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II / 2. ANALYSIS (II) / ARTICLE II(3) / B. Enforcement of arbitration agreements under article II(3) / a. Standard of review / §86
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”.125 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.
125. 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. (December 2005), at 3. See also JS Ocean Liner LLC v MV Golden Progress, Abhoul Marine LLC, High Court of Bombay, India, 25 January 2007.
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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.126
126. 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).
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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”.127 The same approach has been followed in Singapore.
127. Rule 2.4 of the Special ADR Rules. See ARBITRATION IN THE PHILIPPINES UNDER THE ALTERNATIVE DISPUTE RESOLUTION ACT OF 2004 R.A. 9285 155 (E. Lizares ed., 2011), at 200-212, paras. 11.01-11.02.
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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.15 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.
15. Emmanuel Gaillard, Yas Banifatemi, Prima Facie Review of Existence, Validity of Arbitration Agreement, N.Y.L.J. (December 2005), at 3; 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 95-96 (H. Kronke, P. Nacimiento, D. Otto, N.C. Port eds., 2010).
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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.
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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.128 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.129 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.130
128. On the issue whether this solution should be extended to all arbitration agreements, see in favor: 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).
129. Fondation M v Banque X, Federal Tribunal, Switzerland, 29 April 1996.
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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.131 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.
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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,132 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 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.”133 It held that, prior to staying judicial proceedings and referring the parties to arbitration under Section 9(1) of the 1996 Arbitration Act,134 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.135
132. 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.
134. Section 9(1) of the English 1996 Arbitration Act gives effect to article II. 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.”
135. Joint Stock Company ‘Aeroflot-Russian Airlines’ v. Berezovsky & Ors, Court of Appeal, England and Wales, 2 July 2013, [2013] EWCA Civ 784.
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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.136 As ruled by the High Court 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.137 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.138
136. 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.
138. 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.
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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.139
139. First Options of Chicago Inc. v. Kaplan, Supreme Court, United States of America, 22 May 1995, 514 U.S. 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 11 INT’L ARB. REP. 28 (1996).
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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.140
140. First Options of Chicago Inc. v. Kaplan, Supreme Court, United States of America, 22 May 1995, 514 U.S. 938 (1995).
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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.141 Such “clear and unmistakable evidence” has also been inferred from arbitration agreements stating that “any and all” disputes are to be resolved by arbitration.142
141. Republic of Ecuador v. Chevron Corp. (US), 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).
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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.143 Subsequent decisions applying the New York Convention have followed the same reasoning.144 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.145 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].”146 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.”147 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.148
143. Prima Paint Corporation v. Flood & Conklin MFG, Supreme Court, United States of America, 12 June 1967, 388 U.S. 395 (87 S.Ct. 1801, 18 L.Ed.2d 1270).
144. 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, XXVIII Y.B. COM. ARB. 1088 (2003), at 1091.
145. 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; 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.
146. 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), at 707.
147. Nanosolutions, LLC et al. v. Rudy Prajza, et al., District Court, District of Columbia, United States of America, 2 June 2011, 10-1741.
148. 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.
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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.149
149. Prima Paint Corporation v. Flood & Conklin MFG, Supreme Court, United States of America, 12 June 1967, 388 U.S. 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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