Jurisdictional Challenges
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TABLE OF CONTENTS
Jurisdictional Challenges
Jurisdictional Challenges
Introduction
This Guideline sets out the current best practice in international
commercial arbitration for handling jurisdictional challenges. It provides
guidance on:
i. how to deal with challenges to jurisdiction (Article 1);
ii. the most common types of challenges which arise, including
jurisdiction-related and admissibility-related challenges (Articles 2
and 3);
iii. factors that arbitrators should take into account in determining how
and when to deal with jurisdictional challenges (Article 4, paragraph
1); and
iv. the form in which a ruling on jurisdiction should be made (Article 4,
paragraph 2).
Preamble
1. The authority of arbitrators to determine the merits of a dispute,
otherwise known as the arbitrators jurisdiction, arises out of a valid and
enforceable arbitration agreement,1 which is broad enough in scope to
encompass the parties and their dispute(s). Once arbitrators have been
appointed to decide a given dispute, in normal circumstances, their
jurisdiction will last until they render a final award that resolves the
dispute. However, if one or more of the parties challenge(s) the
arbitrators jurisdiction, their decision-making power2 may become an
issue.
Jurisdictional Challenges
Jurisdictional Challenges
Commentary on Article 1
Paragraph 1
Arbitrators jurisdiction to rule on their own jurisdiction
a) It is generally accepted that arbitrators have the power to decide upon
their own jurisdiction. However, they may not be the sole or final
arbiters of the question of jurisdiction.10
Jurisdictional Challenges
matter should decide on its jurisdiction while the second tribunal stays
the proceedings pending the decision of the first tribunal.14 Depending
on the circumstances, the proceedings may be consolidated provided that
this is permitted under the applicable lex arbitri, arbitration rules, and/or
the parties agree to the consolidation.15
Paragraph 2
Independence of the arbitration agreement from the main contract
A contract will often contain clauses recording an agreement to arbitrate
any dispute arising out of or in connection with that contract. That
agreement to arbitrate is widely accepted to represent a separate and
independent contract from the main contract itself. This is known as the
principle of severability or separability. Consequently, even though
the arbitrators may consider that the main contract is invalid and/or
unenforceable, they may decide that the arbitration agreement is valid
and enforceable, insofar as it was not affected by the defects and/or
vitiating factors which impacted the main contract.16
Paragraph 3
Initial enquiries to be made by arbitrators
a) One aspect of the validity of arbitration may be whether arbitrators have
been properly appointed.17 Before accepting an appointment, each of the
arbitrators should declare that they possess any qualifications required
by the agreement to arbitrate, including any arbitration rules, and/or the
Jurisdictional Challenges
Paragraph 4
Timing of challenges raised by a party
Jurisdictional challenges are usually raised by one of the parties.
National laws and arbitration rules may require a party raising a
challenge to do so within a specified time limit. Accordingly, if a party
challenges the arbitrators jurisdiction, the arbitrators should consider
whether the challenge was made within any time limit specified. If there
is no time limit, or where a party becomes aware of a given matter after
the time limit, arbitrators should consider whether a challenge is made in
a timely manner after the facts giving rise to the challenge become
known. Challenges are sometimes used to attempt to delay and/or to
frustrate the arbitration. Arbitrators should, therefore, decide whether the
party making the challenge is deemed to have waived its right to
challenge because the challenge is made late and there is no good reason
for the delay, or whether the partys position is inconsistent with an
earlier stance.
Paragraphs 5 to 7
Arbitrators examination of jurisdiction in the absence of a challenge
a) Where arbitrators identify a jurisdictional issue which the parties have
not raised, the question arises as to whether they should take any active
steps to draw the parties attention so that they can make submissions on
this point. Arbitrators should normally not raise issues on their own.
However, in some situations, they should examine their jurisdiction on
their own motion, regardless of the fact that no party has raised any
challenge.19
b) Examples include cases where arbitration is used as a means to cover up
corruption, money laundering, exchange control fraud or other criminal
activity. In addition, as part of their best efforts to render an enforceable
award, arbitrators should ensure that the subject-matter is capable of
settlement by arbitration and not contrary to any overriding mandatory
laws and/or principles of public policy at the place of arbitration or a
known place of enforcement or recognition.20 Finally, where one party
decides not to participate in the arbitration, arbitrators should consider
and rule on their jurisdiction with respect to that party, regardless of
whether any challenge has been raised.21
c) In any of these cases, it is good practice to invite the parties to file
submissions on jurisdiction, whether separately or as part of their
substantive memorials, before making any decision in order to ensure
fair hearing. In addition, arbitrators should be wary to avoid appearance
of bias when raising issues of jurisdiction on their own motion.
10
Jurisdictional Challenges
Commentary on Article 2
Where different legal cultures are involved in international arbitrations,
it is good practice for arbitrators to obtain the parties agreement as to
the precise scope of any challenge. Arbitrators may invite the parties to
agree upon the challenge or to narrow its scope at the case management
conference. This can also be done by asking the parties to agree a Terms
of Reference or a similar document, such as a Terms of Appointment.
11
clear and sufficient to imply consent to arbitrate and (2) whether such an
agreement complies with the formal requirements of the lex arbitri and,
if it is different, the law governing the arbitration agreement. Arbitrators
should look at the common intention of the parties and determine
whether the terms referred to actually form part of the contract between
or among them.
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Jurisdictional Challenges
iv) Whether the arbitration agreement was made in the required form
Any arbitration agreement should satisfy the requirements as to form
which arise from the law governing the arbitration agreement and/or the
lex arbitri. Most national laws require that an arbitration agreement be in
writing or evidenced in a written text. In addition, they may require that
the arbitration agreement be signed by duly authorised representatives of
both parties. Arbitrators faced with such a challenge should, therefore,
check the relevant applicable law and the arbitration agreement,
including any arbitration rules, in order to determine whether such
requirements have been satisfied.
13
14
Jurisdictional Challenges
carefully determine the precise scope and extent of their powers. Any
lack of powers may be cured by agreement of the parties. However, such
an agreement may be limited by any overriding mandatory provisions of
the applicable law.
Commentary on Article 3
Condition precedent (multi-tier) arbitration clauses
a) Sometimes the parties agreement to arbitrate may include provisions to
the effect that parties should take certain steps in advance of filing for
arbitration, such as trying to settle their dispute(s) by direct negotiation,
mediation or any other dispute resolution mechanism.29 For example, it
is becoming increasingly common for arbitration agreements to require
the parties to engage in one or more forms of alternative dispute
resolution (ADR) before initiating arbitration. In such a case, arbitrators
should decide whether (1) such a clause imposes an obligation and (2) if
so, whether such an obligation should be or has been satisfied.30 They
15
should carefully examine the wording of the clause and also look at the
conduct of the parties when they engaged in the fulfilment of the
imposed condition in order to determine whether adequate efforts were
made to satisfy the condition.31
b) Where there is a clear and precise condition that was intended to be
binding on the parties and was not fulfilled, arbitrators should reject the
request for arbitration as procedurally inadmissible.32 Conversely, where
they determine that the condition is imprecise or is only optional,
arbitrators should dismiss the challenge to the admissibility and proceed
with the arbitration.33
Time-bars
c) Many arbitration rules do not contain any provision limiting the time for
commencing arbitration. However, an arbitration agreement may be
worded in such a way that it contains an express time limit. In such a
case, arbitrators should examine the wording and determine whether
there are any limitations that apply, because it will serve no purpose to
commence the arbitration if the claim is not ripe, nor to continue if the
claim has become time-barred.
16
Jurisdictional Challenges
with
the
jurisdictional
challenge
and
the
merits
simultaneously.
2. In any event, arbitrators should decide on jurisdiction in a reasoned
decision or award.
Commentary on Article 4
Paragraph 1
Arbitrators have broad discretion to determine the timing and the
process by which to deal with a jurisdictional challenge. They need to
consider the most efficient way to resolve jurisdictional challenges on a
case-by-case basis.34 In any event, they should give directions for the
exchange of evidence and submissions on the jurisdictional question, as
well as the timing of any hearing that may be held separately from the
hearing on the merits, if one is deemed necessary. They can either
decline or confirm their jurisdiction.
17
Paragraph 2
a) It is good practice for arbitrators to issue their decision as to jurisdiction
in the form of an award so that such a decision (or orders as to costs
contained in such a decision) can be recognised and enforced under the
New York Convention.36 Arbitrators should, therefore, ensure that their
award on jurisdiction complies with all the relevant requirements with
which awards need to comply.37 The form of the decision may, however,
18
Jurisdictional Challenges
Conclusion
Jurisdiction is fundamental to the validity of arbitration proceedings and
to the enforceability of arbitral awards. This Guideline focuses on the
most commonly raised issues relating to any challenge to the arbitrators
jurisdiction so that they can be dealt with in an efficient and effective
manner.
NOTE
The Practice and Standards Committee (PSC) keeps these guidelines
under constant review. Any comments and suggestions for updates and
19
20
Jurisdictional Challenges
Endnotes
1.
a submission
arbitration,
an
agreement
through
exchanged
written
See
generally
Julio
Csar
Betancourt,
Understanding
the
21
5.
6.
Laurent
Gouiffs
and
Melissa
Ordonez,
Jurisdiction
and
22
Jurisdictional Challenges
8.
ICC Case No. 6474 of 1992 in Sandra Synkova, Courts Inquiry into
Arbitral Jurisdiction at the Pre-Award Stage: A Comparative
Analysis of the English, German and Swiss Legal Order (Springer
2013), p. 38 (where the arbitral tribunal held that It is correct to
state that a decision as to the admissibility of the claim, []
presupposes that the Tribunal has first found that it had
jurisdiction.)
9.
10.
23
12.
13.
14.
15.
24
Jurisdictional Challenges
Cremades
and
Ignacio
Madalena,
Parallel
Proceedings
in
17.
18.
Park, n 3, p. 98.
19.
in
25
ICC Case No. 1110 where a sole arbitrator raised the question of his
jurisdiction ex officio and declined his jurisdiction because the case
involved gross violations of good morals and international public
policy[] in Jean-Jacques Arnaldez, Yves Derains and Dominique
Hascher, Collection of ICC Arbitral Awards/Recueil des sentences
arbitrales de la CCI, 1996-2000 (Kluwer Law International 2003),
pp. 1-5.
21.
22.
See e.g., Final Award, CAM Case No. 7211, 24 September 2013 in
Albert Jan van den Berg (ed), Yearbook Commercial Arbitration,
vol. XXXIX (Kluwer Law International 2014), pp. 275-276 (the
written form requirement does not mandatorily mean that the
contractual intention must be expressed in one document signed by
both parties. It is therefore undisputedly allowed, and relevant here,
that the intention to refer to arbitration may also be expressed by
means of a reference to a separate document in which the arbitration
clause is contained [].)
26
Jurisdictional Challenges
23.
24.
Gary B. Born,
See e.g., Final award on jurisdiction in case no. 14581 in Albert Jan
van den Berg (ed), Yearbook Commercial Arbitration, vol. XXXVII
(Kluwer Law International 2012) pp. 81-82 ([] the wording
International Arbitration Court in Switzerland is ambiguous. It is
however widely recognized that pathological arbitration clauses may
27
Arbitration
in
Switzerland:
Handbook
for
28.
29.
30.
See e.g., ICC Case No. 11490 in Albert Jan van den Berg (ed),
Yearbook Commercial Arbitration, vol. XXXVII (Kluwer Law
International 2012), p. 35.
31.
32.
See e.g., ICC Case No. 6276 (1990) in Figueres, n 31, p. 76.
33.
See e.g., ICC Case No. 4229 (1985) and ICC Case No. 10256 (2000)
in Figueres, n 31, p. 87.
28
Jurisdictional Challenges
34.
35.
36.
Blackaby, n 5, p. 353.
37.
38.
29
Practice,
Comparative
Study
(Kluwer
Law
41.
30