W3: Arbitration Agreements I Flashcards
Types Validity Scope Enforceability Arbitrability
Intro to Conflict of Laws in ICA
Amazonica Case: Law Governing -
- Substantive Contract: Substance/Merits
- Agreement to Arbitrate and it’s Performance: Jurisdiction
- Conduct of Arbitration: Procedure
Law Governing Agreement to Arbitrate
- Law of Contract (applicable law clause)
- Law of Seat of Arbitration
- Parties’ Common Intention - A French ‘third’ way
- Combining Several Approaches - A Swiss Model
Law of Contract
Acceptability: Of Contract = Of Arbitration Clause
HOWEVER, Separability and Autonomy, comparable to Submission Agreement
NYC Art. V(1)(a); Model Law Art. 34(2)(a):
“law parties’ subjected to it”/”law of the seat of arbitration”
Law of Seat of Arbitration
LCIA Rules Art. 16(4): “… unless and to the extent that the parties have agreed in writing on the application of other laws or rules of law and such agreement is not prohibited by the law applicable at the arbitral seat”
Sulamerica Case: Law of the Seat (English) > Law of Contract (Brazilian)
Sulamerica Case (Brazilian Case)
3 Stage Inquiry:
- Express Law
- Implied Law
- Closest and Most Real Connection w Arbitration Agreement (Law of the Seat)
Assumption: Same law to govern entire relationship, ‘natural inference’ - Law of Contract
HOWEVER, 2 reasons why Law of Seat:
1. One Party Enforcement u Brazilian Law: Serious risk - entirely undermine the arbitration agreement
2. Law of the Seat = Lex Arbitri, to govern all aspects of arbitration agreement
* C v D; XL Insurance Ltd v Owens Corning
English Law > Law of New York
Bulbank Case (Bulgarian Case)
Law of Seat (Swedish) > Law of Contract (Austrian); on the basis of separability, as no applicable law clause provided
Matermaco v PPM Cranes (Belgian Case)
Law of Seat (Belgium) > Law of Contract (Wisconsin State)
NYC Arts. II(1) and V(1)(a): lex fori/lex arbitri
US Cases:
- Pedcor Mgt Co. Inc. Welfare Benefit Plan v North American Indemnity (Texan Law)
- AT&T Mobility LLC v Concepcion (California Law)
- County of Nassau v Chase (New York Law)
FAA: Federal/Foreign Law > State Law, iff state policies are inconsistent w FAA
Parties’ Common Intention - A French ‘Third Way’
- Existence and scope determined exclusively by reference to the parties’ discernible common intentions
- Arbitration agreement = Independent of national laws deemed applicable
- Prevents ‘conflicts of laws’ and particularities of pvt. int’l law regimes
- Dalico Case: Delocalised EXCEPT for French Law
- Uni-Kod Case: Parties’ express common intention to designate national legal system/set of conflict of laws
- Dallah Case: French law recognises supranational/transnational principles as potentially applicable to determine the existence, validity and effectiveness of an international arbitration agreement
Combining Several Approaches - A Swiss Model
Section 178(2) of the Swiss Federal Statute of Private International Law (Swiss PIL):
WRT substance: Valid, if conforms to:
1. Law chosen by parties
2. Law governing subject-matter of dispute (law of contract)
3. Swiss Law
This formulation allows Swiss courts maximum opportunity to uphold the validity of the arbitration agreement
Types of Agreements
- Clause
- Submission
- Exclusive/Non-Exclusive
- Multi-Tier DR Clauses
Agreement to Arbitrate
- Arbitration Clauses (w in Contract) - PRIOR
- Submission Agreements (separate) - POST
- Investor Arbitration Clause - PRIOR (standing offer for resolution of ‘investment disputes’
Validity: ‘In Writing’
Justification: Parties Waive Recourse to Courts in favour of Arbitration, should be evidenced in writing
NYC 1958:
- Art. II:
(1) ‘agreement in writing’ (then sign not imp.)
(2) ‘including arbitration clauses and submission agreements’ - Art. IV: to obtain enforcement - produce written agreement/duly certified copy
Changes:
- Modern Methods of Communication > ‘Letters and Telegrams’
- Increased Complexity of Int’l Trade > Presumption of only 2 Parties (states, corporations and individuals - not parties but wish to join/joined irrespective)
Model Law:
Art. 7(1)
- Defined Legal Relationship (Contractual or Non-Contractual)
- Arbitration Clause/Submission Agreement
Expansion of ‘In Writing’:
‘an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement’
Swiss Law:
‘in writing, by telegram, telex, telecopier or any other means of communication which permits it to be evidenced by a text’
Modern Business Dealings = Revised Model Law, Art. 7 (Option 1):
- Orally, in a meeting/telephone conversation
- Conduct
- Other means (record ‘in any form’ of the content of the arbitration agreement)
- Adopting States: 2 Options
1. Adhere to Writing Requirement, INCLUDING eCommunications of all types; Exchange of Statements of Claim/Defence - existence of agreement alleged and not denied; Reference to Document containing Arbitration Clause (so as to make that part of contract)
2. Dispense w Writing Requirement (inconsistent application in diff. jurisdictions) - eCommunication: communications b/w parties by ‘data messages’
- Data Messages: information generated, sent, received or stored by electronic, magnetic, optical or similar means, including, but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy.
*triumph of substance over form: as long as there is some written evidence of an agreement to arbitrate, the form in which that agreement is recorded is immaterial
Arbitration Clauses: Clause Compromissoire (Civil Law)/’Midnight Clauses’
- Short and to the point
- In practice, terse forms are not recommended
- LCIA & ICC Rules have own recommended forms
UNCITRAL Rules: Model Arbitration Clause
- Dispute, Controversy, Claim
- Breach, Termination, Invalidity
- Settled by Arbitration u/UNCITRAL Arbitral Rules
[Standard Clause in internationally accepted Standard Contracts: Shipping, Insurance, Commodity Trading, Civil Engineering]
Submission Agreements: compromis/compromiso
- Institutional/Ad Hoc (Parties’ Decision)
- Fairly detailed document:
1. Constitution of Tribunal
2. Procedure to be followed
3. Issues to be decided
4. Substantive law
5. Other matters - ALL basic elements
6. Definition/Outline of Arbitrable Disputes
7. Procedural Arrangements (prob. better in separate agreement or w Tribunal’s assistance)
[Historically, used to be only recognised type as recourse to arbitration was only for EXISTING disputes. Some states STILL hold this position]
Negotiation of Submission Agreement may be a lengthy process b/c:
- Dispute already arisen
- Est. kind of dispute - structured arbitration
- Conflicting interests of parties
Case: Turriff Arbitration (Peace Palace, Hague)
Importance of Arbitration Agreements
- Proof of Consent of Parties to opt for Arbitration, and waive recourse to Courts
- NO unilateral withdrawal after valid consent is given
- Arbitration Clause survives (separability and autonomy):
1. End of Original Contract
2. Challenge on Validity of Contract - Allows claimants to begin proceedings based on survival of arbitration clause
- Allows Tribunal to decide on own jurisdiction (incl. objections wrt existence/validity of arbitration agreement), ie., Tribunal is competent to judge on its own competence (Competence-Competence Doctrine: Positive)
Continental Jurists:
- Expression of Will of Parties
- On the basis of Autonomy (l’autonomie de la volonté) - Int’l Arb. be ‘denationalised’/’delocalised’
Enforcement of Arbitration Agreement
- Capable of being enforced at law, otherwise = statement of intention (morally binding but NO legal effect)
- Agreement to Arbitrate = Contract of Imperfect Obligation:
1. Damages: Unquantifiable Loss
2. Specific Performance: Parties cannot be compelled to arbitrate (Horse to Water Idiom)
SOLUTION:
- Indirect Enforcement: STOP on Court Proceedings in breach of Arbitration Agreement
- Only available recourse: Arbitration as per agreement
- Int’l Enforceability, not only in place of award (1923 Geneva Protocol and NYC 1958)
Powers Conferred by Arbitration Agreement
- Est. obligation to arbitrate
- Basic source of powers for Tribunal
- Est. jurisidiction of Tribunal
In Principle and w/in limits of Public Policy:
Exercise Powers -
1. Parties entitled to/do confer, expressly/impliedly (basic powers)
2. Lex Arbitri (additional/supplementary powers)
Basic Powers:
- No. of Arbitrators (Tribunal)
- Appointment of Tribunal
- Seat of Arbitration
- Powers
- Procedure
Int’l Conventions
- 1923 and 1927 Geneva Protocols: Recognition and Enforcement of Arbitration Agreements; and Execution of Foreign Arbitral Awards
- 1958 NYC (partial misnomer): starting point = Recognition and Enforcement of Arbitration Agreements; and Int’l Enforcement of Awards (comply w specified criteria)
- 1975 Panama Convention (US & Latin American States): Estd. Arbitration as recognised method of regional DR
Int’l Standards
- 1958 NYC
- Art. II(1) [Formal]
* in writing
* existing/future disputes
* defined legal relationship (contractual or not)
* arbitrable subject matter - Art V(1)(a) [Material]
* legal capacity of parties
* validity of agreement (Art. II(3): must NOT be ‘null and void, inoperative, incapable of being performed’)
Defective Arbitration Clauses
- Inconsistency: ‘surviving clause’ carries into effect the real intention of the parties and the ‘discarded clause’ would defeat the object of the agreement.
- Uncertainty (pathological arbitration clauses): ‘disastrous compromise’ - extensive lit. (unrelated to dispute merits) to sort out conflict of applicable laws
- Inoperability:
a) Null and Void - Devoid of Legal Effect: mistake, duress, fraud
b) Inoperative - Ceased to have Legal Effect: limitation, repudiation, revocation
c) Incapable of Being Performed*: impossibility
* ‘back door’ for a party wishing to escape the arbitration agreement.
* NOT APPLICABLE TO: inability to pay advances for cost/payment of award
- BUT in India:
‘stay of court proceedings should be refused on the grounds that exchange control regulations would prevent payments in foreign currency to the arbitrators and other overseas expenses of those participating in a foreign arbitration’
A Defined Legal Relationship
NYC and Model Law: sufficient - ‘defined legal relationship’ b/w parties, whether contractual or not (real/implied contractual relationship - arbitration agreement as basis for arbitral proceedings)
May be governed by principles of delictual/tortious liability rather than contract law.
Sub: any provisions of the relevant applicable law, terms of arbitrator’s jurisdiction and powers… depend on proper construction of arbitration agreement. Tribunal must consider dispute, then elicit from arbitration agreement intention of parties to resolve such dispute by arbitration.
Kaverit Steel Crane Ltd. v Kone Corporation (Canadian Case)
Arb. Cl.: “all disputes ‘arising out of/in connection with this contract’ would be referred to Arbitration
Alberta QB: refused stay - sounds that some of Kaverit’s claims contained allegations that went beyond Breach of Contract, e.g., Conspiracy and Inducing Breach. HELD: tort-based claims fell outside scope of arbitration clause.
Alberta CoA HELD: wording of arbitration clause wide enough to bring w/in scope any claim that relied on existence of contractual relationship, even if claim = tort. Those claims that were not based on such existence should proceed to trial, not arbitration. -
“‘conspiracy by unlawful means to harm’ relied upon a breach of contract as the source of ‘unlawfulness’”
Subject Matter Capable of Settlement by Arbitration
‘Arbitrability’ involved determining which types of dispute may be resolved by arbitration, and which belong exclusively to domain of courts.
NYC and Model Law: limited to arbitrable disputes.
In Principle: ANY dispute should be just as capable of being resolved by pvt. arbitral tribunal as by judge of a national court.
HOWEVER - b/c Arbitration is a private proceeding w Public consequences, some disputes are reserved for national courts, w proceedings in public domain, i.e, NOT arbitrable.
National Laws: domains, in accordance w its own socio-political and economic policy.
NON-Arbitrable Disputes:
- Criminal matters affecting individuals or corp. entities (bankruptcy/insolvency)
- Disputes over grant/validity of TMs