Article II
1. Each Contracting State shall recognize an agreement in writing 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. 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.
Travaux préparatoires on Article II
A. Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards and Comments by Governments and Organizations
A.1. ECOSOC: Report of the Committee on the Enforcement of Foreign Arbitral Awards: 18 March 1955
A.2. Comments by Governments and Organisations on the Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards: January 1956 - March 1958
- E/2822 - Report by the Secretary-General, Recognition and Enforcement of Foreign Arbitral Awards, 31 Jan 1956
- E/2822/Add.1 - General Observations, Comments on Articles 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15
- E/2822/Add.2 - Comments by Greece on Articles 1, 3, 4
- E/2822/Add.4 - Comments by the Netherlands and the UK on Articles 1, 3, 4, 8, 9
- E/2822/Add.5 - Comments by Hungary and Norway on Articles 1, 3, 4, 7
- E/CONF.26/3/Add.1 - Comments by the Netherlands on Articles 4, 5 and Suggestion of an Additional Article
B. United Nations Conference On International Commercial Arbitration: Documents
B.2. Amendments to the Draft Convention Submitted by Governmental Delegations : 21 -28 May 1958
- E/CONF.26/7 - Poland: amendments to the title of the Convention and Articles 1, 3, 7, 8 10
- E/CONF.26/L.8 - Sweden: amendments to Articles 3, 4 and suggestion of additional articles
- E/CONF.26/L.17 - Netherlands: amendments to Articles 3, 4, 5
- E/CONF.26/L.18 - Israel: proposed definition of the words "arbitral award"
- E/CONF.26/L.20 - Japan: amendments to Swedish proposal for a new Article (E/CONF.26/L.8)
- E/CONF.26/L.22 - United Kingdom: amendment to Article 3
- E/CONF.26/C.3/L.1 - Sweden: draft additional Protocol on Arbitration Agreements: submitted for consideration by Working Party II
- E/CONF.26/L.31 - Israel: amendments to amendments as proposed by the Netherlands (E/CONF.26/L.17)
- E/CONF.26/L.34 - Federal Republic of Germany: amendments to Articles 3, 4, 5
B.3. Comparison of Drafts Relating to Articles III, IV and V of the Draft Convention - 29 May 1958
B.4. Statement submitted by the Observer of the Hague Conference on Private International Law
B.5.Further Amendments to the Draft Convention Submitted by Governmental Delegations - 29 May -3 June 1958
B.8. Text Additional Protocol on the Validity of Arbitral Agreements Submitted by the Working Party No. 2 - 5 June 1958
B.9. Amendments by Governmental Delegations to the Drafts Submitted by the Working Parties and Further Suggested Drafts 3-5 June 1958
- E/CONF.26/L.45 - Yugoslavia: amendment to article 4 of the draft Convention proposed by the Working Party (E/CONF.26/L.43)
- E/CONF.26/C.3/L.3 - Belgium: Working Paper on the draft Supplementary Protocol
- E/CONF.26/L.53 - Sweden: Proposal for an Article 4 in the Additional Protocol
- E/CONF.26/L.54 - Netherlands: Amendment to proposal made by Working Party No. 2 (E/CONF.26/L.52)
B.10. Text of Articles Adopted by the Conference: 4-6 June 1958
B.11. Text of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards as Provisionally Approved by Drafting Committee 6-9 June 1958
- E/CONF.26/L.61 - Text of the Convention as provisionally approved by the Drafting Committee on 6 June 1958
- E/CONF.26/8 - Text of the Convention as as provisionally approved by the Drafting Committee on 9 June 1958
C. Summary Records of the United Nations Conference on International Commercial Arbitration, New York, 20 May - 10 June 1958
- 7 th meeting [E/CONF.26/SR.7 - E/2704 and Corr.1, E/2822 and Add.1 to 6, E/CONF.26/2, 26/3 and Add.1, 26/4, 26/7, E/CONF.26/L.6 to 13]
- 9 th meeting [E/CONF.26/SR.9 - E/2704 and Corr. 1, E/2822 and Add.1 to 6, E/CONF.26/2, 26/3 and Add.1, 26/4, 26/7, E/CONF.26/L.7, L.8, L.12. L.14, L.16]
- 11 th meeting [E/CONF.26/SR.11 - E/2704/Rev.1, E/2822 and Add.1-6, E/CONF.26/2, 6/3 and Add.1, 26/4, 26/7, E/CONF.26/L.6-L.31]
- 12 th meeting [E/CONF.26/SR.12 - E/2704 and Corr.1, E/CONF.26/7, E/CONF.26/L.8 and Corr.1, L.15/Rev.1, L.16, L.19, L.22, L.31 to L.34]
- 13 th meeting [E/CONF.26/SR.13 - E/2704 and Corr. 1, E/2822 and Add.1 to 6, E/CONF.26/2, 26/3 and Add.1, 26/4, 26/7, E/CONF.26/L.8 and Corr.1, L.15/Rev.1, L.16, L.17, L.22 to L.25, L.30 to L.36]
- 14 th meeting [E/CONF.26/SR.14 - E/2704 and Corr.1, E/2822, E/CONF.26/L.17, L.31, L.33/Rev.1, L.34. L.38 and L.40]
- 17 th meeting [E/CONF.26/SR.17 - E/2704 and Corr.1, E/CONF.26/L.31, L.37/Rev.1, L.43 and L.45]
- 21 st meeting [E/CONF.26/SR.21 - E/2704 and Corr.1, E/2822 and Add.1 to 6, E/CONF.26/2, 3 and Add.1, E/CONF.26/4, 7, E/CONF.26/L.16, L.28, L.49, L.52, L.55, L.56]
- 23 rd meeting [E/CONF.26/SR.23 - E/CONF.26/L.60; Adoption and signature of the Final Act and Convention (E/CONF.26/8, 9, E/CONF.26/L.28, L.49, L.58, L.61)]
- 24 th meeting [E/CONF.26/SR.24 - Adoption and signature of the Final Act and Convention (E/CONF.26/8 and 9, E/CONF.26/L.63), Report of the Credentials Committee (E/CONF.26/10)]
D. Committee on the Enforcement of International Arbitral Awards
D.1. Summary Records of the Committee on the Enforcement of International Arbitral Awards
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INTRODUCTION
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ANALYSIS
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ARTICLE II(1)
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ARTICLE II(2)
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ARTICLE II(3)
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INTRODUCTION
1. Article II governs the recognition and enforcement of arbitration agreements. Provided that certain conditions are satisfied, article II mandates Contracting States to recognize an agreement in writing to submit disputes to arbitration and to enforce such an agreement by referring the parties to arbitration.
2. The scope of the New York Convention was initially meant to be limited to the recognition and enforcement of arbitral awards to the exclusion of arbitration agreements.184 While issues pertaining to the validity of arbitration agreements had arisen in the context of discussions about the recognition and enforcement of arbitral awards in connection with articles IV (1)(b) and V (1)(a) of the Convention185, it was only during the United Nations Conference on International Commercial Arbitration convened for the preparation and adoption of the Convention, less than three weeks before the Convention was adopted, that the drafters decided to include a specific provision on the recognition and enforcement of arbitration agreements.186 By that time, most of the other provisions had already been adopted and they were not modified to reflect this late addition.187 This explains why the recognition and enforcement of arbitration agreements is not mentioned in the Convention’s title or in any other provisions, including articles I and VII.
184. Travaux préparatoires, Report of the Committee on the Enforcement of International Arbitral Awards, E/2704, E/AC.42/4/Rev.1, p. 6, paras. 18-19. The Polish (E/CONF.26/7) and Swedish (E/CONF.26/L.8) proposals to add a provision on the validity of arbitration clauses were discussed during the Seventh and Ninth Meeting of the Conference but were ultimately rejected.
185. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Records of the Eleventh (E/CONF.26/SR.11, pp. 7-12), Twelfth (E/CONF.26/SR.12, pp. 3-6), Thirteenth (E/CONF.26/SR.13, pp. 4-7 and 9-11), Fourteenth (E/CONF.26/SR.14, pp. 4-5 and 7-9), Seventeenth (E/CONF.26/SR.17, pp. 4-6) Meetings.
186. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Records of the Twenty-first Meeting, E/CONF.26/SR.21, p. 17. See E/2822 Annexes I and II.
187. Ibid.
3. For example, article I (1) which defines the scope of application of the Convention does not deal with arbitration agreements. However, the commercial reservation in article I (3) which applies to “differences arising out of legal relationships” encompasses, by its own terms, arbitration agreements set out in article II. By contrast, the Convention does not explicitly settle the issue whether the reciprocity reservation in article I (3) which deals with “the recognition and enforcement of awards made [...] in the territory of another Contracting State” applies mutadis mutandis to arbitration agreements.
4. Certain courts have reasoned by analogy to article I (1) that the Convention applies only to arbitration agreements providing for a seat in a State other than the State of the court seized with the dispute.188 This interpretation has been endorsed by certain commentators.189
188. Kaverit Steel and Crane v. Kone Corp., Alberta Court of Queen’s Bench, Canada, 14 May 1991; Compagnie de Navigation et Transports S.A. v. MSC Mediterranean Shipping Company S.A., Federal Tribunal, Switzerland, 16 January 1995; Federal Tribunal, Switzerland, 21 March 1995, 5C.215/1994/lit; Federal Tribunal, Switzerland, 25 October 2010, 4 A 279/2010; X v. Y, Federal Tribunal, Switzerland, 9 January 2008, 4A_436/2007.
189. Reinmar Wolff, Commentary on Article II, in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958—Commentary 85, 99-104 (R. Wolff ed., 2012); ICCA’s Guide to the Interpretation of the 1958 New York Convention: A Handbook for Judges 19 (P. Sanders ed., 2011); Jean-François Poudret, Gabriel Cottier, Remarques sur l’application de l’Article II de la Convention de New York, 1995 ASA Bull. 383, 384.
5. Other commentators have suggested that article II was meant to apply to the recognition and enforcement of all arbitration agreements irrespective of the seat. A commentator, for example, points out that the proposal by Israel (which was further modified by Italy) to introduce a general reservation clause enabling States not to apply article II in certain situations had been rejected during the Conference. Accordingly, this would leave no doubt as to the intention of the drafters of the New York Convention that article II should cover both domestic and international situations without any limitations.190 Another early commentator of the Convention also took the view that article II, unlike the 1923 Geneva Protocol on Arbitration Clauses, does not require the parties to be subject to the jurisdiction of different Contracting States, thereby giving the provision a general application.191 Other commentators have suggested that the New York Convention did not intend to incorporate any territorial limitations on the scope of application on arbitration agreements falling within the scope of article II.192
190. Eugenio Minoli, L’Italie et la Convention de New York pour la reconnaissance et l’exécution des sentences arbitrales étrangères, in International Arbitration Liber Amicorum for Martin Domke 199, 203 (P. Sanders ed., 1967). See also the Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Records of the Twenty-First Meeting, E/CONF.26/SR.21, p. 14, the comments by the representative of Norway that “a reservation to the effect that the Convention would apply to disputes of an international character was essential” and by the representative of Italy that “his proposal was designed to ensure that the Convention would not apply to disputes which were not international.”
191. Frédéric-Edouard Klein, Autonomie de la volonté et arbitrage (suite et fin), 1958 R.C.D.I.P. 479, 491.
192. See, e.g., Philippe Fouchard, La levée par la France de sa réserve de commercialité pour l’application de la Convention de New York, 1990 Rev. Arb. 571, reasoning that given France’s withdrawal of the commercial reservation, article II applies to all arbitration agreements.
6. In that spirit, the High Court of Delhi held that, on the face of article II, there is no “express or implied limitation or fetter which calls for recognition and enforcement of only those arbitration agreements which will result in foreign awards. Such a construction cannot be placed upon the said article as this would go against the spirit and grain of the convention”. The court concluded that “the New York Convention will apply to an arbitration agreement if it has a foreign element or flavour involving international trade and commerce even though such an agreement does not lead to a foreign award [...].”193 The same approach has been adopted by United States courts pursuant to the Federal Arbitration Act and the New York Convention.194 French courts have similarly taken the view that the Convention should apply to a challenge to the existence or validity of an arbitration agreement, and that this was not restricted in any way by the language of article I.195
7. Article II governs the form and effects of arbitration agreements. Article II (l) requires each Contracting State to recognize an “agreement in writing” under which the parties undertake to submit their disputes to arbitration. This provision has been interpreted as establishing a presumption that arbitration agreements are valid.196 Article II (2), which governs the form of “agreements in writing”, covers agreements that have been “signed by the parties or contained in an exchange of letters or telegrams.”
196. Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation 156 (1981); ICCA’s Guide to the Interpretation of the 1958 New York Convention: A Handbook for Judges 37 (P. Sanders ed., 2011).
8. To ensure that arbitration agreements are complied with, article II (3) requires national courts seized of a matter covered by an arbitration agreement to refer the parties to arbitration, “unless it finds that the said agreement is null and void, inoperative or incapable of being performed.” The underlying principle that the parties to an arbitration agreement are required to honour their undertaking to submit to arbitration any dispute covered by their arbitration agreement is given effect by the mandatory requirement on national courts to refer the parties to arbitration when presented with a valid arbitration agreement. It follows that national courts are prohibited from hearing the merits of such disputes. In accordance with the principle of competence-competence, which empowers arbitrators to rule on their own jurisdiction, a challenge to the existence or validity of an arbitration agreement will not prevent an arbitral tribunal from proceeding with the arbitration.197
197. Philippe Fouchard, L’arbitrage commercial international, para. 203 (1965); Antonias Dimolitsa, Separability and Kompetenz-Kompetenz, in Improving the Efficiency of Arbitration and Awards: 40 Years of Application of the New York Convention, ICCA Congress Series No. 9, 217 (A.J. van den Berg ed., 1999).
9. By accepting the principle of competence-competence, national courts do not relinquish their power to review the existence and validity of an arbitration agreement as they recover their power of full scrutiny of the arbitration agreement at the end of the arbitral process, once the award is rendered by the arbitral tribunal. The question arises whether, at the pre-award stage, in complying with their obligation to refer the parties to arbitration pursuant to article II (3), national courts could conduct a full or a limited review of the arbitration agreement to determine whether a valid arbitration agreement exists. In some jurisdictions, courts have limited their scrutiny to a prima facie review, thereby leaving the arbitrators to be the first to fully decide the issue of their jurisdiction. This principle, sometimes referred to as the “negative effect of competence-competence”, gives arbitrators priority in determining their jurisdiction, while the courts keep the power to conduct a full review of the existence, validity and scope of the arbitration agreement at the end of the arbitral process.198 In other jurisdictions, courts conduct a full review of the existence, validity and scope of the arbitration agreement in order to determine whether to refer the parties to arbitration.
198. Emmanuel Gaillard, Yas Banifatemi, Prima facie Review of Existence, Validity of Arbitration Agreement, N.Y.L.J., (December 2005); Dorothee Schramm, Elliott Geisinger,Philippe Pinsolle, Article II, in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 37, 95-96 (H. Kronke, P. Nacimiento et al. eds., 2010).
10. The standard to be applied by the courts in determining whether the agreement is “null and void, inoperative or incapable of being performed” when deciding whether to refer the parties to arbitration therefore remains debated.199
199. See the chapter of the Guide on article II, paras. 79-99.
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ANALYSIS
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ARTICLE II(1)
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A. The obligation to recognize an agreement in writing
11. Article II (1) provides that, when certain conditions are met, Contracting States “shall” recognize an agreement in writing to arbitrate.
12. The obligation to recognize an “agreement in writing” is widely accepted by national courts. The Supreme Court of the United States has held that the compulsory language “shall” in article II (1) leaves courts with no discretion as they must recognize the arbitration agreement in accordance with the clear provisions of the Federal Arbitration Act and the New York Convention.200 Similarly, the Swiss Federal Tribunal has interpreted article II as obliging Contracting States to recognize the validity and effect of an arbitration agreement.201 The mandatory nature of the requirement to recognize and enforce arbitration agreements has been confirmed by decisions in most jurisdictions.202
200. Scherk v. Alberto-Culver Company, Supreme Court, United States of America, 17 June 1974, 73-781. See also Lindo (Nicaragua) v. NCL (Bahamas), Ltd., Court of Appeals, Eleventh Circuit, United States of America, 29 August 2011, 10-10367; Ernesto Francisco v. Stolt Achievement MT, Court of Appeals, Fifth Circuit, United States of America, 4 June 2002, 01-30694.
201. Tradax Export S.A. v. Amoco Iran Oil Company, Federal Tribunal, Switzerland, 7 February 1984.
202. Seeley International Pty Ltd. v. Electra Air, Federal Court, Australia, 29 January 2008, SAD 157 of 2007; Sunward Overseas SA v. Servicios Maritimos Limitada Semar, Supreme Court of Justice, Colombia, 20 November 1992, 472; SA C.F.T.E. v. Jacques Dechavanne, Court of Appeal of Grenoble, France, 13 September 1993; Westco Airconditioning Ltd. v. Sui Chong Construction & Engineering Co. Ltd., Court of First Instance, High Court of the Hong Kong Special Administrative Region, Hong Kong, 3 February 1998, A12848; Renusagar Power Co. Ltd. v. General Electric Company and anor., Supreme Court, India, 16 August 1984; Louis Dreyfus Corporation of New York v. Oriana Soc. di Navigazione S.p.a, Court of Cassation, Italy, 27 February 1970, 470, I Y.B. Com. Arb. 189 (1976).
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B. Meaning of 'agreement'
13. Article II (1) deals with the agreement to arbitrate. When deciding whether to enforce an arbitration agreement, courts rely on the consent of the parties to establish whether they have agreed to submit the underlying dispute to arbitration.
14. The task of a court in determining an agreement to arbitration has been defined as follows by the Supreme Court of the United States under both the Federal Arbitration Act and the New York Convention: “the first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate” the dispute.203 As confirmed by an Australian court, consent falls to be assessed on a case-by-case basis.204
204. ACD Tridon v. Tridon Australia, Supreme Court of New South Wales, Australia, 4 October 2002, 5738 of 2001. See also Moscow Dynamo v. Alexander M. Ovechkin, District Court, District of Columbia, United States of America, 18 January 2006, 05-2245 (EGS) where the United States District Court of Colombia denied enforcement of the alleged arbitration clause as it was unable to find “factual predicate or legal authority to support [the] argument that a written agreement to arbitrate can be found absent a written exchange demonstrating both parties’ agreement to arbitrate with one another.”
15. Reported case law in various jurisdictions applying the Convention shows that parties were referred to arbitration pursuant to article II (3) when courts have found that the parties had consented to arbitration. Consent to arbitration has been found in a variety of situations, including when the parties (i) participated in the negotiation of the contract, (ii) participated in the performance of the contract, (iii) participated in both the negotiation and performance of the contract, (iv) had knowledge of the arbitration agreement, or (v) participated in the arbitral proceedings without raising any objection to the arbitral tribunal’s jurisdiction.
16. First, a United States court held that participation in the negotiation of the contract containing the arbitration clause through an exchange of documents evidences the parties’ consent to arbitrate any dispute arising out of that contract, thereby satisfying the requirements of article II.205 In so ruling, the court noted that the party had affixed its stamp to the broker’s slip as further evidence of consent.
205. Chloe Z Fishing Co. Inc., et al. v. Odyssey Re (London) Ltd., formerly known as Sphere Drake Insurance, P.L.C., et al., District Court, Southern District of California, United States of America, 26 April 2000, 109 F. Supp. 2d 1236 (2000).
17. Second, evidence of consent has been found in the parties’ conduct in performing the contract. In situations where a party does not sign the contract or return a written confirmation, but nevertheless performs its obligations, many courts have held that such conduct amounts to a tacit acceptance of the terms of the contract, including the arbitration agreement.206 For example, the Indian Supreme Court has enforced an arbitral award notwithstanding the fact that the arbitration agreement was neither signed nor contained in an exchange of documents. It held that the party, in particular by opening letters of credit in reliance on the contract and invoking the contract’s force majeure clause, accepted the terms of the written contract, including the arbitration clause.207 Following the same reasoning, but applying French law on the basis of the “more-favourable-right” provision at article VII (1),208 a French court upheld an arbitration agreement contained in a booking note on the ground that the parties had performed the booking note. The court held that since the parties had knowledge of the booking note, which constituted the parties’ sole “meeting of minds”, they were bound by the arbitration agreement contained therein.209
206. Metropolitan Steel Corporation Ltd. v. Macsteel International U.K. Ltd., High Court of Karachi, Pakistan, 7 March 2006, XXXII Y.B. Com. Arb. 449 (2007); Standard Bent Glass Corp. v. Glassrobots OY [Fin.], Court of Appeals, Third Circuit, United States of America, 20 June 2003, 02-2169; Compagnie de Navigation et Transports S.A. v. MSC Mediterranean Shipping Company S.A., Federal Tribunal, Switzerland, 16 January 1995; Smita Conductors Ltd. v. Euro Alloys Ltd., Supreme Court, India, 31 August 2001, Civil Appeal No. 12930 of 1996. Contra, Concordia Trading BV. v. Nantong Gangde Oil Co., Ltd., Supreme People’s Court, China, 3 August 2009, [2009] MinSiTaZi No. 22.
208. Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation 81 (1981); Emmanuel Gaillard, The Relationship of the New York Convention with other Treaties and with Domestic Law, in Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice 69, 70 (E. Gaillard, D. Di Pietro eds., 2008).
18. Third, when a party that did not sign the contract containing the arbitration agreement had nevertheless participated in the negotiation of, and performed obligations under, that contract, certain courts have referred that non-signatory to arbitration. In a case concerning an action to set aside an award, but dealing with the issue of the binding character of an arbitration agreement on a non-signatory, the Paris Court of Appeal confirmed that the parent company that participated in the negotiation of and assumed obligations under the main contract was bound by the arbitration agreement, despite not being a party to the main contract.210 However, this approach is not universally accepted. For instance, in the Dallah case, the Supreme Court of the United Kingdom, relying on the New York Convention, refused to grant leave to a party seeking to enforce an award rendered against the Islamic Republic of Pakistan on the grounds that there was no evidence that the common intention of the parties was to add the Government of Pakistan as a party to the main contract, despite its participating in negotiations and in the performance of certain obligations under that contract.211
210. Société Kis France et autres v. Société Générale et autres, Court of Appeal of Paris, France, 31 October 1989, 1992 Rev. Arb. 90. For a similar reasoning, finding that the Government of Turkmenistan “acted as the alter ego of [a State owned entity] in regard to this Joint Venture with [the claimant in the arbitration]”: Bridas S.A.P.I.C., Bridas Energy International, Ltd., Intercontinental Oil and Gas Ventures, Ltd., and Bridas Corp v. Government of Turkmenistan, Court of Appeals, Fifth Circuit, United States of America, 21 April 2006, 04-20842.
211. Dallah Real Estate and Tourism Holding Company v. Ministry of Religious Affairs, Government of Pakistan, Supreme Court, England and Wales, 3 November 2010, UKSC 2009/0165. See also the contrary decision by the French Paris Court of Appeal in the same matter: Gouvernement du Pakistan—Ministère des affaires religieuses v. société Dallah Real Estate and Tourism Holding Company, Court of Appeal of Paris, France, 17 February 2011, 09/28533, 09/28535 and 09/28541, 2011 Rev. Arb. 286.
19. Fourth, consent has also been found in situations where a party had knowledge of the arbitration agreement. For instance, when the arbitration agreement is printed on the back of the contract (or contained in general terms and conditions printed on the back of the contract), parties have been deemed to have knowledge of the agreement to arbitrate as they had the opportunity to review the arbitration agreement.212 In this vein, in a dispute where the arbitration agreement was contained in a document other than the main contract, the Italian Court of Cassation noted that, in order to establish the parties’ consent to an arbitration agreement, the parties had to have knowledge of the arbitration agreement through a specific reference to it in the main contract (“per relationem perfecta”).213
212. Court of Appeal of the Canton of Basel-Landschaft, Switzerland, 5 July 1994, 30-94/261; Bobbie Brooks Inc. v. Lanificio Walter Banci s.a.s., Court of Appeal of Firenze, Italy, 8 October 1977, IV Y.B. Com. Arb. 289 (1979).
213. Louis Dreyfus S.p.A. v. Cereal Mangimi S.r.l., Court of Cassation, Italy, 19 May 2009, 11529.
20. In some jurisdictions, parties are deemed to have knowledge of the arbitration agreement when, irrespective of whether they had actual knowledge of the arbitration agreement, they should reasonably have known about it. In such cases, courts will enforce arbitration agreements when parties are aware of the arbitration agreement or should have been aware of the arbitration agreement. For instance, the Italian Court of Cassation now recognizes that, when the parties are professional businessmen who should be aware of the content of general terms and conditions in their field, a generic reference to such terms and conditions (“per relationem imperfecta”) satisfies the requirement of article II of the Convention.214 German courts also admit that consent can be implied from relevant international trade usages when the contract is typical of the industry and the parties are active in the relevant field of business.215
21. Some courts have also ruled that parties are bound by an arbitration agreement incorporated by reference on the grounds that they should have been aware of its terms. It is indeed very common in international trade for parties not to set out the terms of their contract in detail, but instead to refer to separate documents, such as general conditions and standard-form agreements produced by professional bodies, which may contain arbitration agreements.216 Some courts have accepted that, by referring to general terms and conditions in their contract, the parties have consented to the arbitration agreement therein because they should reasonably have known about the arbitration agreement.217 Indeed, as noted by an Indian court, article II does not specify that the agreement to arbitrate must be contained in a single document.218 Hence, in a case where the Convention applied, a United States court upheld an arbitration agreement contained in general terms and conditions on the grounds that the parties had tacitly consented to the general terms and conditions to which the contract referred, notwithstanding the fact that the plaintiff had never been in possession of those general terms and conditions. The court reasoned that failure to request the terms and conditions referred to in a contract implied tacit acceptance of its terms, including the arbitration agreement.219 In the same vein, in Bomar, relying on both the Convention and French law, a French court held that an arbitration agreement contained in a document referred to in the main contract should be enforced insofar as it could be demonstrated that the parties were aware or should have been aware of it.220 A number of courts have thus upheld arbitration agreements contained in general conditions referred to in the main contract.221 In the same vein, in a dispute arising out of a bill of lading expressly referring to a charter party agreement,222 the Indian Supreme Court upheld an arbitration agreement contained in the charter party agreement. As confirmation of this approach, article 7(6) (Option I) of the UNCITRAL Model Law on International Commercial Arbitration expressly provides that a reference in a contract to any document containing an arbitration clause qualifies as an arbitration agreement in writing.223
216. Domenico Di Pietro, Validity of Arbitration Clauses Incorporated by Reference, in Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention 1958 in Practice 355 (E. Gaillard, D. Di Pietro eds., 2008).
217. Owners & Parties Interested in the Vessel M.V. Baltic Confidence, et al. v. State Trading Corp. of India, et al. (India), Supreme Court, India, 20 August 2001, Special Leave Petition (civil) 17183 of 2001; Tradax Export S.A. v. Amoco Iran Oil Company, Federal Tribunal, Switzerland, 7 February 1984; X S.A. v. Y Ltd., Federal Tribunal, Switzerland, 12 January 1989, 5P.249/1988.
220. Société Bomar Oil N.V. v. Entreprise tunisienne d’activités pétrolières (ETAP), Court of Appeal of Versailles, France, 23 January 1991, upheld by Société Bomar Oil N.V. v. Entreprise tunisienne d’activités pétrolières (ETAP), Court of Cassation, France, 9 November 1993, 91-15.194. See also SA Groupama transports v. Société MS Régine Hans und Klaus Heinrich KG, Court of Appeal of Basse Terre, France, 18 April 2005.
221. Del Medico & C. SAS v. Iberprotein Sl, Court of Cassation, Italy, 16 June 2011, 13231; Copape Produtos de Pétroleo LTDA. v. Glencore LTD., District Court, Southern District of New York, United States of America, 8 February 2012, 11 Civ. 5744 LAK; Standard Bent Glass Corp. v. Glassrobots OY [Fin.], Court of Appeals, Third Circuit, United States of America, 20 June 2003, 02-2169; SA Groupama transports v. Société MS Régine Hans und Klaus Heinrich KG, Court of Cassation, France, 21 November 2006, 05-21.818; Court of Appeal of the Canton of Basel-Landschaft, Switzerland, 5 July 1994, 30-94/261; Oberlandesgericht [OLG] Cologne, Germany, 16 December 1992, XXI Y.B. Com. Arb. 535 (1996).
222. Owners & Parties Interested in the Vessel M.V. Baltic Confidence, et al. v. State Trading Corp. of India, et al. (India), Supreme Court, India, 20 August 2001, Special Leave Petition (civil) 17183 of 2001. See also Tradax Export SA v. Amoco Iran Oil Company, Federal Tribunal, Switzerland, 7 February 1984; Welex A.G. v. Rosa Maritime Ltd., Court of Appeal, England and Wales, 3 July 2003, A3/02/2230 A3/02/2231.
223. Article 7(6) (Option I) of the UNCITRAL Model Law on International Commercial Arbitration.
22. Fifth, courts have relied on the procedural behaviour of the parties to infer their consent to arbitrate their disputes. Hence, participation in the arbitral proceedings without any objection to the jurisdiction of the arbitral tribunal has been held to establish the parties’ agreement to arbitrate.224 For instance, having found that an unsigned arbitration agreement did not comply with the requirements of article II (2), the Brazilian Superior Court of Justice nevertheless enforced an award rendered under that arbitration agreement on the grounds that the parties had consented to the arbitral tribunal’s jurisdiction by participating in the arbitral proceedings without raising any objections to the arbitral tribunal’s jurisdiction.225 Likewise, an Australian court enforced an arbitral award on costs rendered under the auspices of the ICC in Paris where the arbitral tribunal found that it did not have jurisdiction as the arbitration agreement was invalid. The Australian court held that, by signing the Terms of Reference, the parties had consented to submit their dispute to arbitration.226
224. CTA Lind & Co. Scandinavia AB in Liquidation’s bankruptcy Estate v. Erik Lind, District Court, Middle District of Florida, Tampa Division, United States of America, 7 April 2009, 8:08-cv-1380-T-30TGW; China Nanhai Oil Joint Service Corporation Shenzhen Branch v. Gee Tai Holdings Co. Ltd., High Court, Supreme Court of Hong Kong, Hong Kong, 13 July 1994, 1992 No. MP 2411; Oberlandesgericht [OLG] Schleswig, Germany, 30 March 2000, 16 SchH 05/99.
225. L’Aiglon S/A v. Têxtil União S/A, Superior Court of Justice, Brazil, 18 May 2005, SEC 856.
23. The reliance placed by courts on the parties’ consent to arbitration is consistent with the Convention’s philosophy of providing “satisfactory evidence of the agreement”.227 Commentators have emphasized the importance of the intention of the parties and whether there is a “meeting of minds”.228
227. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Comments by Governments and Organizations on the Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Comments by the United Kingdom, E/2822/Add.4, Annex I, p. 5.
228. Reinmar Wolff, Commentary on Article II, in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958—Commentary 85, 128-132 (R. Wolff ed., 2012); ICCA’s Guide to the Interpretation of the 1958 New York Convention: A Handbook for Judges 45 (P. Sanders ed., 2011).
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C. Scope of the 'agreement in writing'
24. Article II (1) requires national courts to recognize an agreement in writing under which the parties have undertaken to submit to arbitration all “differences” in respect of a legal relationship which is capable of settlement by arbitration.
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a. Meaning of 'differences'
25. Article II (1) refers to the parties’ undertaking to submit to arbitration “all or any differences” which have arisen or which may arise between them, and which are covered by their agreement.
26. Very few reported cases have addressed this issue and all of them have adopted a broad interpretation of “differences” in line with the pro-arbitration bias of the Convention.
27. In interpreting the word “differences”, the High Court of Hong Kong has held that the parties should be referred to arbitration even when there is a dispute as to the existence of a dispute.229 The court concluded that whether or not a dispute existed was a matter for the arbitral tribunal to determine. The Australian Supreme Court relied on the words “all or any” in article II (1) to confirm that article II (1) should be construed broadly.230 Similarly, the Court of Appeal of England and Wales in Fiona Trust held that, in the absence of clear language to the contrary, arbitration clauses are to be given the broadest interpretation possible, since the parties, as rational businessmen, were likely to have intended any dispute arising out of the relationship into which they had entered to be decided by the same tribunal.231
231. Fiona Trust & Holding Corp. v. Privalov, Court of Appeal, England and Wales, 24 January 2007, 2006 2353 A3 QBCMF, upheld by Fili Shipping Co. Ltd. and others v. Premium Nafta Products Ltd. and others, House of Lords, England and Wales, 17 October 2007.
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b. 'Defined legal relationship'
28. Article II (1)’s requirement that the dispute must have arisen “in respect of a defined legal relationship, whether contractual or not”, is very broad and seldom disputed in case law.
29. Relying on the text of article II, the Canadian Supreme Court has held that extra-contractual claims could fall within the scope of an arbitration agreement when the claims relate to contractual obligations.232
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c. 'Subject matter capable of settlement by arbitration'
30. The requirement that the dispute concerns a “subject matter capable of settlement by arbitration” refers to the arbitrability of the dispute.233 Given the New York Convention’s lack of guidance on this topic, national courts have determined whether a specific subject matter can be settled by arbitration either by referring to the law applicable to the arbitration agreement or by referring to their own law.
233. Dorothee Schramm, Elliott Geisinger, Philippe Pinsolle, Article II, in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 37, 69-73 (H. Kronke, P. Nacimiento et al. eds., 2010); Albert Jan van den Berg, The New York Convention of 1958: An Overview, in Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention 1958 in Practice 39, 53 (E. Gaillard, D. Di Pietro eds., 2008); Jan Paulsson, Arbitrability, Still Through a Glass Darkly, in Arbitration in the Next Decade 95, 96 (ICC Pub. No. 612E, 1999).
31. Some courts have determined that this issue should be resolved according to the law applicable to the arbitration agreement. In making this determination, they have referred to the conflict of laws rule in article V (1)(a) of the Convention, i.e., “the law to which the parties have subjected [the arbitration agreement] or, failing any indication thereon, under the law of the country where the award was made.”234 By analogy, courts have interpreted the expression “where the award was made” to mean “where the award shall be made”, i.e., by reference to the seat of arbitration. Swiss and Austrian courts have followed this approach.235
234. Misr Insurance Company v. Alexandria Shipping Agencies Company, Court of Cassation, Egypt, 23 December 1991, 547/51 (unofficial translation).
235. Federal Tribunal, Switzerland, 21 March 1995, 5C.215/1994/lit; Supreme Court, Austria, 17 November 1971, I Y.B. Com. Arb. 183 (1976).
32. Other courts have assessed whether a dispute was capable of settlement by arbitration pursuant to their own system of law. In so doing, courts have followed three different approaches to conclude that the lex fori should apply to determine whether a dispute is capable of settlement by arbitration.
33. First, a number of courts have relied on article V (2)(a) of the Convention which provides that whether the subject matter of a dispute is capable of settlement by arbitration is to be assessed pursuant to the law of the country where recognition and enforcement is sought. By analogy, the Italian Court of Cassation determined that the lex fori, that is, the law of the State of the court seized, should be applied to determine whether a dispute is capable of settlement by arbitration.236 Belgian courts have followed the same approach.237
236. Compagnia Generale Construzioni “COGECO” S.p.A. v. Piersanti, Court of Cassation, Italy, 27 April 1979, XVI Y.B. Com. Arb. 229 (1996).
237. Colvi NV. v. Interdica, Supreme Court, Belgium, 15 October 2004, C.02.0216.N.
34. Second, in assessing whether a dispute is capable of settlement by arbitration and consequently deciding whether to refer the parties to arbitration pursuant to article II (3), courts in the United States have applied the Federal Arbitration Act, that is the lex fori, but without any reference to article V (2)(a).238 Hence, United States courts have recognized that disputes arising out of a Statute are capable of settlement by arbitration under the Convention. By way of example, disputes arising out of the Sherman Antitrust Act,239 the Securities Act and Exchange Act,240 the Jones Act on employment,241 and bankruptcy legislation242 were held to be capable of settlement by arbitration. United States courts have also accepted that disputes arising out of employment243 and distributorship contracts244 are capable of settlement by arbitration.245
238. Scherk v. Alberto-Culver Company, Supreme Court, United States of America, 17 June 1974, 73-781; Rhone Mediterranee Compagnia Francese v. Lauro, Court of Appeals, Third Circuit, United States of America, 6 July 1983, 82-3523.
240. Scherk v. Alberto-Culver Company, Supreme Court, United States of America, 17 June 1974, 73-781.
242. Société Nationale Algérienne Pour La Recherche, La Production and others v. Distrigas Corp., District Court, District of Massachusetts, United States of America, 17 March 1987, 86-2014-Y.
243. Lindo v. NCL, Ltd., Court of Appeals, Eleventh Circuit, United States of America, 29 August 2011, 10-10367; Jane Doe v. Princess Cruise Lines, LTD., a foreign corporation, d.b.a. Princess Cruises, Court of Appeals, Eleventh Circuit, United States of America, 23 September 2011, 10-10809.
244. Becker Autoradio U.S.A., Inc. v. Becker Autoradiowerk GmbH, Court of Appeals, Third Circuit, United States of America, 17 July 1978, 77-2566, 77-2567; Travelport Global Distribution Systems B.V. v. Bellview Airlines Limited, District Court, Southern District of New York, United States of America, 10 September 2012, 12 Civ. 3483(DLC).
245. In so doing, courts have assessed whether, for each Statute, it was the congressional intent to have a specific category of disputes capable of settlement by arbitration: Mitsubishi Motors Corp v. Soler Chrysler-Plymouth, Supreme Court, United States of America, 2 July 1985, 437 United States 614. More generally, see Gary B. Born, International Commercial Arbitration 769, 778 (2009).
35. Third, French courts have rejected the application of a particular national law to assess whether or not a dispute is capable of settlement by arbitration. Relying on article VII of the Convention, the Paris Court of Appeal held that French law should apply because it was more favourable than article II, and that the principle of the validity of international arbitration agreements, which is a “substantive rule of French international arbitration law”, establishes the validity of any arbitration clause “irrespective of any reference to national law”.246 The Paris Court of Appeal expressly distinguished this principle from articles II and V of the Convention “which call, in particular, for the application of national laws to render the clause valid.”247 By way of example, a French court referred the parties to arbitration on the basis of an arbitration agreement contained in an employment contract notwithstanding the petitioner’s argument that employment disputes were not capable of settlement by arbitration. The court noted that the Convention applied since the employment contract was international and France had withdrawn its commercial reservation.248
246. Ste A.B.S. American Bureau of Shipping v. Copropriété Maritime Jules Verne et autres, Court of Appeal of Paris, France, 4 December 2002, 2001/17293, upheld by Copropriété Maritime Jules Verne et autres v. Société A.B.S. American bureau of shipping, Court of Cassation, France, 7 June 2006, 03-12.034.
248. SA C.F.T.E. v. Jacques Dechavanne, Court of Appeal of Grenoble, France, 13 September 1993.
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-
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ARTICLE II(2)
36. Article II (2) defines the “in writing” requirement. An “agreement in writing” includes “an arbitral clause in a contract, or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.”
37. Prior to UNCITRAL addressing the issue, national courts had diverged on whether the more-favourable-rule principle embodied in article VII (1) of the Convention applied to the requirement that an arbitration agreement be “in writing” within the meaning of article II. In 2006, UNCITRAL confirmed that article VII (1) “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.”249 Since then, national courts have more consistently enforced arbitration agreements pursuant to the less stringent formal requirements available under their national laws or treaties as provided for by article VII with respect to arbitral awards.250
249. Recommendation regarding the interpretation of article II, paragraph 2, and article VII, paragraph 1, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done in New York, 10 June 1958 (2006), Official Records of the General Assembly, Sixty-first Session, Supplement No. 17 (A/61/17), paras. 177-81 and Annex II, available at www.uncitral.org/pdf/english/texts/arbitration/NY-conv/A2E.pdf. The Travaux préparatoires to the Recommendation are contained in Official Records of the General Assembly, Fifty-sixth Session, Supplement No. 17 (A/56/17), para. 313; Ibid., Fifty-seventh Session, Supplement No. 17 (A/57/17), para. 183; and in United Nations documents A/CN.9/468, paras. 88-106; A/CN.9/485, paras. 60-77; A/CN.9/487, paras. 42-63; A/CN.9/508, paras. 40-50; A/CN.9/592, paras. 82-88; A/CN.9/WG.II/WP.118, paras. 25-33; A/CN.9/607; and A/CN.9/609, and its addenda 1 to 6.
250. For a more detailed analysis on the interaction between articles II and VII, see the chapter of the Guide on article VII, paras. 31-35.
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A. 'Arbitral clause in a contract' versus 'arbitration agreement'
38. The Convention provides that an “agreement in writing” may be either an “arbitral clause in a contract” or an “arbitration agreement”.
39. Examples of “arbitral clauses in a contract” within the meaning of article II (2) have been found when the arbitration agreement is printed on the back of the contract.251
251. See the chapter of the Guide on article II, para. 19. See also Bayerisches Oberstes Landesgericht [BayObLG], Germany, 17 September 1998, BayObLG 4 Z Sch 1/98; Bundesgerichtshof [BGH], Germany, 25 May 1970, VII ZR 157/68; Oberlandesgericht [OLG] Schleswig, Germany, 30 March 2000, 16 SchH 05/99; Bundesgerichtshof [BGH], Germany, 12 February 1976, III ZR 42/74.
40. Regarding the “arbitration agreement”, an Australian court has confirmed that the Terms of Reference signed in arbitration proceedings under the auspices of the ICC International Court of Arbitration qualified as an “arbitration agreement” and an “agreement in writing” within the meaning of article II (2).252 In that case, one of the respondents in the arbitral proceedings had successfully objected to the jurisdiction of the arbitral tribunal. The arbitral tribunal then issued an award on costs in favour of that respondent who then sought to enforce the award. The appellant opposed enforcement on the grounds that the arbitral tribunal had found that there was no valid arbitration agreement binding the respondent. The Supreme Court of Queensland enforced the award, finding that the Terms of Reference signed by the parties to the arbitration proceedings constituted an “agreement in writing” within the meaning of article II.
41. The distinction between an arbitration clause in a contract and a “submission agreement”253 has lost most of its relevance in contemporary arbitral practice. In a 1994 decision, the United States Court of Appeals for the Fifth Circuit distinguished between an arbitral clause in a contract and an arbitration agreement. It ruled that, within the meaning of article II (2), while the former needed to be signed by the parties, no such requirement applied to the latter.254 This position was subsequently rejected by the United States Court of Appeals for the Second Circuit. It held that the signature requirement in article II (2) of the Convention applies to both contracts containing an arbitral clause and arbitration agreements, unless they are contained in an exchange of letters or telegrams.255
253. The expression “arbitration agreement” is generally used to include both arbitration clauses and submission agreements. See Fouchard Gaillard Goldman on International Commercial Arbitration 193-96 (E. Gaillard, J. Savage eds., 1999).
254. Sphere Drake Insurance PLC v. Marine Towing, Court of Appeals, Fifth Circuit, United States of America, 23 March 1994, 93-3200. See also Borsack v. Chalk & Vermilion Fine Arts, Ltd., District Court, South District of New York, United States of America, 7 August 1997, 96 CV 6587 (BDP).
255. Kahn Lucas Lancaster, Inc. v. Lark International Ltd., Court of Appeals, Second Circuit, United States of America, 9 July 1999, 97-9436. See also Czarina, L.L.C. v. W.F. Poe Syndicate, Court of Appeals, Eleventh Circuit, United States of America, 4 February 2004, 03-10518; Moscow Dynamo v. Alexander M. Ovechkin, District Court, District of Columbia, United States of America, 18 January 2006, 05-2245 (EGS).
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B. The signature requirement
42. Pursuant to article II (2), the requirement of an agreement in writing is met when an arbitral clause or an arbitration agreement is signed by the parties.
43. When the parties to the contract or instrument containing the arbitration agreement have signed such contract or instrument, the signature requirement of article II (2) is to be regarded as satisfied. This has been generally followed by courts.256
256. Sunward Overseas S.A. v. Servicios Maritimos Limitada Semar, Supreme Court of Justice, Colombia, 20 November 1992, 472; Krauss Maffei Verfahrenstechnik GmbH et al. v. Bristol Myers Squibb S.p.A., Court of Cassation, Italy, 10 March 2000, 58; Steve Didmon v. Frontier Drilling (United States), INC., et al., District Court, Southern District of Texas, Houston Division, United States of America, 19 March 2012, H-11-2051; Kahn Lucas Lancaster, Inc. v. Lark International Ltd., Court of Appeals, Second Circuit, United States of America, 29 July 1999, 97-9436; Smita Conductors Ltd. v. Euro Alloys Ltd., Supreme Court, India, 31 August 2001, Civil Appeal No. 12930 of 1996; Bundesgerichtshof [BGH], Germany, 8 June 2010, XI ZR 349/08; Bundesgerichtshof [BGH], Germany, 25 January 2011, XI ZR 350/08.
44. Conversely, certain courts have refused to enforce arbitration agreements against parties that have not signed it.257 For example, the Chinese Supreme Court denied enforcement of an award on the ground that only one party had signed the contract containing the arbitration clause.258 Similarly, the Brazilian Superior Court of Justice refused to enforce an arbitration agreement because the parties had not signed the contract containing the arbitration agreement.259
259. Plexus Cotton Limited v. Santana Têxtil S/A, Superior Court of Justice, Brazil, 15 February 2006, SEC 967; Indutech SpA v. Algocentro Armazéns Gerais Ltda., Superior Court of Justice, Brazil, 17 December 2008, SEC 978; Kanematsu USA Inc. v. ATS—Advanced Telecommunications Systems do Brasil Ltda., Superior Court of Justice, Brazil, 18 April 2012, SEC 885.
45. In the same vein, in Javor v. Francoeur, the Canadian Supreme Court of British Columbia refused to enforce an award rendered against the respondent because it had not signed the arbitration agreement. During the arbitral proceedings, the tribunal found that the respondent was the alter-ego of the corporate party which had signed the arbitration agreement and consequently ordered the respondent to participate in the arbitral proceedings. The court relied on the text of article II (2) of the British Columbia Foreign Arbitral Awards Act (which incorporates article II (2) of the Convention) and ruled that the purpose of the Act was to limit enforcement of awards to “part[ies] signatory to the [arbitration] agreement.” It held that since the respondent was not a named party or a signatory to the arbitration agreement, the award could not be enforced against it.260
46. By contrast, a number of courts have enforced arbitration agreements against parties that had not signed the arbitration agreement. For instance, United States courts have held that non-signatories can be bound by an arbitration agreement
to the extent that the arbitration agreement is not null and void under the Convention and that a contract law theory—such as agency, estoppel, or principles relating to alter-egos and third party beneficiaries—applies to the case at hand.261 In France, entities that had not signed the arbitration agreement have been referred to arbitration pursuant to the group of companies doctrine.262261. Formostar, LLC, et al. v. Henry Florentius, et al., District Court, District of Nevada, United States of America, 13 July 2012, 2:11-cv-01166-GMN-CWH; Flexi-Van Leasing, Inc. v. Through Transport Mutual Insurance Association, Ltd., et al., Court of Appeals, Third Circuit, United States of America, 18 August 2004, 03-3383; Sarhank Group v. Oracle Corporation, Court of Appeals, Second Circuit, United States of America, 14 April 2005, 02-9383; Milton Escobal v. Celebration Cruise Operator Inc., Celebration Cruise Line LLC, Court of Appeals, Eleventh Circuit, United States of America, 20 July 2012, 11-14022. See also for a case where none of the contract law theories were found applicable: Bel-Ray Co., Inc. (United States) v. Chemrite (Pty) Ltd. (South Africa), Court of Appeals, Third Circuit, United States of America, 28 June 1999, 98-6297; Sarhank Group v. Oracle Corporation, Court of Appeals, Second Circuit, United States of America, 14 April 2005, 02-9383.
262. Société Kis France et autres v. Société Générale et autres, Court of Appeal of Paris, France, 31 October 1989, 1992 Rev. Arb. 90.
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C. An arbitral clause or an arbitration agreement included in an exchange of documents
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a. An exchange
47. Under article II (2), an agreement will also meet the “in-writing” requirement if it is contained in an exchange of letters or telegrams. As noted by a German court, the essential factor in the exchange of documents requirement under the New York Convention is mutuality; that is, reciprocal transmission of documents.263
48. The United States District Court for the District of Colombia has confirmed that one party’s unilateral conduct is insufficient to establish an “agreement in writing” within the meaning of article II (2) of the Convention.264 In that case, the counter-party never responded either explicitly or implicitly to the letters containing the arbitration agreements.
49. In the context of an investment arbitration dispute, the United States Court of Appeals for the Second Circuit has confirmed that the requirement of an exchange of documents within the meaning of article II of the Convention is fulfilled by an offer to arbitrate contained in a bilateral investment treaty and its subsequent acceptance by an investor in the Request for Arbitration.265
265. Republic of Ecuador v. Chevron Corp. (United States), Court of Appeals, Second Circuit, United States of America, 17 March 2011, 10-1020-cv (L), 10-1026 (Con). See also Ministry of Defense of the Islamic Republic of Iran v. Gould Inc., Gould Marketing, Inc., Hoffman Export Corporation, and Gould International, Inc., Court of Appeals, Ninth Circuit, United States of America, 23 October 1989, 88-5879/88-5881 for the Iran-US Claims Tribunal Statutes qualifying as an “agreement in writing”.
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b. Non-exhaustive list of documents
50. Even though article II (2) only makes express reference to “an exchange of letters or telegrams”, it is widely accepted that article II (2) covers any exchange of documents and is not limited to letters and telegrams. Most courts recognize that an arbitration agreement contained in an exchange of documents or other written communications, whether physical or electronic, satisfies the requirement of article II (2).266
266. For an exchange of telexes and faxes, see Compagnie de Navigation et Transports S.A. v. MSC Mediterranean Shipping Company S.A., Federal Tribunal, Switzerland, 16 January 1995; C S.A. v. E. Corporation, Court of Justice of Geneva, Switzerland, 14 April 1983, 187. For an exchange by e-mails with a confirmation by fax, see Great Offshore Ltd. v. Iranian Offshore Engineering & Construction Co., Supreme Court, Civil Appellate Jurisdiction, India, 25 August 2008, Arbitration Petition No. 10 of 2006.
51. By way of example, a Canadian court ruling upon the validity of an arbitration agreement under article V (1)(a) has confirmed that an “agreement in writing” under article II (2) can take various forms and should be given a functional and pragmatic interpretation.267
52. Indeed, at its thirty-ninth session, in July 2006, UNCITRAL expressly recommended that article II (2) be applied “recognizing that the circumstances described therein are not exhaustive”.268 As further confirmation, at the same session, UNCITRAL amended the Model Law on International Commercial Arbitration to clarify that “the requirement that an arbitration agreement be in writing is met by an electronic communication [...]”.269 In accordance with the UNCITRAL Recommendation, a recent Spanish decision has held that the list of documents set out in article II is not exhaustive and therefore an arbitration agreement concluded by electronic means of communications fulfils the “in-writing” requirement.270
268. Recommendation regarding the interpretation of article II, paragraph 2, and article VII, paragraph 1, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done in New York, 10 June 1958 (2006), para. 1. Official Records of the General Assembly, Sixty-first Session, Supplement No. 17 (A/61/17), paras. 177-81 and Annex II, available at www.uncitral.org/pdf/english/texts/arbitration/NY-conv/A2E.pdf. As early as 2005, the United Nations Convention on the Use of Electronic Communications in International Contracts prepared by UNCITRAL provided that it applies, pursuant to its article 20, to the use of electronic communications in connection with the formation or performance of an agreement falling under the New York Convention. See the Resolution 60/21 adopted by the General Assembly on 23 November 2005 on the United Nations Convention on the Use of Electronic Communications in International Contracts, available at www.uncitral.org/pdf/english/texts/electcom/06-57452_Ebook.pdf.
269. Article 7(4) (Option I) of the UNCITRAL Model Law on International Commercial Arbitration.
270. High Court of Justice of Cataluña, Spain, 15 March 2012, RJ 2012/6120.
53. Relying on the wording “include” in article II (2), certain commentators have also considered that the circumstances described in article II (2) are not exhaustive.271
271. See, e.g., Toby Landau, Salim Moollan, Article II and the Requirement of the Form, in enforcement of Arbitration Agreements and International Arbitral Awards—The New York Convention 1958 in Practice 189, 244-47 (E. Gaillard, D. Di Pietro eds., 2008); Gabrielle Kaufmann-Kohler, Arbitration Agreements in Online Business to Business Transactions, in Liber Amicorum K.-H. Bockstiegel 355, 358-62 (2001). In fairness, taken in isolation, this argument is not determinative as it is not supported by the Convention’s other official languages. For instance, the French uses the expression “On entend par “convention écrite” [...]” which does not suggest a non-exhaustive list but rather a definition of the “agreement in writing”.
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c. Whether the signature requirement applies to an exchange of documents
54. Where the arbitration agreement is contained in an exchange of documents, the text of article II (2) does not, on its face, require the parties’ signature on the agreement to arbitrate.
55. The Swiss Federal Tribunal has confirmed that when the arbitration agreement is contained in an exchange of documents, the signature requirement does not apply.272 Similarly, ruling upon Section 7 of the Indian Arbitration Act of 1996 (which mirrors article II (2) of the Convention), the Supreme Court of India has upheld an arbitration agreement contained in an unsigned contract exchanged between parties.273 This approach has been followed in many jurisdictions.274
272. Compagnie de Navigation et Transports S.A. v. MSC Mediterranean Shipping Company S.A., Federal Tribunal, Switzerland, 16 January 1995; Tradax Export SA v. Amoco Iran Oil Company, Federal Tribunal, Switzerland,7 February 1984.
274. Not Indicated v. Not Indicated, Supreme Court, Austria, 21 February 1978, X Y.B. Com. Arb. 418 (1985); Standard Bent Glass Corp. v. Glassrobots OY, Court of Appeals, Third Circuit, United States of America, 20 June 2003, 02-2169. See also at the award enforcement stage: Landgericht [LG] Zweibrücken, Germany, 11 January 1978, 6.0 H 1/77; Oberlandesgericht [OLG] Schleswig, Germany, 30 March 2000, 16 SchH 05/99.
56. By contrast, a limited number of decisions have refused to enforce an unsigned arbitration agreement that had been exchanged via telexes.275
275. See, e.g., Oleaginosa Moreno Hermanos Sociedad Anonima Comercial Industrial Financeira Imobiliaria y Agropecuaria v. Moinho Paulista Ltd, Superior Court of Justice, Brazil, 17 May 2006, SEC 866, upheld by Oleaginosa Moreno Hermanos Sociedad Anónima Comercial Industrial Financeira Imobiliaria y Agropecuaria v. Moinho Paulista Ltda., Superior Court of Justice, Brazil, 7 March 2007, Motion for Clarification on SEC 866.
57. The travaux préparatoires and the wording of article II (2) support the approach that the signature requirement does not apply to an exchange of documents. The drafters of the New York Convention sought to adopt a flexible “in-writing” requirement in order to reflect business reality.276 For this reason, a distinction was drawn between “an arbitral clause [...] or an arbitration agreement, signed by the parties” “or” “contained in an exchange of letters or telegrams”
276. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Comments by Governments and Organizations on the Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards, E/2822/Add. 4 (United Kingdom); Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Records of the Thirteenth Meeting, E/CONF.26/SR.13 (Representative of the Hague Conference on Private International Law); Travaux préparatoires, Report of the Committee on the Enforcement of International Arbitral Awards, E/AC.42/SR.7 (Sweden, India); Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Records of the Ninth Meeting E/CONF.26/SR.9 (Representative of Germany), p. 3.
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ARTICLE II(3)
58. Where there is an agreement in writing as defined under article II (1) and (2), article II (3) requires national courts to refer the parties to arbitration, if requested to do so by at least one party, unless the court finds that the agreement is null and void, inoperative or incapable of being performed.
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A. General principles - (II)
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a. Obligation to refer the parties to arbitration
59. Article II (3) provides that a “court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement in writing within the meaning of this article, shall [...] refer the parties to arbitration [...].” As noted by the Supreme Court of Canada, the object and purpose of article II (3) is to strengthen the obligation to enforce arbitration agreements.277
60. The travaux préparatoires are silent on the scope of the obligation of courts to refer parties to arbitration. The expression “refer the parties to arbitration” has its origin in the 1923 Geneva Protocol on Arbitration Clauses, which provides, in relevant part, that the “tribunals of the Contracting Parties [...] shall refer the parties on the application of either of them to the decision of the arbitrators.”278 The expression was proposed by the Swedish delegation at the Conference and adopted after further modification by the drafting committee.279
278. 1923 Geneva Protocol on Arbitration Clauses, Article 4.
279. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Record of the Twenty-First Meeting, E/CONF.26/SR.21, pp. 17-23; Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Consideration on the Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards, E/CONF.26/L.59.
61. Courts interpret the word “shall” in article II (3) to indicate that referral to arbitration is mandatory and cannot be left to the courts’ discretion.280 In practice, courts have fulfilled their obligation to refer the parties to arbitration in two different manners.
280. See, e.g., Renusagar Power Co. Ltd. v. General Electric Company and anor, Supreme Court, India, 16 August 1984; Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. and anor, Supreme Court, India, 12 August 2005; Ishwar D. Jain v. Henri Courier de Mere, Court of Appeals, Seventh Circuit, United States of America, 3 April 1995, 94-3314; Aasma et al. v. American Steamship Owners Mutual Protection and Indemnity Association Inc. (USA), Court of Appeals, Sixth Circuit, United States of America, 29 August 1996, 94-3881, 94-3883; InterGen N.V. (Netherlands) v. Grina (Switzerland), Court of Appeals, First Circuit, United States of America, 22 September 2003, 03-1056; Ingosstrakh v. Aabis Rederi Sovfrakht, City Court of Moscow, Former USSR, 6 May 1968, I Y.B. Com. Arb. 206 (1976); Louis Dreyfus Corporation of New York v. Oriana Soc. di Navigazione S.p.a, Court of Cassation, Italy, 27 February 1970, 470, I Y.B. Com. Arb. 189 (1976); Nile Cotton Ginning Company v. Cargill Limited, Court of Appeal of Cairo, Egypt, 29 June 2003, 92-7876.
62. The first approach, endorsed in civil law jurisdictions, consists in declining jurisdiction in the presence of an arbitration agreement. For instance, in a number of decisions, French and Swiss courts have held that, pursuant to article II of the Convention, the presence of an arbitration agreement rendered national courts incompetent and have thus referred the parties to arbitration.281
281. Société Sysmode S.A.R.L. et Société Sysmode France v. Société Metra HOS et Société SEMA, Court of Appeal of Paris, 8 December 1988; Les Trefileries & Ateliers de Commercy v. Société Philipp Brothers France et Société Derby & Co. Limited, Court of Appeal of Nancy, 5 December 1980. See also Fondation M v. Banque X, Federal Tribunal, Switzerland, 29 April 1996.
63. The second approach, endorsed in most common law jurisdictions, consists in staying judicial proceedings, thereby giving effect to the courts’ obligation to enforce arbitration agreements. By way of example, the Australian Federal Court, in interpreting Section 7(2) of the Australian International Arbitration Act in light of article II (3) of the Convention, has held that the expression “shall refer the parties to arbitration [...] should not be taken as to having the meaning of obliging the parties to arbitrate.”282 Rather, the court explained that courts should stay judicial proceedings, but cannot compel the parties to arbitrate if they do not wish to do so.
282. Hi-Fert Pty Ltd. v. Kuikiang Maritime Carriers Inc., Federal Court, Australia, 26 May 1998, NG 1100 & 1101 of 1997. See also Westco Airconditioning Ltd. v. Sui Chong Construction and Engineering Ltd, Court of First Instance, High Court of the Hong Kong Special Administrative Region, Hong Kong, 3 February 1998, No. A12848.
64. Both approaches are consistent with the obligation of the courts of Contracting Parties to the Convention to refer the parties to arbitration.
65. Courts in certain jurisdictions go as far as issuing anti-suit injunctions in favour of arbitration. In particular, the Court of Appeal of England and Wales has held that such anti-suit injunctions designed to compel parties to comply with an arbitration agreement were not in violation of the New York Convention.283
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b. Party request necessary
66. Pursuant to article II (3), the courts’ obligation to refer the parties to arbitration is triggered by the “request of one of the parties”.
67. Whether or not a court can refer the parties to arbitration ex officio is not expressly settled by article II (3). However, as arbitration, by definition, is premised on consent, the parties are always at liberty to waive their prior agreement to arbitrate. If neither party alleges the existence of an arbitration agreement, the court will not ex officio refer the parties to arbitration but rather will, as a result, uphold its own jurisdiction.284 In such situations, courts often consider that the parties have waived their right to arbitrate.
68. For instance, United States courts generally find that parties waive their right to arbitrate when they “substantially” participate in litigation, or when they seek to invalidate the arbitration agreement before the courts of another country.285 In assessing whether the conduct of the parties amounted to a waiver of their right to arbitrate, a Brazilian court held that such waiver must be clearly established; i.e., all the parties had to act in a manner that unequivocally demonstrated their wish to waive the arbitration agreement.286
285. Anna Dockeray v. Carnival Corporation, District Court, Southern District of Florida, Miami Division, United States of America, 11 May 2010, 10-20799; Apple & Eve LLC v. Yantai North Andre Juice Co. Ltd, District Court, Eastern District of New York, United States of America, 27 April 2009, 07-CV-745 (JFB)(WDW).
286. Companhia Nacional de Cimento Portland—CNCP v. CP Cimento e Participações S/A, Court of Justice of Rio de Janeiro, Brazil, 18 September 2007, Civil Appeal 24.798/2007. Compare with L’Aiglon S/A v. Têxtil União S/A, Superior Court of Justice, Brazil, 18 May 2005, SEC 856 (chapter of the Guide on article II, para. 22) where the Superior Court of Justice held that participation in arbitral proceedings amounts to consent to arbitration.
69. The travaux préparatoires to the Convention reflect the drafters’ contemplation that parties would fail to raise the existence of an arbitration agreement in proceedings before national courts. Indeed, the drafters specifically deleted the expression “of its own motion” from an earlier draft of article II (3) in order to leave greater freedom to the parties and to preserve the possibility for the parties to waive their right to have a particular dispute resolved through arbitration.287
287. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Records of the Twenty-fourth Meeting, E/CONF.26/SR.24.
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c. Matters in respect of which there is an agreement
70. Article II (3) limits the obligation to refer the parties to arbitration to “matter[s] in respect of which” there is an agreement in writing, as defined in article II (1) and (2).
71. The Court of Appeal of England and Wales has indicated that, under both the English Arbitration Act of 1975 and the New York Convention, courts “are bound to send a dispute to arbitration if it is a dispute with regard to any matter to be referred.”288 To interpret the word “matter”, the Australian Federal Court relied on the pro-arbitration policy of the Convention and held that the term was of “wide import” and was not limited, for the purposes of Section 7(2)(b) of the Australian Arbitration Act (which is similar to article II (3) of the Convention), to issues arising out of the parties’ pleadings.289
288. Kammgarn Spinnerei GmbH v. Nova (Jersey) Knit Ltd, Court of Appeal, England, 2 April 1976.
289. Casaceli v. Natuzzi S.p.A. (formerly known as Industrie Natuzzi S.p.A.), Federal Court, Australia, 29 June 2012, NSD 396 of 2012. See also CTA International Pty Ltd. v. Sichuan Changhong Electric Co., Supreme Court of Victoria, Australia, 6 September 2002, 4278 of 2001.
72. In determining whether a dispute or a particular claim falls under the obligation to refer the parties to arbitration, national courts assess the scope of the agreement to arbitrate.290 For instance, an Australian Court stayed proceedings pursuant to Section 7(2) of the Arbitration Act (implementing article II (3) of the New York Convention) by construing the broad language of the arbitration agreement which covered “all dispute arising in connection with this agreement or execution thereof [...]”. The court concluded that claims related to the performance of the agreement were within the scope of the arbitration agreement.291 Conversely, when parties have voluntarily excluded certain issues from the scope of their arbitration agreement, courts will refer them to arbitration to the extent that the dispute does not fall within the exclusion.292
73. Similarly, in determining whether or not to refer the dispute to arbitration under both the Federal Arbitration Act and the Convention, the United States Court of Appeals for the Eleventh Circuit assessed whether the dispute related to, arose from, or was connected with the employment agreements at stake. The court determined that claims of false imprisonment, intentional infliction of emotional distress, spoliation of evidence, invasion of privacy, and fraudulent misrepresentation were not dependent on the parties’ employment relationship and therefore did not fall within the scope of the arbitration clause.293
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d. Provisional and conservatory measures
74. The duty to refer the parties to arbitration does not extend to provisional and conservatory measures, except if the arbitration agreement itself refers to such measures. Most courts exercise jurisdiction to order interim or provisional relief in support of arbitration upon application by a party notwithstanding the presence of an arbitration agreement.294
294. Hi-Fert Pty Ltd. v. Kuikiang Maritime Carriers Inc., Federal Court, Australia, 26 May 1998, NG 1100 & 1101 of 1997; Société Fieldworks-INC v. Société Erim, S.A. Logic Instrument et Société ADD-on Computer Distribution (A.C.D.), Court of Appeal of Versailles, France, 4 July 1996, 3603/96, 3703/96, 3998/96; Toyota Services Afrique (TSA) v. Société Promotion de Représentation Automobiles (PREMOTO), Supreme Court, Côte d’Ivoire, OHADA, 4 December 1997, Arrêt n°317/97.
75. For example, a French court has confirmed that the presence of an arbitration agreement does not prevent one of the parties from obtaining urgent provisional measures which do not require a ruling on the merits of the dispute.295 The Australian Federal Court has similarly held that the existence of an otherwise applicable arbitration clause did not prevent a party from seeking injunctive or declaratory relief. 296
295. Société Fieldworks-INC v. Société Erim, S.A. Logic Instrument et Société ADD-on Computer Distribution (A.C.D.), Court of Appeal of Versailles, France, 4 July 1996. The new 2011 French arbitration law limits the jurisdiction of the French courts’ to order interim relief to the period prior to the constitution of the arbitral tribunal: see article 1449 of the French Code of civil procedure.
76. Commentators have confirmed that national courts’ jurisdiction to order provisional measures does not breach the New York Convention as it does not prejudice the merits of the dispute.297
297. Dorothee Schramm, Elliott Geisinger, Philippe Pinsolle, Article II, in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 37, 139-144 (H. Kronke, P. Nacimiento et al. eds., 2010).
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B. Enforcement of arbitration agreements under article II(3)
77. Article II (3) requires national courts to refer the parties to arbitration unless they find that the relevant agreement is “null and void, inoperative or incapable of being performed.”
78. Neither the travaux préparatoires nor the text of the Convention provides any indication of the standard of review that should be applied by national courts in this exercise, or any further elucidation of the terms “null and void, inoperative or incapable of being performed.”
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a. Standard of review
79. The New York Convention does not address the issue of the standard of review of arbitration agreements under article II (3).298
298. The same conclusion may be drawn from case law regarding article 8 of the UNCITRAL Model Law on International Commercial Arbitration, see UNCITRAL, 2012 Digest of Case Law on the Model Law on International Commercial Arbitration, Article 16 (2012), 75-76, para. 3, available at www.uncitral.org/pdf/english/clout/MAL-digest-2012-e.pdf.
80. Two trends are discernible in the case law. Some courts perform a full review of the agreement to arbitrate to assess whether it is “null and void, inoperative or incapable of being performed”, while others confine themselves to a limited or prima facie inquiry, which itself can take on various forms and distinctions.
81. As the Convention does not prohibit courts from conducting either a prima facie review of the arbitration agreement299 or a full review of its existence and validity, none of the two approaches can be held to breach the New York Convention.
299. This view is mirrored under the UNCITRAL Model Law on International Commercial Arbitration where article 8(1) in fine exactly reflects the text of article II (3) of the Convention: Frédéric Bachand, Does Article 8 of the Model Law Call for Full or Prima Facie Review of the Arbitral Tribunal’s Jurisdiction?, 22 Arb. Int’l 463 (2006).
82. The full review standard has been endorsed by certain jurisdictions, notably Italy and Germany.
83. The Italian Court of Cassation held that article II (3) allows national courts to assess the validity and efficacy of the arbitration agreement, noting that it is an inherent part of the power of the domestic court to review the validity of the arbitration agreement.300
84. While not expressly referring to the Convention, German courts also conduct a full review of the arbitration agreement in assessing whether to refer the parties to arbitration. In so doing, courts rely on the German Code of Civil Procedure that expressly provides that prior to the constitution of the arbitral tribunal, a party may apply to a court to establish the admissibility or inadmissibility of arbitration proceedings.301 By way of example, relying on Section 1032 of the Code of Civil Procedure, the German Federal Supreme Court conducted a full review of the arbitration agreement contained in a standard form consumer contract. It held that, notwithstanding the principle of competence-competence, the lower court had erred in limiting its scrutiny of the arbitration agreement, as the court’s competence may not be curtailed by agreement of the parties. Having confirmed that the arbitration agreement complied with the formal and substantive requirements of German law, the court referred the parties to arbitration.302 German commentators confirm that German courts follow the same approach under the New York Convention.303
301. See Section 1032 of the Code of Civil Procedure (ZPO).
302. Bundesgerichtshof [BGH], Germany, 13 January 2005, III ZR 265/03.
303. Dorothee Schramm, Elliott Geisinger, Philippe Pinsolle, Article II, in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 37, 99-100 (H. Kronke, P. Nacimiento et al. eds., 2010); Peter Huber, Arbitration Agreement and Substantive Claim Before Court, in Arbitration in Germany: The Model Law in Practice 139, 143-44, para. 15 (K. H. Böckstiegel, S. Kröll and P. Nacimiento eds., 2007).
85. Other jurisdictions have restricted their review of the arbitration agreement to a limited analysis to confirm prima facie that it is not “null and void, inoperative or incapable of being performed”.304
304. For an argument in favour of a prima facie standard, see R. Doak Bishop, Wade M. Coriell, Marcelo Medina, The ‘Null and Void’ Provision of the New York Convention, in Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention 1958 in Practice 275, 280-86 (E. Gaillard, D. Di Pietro eds., 2008); Yas Banifatemi, Emmanuel Gaillard, 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 1958 in Practice 257 (E. Gaillard, D. Di Pietro eds., 2008); Fouchard Gaillard Goldman on International Commercial Arbitration 407-08 (E. Gaillard, J. Savage eds., 1996). Contra, see Jean-François Poudret, Gabriel Cottier, Remarques sur l’application de l’article II de la Convention de New York (Arrêt du Tribunal Fédéral du 16 janvier 1995), 13 ASA Bull. 383, 388-89 (1995).
86. For instance, in France, courts apply a prima facie standard of review of the arbitration agreement. They hold that courts are precluded from performing an in-depth analysis of the arbitration agreement and must refer the parties to arbitration unless the arbitration agreement is manifestly null and void.305
305. Legal Department du Ministère de la Justice de la République d’Irak v. Société Fincantieri Cantieri Navali Italiani, Société Finmeccanica et Société Armamenti E Aerospazio, Court of Appeal of Paris, France, 15 June 2006; SA Groupama transports v. Société MS Régine Hans und Klaus Heinrich KG, Court of Cassation, France, 21 November 2006, 05-21.818; Ste A.B.S. American Bureau of Shipping v. Copropriété Maritime Jules Verne et autres, Court of Appeal of Paris, France, 4 December 2002; Société Generali France Assurances et al. v. Société Universal Legend et al., Court of Cassation, France, 11 July 2006, 05-18.681. The new 2011 French arbitration law confirmed that even prima facie review by courts of an arbitration agreement is time-barred after the arbitral tribunal is seized (see article 1448 of the French Code of civil procedure).
87. Similarly, in India, the Supreme Court has relied on the spirit and the pro-enforcement bias of the New York Convention in order to determine the standard of review of arbitration agreements. In Sin-Etsu, the Supreme Court held that, although nothing in the language of article II (3) itself “indicated whether a finding as to the nature of the arbitral agreement has to be ex facie or prima facie, requiring only a prima facie showing better served the purpose of the New York Convention, which was to enable expeditious arbitration without avoidable intervention by judicial authorities”.306 The court emphasized that a prima facie review of the arbitration agreement at the pre-award stage would allow an expedited arbitral process while ensuring a fair opportunity to contest the award after full trial.
306. Shin-Etsu Chemical Co. Ltd. (Japan) v. Aksh Optifibre Ltd. & Anr. (Ind), Supreme Court, India, 12 August 2005, Appeal (civil) 5048 of 2005; Emmanuel Gaillard, Yas Banifatemi, Prima Facie Review of Existence, Validity of Arbitration Agreement, N.Y.L.J., 1 December 2005, 3. See also JS Ocean Liner LLC v. MV Golden Progress, Abhoul Marine LLC, High Court of Bombay, India, 25 January 2007.
88. In Venezuela, the Supreme Court of Justice relied on the competence-competence principle and article II (3) of the Convention to conclude that it could not conduct a full analysis of the arbitration agreement, but should instead limit itself to a prima facie analysis of whether the arbitration agreement was “null and void, inoperative or incapable of being performed.” The Supreme Court of Justice further held that, in applying the prima facie standard, Venezuelan courts should limit themselves to an assessment of whether there is an arbitration agreement in writing and should not enter into an analysis of whether a party had consented to arbitrate.307
307. Astivenca Astilleros de Venezuela, C.A. v. Oceanlink Offshore A.S., Supreme Court of Justice, Venezuela, 10 November 2011, Exp. No. 09-0573, XXXVI Y.B. Com. Arb. 496 (2011).
89. The prima facie standard has also been embraced in the Philippines by adopting the Special Rules of Court on Alternative Dispute Resolution (“Special ADR Rules”) which constitute guidelines by the Supreme Court binding on lower courts. Rule 2.4 of the Special ADR Rules explicitly provides for a prima facie test in order to determine whether the arbitration agreement is “null and void, inoperative or incapable of being performed”.308 The same approach has been followed in Singapore.309
308. Rule 2.4 of the Special ADR Rules. See Arbitration in the Philippines Under the Alternative Dispute Resolution Act of 2004 R.A. 9285 (E. Lizares ed., 2011), 200-212, paras. 11.01-11.02.
309. Tomolugen Holdings v. Silica Investors Ltd. and other appeals, Singapore Court of Appeal, 26 October 2015.
90. In a number of jurisdictions, courts have adopted a prima facie standard of review, but have confined its scope to certain situations or issues.
91. For instance, Swiss courts apply a prima facie standard of review to the extent that the arbitration agreement provides for Switzerland as the seat of arbitration.310 Under such a scenario, the Swiss Federal Tribunal held that the court’s review was limited to a prima facie verification of the existence and validity of the arbitration clause.311 On the other hand, where the arbitration agreement provides for a seat outside Switzerland, the Swiss Federal Tribunal has held that it was entitled to conduct a full review of the existence and validity of the arbitration agreement.312
310. On the issue whether this solution should be extended to all arbitration agreements, see in favour: Emmanuel Gaillard, La reconnaissance, en droit suisse, de la seconde moitié du principe d’effet négatif de la compétence-compétence, in Global Reflections on International Law, Commerce and Dispute Resolution—Liber Amicorum in Honour of Robert Briner 311 (G. Aksen et al. eds., 2005); contra Jean-François Poudret, Gabriel Cottier, Remarques sur l’application de l’Article II de la Convention de New York, 13 ASA Bull. 383 (1995).
311. Fondation M v. Banque X, Federal Tribunal, Switzerland, 29 April 1996.
92. In Canada, courts have adopted a prima facie standard of review of the arbitration agreement, but have limited its scope to questions of facts. As a result, Canadian courts are entitled to conduct a full review of the arbitration agreement to the extent that the challenge to the arbitrators’ jurisdiction pertains to “question[s] of law”. This principle was established by the Supreme Court of Canada in Dell. Having set out the two schools of thought on the standard of review, the court held that article II (3) of the Convention did not provide that a court is required to rule on whether the arbitration agreement is null and void, inoperative or incapable of being performed before the arbitrators do. The court continued and held that, as a general rule, “any challenge to the arbitrator’s jurisdiction must be resolved first by the arbitrator” in accordance with the competence-competence principle.313 While the Canadian Supreme Court has clearly adopted a prima facie standard of review as a general rule, it then limited the arbitrators’ power to rule on their jurisdiction to the sole facts of the case, thus upholding the courts’ competence to rule on the arbitrators’ jurisdiction in relation to questions of law and to assessing whether the challenge to the arbitrators’ jurisdiction constituted a dilatory tactic.
93. In England, courts have endorsed the principle that arbitrators should be the first tribunal to rule on their jurisdiction, but have limited this principle in a number of ways. In the seminal Fiona Trust decision,314 the Court of Appeal of England and Wales established that “it will, in general, be right for the arbitrators to be the first tribunal to consider whether they have jurisdiction to determine the dispute.” However, the court further held that courts maintain within their jurisdiction the right to determine whether an arbitration agreement had come into existence at all. Relying on Fiona Trust, the High Court of Justice in Albon explained that, despite the fact that the arbitral tribunal had jurisdiction to determine whether the arbitration agreement was ever concluded in accordance with the principle of competence-competence, such principle “does not preclude the court itself from determining that question.”315 It held that, prior to staying judicial proceedings and referring the parties to arbitration under Section 9(1) of the 1996 Arbitration Act,316 it should be satisfied that (i) there existed a valid arbitration agreement and (ii) the dispute fell within its scope. In reviewing this two-step process in Berezovsky, the Court of Appeal held that a stay would be granted when the applicant had proven, on the balance of probabilities, that the arbitration agreement existed and apparently covered the matters in dispute.317
314. Fiona Trust & Holding Corp. v. Privalov, Court of Appeal, England and Wales, 24 January 2007, 2006 2353 A3 QBCMF, upheld by Fili Shipping Co. Ltd. and others v. Premium Nafta Products Ltd. and others, House of Lords, England and Wales, 17 October 2007.
316. Section 9(1) of the English 1996 Arbitration Act gives effect to article II of the Convention. It provides: “A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.”
317. Joint Stock Company “Aeroflot-Russian Airlines” v. Berezovsky & Ors, Court of Appeal, England and Wales, 2 July 2013, [2013] EWCA Civ 784.
94. In practice, once a court is satisfied that an arbitration agreement exists and that the dispute falls within its terms pursuant to Section 9(1) of the 1996 Arbitration Act, it will grant a stay pursuant to Section 9(4) of the 1996 Arbitration Act (giving effect to article II (3) of the Convention) unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.318 As ruled by the High Court of Justice in A v. B., courts should conduct a cost analysis to determine whether the issue of whether the arbitration agreement is “null and void, inoperative or incapable of being performed” should be dealt with by the arbitral tribunal or by the courts.319 The court held that it will “depend heavily on the extent to which the resolution of that issue will involve findings of fact which impact on substantive rights and obligations of the parties which are already in issue and whether in general the trial can be confined to a relatively circumscribed area of investigation or is likely to extend widely over the substantive matters in dispute between the parties. If the latter is the case the appropriate tribunal to resolve the jurisdictional issues is more likely to be the arbitration tribunal, provided it has Kompetenz-Kompetenz” English courts have consistently followed this approach.320
318. Golden Ocean Group Ltd. v. Humpuss Intermoda Transportasi TBK Ltd. & anr, High Court of Justice, England and Wales, 16 May 2013, [2013] EWHC 1240; Joint Stock Company “Aeroflot-Russian Airlines” v. Berezovsky & Ors, Court of Appeal, England and Wales, 2 July 2013, [2013] EWCA Civ 784.
320. Joint Stock Company “Aeroflot-Russian Airlines” v. Berezovsky & Ors, Court of Appeal, England and Wales, 2 July 2013, [2013] EWCA Civ 784; Golden Ocean Group Ltd. v. Humpuss Intermoda Transportasi TBK Ltd. & anr, High Court of Justice, England and Wales, 16 May 2013, [2013] EWHC 1240.
95. In the United States, courts have approached the standard of review issue in terms of whether the court or the arbitral tribunal has “primary power” to determine the validity of an arbitration agreement. The leading case in this regard, although it does not cite the New York Convention, was rendered by the Supreme Court in First Options.321
321. First Options of Chicago Inc. v. Kaplan, Supreme Court, United States of America, 22 May 1995, 514 United States 938 (1995). See also William Park, The Arbitrability Dicta in First Options v. Kaplan: What Sort of Kompetenz-Kompetenz Has Crossed the Atlantic?, 12 Arb. Int’l 137 (1996), reprinted in 11 Int’l Arb. Rep. 28 (1996).
96. In First Options, the Supreme Court held that there is a presumption in favour of courts deciding whether the arbitral tribunal has jurisdiction, unless the parties have agreed explicitly to submit this issue to the arbitral tribunal in their arbitration agreement. However, once the court is satisfied that a valid arbitration agreement exists, and that it complies with the requirements of both the Federal Arbitration Act and the Convention, the Supreme Court held that the presumption reverses in favour of the arbitral tribunal.322
322. First Options of Chicago Inc. v. Kaplan, Supreme Court, United States of America, 22 May 1995, 514 United States 938 (1995).
97. United States courts have found that parties agreed to empower the arbitrators to determine the existence and validity of the arbitration agreement when the arbitration rules explicitly allowed the arbitrators to do so. For instance, the Court of Appeals for the Second Circuit held that a reference to the UNCITRAL Arbitration Rules constituted “clear and unmistakable evidence of the parties’ intent” to have arbitrators decide on their jurisdiction.323 Such “clear and unmistakable evidence” has also been inferred from arbitration agreements stating that “any and all” disputes are to be resolved by arbitration.324
323. Republic of Ecuador v. Chevron Corp. (United States), Court of Appeals, Second Circuit, United States of America, 17 March 2011, 10-1020-cv (L), 10-1026 (Con). For a similar reasoning regarding the AAA Arbitration Rules, see also JSC Surgutneftegaz v. President and fellows of Harvard College, District Court, Southern District of New York, United States of America, 3 August 2005, 04 Civ. 6069 (RCC).
98. In the absence of clear and unmistakable evidence of the parties’ intention, the Supreme Court in Prima Paint held that, if a claim goes to the “making” of the arbitration agreement, courts have jurisdiction.325 Subsequent decisions applying the New York Convention have followed the same reasoning.326 In so doing, courts have determined that both challenges to the existence of the contract containing the arbitration agreement and to the validity of the arbitration agreement go to the “making” of the arbitration agreement, and thus should be adjudicated by the courts.327 For instance, in Sphere Drake, the Court of Appeals of the Second Circuit held that if “a party alleges that a contract is void and provide some evidence in support, then the party need not specifically allege that the arbitration clause in that contract is void and the party is entitled to trial [this issue before the court].”328 Similarly, in Nanosolutions, the District Court of Columbia, relying on the decision of the Supreme Court in Buckeye, held that “challenges [specific to] the validity of the agreement to arbitrate may be adjudicated by this Court.”329 However, when assessing the validity of the arbitration agreement, courts have performed a “very limited inquiry” in line with the “strong federal policy favouring arbitration” stemming from the Federal Arbitration Act implementing the New York Convention.330
325. Prima Paint Corporation v. Flood & Conklin MFG, Supreme Court, United States of America, 12 June 1967, 388 United States 395 (87 S.Ct. 1801, 18 L.Ed.2d 1270).
326. See, e.g., Phoenix Bulk Carriers Ltd. v. Oldendorff Carriers GmbH & Co., KG, District Court, Southern District of New York, United States of America, 6 November 2002, 2002 United States Dust. LEXIS 21421, XXVIII Y.B. Com. Arb. 1088 (2003).
327. The Canada Life Assurance Company v. The Guardian Life Insurance Company of America, District Court, Southern District of New York, United States of America, 22 January 2003, 242 F. Supp. 2d 344; Guang Dong Light Headgear Factory v. ACI International, Inc., District Court, District of Kansas, United States of America, 10 May 2005, 03-4165-JAR; Dedon GMBH and Dedon Inc. v. Janus et CIE, Court of Appeals, Second Circuit, United States of America, 6 January 2011, 10-4331.
328. Sphere Drake Insurance Limited v. Clarendon America Insurance Company, Court of Appeals, Second Circuit, United States of America, 28 August 2001, 00-9464, XXVII Y.B. Com. Arb. 700 (2002).
329. Nanosolutions, LLC et al. v. Rudy Prajza, et al., District Court, District of Columbia, United States of America, 2 June 2011, 10-1741.
330. Bautista v. Star Cruises and Norwegian Cruise Line, Ltd., District Court, Southern District of Florida, United States of America, 14 October 2003, 03-21642-CIV. See also Agnelo Cardoso v. Carnival Corporation, District Court, Southern District of Florida, United States of America, 15 March 2010, 09-23442-CIV-GOLD/ MCALILEY; Boston Telecommunications Group, Inc. et al. v. Deloitte Touche Tohmatsu, et al., District Court, Northern District of California, United States of America, 7 August 2003, C 02-5971 JSW.
99. On the other hand, when United States courts face a challenge which goes to the validity of the contract as a whole, they have referred the parties to arbitration pursuant to both the New York Convention and the Federal Arbitration Act.331
331. Prima Paint Corporation v. Flood & Conklin MFG, Supreme Court, United States of America, 12 June 1967, 388 United States 395 (87 S.Ct 1801, 18 L.Ed.2d 1270); Sphere Drake Insurance Limited v. Clarendon America Insurance Company, Court of Appeals, Second Circuit, United States of America, 28 August 2001, 00-9464, XXVII Y.B. Com. Arb. 700 (2002); Nanosolutions, LLC et al. v. Rudy Prajza, et al., District Court, District of Columbia, United States of America, 2 June 2011, 10-1741; Ascension Orthopedics, Inc. v. Curasan AG, District Court, Western District of Texas, Austin Division, United States of America, 20 September 2006, A-06-CA-424 LY.
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b. Courts' review of the existence and validity of an 'agreement in writing'
100. Article II (3) requires national courts to refer the parties to arbitration “unless [they find] that the said agreement is null and void, inoperative or incapable of being performed.”
101. United States courts have held that the grounds for refusing to refer parties to arbitration listed under article II (3) are exhaustive.332 Similarly, an Indian court has held that there are only three grounds under article II (3) for refusing enforcement of an arbitration agreement: (i) the agreement is null and void; (ii) the agreement is inoperative; and (iii) the agreement is incapable for being performed.333
332. Lindo (Nicaragua) v. NCL (Bahamas), Ltd. (Bahamas), Court of Appeals, Eleventh Circuit, United States of America, 29 August 2011, 10-10367; Aggarao (Philippines) v. MOL Ship Management Company Ltd. (Japan), Nissan Motor Car Carrier Company, Ltd., trading as Nissan Carrier Fleet (Japan), World Car Careers (Lebanon), Court of Appeals, Fourth Circuit, United States of America, 16 March 2012, 10-2211.
333. Gas Authority of India Ltd. v. SPIE-CAPAG SA and ors, High Court of Delhi, India, 15 October 1993, Suit No. 1440, IA No. 5206. See also in Canada: Automatic Systems Inc. v. Bracknell Corporation, Court of Appeal of Ontario, Canada, 17 February 1994.
102. On the other hand, the United States Court of Appeals for the Second Circuit determined that it had jurisdiction to establish whether an arbitration agreement existed before referring the dispute to the arbitrators.334 In so ruling, the Court did not refer to any exceptions provided for under article II (3).
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i. 'Null and void'
103. Article II (3) of the Convention is silent with regards to the legal standard for determining whether an arbitration agreement is null and void. Some courts consider that the issue is to be determined under the applicable municipal law, either the lex fori335 or the law applicable pursuant to the conflict-of-laws rule contained in article V (1)(a) of the Convention.336
335. Piero Bernardini, Arbitration Clauses: Achieving Effectiveness in the Law Applicable to the Arbitration Clause, in Improving the Efficiency of Arbitration Agreements and Awards: 40 Years of Application of the New York Convention 197, 200 (A.J. van den Berg ed., 1998).
336. Federal Supreme Court, Switzerland, 21 March 1995, 5C.215/1994/lit.
104. United States courts and English courts have defined the expression “null and void” to mean “devoid of legal effect”.337 In practice, they have applied an international standard of contract law defences. In accordance with longstanding case law, United States courts have ruled upon the “null and void” ground pursuant to “standard breach-of-contract defences that can be applied neutrally on an international scale, such as fraud, mistake, duress, and waiver.”338 In applying such international standards, United States courts have adopted a narrow interpretation in light of “a general policy of enforceability of agreements to arbitrate”.339 For instance, courts have dismissed the argument that the arbitration agreement was void and unenforceable as contrary to public policy of the United States, reasoning that this defence “could not be applied neutrally on an international scale and, moreover, does not outweigh the policy favouring arbitration.”340
337. Rhone Mediterranee Compagnia Francese v. Lauro, Court of Appeals, Third Circuit, United States of America, 6 July 1983, 82-3523. See also Albon (t/a NA Carriage Co) v. Naza Motor Trading Sdn Bhd, High Court of Justice, England and Wales, 29 March 2007, HC05C02150, [2007] EWHC 665 (Ch); Golden Ocean Group Ltd. v. Humpuss Intermoda Transportasi TBK Ltd. & anr, High Court of Justice, England and Wales, 16 May 2013, [2013] EWHC 1240.
338. St. Hugh Williams v. NCL (Bahamas) LTD., d.b.a. NCL., Court of Appeals, Eleventh Circuit, United States of America, 9 July 2012, 11-12150; Allen v. Royal Caribbean Cruise, Ltd., District Court, Southern District of Florida, United States of America, 29 September 2008, 08-22014.
339. Rhone Mediterranee Compagnia Francese v. Lauro, Court of Appeals, Third Circuit, United States of America, 6 July 1983, 82-3523; Anna Dockeray v. Carnival Corporation, District Court, Southern District of Florida, Miami Division, United States of America, 11 May 2010, 10-20799; Oriental Commercial and Shipping (UK) v. Rosseel, NV. (Belgium), District Court, Southern District of New York, United States of America, 4 March 1985, 84 Civ. 7173 (PKL).
340. Allen v. Royal Caribbean Cruise, Ltd., District Court, Southern District of Florida, United States of America, 29 September 2008, 08-22014. See also Aggarao (Philippines) v. MOL Ship Management Company Ltd. (Japan), Nissan Motor Car Carrier Company, Ltd., trading as Nissan Carrier Fleet (Japan), World Car Careers (Lebanon), Court of Appeals, Fourth Circuit, United States of America, 16 March 2012, 10-2211; Ledee (Puerto Rico) v. Ceramiche Ragno (Italy), Court of Appeals, First Circuit, United States of America, 4 August 1982, 684 F.2d 184, 82-1057. Concerning the unconscionability defence, see Rizalyn Bautista, et al. v. Star Cruises, et al., Court of Appeals, Eleventh Circuit, United States of America, 15 July 2005, 03-15884.
105. In addition, parties have sought to invalidate arbitration agreements and escape their obligation to arbitrate by arguing that the main contract containing the agreement was null and void. The vast majority of courts distinguish between the invalidity of the contract and the invalidity of the arbitration agreement in accordance with the principle of the severability of the arbitration agreement—sometimes referred to as the principle of autonomy.
106. In Fiona Trust, the Court of Appeal of England and Wales stayed the judicial proceedings before it pursuant to Section 9(1) of the 1996 Arbitration Act (giving effect to article II (1) of the New York Convention) as the applicant alleged the invalidity of the overall contract, but did not challenge the validity of the arbitration agreement itself.341 Relying heavily on the severability principle, the Court of Appeal held that a dispute regarding the invalidity of the overall contract, but not specifically directed at the arbitration agreement, should be addressed by the arbitrators. In the same manner, a Dutch court held that “the validity of the arbitration agreement is ascertained separately, independent of the validity of the main contract in respect of which arbitration has been agreed, even if both are contained in the same document.”342 The Madras High Court similarly made express reference to the “doctrine of separability”, and referred the parties to arbitration on the basis that “[t]he plaintiffs cannot ignore the Arbitration Clause and invoke the jurisdiction of a Civil Court, just on the basis that even according to the defendants the underlying agreement was void.”343
341. Fiona Trust & Holding Corp. v. Privalov, Court of Appeal, England and Wales, 24 January 2007, 2006 2353 A3 QBCMF, upheld by Fili Shipping Co. Ltd. and others v. Premium Nafta Products Ltd. and others, House of Lords, England and Wales, 17 October 2007.
342. Claimant v. Ocean International Marketing B.V., et al., Court of First Instance of Rotterdam, Netherlands, 29 July 2009, 194816/HA ZA 03-925.
343. Ramasamy Athappan and Nandakumar Athappan v. Secretariat of Court, International Chamber of Commerce, High Court of Madras, India, 29 October 2008. See also Oberlandesgericht [OLG] Celle, Germany, 8 Sch 3/01, 2 October 2001.
107. The severability doctrine has been endorsed by most countries,344 arbitral institutions,345 UNCITRAL instruments on arbitration,346 and leading commentators who consider that an arbitration agreement constitutes an agreement within an agreement.347
344. See, e.g., Swiss Private International Law, Chapter 12, article 178(3), Colombian Arbitration Act, article 5; French arbitration law, article 1447; English Arbitration Act, article 7; Australian Arbitration Act, Chapter VI, article 16; Brazilian Arbitration Act, article 8; Chinese Arbitration Act, article 19.
345. ICC Arbitration Rules, article 6(4); LCIA Arbitration Rules, article 23(1).
346. Article 16(1) of the UNCITRAL Model Law on International Commercial Arbitration provides that “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.” A list of countries that have enacted legislation based on the UNCITRAL Model Law on International Commercial Arbitration is available on the Internet at www.uncitral.org. See also UNCITRAL Arbitration Rules, article 23(1).
347. R. Doak Bishop, Wade M. Coriell, Marcelo Medina, The ‘Null and Void’ Provision of the New York Convention, in Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice 275, 278 (E. Gaillard, D. Di Pietro eds., 2008).
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ii. 'Inoperative'
108. Courts generally assess the standard of “inoperability” under the broader expression “null and void, inoperative or incapable of being performed” without any further distinction. However, the relevant case law suggests that the word “inoperative” covers situations where the arbitration agreement has become inapplicable to the parties or their dispute.348
348. See, e.g., Golden Ocean Group Ltd. v. Humpuss Intermoda Transportasi TBK Ltd. & anr, High Court of Justice, England and Wales, 16 May 2013, [2013] EWHC 1240.
109. For instance, in circumstances where the parties had waived their right to arbitrate by initiating judicial proceedings, an Indian court has held that the arbitration agreement was inoperative under Section 45 of the Indian Arbitration Act of 1996, which mirrors article II (3) of the Convention.349 Accordingly, it refused to refer to arbitration the parties which had submitted numerous civil and criminal suits before Indian courts.
349. Ramasamy Athappan and Nandakumar Athappan v. Secretariat of Court, International Chamber of Commerce, High Court of Madras, India, 29 October 2008. See also the citations para. 67.
110. A French court has found that it had jurisdiction as the timeframe specified for the constitution of the arbitral tribunal had expired, thereby dismissing the argument that there was no manifest inapplicability of the arbitration agreement pursuant to article II of the Convention. The court ruled that the arbitration agreement was “caduc” and concluded that it had jurisdiction over the dispute without any reference to the Convention.350
111. Another situation of the alleged inoperability of an arbitration agreement can be found in the Westco decision rendered by the High Court of Hong Kong. A party alleged that non-compliance with procedural conditions prior to the commencement of the arbitral proceedings rendered the agreement to arbitrate inoperative. The High Court dismissed the argument and referred the parties to arbitration.351
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iii. 'Incapable of being performed'
112. The “incapable of being performed” provision is generally understood as relating to situations where the arbitration cannot effectively be set in motion.352 As explained by an Indian court relying on Section 45 of the Indian Arbitration Act of 1996 (which mirrors article II (3) of the Convention) “the phrase incapable of being performed signifies, in effect, frustration and the consequent discharge. If, after the making of the contract, the promise becomes incapable of being fulfilled or performed, due to unforeseen contingencies, the contract is frustrated.”353
352. Stefan Kröll, The ‘Incapable of Being Performed’ Exception in Article II (3) of the New York Convention, in Enforcement of Arbitration Agreements and International Arbitral Awards—The New York Convention 1958 in Practice 323, 326 (E. Gaillard, D. Di Pietro eds., 2008).
353. Ramasamy Athappan and Nandakumar Athappan v. Secretariat of Court, International Chamber of Commerce, High Court of Madras, India, 29 October 2008. See also the references cited in para. 67.
113. It emerges from case law that an arbitration agreement has been held incapable of being performed when the arbitration agreement was pathological, i.e., in two main situations: (i) when the arbitration agreement is unclear and does not provide sufficient indication to allow the arbitration to proceed, and (ii) when the arbitration agreement designates an inexistent arbitral institution.
114. For instance, ruling upon Section 44 of the Indian Arbitration Act of 1996 (implementing articles I and II of the Convention), an Indian court denied enforcement of an arbitral clause providing for “Durban Arbitration and English Law to apply”354 The court held that the alleged arbitration agreement was “absolutely vague, ambiguous and self-contradictory”. Similarly, the Swiss Federal Tribunal refused to enforce an arbitral clause providing for arbitration “through the American Arbitration Association or to any other American court” on the ground that the arbitration agreement was not sufficiently clear so as to exclude beyond doubt the jurisdiction of the state courts under both article II (3) and Swiss law.355
355. Federal Tribunal, Switzerland, 25 October 2010, 4A279/2010. It is unclear from that case whether the Federal Tribunal analysed the arbitration agreement under the “incapable of being performed” ground as the decision concluded that the arbitration agreement was invalid under the “null and void, inoperative or incapable of being performed” provision.
115. In a case where the arbitration agreement designated a non-existent arbitral institution, a United States court nevertheless compelled the parties to arbitration pursuant to article II (3) of the Convention and the Federal Arbitration Act. The court reasoned that the UNCITRAL Arbitration Rules referred to in the arbitration agreement provided for a method for constituting an arbitral tribunal in the absence of a prior agreement by the parties and dismissed the plaintiff’s claims that the agreement was incapable of being performed.356
116. In Russian Federation, the Highest Arbitrazh Court of the Russian Federation held that, in order for the arbitration agreement to be enforceable under the Convention, the agreement had to contain clear language from which the true intentions of the parties to refer the dispute to an arbitration body could be ascertained.357 Another Russian court held an arbitration agreement to be “incapable of being performed” within the meaning of article II (3) of the Convention because it was not a standard arbitration clause pursuant to the UNCITRAL Rules and it was therefore impossible to conclude that the parties had agreed on those Rules.358 It further added that the appointing authority, the “President of the International Chamber of Commerce”, did not exist.
117. Other courts have adopted a pro-arbitration stance and interpreted vague or inconsistent arbitration agreements so as to uphold such agreements. For instance, French courts have enforced an arbitral award rendered under the auspices of the Arbitration Court of the Chamber of Commerce of Yugoslavia notwithstanding that the wording of the arbitration agreement provided for arbitration under the auspices of a non-existent institution, the “Belgrade Chamber of Commerce”. The court held that the parties intended to refer to the Arbitration Court of the Chamber of Commerce of Yugoslavia, which has its headquarters in Belgrade.359 Similar reasoning has been adopted in Switzerland,360 Germany,361 and Hong Kong362 where the courts have held that the intention of the parties to have their dispute resolved by arbitration should prevail.
359. Epoux Convert v. Société Droga, Court of Appeal of Paris, France, 14 December 1983, 1994 Rev. Arb. 483.
360. Federal Tribunal, Switzerland, 8 July 2003, 129 III 675.
361. Kammergericht [KT] Berlin, 15 October 1999, XXVI Y.B. Com. Arb. 328 (2001).
362. Lucky Goldstar International Limited v. Ng Moo Kee Engineering Limited, High Court, Supreme Court of Hong Kong, Hong Kong, 5 May 1993, XX Y.B. Com. Arb. 280 (1995).
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