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II / 2. ANALYSIS (II) / ARTICLE II(3) / A. General principles - (II) / a. Obligation to refer the parties to arbitration / §59
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.96
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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 (…).”10 The same approach has been adopted by United States courts pursuant to the Federal Arbitration Act and the New York Convention.11 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.12
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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.”97 The expression was proposed by the Swedish delegation at the Conference and adopted after further modification by the drafting committee.98
97. Geneva Protocol on Arbitration Clauses, Article 4.
98. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Record of the Twenty-First Meeting, E/CONF.26/SR.21, at 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.
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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.100
100. 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.
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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.”101 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.
101. 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.
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64. Both approaches are consistent with the obligation of the courts of Contracting Parties to the Convention to refer the parties to arbitration.
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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.102
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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”.
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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.103 In such situations, courts often consider that the parties have waived their right to arbitrate.
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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.104 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.105
104. 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).
105. 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 (supra para. 22) where the Superior Court of Justice held that participation in arbitral proceedings amounts to consent to arbitration.
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69. The travaux préparatoires to the Convention reflect the drafters' contemplation the possibility 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.106
106. 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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7. Article II governs the form and effects of arbitration agreements. Article II(1) 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.13 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.”
13. ALBERT JAN VAN DEN BERG, THE NEW YORK ARBITRATION CONVENTION OF 1958: TOWARDS A UNIFORM JUDICIAL INTERPRETATION (1981), at 156; ICCA’S GUIDE, supra note 6, at 37.
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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).
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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.”107 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.108
107. Kammgarn Spinnerei GmbH v. Nova (Jersey) Knit Ltd, Court of Appeal, England and Wales, 8 April 1976.
108. 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.
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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. 109 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.110 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.111
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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.112
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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.113
113. 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.
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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.114 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.115
114. 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.
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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.116
116. Dorothee Schramm, Elliott Geisinger, Philippe Pinsolle, Article II, supra note 15, at 139-144.
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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.”
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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 there any further elucidation of the terms “null and void, inoperative or incapable of being performed.”
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79. The New York Convention does not address the issue of the standard of review of arbitration agreements under article II(3).117
117. The same conclusion may be drawn from case law regarding article 8 of the UNCITRAL Model Law on Arbitration, see UNCITRAL, 2012 DIGEST OF CASE LAW ON THE MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION, Article 16 (2012), at 75-76, para. 3, available at http://www.uncitral.org/pdf/english/clout/MAL-digest-2012-e.pdf.
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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.14
14. PHILIPPE FOUCHARD, L’ARBITRAGE COMMERCIAL INTERNATIONAL (1965), para. 203; Antonias Dimolitsa, Separability and Kompetenz-Kompetenz, in ICCA CONGRESS SERIES NO. 9, IMPROVING THE EFFICIENCY OF ARBITRATION AND AWARDS: 40 YEARS OF APPLICATION OF THE NEW YORK CONVENTION217 (A.J. van den Berg ed., 1999).
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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.
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81. As the Convention does not prohibit courts from conducting either a prima facie review of the arbitration agreement118 or a full review of its existence and validity, none of the two approaches can be held to breach the New York Convention.
118. This view is mirrored under the UNCITRAL Model Law on 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).
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82. The full review standard has been endorsed by certain jurisdictions, notably Italy and Germany.
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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.119
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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.120 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.121 German commentators confirm that German courts follow the same approach under the New York Convention.122
120. See Section 1032 of the Code of Civil Procedure (ZPO), available at: http://www.gesetze-im-internet.de/englisch_zpo/englisch_zpo.html#p3471.
121. Bundesgerichtshof [BGH], Germany, 13 January 2005, III ZR 265/03.
122. 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, at 99-100 (H. Kronke, P. Nacimiento, D. Otto, N.C. Port eds., 2010); Peter Huber, Arbitration Agreement and Substantive Claim Before Court, in ARBITRATION IN GERMANY: THE MODEL LAW IN PRACTICE 139, at 143-144, para. 15 (K.-H. Böckstiegel, S. Kröll and P. Nacimiento eds., 2007).
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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”.123
123. 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, at 280-286 (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 (E. Gaillard, J. Savage eds., 1996), at 407-408. 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 (1995), at 388-389.
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