To what
extent are these restrictions acceptable?
Inarbitrability should be examined in the light of the inherent limitations of arbitration
as a dispute resolution mechanism of contractual origins. Therefore, national laws
often provide some disputes to be submitted to the exclusive jurisdiction of specially
designated national courts (e.g. insolvency disputes – p. 33, 2-43).
Effects of inarbitrability on the validity of arbitration agreement
It renders the arbitration agreement null and void. However, it is questionable if the
subject matter of an arbitration agreement relates to the validity of the arbitration
agreement. In the NYC, for example, invalidity of the AA is provided in the art. V.1.a
and it states inarbitrability as a matter of non-enforcement. Similarly: UNCITRAL
Model Law, the English Arbitration Act, The German ZPO or the Swiss PILA.
It is important to note that it is difficult to determine with certainty at the time of the
conclusion of an arbitration agreement whether an arbitration agreement deals with a
subject matter that is inarbitrable. (e.g. p. 39, 2-66)
The conclusion: inarbitrability should not be considered as a condition of arbitration
agreement’s validity.
Practical relevance of the discussion on the rationale behind arbitrability
The discussion: to which forum should be given priority in determining arbitrability:
national courts or arbitral tribunals?
The prevailing view: they have concurrent power to review arbitrability at a pre-
award stage.
However, if arbitrability is a matter related o jurisdiction rather than a matter related to
the validity of the AA, it seems less reasonable for the courts to review arbitrability at
a pre-award stage.
Law applicable to arbitrability – Lex fori
The scope of national provisions on inarbitrability has been reduced: it is no longer
determined by public policy considerations, but rather by jurisdictional considerations,
which call for the application of the lex fori only when the exclusive jurisdiction of the
national courts of the lex fori are at stake.
The scope and the relevance of the Lex fori
The scope of inarbitrability is determined by national law in non-arbitration laws or in
arbitration laws.
The scope of arbitrability can be examined at different stages: when the issue arises
before national courts at a pre-award stage, when the issue arises before national
courts at the stage of annulment proceedings, at the stage of enforcement proceedings
and before a tribunal.
1. (The referral stage) The lex fori will apply only when there exists a conflict
between an arbitral tribunal and the national courts of referral. However, this sort
of jurisdictional conflict will occur only if the national courts of referral have in
the first place exclusive jurisdiction over the specific dispute pending before the
tribunal. It depends on whether the dispute at hand has a territorial link with the
country of the national courts of referral.
2. When the award is challenged before the national court of the seat – similar to 1
3. Arbitrability control by national courts at the place of enforcement – NYC art.
V.2.a
4. When the dispute is before an arbitral tribunal – lex loci arbitri (the seat of
arbitration)
Case law + conclusions
The paper argues that a rather jurisdictional perspective than a public policy one is
more suitable for the determination of the applicable law to arbitrability.
Objective arbitrability of intra-corporate disputes, those that rise out of the internal
affairs of the corporation, rather than those arise out of contracts with other
corporations
The dispute- a component of arbitrability and matters that are subject to
arbitration
 It is connected with the concept of domestic law and with the powers of the arbitrators.
Thus, arbitrability will vary from country to country, and even within the same country
it will vary from time to time, a clear principle applies with regard to its interpretation,
particularly in international commercial arbitration: the principle of favor arbitris. It
means, first, that there is a general presumption in favour of the arbitrability of
commercial disputes (policy favouring arbitrability – Marta Gonzalo Quiroga, Orden
publico y arbitraje internacional en el marco de la globalizacion comercial,
Arbitrabilitad y derecho applicable al fondo de la controversia international); second,
that there is a tendency to expand the scope of arbitration.
Limits to arbitrability
1. Public policy/ mandatory rules: traditionally, it is held that those issues that are subject
to public policy are not arbitrable, but the there are some law systems that see
arbitrability as a concept which the arbitrators have to respect in order to render an
enforceable award
2. Exclusive jurisdiction of national courts
3. The impact on third parties
THE OTHER BOOK – BORN OR LEW
1. Law applicable to arbitrability
The definition of subjective arbitrability- the fact that national laws imposed restrictions and
limitations on what matters can be referred to and resolved by arbitration. The limitations
based on the subject matter in issue is connected to objective arbitrability.
The first thing that needs to be taken into consideration are the international conventions
because the obligations of national courts to enforce arbitration agreement and awards only
exist where the dispute is arbitrable. First reference: The NYC – it treats the issue only from
the perspective of enforcement. Even if the convention can be applied only in the post-award
phase of the dispute, in the majority of cases courts have determined the question of
arbitrability at the pre-award stage according to their own national law and courts which have
reviewed the issues properly have in general applied art. V.2.a NYC.
In this chapter the author interprets the art of the NYC.
National Arbitration Laws – the different national arbitration rules do not regulate which law
governs the question of arbitrability, rather they determine directly which disputes are
arbitrable. There are two approaches to determine if a dispute is arbitrable or not. The first one
is based on a broad notion of arbitrability defined by the national legislator and the second
generally relies on the parties’ power to dispose of the rights involved in the dispute or to
reach a compromise. The last one requires a conflict of law analysis.
There are two ways to determine whether the parties can settle the specific legal relationship –
one by reference to the substantive law of the seat of arbitration. – pg. 195
Arbitration practice
Additional problem arise when a tribunal has to determine the arbitrability of a dispute. Art. V
NYC and Art. VI European Convention are primarily directed to courts and not to tribunals.
Consequently the practice of arbitration tribunals concerning the issue of arbitrability varies
considerably. There are 8 different approaches in arbitration practice. In the majority of cases,
however, tribunals determine the arbitrability of a dispute on the basis of the provisions of the
place of arbitration.
The lack of arbitrability is codified in art. 34.2 Model Law and in the most other laws as a
separate reason for annulment besides public policy.
Substantive rules on objective arbitrability – Every national law determines which types of
disputes are the exclusive domain of national courts and which can be referred to arbitration.
This differ from state to state reflecting the political, social and economic prerogatives of the
state, as well as its general attitude towards arbitration. The areas where traditionally
problems of arbitrability have arisen are anti-trust and competition, securities transactions,
insolvency, intellectual property rights, illegality and fraud, bribery and corruption, and
investments in natural resources.
Duty to deal with the lack of arbitrability ex officio – In the majority of cases the non-
arbitrability of a dispute is raised by one party seeking to preclude arbitration. There are cases
when the parties do not invoke this issue and in such cases the question arises whether the
arbitration tribunal has the right itself to rise the issue of arbitrability even thought the parties
do not challenge the jurisdiction of the tribunal. NYC- the recognition and enforcement of an
award may be refused ex officio if the competent authority in the country where recognition
and enforcement is sought finds that a. the subject matter of the difference is not capable of
settlement by arbitration under the law of that country, or b. the recognition and enforcement
of the award would be contrary to the public policy of that country.
The preferred view is that an arbitration tribunal should on its own initiative deny jurisdiction
if the dispute is not arbitrable on the basis of the facts submitted by the parties. Party
autonomy does not extend to avoiding the mandatory rules governing the issue of arbitrability.
The non-arbitrability of a dispute might also exclude any further court support during and
after the arbitration. It is at least doubtful whether in an action to set aside courts would
consider that party from being estopped from arising the lack of arbitrability defence given
the importance of the matter.
Arbitrability under the New York Convention: the Lex Fori Revisited by HOMAYOO N
ARFAZADEH
Arbitrability may be at issue when a court is called upon to recognize an arbitration agreement
and refer the parties to arbitration (art. II), or when the court is requested to enforce a foreign
arbitral award (art. V).
Jan Paulsson, 'Arbitrability, Still Through a Glass Darkly', in Arbitration in the Next
Decade (Special Supplement ICC Int'l Q. of Arb. Bull., 1999) 95: Jan Paulsson traced the
murky trail of incoherent court decisions and concluded mat the source of such inconsistency
lies in the New York Convention itself, in particular the Convention's propensity to favour the
application of the law of the forum to the issue of arbitrability.
The author thus suggested adopting a protocol to the New York Convention or a set of
guidelines for its interpretation,3 according to which, 'for the purposes of Articles II and V(l)
(a), an arbitration agreement shall be considered effective in causu unless the agreement is
invalid under both: (a) the law chosen by the parties to govern their agreement, and (b) the
law of the country where the place of arbitration is located, ...', while allowing for a restrictive
application of the forum's standards under Article V(2)(a). - 'Subparagraph V(2)(a) shall not
prevent recognition and enforcement unless the non-arbitrability of the subject matter is a
matter of such fundamental importance that recognition and enforcement would also violate
subparagraph V(2)(b)' (Paulsson, supra n. 2, at p. 104)
'Does the World Need Additional Uniform Legislation on Arbitration? The 1998
Freshfiekls Lecture' (1999) 15 Arbitration International 211 at p. 219 er seq: This
proposal, however, was regarded by Gerold Herrmann as 'thought-provoking and potentially
objection-provoking', and likely to lead to 'frustrating discussions and negotiations'.
We believe, however, that the source of inconsistency is not the Convention itself, but, rather,
confusing interpretations of its different provisions, coupled with an inappropriate method of
analysis. First, distinct notions such as non-arbitrability per se, the validity of the arbitration
clause, and the public policy exception, are often intermingled, thereby causing confusion.
Secondly, regarding method, non-arbitrability has been systematically treated as a problem of
conflict of law rather than conflict of jurisdiction. Together, they have led national courts to
examine the issue of arbitrability by reference to foreign law rather than the law of the forum.
We believe any such reference to foreign standards of arbitrability to be quite unwarranted in
the context of current international arbitration law and practice.
The law governing the various issues that may arise in international arbitration is usually
determined through the application of rules and principles of conflict of laws, which manage
potential conflicts between competing domestic legal systems. Certain issues, however, are
governed by substantive rules of the forum.7 The reason behind the choice of substantive
rather than conflict rules is the widespread belief that international arbitration represents an
institution of global rather than national interest, such that certain of its aspects are more
appropriately governed by a body of rules and principles specifically tailored to its
international character. (See Fouchard, Gaillard and Goldman, Traite de ['arbitrage
commercial international (Paris, 1996) at p. 251 (no. 442); J. Gillis Wetter, 'The
Internationalization of International Arbitration' (1995) 11 Arbitration International
117; Michael Kerr, 'Concord and Conflict in International Arbitration' (1997) 13
Arbitration International 121 at p. 137 er seq.) This applies in particular to arbitrability,
which is increasingly held to be governed by substantive rules of the forum. The best
illustrations are Article 177 of the Swiss PIL Statute, Article 1030 of the German ZPO, and
possibly the UNCITRAL Model Law.9 According to the Swiss PIL Statute, for example, all
disputes involving property rights ('de nature patrimoniale') are capable of settlement by
arbitration. - As stated by the Swiss Federal Supreme Court, it is for the claimant to bear the
risk of non-enforceability of the award abroad, where the subject matter of the dispute is
incapable of settlement by arbitration under the laws of other countries. (In ATF 118 II 353 at
3d - SJ 1993 at p. 8, in Fincantieri dated 23 June 1992, following the opinion by Lalive,
Poudret and Reymond, Le droit de l'arbitrage interne er international en Suisse at pp.
305 and 308.)
Non-arbitrability governed by conflict of jurisdiction rules: Traditionally, 'non-arbitrability'
results from public policy rules determined to be applicable to the underlying dispute pursuant
to relevant conflict of laws principles.14 In our opinion, this approach is outdated. As stated
by the Swiss Federal Supreme Court in an obiter dictum in the Fincantieri decision,'
[arbitrability could only be denied] with regard to claims … exclusively reserved to the
jurisdiction of a state court by provisions which must be taken into consideration for reasons
of public policy'. (ATF 118 II 353, supra, n. 10, at 3c, also stating that: 'Public policy would
only be relevant if it imperatively required that the disputed claims be submitted to a state
authority... .' It is important to mention that this obiter dictum was arrived at during a soul-
searching analysis of Article 177 of the Swiss PIL Statute. In fact, the Federal Supreme Court
had first emphasized that me liberal solution adopted by Article 177 of me PIL Statute 'makes
no reservation in favour of the exclusive jurisdiction of state courts, in contrast to the Article 5
Concordat Intercantonal'. Nevertheless, the Court finally comes to the conclusion that if there
should be any public policy restriction to Article 177 of the PIL Statute, such restriction must
necessarily be derived from the exclusive jurisdiction of a State court.) The same approach
was explicitly adopted by the Paris Court of Appeal in Almira, (Decision dated 16 Febuary
1989, in (1989) Rev. de I'Arb. 711: 'L'inarbitrabilite d'un litige au regard de l'ordre public ne
doit pas s'entendre de l'interdiction faite aux arbitres d'appliquer des dispositions imperatives,
mais seulement de statuer dans une matiere relevant par sa nature de la competence exclusive
de la juridiction etatique... .' ) and is also to be found in the US Supreme Court Mitsubishi
decision. (In Mitsubishi (supra n. 12, at p. 559, no. 6), the US Supreme Court considered that
if 'Congress intended the substantive protection afforded by a given statute to include
protection against waiver of the right to a judicial forum, mat intention will be deductible
from the legislative history'; and also infra n. 34. See the rather confusing debate in Germany:
Simms, supra n. 11 at p. 193 et seq.) Thus, to identify possible restrictions upon arbitrability,
attention needs to be redirected and focused first on the jurisdiction of the courts.
The 'international' jurisdiction of territorial courts is mandatory because the principal claim in
dispute (i) involves the creation/annulment of property rights subject to public registration and
designed to produce an erga omnes effect (such as real estate and intellectual property), (ii) is
of interest to the public at large (such as bankruptcy proceedings and aspects of employment
policy), or (iii) involves regulatory and sovereign intervention by an administrative authority
(for example, antitrust exemption under Article 85(3) of the EC Rome Treaty (Article 81(3)
European Union Convention), or fiscal, social security or other economic policies). In our
opinion, there is no reason to restrict arbitrability other than for issues falling within this third
category - the exercise of mandatory and exclusive jurisdiction by a State court or authority
over the principal claim in dispute.
When an arbitral tribunal disregard the forum's standards on arbitrability as defined above, its
award runs the risk of being challenged and set aside by courts at the seat of arbitration.
Conversely, the arbitral tribunal is under no obligation to respect foreign legislation giving a
foreign court exclusive jurisdiction over the dispute. It is at this point that a delicate question
would arise: can reciprocity be applied and, in turn, the foreign court claiming exclusive
jurisdiction be allowed to ignore the arbitrators' jurisdiction? The New York Convention deals
with this problem.
- As a general rule, an award on jurisdiction rendered in violation of the rules on
arbitrability in force at the place of arbitration is open to challenge before the courts of
that country. The appropriate defence for a party wishing to resist enforcement is
therefore Article V(l)(e) of the Convention, which allows for an award suspended or set
aside in its country of origin not to be enforced.
- Several commentators have expressed the view that Article V(2)(a) is tautological since
its purpose and scope are already covered by the general public policy defence under
Article V(2)(b).46 According to our understanding, however, nonarbitrability derives
from the exclusive jurisdiction of a national court. As such, subparagraphs (a) and (b) of
Article V(2) call for two different types of scrutiny. The first pertains to the jurisdiction of
a State authority, and constitutes an absolute procedural bar to the recognition of an
arbitral award, irrespective of its findings. The second pertains to the merits, and sets
standards to be respected by arbitrators and their awards.
Conclusions: In our view, the New York Convention should be construed as follows: • for the
purposes of Article II, the subject matter of the dispute is capable of setdement by arbitration
unless the court seized of an action on the merits determines that, under the laws of the
forum, it has mandatory jurisdiction over the dispute, to the exclusion of arbitration; • for the
purposes of Article V(l)(a), the non-arbitrability of the subject matter cannot constitute a
defence to the enforcement of an award; • for the purposes of Article V(2)(a), recognition and
enforcement of an award may be refused only if, under the laws of the forum, the subject
matter of the dispute is expressly reserved to the mandatory jurisdiction of a national court or
authority, to the exclusion of arbitration.

LAW APPLICABLE TO ARBITRABILITY BY Bernard Hanotianu

Pg 3 pct 6 the issue of subjective arbitrability
Pg 5 pct 15 example of issues which may arise in connection with objective arbitrability
The Sulamerica test
Arbitrators and Arbitrability by Robben Wright Fleming
Non-arbitrable cases:
1. The procedural cases:
2. On substantial grounds
3. Cases ruled arbitrable despite express language in the contract
4. Arbitrable despite silent contract