Introduction
The doctrines of separability and Competence-Competence are often called the cornerstones of international commercial arbitration. Two distinct yet related doctrines aim to maximize the effectiveness of arbitration as an efficient way to solve international commercial disputes and to minimize the use of delay tactics. Each of these principles arises from the autonomous nature of the arbitration agreement.
The Arbitration Agreement
An arbitration agreement is a legally binding contract in which two or more parties agree to resolve any disputes arising between them through arbitration rather than through court litigation. By signing the agreement, parties waive a fundamental right – the right to have their dispute decided in court – while simultaneously gaining new rights, including the ability to define and control all aspects of the dispute resolution process.
Thanks to the agreement, parties indeed have the power to create their own private system of justice; they can select the rules that will govern the procedure, the location of the arbitration, the language of the arbitration, the law governing the arbitration, and frequently, the decision makers, who may be chosen for their expertise in the subject matter of the dispute. The parties’ agreement grounds also the power of the arbitrators to decide the dispute.
The parties’ arbitration agreement is frequently contained in a clause within a broader contract, which is designed to offer a final and legally binding method for resolving any disputes that may arise. Parties may also enter into an agreement after a dispute has arisen, provided both sides consent; this is known as a submission agreement. Submission agreements are much less common than arbitration clauses in contracts because, once a dispute occurs, parties often struggle to reach a mutual agreement.
Validity of the Arbitration Agreement
Considering the importance of the arbitration agreement, the question of its validity is critical. Arbitration is a creature of consent, and that consent should be freely, knowingly, and competently given. The validity of the agreement is determined by several key elements typical of contract law, namely capacity, consent, form and legality. These elements may be governed by different legal systems, depending on the specific circumstances of the contract and the parties involved.
Capacity refers to the legal ability of the parties to enter into a binding agreement. It is usually governed by the parties’ personal or national law, which means that the legal system governing their individual rights determines whether they can sign a valid arbitration agreement.
Consent is the second essential element of a valid arbitration agreement. It must be freely given and cannot be coerced. The law applicable to consent can vary depending on whether the parties have made an express or implied choice of law. In the case of an express choice of law, the arbitration agreement itself clearly specifies the law that will govern it. In the absence of an express choice, the law applicable to the main contract may be implied as the governing law for the arbitration clause as well. If there is no express or implied choice of law, the law of the seat of arbitration is applied. The “seat” is the jurisdiction appointed by the parties in which the arbitration is based, and its legal framework will govern the arbitration agreement when no other choice of law has been made.
The formal requirements of an arbitration agreement in international commercial arbitration are set by the New York Convention, provided that the Convention applies in the country where enforcement is sought. According to Article II of the NYC, an arbitration agreement must be in writing. However, this is considered the maximum formal requirement that a court may impose. Moreover, if a national law permits a less formal method of agreement, such as an oral agreement or a handshake, the court cannot insist on a written agreement. This ensures that the arbitration agreement remains enforceable under international standards.
Finally, the legality of an arbitration agreement is governed by the law of the forum where the agreement is executed and the law of the forum where the award is to be enforced. This means that even if the agreement is valid under the law of the seat of arbitration, it may still face challenges during enforcement in another jurisdiction if that country’s legal system considers the agreement invalid.
In summary, all the foundational elements of a valid agreement can be governed by different legal systems, particularly in international arbitration. This requires careful consideration of the applicable laws at every stage of the process to ensure validity and enforceability.
Separability
Considering all the elements that determine the validity of an arbitration agreement, we have to consider what occurs if a valid arbitration agreement is included within a broader, but invalid, contract. Can the parties still proceed to arbitration in case of a dispute? For a long time, the arbitration clause and the other provisions in a contract were seen as an indivisible whole. If the contract was invalid, the arbitration provisions never bound the parties, and hence no arbitrator appointed under the provisions had any authority to act.
As of today, the doctrine of separability is widely recognized as a universal principle in international commercial arbitration. Under this doctrine, an arbitration agreement is distinct and autonomous from the underlying contract in which it appears. It can thus remain valid even if the main agreement - the contract containing the arbitration clause - may be potentially invalid. In most jurisdictions, this doctrine of separability allows arbitrators to hear and decide disputes even if one party asserts, for instance, that the contract has been terminated or is invalid due to fraudulent inducement. It is precisely because of this principle that, as will be discussed later, the arbitral tribunal has the authority to determine its own jurisdiction. Therefore, since the arbitration clause is viewed as a separate and distinct agreement, it is not affected by claims regarding the invalidity of the main contract, thereby granting the arbitrators the jurisdiction to decide the dispute.
The rule was first established in England with Harbour Assurance Co. Ltd. v. Kansa General International Assurance. In this case, the Court of Appeal declared that the arbitration clause was wide enough to cover disputes as to the initial illegality of the contract and, since the illegality alleged had nothing to do with the arbitration clause itself, the arbitration clause remained operative. Even if the rest of the contract were to fail, this would not bring down the arbitration clause, because the illegality alleged did not affect it.
The doctrine of separability has since been codified in Section 7 of the English Arbitration Act, which states that “Unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement (whether or not in writing) shall not be regarded as invalid, non-existent or ineffective because that other agreement is invalid, or did not come into existence or has become ineffective, and it shall for that purpose be treated as a distinct agreement”.
The doctrine of separability is also reflected in UNCITRAL Rules, Article 23 (See also UNCITRAL Model Law, Article 16), which states that “The arbitral tribunal shall have the power to rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause that 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 shall not entail automatically the invalidity of the arbitration clause”. This provision highlights the link between the doctrine of separability and the Competence-Competence principle, which will be discussed shortly, by addressing the two concepts in a single clause.
The extent to which the doctrine has evolved varies and depends on both the legislative framework and, more importantly, the judicial approach within the relevant jurisdiction. The doctrine of separability, however, finds its limits when the main contract, defined by scholars as “container agreement”, is tainted by illegality. In such cases, if a contract is void ab initio, the arbitration agreement embedded within it is also considered invalid, as the lack of a valid contract prevents the arbitration clause from conferring jurisdiction.
This principle was examined in the case Fiona Trust & Holding Corp. v. Yuri Privalov, where the English Court of Appeal asserted that “When a contract is rescinded on the grounds of bribery, the entire contract, including the arbitration clause, is rendered void. This occurs because the fraud undermines the very existence of the contract, indicating that the claimant never genuinely agreed to be bound by it at all”. In this specific case, however, the Court of Appeal affirmed that there was no evidence that the bribery directly affected the arbitration clause. The House of Lords upheld the Court of Appeal’s decision, further limiting the possibility of challenging the arbitration agreement. The ruling clarified that an arbitration agreement can only be invalidated on a basis relating specifically to the arbitration agreement itself and not due to the invalidity of the main contract. The House of Lords then considered certain scenarios where challenges to the main contract could impeach the validity of the arbitration agreement. An example they provided involves cases where both the main contract and the arbitration clause are contained within a single document, and one party contends that they never agreed to the document’s terms or that their signature was forged.
Another similar example is the more recent case of Beijing Jianlong Heavy Industry Group v. Golden Ocean Group Ltd, in which English courts enforced an arbitration agreement even if the main contract was deemed unenforceable due to the violation of public policy rules.
As evidenced, the doctrine of separability has gained increasing importance, making arbitration clauses fully enforceable even in contracts that are manifestly void, while gradually expanding the jurisdiction of arbitral tribunals over time. Precisely on the issue of jurisdiction, it becomes essential to further explore the Competence-Competence doctrine.
Competence-Competence
The “Competence-Competence” or “Kompetenz-Kompetenz” principle provides the arbitral tribunal with the authority to determine its own jurisdiction, without involving a court. Essentially, this principle allows arbitrators to assess whether an arbitration agreement is valid, thereby granting them the power to rule on the existence and scope of their jurisdiction.
As previously discussed, the separable and autonomous nature of the arbitration clause reflects the presumed intention of the parties that, by opting for arbitration, they intend for the arbitrator to resolve all disputes arising from the contract, including matters concerning the arbitrator’s own jurisdiction. Predicated on that assumption, the application of the principle of Competence-Competence is a means of avoiding the splitting of proceedings. The combined effect of the principles of separability and Competence-Competence serves to prevent parties from evading arbitral proceedings and enhances the overall efficiency of the arbitration process. Both doctrines share the crucial function of establishing safeguards against bad faith actions by one party that could otherwise obstruct the initiation of arbitration.
Even though these two principles intersect functionally and arise from shared objectives, they are very distinct. The separability principle addresses how the validity of the arbitration agreement can be determined, focusing on its independent existence from the main contract. On the other hand, the Competence-Competence doctrine pertains to who has the authority to decide about the validity of the arbitration agreement, entrusting this power to the arbitral tribunal itself. Notably, the Competence-Competence doctrine is not dependent upon the separability principle and, similarly, the separability principle could be accepted without also adopting a rule of Competence-Competence.
The principle of Competence-Competence operates in two distinct dimensions – positive and negative – depending on its implementation. The positive dimension grants the arbitral tribunal the authority to address and resolve jurisdictional objections. This capacity is derived not from the arbitration agreement, but from the arbitration laws of the country in which the arbitration is held, as well as the arbitration laws of any country in which the agreement is sought to be enforced.
On the other hand, the negative dimension limits the judicial power to intervene in jurisdictional matters. However, arbitration does not exist in a vacuum and relies on the courts for its overall effectiveness. Therefore, courts play a necessary supervisory role to ensure that arbitration proceedings are conducted properly and effectively. While all jurisdictions recognize the courts’ authority to review questions of jurisdiction at some point, they vary in their approach as to the timing of such review. The varying approaches as to when a challenge can be pursued in court carry both advantages and disadvantages. Deferring court involvement until after an award has been made minimizes judicial interference but risks inefficiency if the tribunal is later deemed to lack jurisdiction, resulting in wasted time and costs. Alternatively, permitting early court intervention could prevent such inefficiencies but risks undermining arbitration by giving parties a chance to obstruct the process. Of course, the approach taken need not be at one extreme or the other.
As observed, while Competence-Competence doctrine is widely viewed by the international arbitration community as a “central tenet of international arbitration”, its application differs across jurisdictions. The following analysis explores different regulatory approaches.
The Model Law position
The UNCITRAL Model Law on International Commercial Arbitration incorporates the Competence-Competence principle in Article 16 (1), which declares that “The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement”. This provision, replicated in various forms across most international arbitration legislation, provides the source of the tribunal’s capacity to decide on its own jurisdiction.
A second key aspect to consider is the principle’s negative dimension, which concerns the role of the courts in arbitration proceedings. The Model Law represents a compromise between allowing recourse to the courts regarding the issue of jurisdiction in the preliminary stages of the arbitral proceedings and delaying it until after the award has been made. This approach is set out in Article 16 (3), which establishes that “The arbitral tribunal may rule on a plea [that the tribunal does not have jurisdiction] either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court specified in Article 6 to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award”. Under the Model Law, parties are entitled to recourse to the courts regarding jurisdictional matters within 30 days following an arbitral tribunal’s ruling on the issue. Consequently, the timing of any challenge is contingent upon the tribunal’s decision on the matter. This can be regarded as a balanced solution between the opposing extremes regarding the timing of judicial review within the arbitral process.
In conclusion, the UNCITRAL Model Law adopts a balanced approach, allowing both the arbitral tribunal and State courts to address issues of jurisdiction.
The English approach
In England, Competence-Competence is embedded in Section 30 of the Arbitration Act, which establishes that “Unless otherwise agreed by the parties, the arbitral tribunal may rule on its own substantive jurisdiction, that is, as to: whether there is a valid arbitration agreement, whether the tribunal is properly constituted, and what matters have been submitted to arbitration in accordance with the arbitration agreement”. This provision essentially mirrors the corresponding provision in the Model Law.
The English approach to the negative dimension of the Competence-Competence principle closely aligns with that of the Model Law, as it grants both the arbitral tribunal and the court the authority to determine the validity of the arbitration agreement. The English Arbitration Act, however, diverges from the Model Law by establishing a mechanism designed to safeguard the legitimate interests of both parties involved during disputes concerning the jurisdiction of the arbitral tribunal. According to Section 32 of the EAA, “The court may, on application of a party to arbitral proceedings (upon notice to the other parties), determine any question as to the substantive jurisdiction of the tribunal. An application under this section shall not be considered unless: it is made with the agreement in writing of all the other parties to the proceedings, or it is made with the permission of the tribunal and the court is satisfied:
- That the determination of the question is likely to produce substantial savings in costs,
- That the application was made without delay, and
- That there is good reason why the matter should be decided by the court.
Unless otherwise agreed by the parties, the arbitral tribunal may continue the arbitral proceedings and make an award while an application to the court under this section is pending”.
Section 32 would appear to prevent the court from deciding the question of jurisdiction unless both parties agree or, alternatively, the tribunal permits the court to decide the issue of jurisdiction and the court is satisfied that intervention is appropriate.
It is essential to highlight that a good reason is required for a matter to be decided by the court, resulting in a discretionary evaluation that is undertaken on a case-by-case basis. This evaluation is guided by several key considerations. If there is a good arguable case challenging the validity of the arbitration agreement, the court maintains jurisdiction to address the issue. On the other hand, if a compelling case is presented in favor of the validity of the arbitration agreement, the judge will abstain from rendering a determination. Furthermore, when the focus is on the existence of the arbitration agreement itself, the court is endowed with the authority to exercise jurisdiction.
Therefore, this provision should act as a safeguard for the rights of both parties involved in the proceedings. If the parties do not agree to the question of jurisdiction being referred to the court, the tribunal is likely to allow this course of action only if it possesses a genuine doubt regarding the validity of the arbitration agreement.
Even though the provision specifically establishes when the courts have jurisdiction, allowing for some discretion in the evaluation, case law indicates that, in challenging cases, courts tend to prefer resolving the question of a tribunal’s jurisdiction prior to the tribunal hearing the matter. For instance, in Law Debenture Trust Corp Plc v Elektrim Finance BV, the court held: “There is no support for any suggestion that the court should inevitably allow the arbitral tribunal to decide the jurisdiction question and stay the court proceedings in the meanwhile”.
Overall, the English approach may be seen as balanced and reasonable regarding the negative dimension of the Competence-Competence principle. It provides both arbitral tribunals and courts with the opportunity to adjudicate issues of jurisdiction, in accordance with Section 32 and various guidelines established in case law.
The German law position
The principle of Competence-Competence is recognized in Germany by Section 1040 (1) of the Zivilprozessordnung (ZPO), which establishes that “The arbitral tribunal may rule on its own jurisdiction and in this context on the existence or the validity of the arbitration agreement”. However, a Competence-Competence clause in an arbitration agreement, which excludes subsequent judicial review of the tribunal’s decision on its jurisdiction, is impermissible (BGH, SchiedsVZ 2014, 303).
From the perspective of the negative dimension of the Competence-Competence principle, German law is considerably stricter compared to the approaches previously analyzed. According to Section 1032 (2) of the German ZPO, a prior judicial determination of the admissibility of arbitration is available on the application of a party only before the tribunal has been constituted. In the context of such an application, the competent higher regional court examines whether an arbitration agreement exists, is enforceable and covers the subject matter of the arbitration proceedings (BGH BeckRS 2019, 26414).
Thus, courts have the authority to determine the jurisdiction of the arbitral tribunal only prior to its formation. Once the arbitral tribunal has been constituted, the court must defer to the tribunal, leaving the determination regarding the validity of the arbitration agreement to the arbitral body itself.
In this context, it can be observed that, in conclusion, there is a restriction of the powers of state courts, favoring a stricter application of the principle of Competence-Competence than what has been previously discussed.
The French approach
In France, the principle of Competence-Competence is enshrined in the Article 1448 of the French Code of Civil Procedure, which states that “The arbitral tribunal shall have sole jurisdiction to rule on disputes relating to its jurisdictional powers”. Moreover, court intervention is generally not allowed until after a final arbitral award has been rendered. This appears to be true for the most part even in cases in which the arbitral proceedings have not yet begun. France has adopted a stringent stance by prohibiting parties from initiating concurrent court proceedings or pursuing any legal actions prior to arbitration if they are bound by an apparently valid arbitration agreement or are involved in ongoing arbitration. This means that once parties have entered into an arbitration agreement, they are generally restricted from seeking judicial intervention until the arbitration process has concluded.
In relation to the negative dimension of the principle, the application in this case is notably more stringent. Specifically, Article 1448 of the French Civil Procedural Code establishes that “Where a dispute arising under an arbitration agreement is brought before a State Court, the latter shall declare that it has no jurisdiction unless the arbitral tribunal has not yet been seized and the arbitration agreement is manifestly null and void or manifestly unenforceable”. This implies that when a dispute falling under an arbitration agreement is brought before a court, the court must decline jurisdiction unless two specific conditions are satisfied: first, the arbitral tribunal has not yet been constituted to hear the dispute, and second, the arbitration agreement in question is manifestly void or unenforceable. Thus, a judge may only make determinations regarding the arbitration agreement if it is unequivocally void, and the arbitral tribunal has not yet taken up the matter. It has been suggested, however, that an agreement is very unlikely to be found “manifestly void” unless, for example, the agreement pertains to a patent or other subject matter that is not arbitrable under French law.
In conclusion, the French approach manifestly represents the most stringent application of the principle of Competence-Competence, restricting the intervention of State Courts to a limited number of exceptional cases. This approach demonstrates a considerable degree of respect and trust in the tribunal’s capacity to determine matters of its own jurisdiction in a manner that is both fair and protective of the parties’ interests.
The ICC position
Under the ICC Rules, the application of the principle is slightly more complex. When any question is raised as to the jurisdiction of the arbitral tribunal a two – stage procedure is followed. At the first stage, if one of the parties raises “one or more pleas concerning the existence, validity or scope of the agreement to arbitrate”, the ICC Court must verify whether and to what extent the arbitration shall proceed. The arbitration will move forward “if and to the extent that the Court is prima facie satisfied that an arbitration agreement under the Rules may exist”.
If it is satisfied that such an agreement may exist, the ICC Court must allow the arbitration to proceed so that, at the second stage “any decision as to the jurisdiction of the Arbitral Tribunal shall be taken by the Arbitral Tribunal itself”.
In this case, the ICC Court is responsible for conducting a preliminary assessment of the validity of the arbitration agreement. This serves as a filter to determine the arbitral tribunal’s authority to decide whether it has jurisdiction over the matter.
Separability and Competence-Competence: The American Approach
As noted, the doctrines of Separability and Competence-Competence are now recognized in nearly all contemporary legal systems governing arbitration, although the application of the latter varies from country to country. While the basic doctrine of separability was judicially established over forty years ago by the U.S. Supreme Court in Prima Paint Corp. v. Flood & Conklin Mfg. Co., the evolution of a distinct “Competence-Competence” doctrine has been a much slower process, and it is only now beginning to take on a clearer shape.
Separability
In 1967, the Supreme Court first adopted the doctrine of separability under the FAA in Prima Paint Corp. v. Flood & Conklin Mfg. Co., a case involving claims of fraudulent inducement relating to the matrix contract that could render it voidable. Prima Paint argued that the contract, comprehending the arbitration clause, was obtained through fraud. They argued that they would not have entered into any agreement with Flood and Conklin had it not been for the fraudulent misrepresentations involved. Thus, the Court had to determine whether the fraud vitiated the alleged arbitration agreement. The majority opinion underscored, through a textual analysis, the provision of Section 4 of the FAA, which limits court review to “only issues relating to the making and performance of the agreement to arbitrate”. Since Prima Paint did not specifically allege fraud concerning the arbitration agreement itself, there were no issues for judicial determination within the narrow scope defined in Section 4. As a result, the Court sent the parties to arbitration to solve their contractual dispute, including any claims of fraud related to the inducement of the contract containing the arbitration clause. Justice Fortas concluded that the arbitration clause would only be deemed inseparable from the main contract if the parties explicitly stipulated its inseparability.
The Supreme Court’s next significant case on separability arose almost 40 years later, when it extended the doctrine from voidable to void contracts in Buckeye Check Cashing, Inc. v. Cardegna. The case involved the illegality of a usurious loan agreement, with a Florida Court ruling that the illegality rendered both the main agreement and the arbitration clause contained within it void ab initio in accordance with Florida law. The Supreme Court affirmed that, even if state or foreign law deemed a contract invalid, illegal, void, voidable, or void ab initio, the presumption of separability operates as a substantive rule of federal law, as established by the Federal Arbitration Act. The Court made a clear distinction between challenges aimed at the arbitration agreement itself and those directed at the contract as a whole. It held that challenges to the arbitration agreement would be subject to interlocutory judicial review, while challenges concerning the validity of the contract in its entirety would be referred to arbitration. However, the Court identified exceptions for cases that raised questions about consent, such as situations where valid concerns exist regarding a party’s capacity or authority to sign the contract. This ruling significantly contributed to the acceptance of the doctrine of separability in the United States, confirming that this doctrine applies in both Federal and State Courts.
In the more recent case of Rent-A-Center West Inc. v. Jackson, which stemmed from an employment relationship, the Supreme Court treated the arbitration agreement as the primary contract. The Court classified the clauses within this arbitration agreement, which designated the arbitrator as the entity responsible for resolving jurisdictional disputes, as a “mini-arbitration agreement”. The Court thus determined that the clauses within the arbitration agreement could themselves be separable from the overarching arbitration agreement. This ruling carries significant implications, particularly with respect to the principle of Competence-Competence, as will be discussed shortly.
Competence-Competence
In establishing the doctrine of separability, the Supreme Court encountered no challenges from conflicting statutory provisions. In contrast, an arbitral tribunal’s power to determine its own jurisdiction under the Federal Arbitration Act (FAA) must overcome Section 4, which specifically assigns courts the responsibility of deciding whether the parties have agreed to arbitration. The Supreme Court refers to this issue as a question of arbitrability. In this context, the term “arbitrability” includes issues concerning the existence, validity, and scope of an arbitration agreement.
In First Options Inc. v. Kaplan, the Supreme Court addressed the issue of who has the authority to decide on the validity of an arbitration agreement, ruling that, unless there is clear and unmistakable evidence showing that the parties explicitly intended to delegate this decision to the arbitral tribunal, the courts retain the authority to make this determination. This position was reaffirmed in AT&T Technologies Inc. v. Communications Workers of America, where the Supreme Court explained that the question of “arbitrability” is fundamentally an issue for judicial determination, “unless the parties clearly and unmistakably provide otherwise”.
This formula was then clarified in the case Rent-A-Center West Inc. v. Jackson. In this case, the U.S. Supreme Court combined two separate lines of jurisprudence involving separability and Competence-Competence. When read in combination with the Court’s ruling in Hall Street Associates v. Mattel Inc., the Rent-A-Center decision not only empowers the tribunal to determine its own jurisdiction, but also appears to confer the tribunal the final word in this regard, effectively precluding any subsequent judicial review. Specifically, this decision addresses the issue of the “delegation clause”, affirming its independence and autonomy (i.e., separability) from the arbitration agreement itself, in precisely the same manner that the arbitration agreement is considered separate from the main contract.
The Rent-A-Center contract executed by employee Jackson included a provision within the arbitration agreement that clearly and unmistakably delegated to the arbitral tribunal the authority to determine its own jurisdiction, granting this decisional authority on an “exclusive” initial basis, although still subject to later judicial review. As a result, the framework established by the Supreme Court in the First Options case was now directly before the judges. Rent-A-Center relied on this precedent, asserting that the provision in question was fully enforceable as written. The Court only needed to apply the established principles to the facts of the case. In contrast, Jackson raised a defense of unconscionability against the alleged arbitration agreement, insisting that the matter be resolved by a court under FAA Section 4, rather than by an arbitrator.
In a 5-4 decision, the Supreme Court chose to follow the dicta from First Options to its logical conclusion, thereby enforcing the parties’ contractual delegation of “Competence-Competence” to the arbitrators. In doing so, the Court invoked the doctrine of separability to affirm the independent nature of the delegation clause in relation to the broader arbitration agreement. Consequently, the question of whether Jackson’s agreement to arbitrate was unconscionable and, therefore, invalid, was deemed to fall within the competence of the arbitral tribunal, having been clearly and unmistakably delegated to the arbitrators.
The innovative aspect of this decision lies in the autonomous nature of the delegation clause, which enables parties to clearly and unmistakably delegate the authority to determine the validity of the arbitration agreement to the arbitral tribunal itself. This delegation is facilitated through a provision known as a delegation clause, which, as mentioned, is recognized as distinct from the arbitration agreement itself. Consequently, this delegation clause is considered sufficient to establish the jurisdiction of the arbitrators.
The Supreme Court has clarified that not only is the delegation clause sufficient to empower the arbitral tribunal to decide on its own jurisdiction, but the adoption of specific institutional rules that grant the arbitrator the authority to determine their competence also constitutes clear and unmistakable evidence that at least some questions of arbitrability are to be resolved by the arbitrators.
In conclusion, the complex application of the principle of Competence-Competence in the United States can be articulated as follows: unless the parties expressly indicate otherwise, the courts bear the responsibility for determining whether an agreement to arbitrate exists. Any inquiries regarding the validity of the arbitration agreement must initially be addressed by the courts, rather than by the arbitrators. Consequently, to establish the validity of the arbitration agreement, a party is required to obtain a court ruling, as arbitrators derive their authority exclusively from the contractual agreement. On the other hand, if the parties include a delegation clause that designates the resolution of disputes concerning to the validity of the arbitration agreement to the arbitrators, the authority to determine that validity shifts to the arbitral tribunal itself. Furthermore, the explicit adoption of institutional rules serves as compelling evidence that the parties have consented to arbitrate arbitrability, thereby granting the autonomy of the arbitrators in evaluating the validity of the arbitration agreement.
Which Approach to Competence-Competence Is More Appropriate?
This final question imposes an examination of the policy considerations surrounding each approach. The Model Law framework offers the potential to save both time and costs for parties involved in arbitration. If a tribunal erroneously concludes that it has jurisdiction, the parties can promptly challenge this determination in court, thereby suspending the arbitration and allowing for litigation to proceed. However, this approach may also allow parties to exploit delay tactics, resulting in the inefficient utilization of both public and private resources.
On the other hand, the English variation of the Model Law aims to prevent parties from using delay tactics, thereby conserving both public and private resources while presenting greater trust in a tribunal’s ability to adjudicate jurisdictional issues. This English variant may thus be regarded as a more suitable approach. Nevertheless, the English Arbitration Act allows for the possibility of court intervention following a purely discretionary judgment, which often occurs and restricts the effectiveness of the Competence-Competence principle. It has been suggested that this framework would benefit from empowering tribunals to issue preliminary awards on jurisdictional questions, deferring to the courts only if necessary.
The French approach, which delays judicial intervention until after the final award, effectively minimizes the risk of parties obstructing arbitral proceedings, thereby reducing both public and private expenditures. This model grants significant power to arbitral tribunals, limiting the courts’ involvement to cases involving contracts that are manifestly void. In comparison to the Model Law and the current interpretation of the English approach, the French model offers a more effective means of conserving resources for both the judicial system and the parties involved. However, it can be contended that if English courts were to adopt a more pro-arbitration interpretation of the English Arbitration Act, this model might provide greater flexibility for both the tribunal and the parties, potentially rendering it more advantageous than the French model.
Finally, it is essential to examine the American model, which is grounded in case law. In this framework, it is up to the parties to determine the jurisdiction of the arbitral tribunal regarding the validity of the arbitration agreement. If the parties do not specify otherwise, jurisdiction is assigned to the courts according to the FAA. Conversely, if they clearly and unmistakably delegate this authority to the arbitral tribunal – either through a delegation clause or by adopting institutional rules – the courts must step aside. Therefore, meticulous attention must be paid to the drafting of the arbitration agreement, as its language will ultimately influence the application of the Competence-Competence principle.
Conclusion
The principles of Separability and Competence-Competence play crucial yet distinct roles in the framework of international commercial arbitration. While both principles aim to enhance the efficiency and integrity of arbitration proceedings, they diverge significantly in their applications and implications. The doctrine of separability emphasizes the autonomy of the arbitration clause, asserting that its validity is independent of the main contract. On the other hand, Competence-Competence empowers the tribunal to determine its own jurisdiction, including issues surrounding the arbitration agreement’s validity. In a more pragmatic sense, separability focuses on how the validity of the arbitration agreement is determined, while Competence-Competence pertains to who has the authority to decide that validity.
The evolving case law in the United States highlights that the interplay between these principles is dynamic and continues to develop. While both concepts are broadly accepted within the International Arbitration Community, their implementation varies significantly across jurisdictions. This divergence underscores the necessity for parties to carefully consider the legal frameworks in which they operate, as well as the potential implications of their choices regarding arbitration agreements.
As the field of International Commercial Arbitration continues to evolve, a comprehensive understanding of the principles of separability and Competence-Competence will be essential in shaping the future of arbitration practices globally. These principles not only significantly influence the procedural dynamics of arbitration but also play a critical role in enhancing the predictability and reliability of its outcomes.
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