UNIVERSITY OF BUCHAREST, FACULTY OF LAW

Program of study: International arbitration LL.M.

DISSERTATION

Comparative arbitration law. Part I

Title

ARBITRABILITY OF DISPUTES:

PRINCIPLES AND METHODS FOR ITS DETERMINATION

IN INTERNATIONAL ARBITRATION

Coordinator:

Dr. Cristiana Irinel Stoica

Student:

Drăghici Livia-Liliana

Bucharest

2019

1
SUMMARY

The purpose of this thesis is to address the problem of arbitrability in the context of
international arbitration. The elements it will be focused on are the methods and the principles
found by the international legal community regarding arbitrability. Hence, the paper is going to
present and analyze this concept from various perspectives, trying to picture the wide dimension
arbitrability gained throughout the time.

This thesis is composed of five principal chapters, each of them dealing with a different side
of arbitrability, an introductory chapter and a chapter drafted for conclusions.

The introductory chapter is going to define arbitrability and to describe the most pregnant
issues regarding this concept, presenting a generalized image of it, from which each particular
element will be analyzed.

The aim of the first chapter is to illustrate the two main approaches towards arbitrability,
namely the European and the United States’ perspectives.

Chapter II is structured in two sections, each of them dealing with the problem of the law
applicable to arbitrability, but from different points of view. Section 1 treats the issue of subjective
arbitrability, while Section 2 deals with the issue of objective arbitrability.

Chapter III examines the limits to arbitrability. This chapter is divided into 3 sections, each
one of them treating one important limit applicable to arbitrability. The first section is also divided
into seven sub-sections, each of them treating a different element related to the section’s topic.

Chapter IV illustrates the problem of the lack of arbitrability and the theory based on which
it is founded. Also, it examines the duties the arbitrators have in this matter.

Chapter V examines arbitrability when a party is unsatisfied with the rendered arbitral award
and enters in the setting aside stage of the proceedings.

Conclusions are drawn in the last chapter. The aim of this chapter is to collect all the aspects
analyzed in all the other chapters and to reconstruct the concept of arbitrability offering the reader
its full international image.

2
 TABLE OF CONTENTS

SUMMARY ................................................................................................................................................ 2
INTRODUCTION ....................................................................................................................................... 4
CHAPTER I. ARBITRABILITY IN AN EUROPEAN AND THE UNITED STATES’ PERSPECTIVE ..... 7
CHAPTER II. THE LAW APPLICABLE TO ARBITRABILITY ...............................................................13
Section 1. Subjective arbitrability ............................................................................................................14
Section 2. Objective arbitrability .............................................................................................................16
CHAPTER III. THE LIMITS TO ARBITRABILITY .................................................................................20
Section 1. Public policy/ Mandatory rules ...............................................................................................20
1. Antitrust and Competition Laws ..................................................................................................22
2. Securities Transactions ................................................................................................................24
3. Insolvency Law ...........................................................................................................................25
4. Intellectual Property Rights .........................................................................................................27
5. Illegality and Fraud......................................................................................................................27
6. Bribery and Corruption ................................................................................................................28
7. Investment Contracts relating to Infrastructure and Natural Resources .........................................30
Section 2. Exclusive jurisdiction of national courts ..................................................................................30
Section 3. The impact on third parties .....................................................................................................31
CHAPTER IV. THE LACK OF ARBITRABILITY. THE THEORY OF INARBITRABILITY ..................32
CHAPTER V. ARBITRABILITY AND THE SETTING ASIDE PROCEDURE ........................................40
CONCLUSIONS ........................................................................................................................................44
BIBLIOGRAPHY ......................................................................................................................................47

3
INTRODUCTION

The importance of arbitration is undeniable, especially for the international community. It

offers a professional framework for disputes settlement, having many positive features, such as the
possibility to apply the principle of parties’ autonomy or the ability to easily enforce the rendered
award1. In order to have a deeper understanding of this topic, the present paper discovers one of the
most important concepts connected to it, namely, arbitrability. However, a brief definition of
international arbitration shall be given previously.

According to the opinion of one of the leading international arbitration law firms, arbitration
is “a dispute resolution process agreed between parties in which the dispute is submitted to one or
more arbitrators who issue an award. It is an alternative dispute resolution (ADR) mechanism
because it allows the parties to resolve their dispute outside of state courts, without litigation.
Among alternative dispute resolution methods, arbitration is defined as a jurisdictional means of
settling disputes because of the power given to arbitrators to decide a case and issue an award.
Different from mediation and negotiation, the parties have no say on the solution found by the
arbitral tribunal, which is imposed on them in a final and binding manner.”2

Even if this definition has been stated under different forms by other legal professionals, the
first relevant aspect to be observed is the possibility of the parties to “escape” the traditional courts
of law and their strict law application and their possibility to create a structure of their own for the
settlement of a potential dispute or even a present one. Although this freedom became larger over
time, as people understood the positive impact arbitration can have on their business life, there still
exist limitations to arbitration, meaning that not all legal disputes are arbitrable. The types of
arbitrable disputes are different from one legal system to another, turning arbitrability into one of
the most important aspect to be dealt with when deciding to go to arbitration.

For the international community, the meaning of arbitrability is relatively precise. It is

connected to the question whether a specific type of dispute can be legally referred to arbitration.
The concept’s definition and its interpretation stems from the 1958 New York Convention on the
Recognition and Enforcement of Foreign Arbitral Awards (“The New York Convention”), which
provides in Article II(1)3 that each contracting state shall recognize an arbitration agreement

1
Buys, C.G., The Tensions Between Confidentiality and Transparency in International Arbitration.
American Review of International Arbitration, Volume 14, No. 121. 122-123.
2
https://www.international-arbitration-attorney.com/definition-of-arbitration [accessed 1st April, 2019].
3
The exact provision is: “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.”
4
“concerning a subject-matter capable of settlement by arbitration”, and in Article V(2)(a)4 that an
arbitral award may be refused recognition and enforcement if the “subject-matter of the difference
is not capable of settlement by arbitration under the law of that country.” 5 These provisions
transform the law applicable to the dispute into a very important for the issue for arbitrability.
However, it depends on the approach towards this concept. If arbitrability is understood in an
United States manner, the term can receive confusing interpretations, since it can also be defined as
a preliminary question of whether an arbitral tribunal has the authority to decide that a given dispute
should be submitted to arbitration, this being a determination of whether the arbitral tribunal has
jurisdiction over the dispute. 6

It must be specified that the clarifications made until this point are available only for the
recognition and enforcement stage of the procedure, as the New York Convention treats only this
named stage, but the concept of arbitrability needs to be understood widely. Nevertheless, most of
the times, when national courts find themselves in the position to analyse if a specific matter can be
settled by an arbitral tribunal or not, they base their argumentations on the dispositions of the New
York Convention even in the pre-award stage of the proceedings. So, a court will find a dispute
non-arbitrable if, according to the Article V(2)(a)7 of the New York Convention, the “subject-matter
of the difference is not capable of settlement by arbitration under the law of that country.”

Thus, in order to define the term of “arbitrability” in a complete way, one needs to consider
it as a concept applicable both in the phase after an award was rendered and in the pre-award phase
of the proceedings. It means that the law applicable to this term is an issue which needs to be
examined in the first place.

First of all, there must be made a distinction between subjective arbitrability and objective
arbitrability. According to the article written by Bernard Hanotianu for the Singapore Academy of
Law Journal8, subjective arbitrability relates to the quality of one of the parties, meaning the
situations when in the dispute is involved a State, a public entity or a public body, and objective
arbitrability relates to the subject-matter of the dispute, it being removed from the domain of
arbitration by law.

4
It states that: “Recognition and enforcement of an arbitral award may also be refused if the competent
authority in the country where recognition and enforcement is sought finds that: (a) The subject matter of the
difference is not capable of settlement by arbitration under the law of that country”.
5
http://www.newyorkconvention.org/English [accessed 4th April, 2019].
6
Laurence Shore, Defining ‘Arbitrability’. The United States vs. the rest of the world, New York Law
Journal, 2009.
7
Supra 4.
8
Bernard Hanotiau, The Law Applicable to Arbitrability, Singapore Academy of Law Journal, 2014.
5
 The law applicable to the dispute turns out to be a delicate issue as it can vary depending on
whether the entity asked to decide on the matter is the arbitral tribunal itself, the state court which
one of the parties concurrently seized or the state court to which it refers in a setting-aside or
enforcement procedure. Apparently, the law applicable by the state courts is much easier to be
determined as state courts generally apply lex fori, but this is not always the case. For example, it
can be determined after the conflict of laws is resolved, process which implies a deeper analyzation
of the subject by the court members. Moreover, the problem of the law applicable becomes even
more difficult to be resolved when the entity is the arbitral tribunal, as answers varies from the law
applicable to the arbitration agreement to the law applicable to the seat of arbitration and a unitary
answer to the problem has not been given yet.

Thereby, the law applicable to arbitrability is the law limiting the power of the parties
regarding the arbitration of their dispute. It is happening because states still have the power to
decide if a dispute is arbitrable or not, either on considerations of the quality of the parties involved
in the dispute, or of the subject-matter in dispute. By declaring a dispute non-arbitrable, states make
sure that a particular dispute will be settled exclusively by courts of law and, if an award was
rendered in that domain, it will not be enforced in that state.

However, there are still parties who do not obey the provisions of the applicable law and
enter into arbitration agreements involving non-arbitrable matters with the scope of having their
dispute settled by an arbitral tribunal and not by an ordinary court of law. Considering this, some
legal scholars argued that arbitrability is a condition of validity of the arbitration agreement. In this
understanding, arbitrability becomes a concept concerning which disputes can be decided through
arbitration and, consequently, a condition of validity of the arbitration agreement.

On the other hand, there are dissident opinions which must be taken into consideration when
it comes to understanding arbitrability as a matter of validity of the arbitration agreement.
According to Loukas Mistelis9, even if the concept of inarbitrability is destinated to render an
arbitration agreement null and void, it is not necessary a condition of validity of the agreement. The
statement is based on the interpretation of Article V(1)(a)10 of the New York Convention which
enables the courts of a contracting state to refuse recognition and enforcement in two situations:

9
Loukas A. Mistelis, Arbitrability: International & Comparative Perspectives, Kluwer Law International
B.V., 2009.
10
It states that: “ 1. Recognition and enforcement of the award may be refused, at the request of the party
against whom it is invoked, only if that party furnishes to the competent authority where the recognition and
enforcement is sought, proof that: (a) The parties to the agreement referred to in article II were, under the law
applicable to them, under some incapacity, or the said agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon, under the law of the country where the award was
made”.
6
firstly, if “the parties to the [arbitration] agreement [...] were, under the law applicable to them,
under some incapacity” and, secondly, if the “[arbitration] agreement is not valid under the law to
which the parties have subjected it or, failing any indication thereon, under the law of the country
where the award was made.”11 So, arbitrability is rather a matter of non-enforceability than of
validity of the arbitration agreement. Moreover, by considering it a matter of validity, it can be
almost impossible to determine which subject-matter is arbitrable and which is not, because the
contract is void from the beginning and so the arbitrators have no power of jurisdiction. It leads to
the conclusion that arbitrability is only a matter of jurisdiction, not an issue of validity of the
agreement.

The interpretation presented above leads to the question whether a specific entity is entitled
to decide which matter is arbitrable and in what stage of the dispute this problem must be resolved.
In other words, the question is to which forum must be given priority in determining if a matter is
arbitrable, either to national courts or to arbitral tribunals. The easiest and the most practical answer
to this question is that the problem of arbitrability shall be resolved at a pre-award stage. However,
it turns out to be a delicate problem, because it does not seem reasonable to analyse arbitrability at a
pre-award stage, as it is not a problem of validity of the arbitration agreement and rather a problem
of jurisdiction of the courts.

Nevertheless, the issues regarding arbitrability are different from one legal system to another
and the complete picture has to be seen. As it was mentioned before, there are slightly differences
between the European’s perspective towards arbitration and arbitrability and the United States’ one.
This is the reason why a better understanding of the concept will be offered based on the analyse of
these perspectives.

CHAPTER I. ARBITRABILITY IN AN EUROPEAN AND THE UNITED STATES’

PERSPECTIVE

According to the American legal researcher L. Shore, outside the United States “the term
“arbitrability” has a reasonably precise and limited meaning: i.e., whether specific classes of
disputes are barred from arbitration because of national legislation or judicial authority”12. The
author emphasizes the role of the New York Convention for the international understanding of
arbitrability, namely, Article II (1)13 and Article V(2)(a)14, both of them pointing out that the

11
http://newyorkconvention1958.org [accessed 5th April, 2019].
12
L. Shore, Defining Arbitrability. The United States v. The Rest of The World, New York Law Journal,
2009.
13
It states that: “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
7
subject-matter of the claim is the key to arbitrability in international commercial arbitration. This
argumentation points out the scope of the arbitrability, it being connected to a state’s attitude
towards arbitrability and public policy or national mandatory rules. However, the scope of the
arbitration agreement shall be understood differently, because it evolved from the principle of
parties’ autonomy. The link between these principles is the principle of separability, which
transforms the arbitration agreement into a different legal concept from the rest of the contract.

It is notable that this attitude of European states towards arbitrability may vary. It happens
because all legal concepts, which are part of a national legal system, are part of the socio-cultural
diversity of that particular society. Following that, it is natural for civil and common law systems,
which can be analysed under the umbrella of European perspectives towards arbitrability, to create
different conceptual systems to address specific national issues. However, in the context of
arbitration, national legal boundaries and multiculturality are moving following the globalization of
economy and the changes in the area of international business and trade. All these changes are
pushing the legislators inside Europe to face important international challenges and to move
towards a similar viewpoint regarding arbitration and arbitrability.

For example, in Italy, Section 806 of the civil procedural code15, in force since October 28,
1942, and lastly modified in 2019, provides that the parties may refer any disputes to be heard by an
arbitration tribunal, except for disputes involving inalienable rights and disputes explicitly excluded
by the law. Italian law also excludes the referral of employment matters to an arbitration, except
when the arbitration is established by the law or when it was provided in the appropriate national
collective employment agreements.16 Arbitrators have exclusive competence to rule on their
jurisdiction to award the dispute before them, under the terms of the arbitration agreement. So, the
Italian legal system fully recognises the competence-competence principle.17

Another approach is established by the German law regarding arbitration. In Germany, any
claim involving an economic interest is arbitrable, even those involving antitrust problems or the
intellectual property rights, which in other European countries are expressly excluded from the

in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of
settlement by arbitration.”
14
Supra 3.
15
It provides that: “The parties may have the disputes arising between them decided by arbitrators, with the
exception of the disputes provided for in Articles 409 and 442, 1 those concerning issues of personal status
and marital separation and those other disputes which may not be the subject of a settlement.”
16
Section 806 of the Code of Civil Procedure is providing: “Disputes provided for in Article 409 may be
decided by arbitrators only if so provided by law or by collective labour contracts or agreements.” Apud
Unofficial translation by Prof. Piero Bernardini in Jan Paulsson (ed.), International Handbook on
Commercial Arbitration, Kluwer Law International, Supplement n. 49.
17
https://www.globallegalinsights.com/practice-areas/international-arbitration-laws-and-regulations/Italy
[accessed 12th April, 2019].
8
arbitration proceedings. Moreover, even claims not involving an economic interest are arbitrable, if
parties are entitled to conclude a settlement on the issue in dispute. According to Section 1030(2) of
the German Code of Procedure (“ZPO”)18, disputes regarding the existence of a lease of residential
accommodation within Germany are not arbitrable.19

The French law perspective towards arbitrability has to be mentioned as well. Pursuant to
Article 2059 of the French Civil Code 20, parties can opt for arbitration for all disputes relating to
private patrimonial rights, excluding the matters of family law, criminal law, succession law, for
which the rights cannot be freely disposed of by a party. 21 Additionally, arbitration is not available
to public entities in connection with domestic disputes, according to Article 2060 of the French
Civil Code. However, this restriction does not apply to international arbitration. 22

Perhaps the approach which is the most similar to the U.S. perspective can be found in UK.
Here arbitrability is understood rather as a matter of jurisdiction, for the reason that if a dispute is
not arbitrable, the arbitral tribunal does not have the jurisdiction to rule on the substantive issues of
the case, but will still rule on its own jurisdiction. 23 However, it is important to mention that the
English law approach towards arbitrability is balancing between the case-law and the provisions of
the Arbitration Act 1996 (“AA”). According to the AA, arbitrability is a matter to be argued after
the award was issued, with reference to public policy and under the auspices of the New York
Convention. This affirmation is bases on the provisions of the Section 30 24 and 82(1)25. So, the AA

18
Code of Civil Procedure as promulgated on 5 December 2005 (Bundesgesetzblatt (BGBl., Federal Law
Gazette) I page 3202; 2006 I page 431; 2007 I page 1781), last amended by Article 1 of the Act dated 10
October 2013 (Federal Law Gazette I page 3786).
19
https://www.globallegalinsights.com/practice-areas/international-arbitration-laws-and-
regulations/Germany [accessed 12th April, 2019].
20
In force since February 10, 2016.
21
See Article 2060, French Civil Code, which provides: “One may not enter into arbitration agreements in
matters of status and capacity of the persons, in those relating to divorce and judicial separation or on
controversies concerning public bodies and institutions and more generally in all matters in which public
policy is concerned. (Act no 75-596 of 9 July 1975) However, categories of public institutions of an
industrial or commercial character may be authorized by decree to enter into arbitration agreements.”
22
https://www.globallegalinsights.com/practice-areas/international-arbitration-laws-and-regulations/france
[accessed 14th May 2019].
23
Leonardo V. P. de Oliveira, The English Law Approach to Arbitrability of Disputes.
24
Arbitration Act 1996, Section 30: “(1) Unless otherwise agreed by the parties, the arbitral tribunal may rule
on its own substantive jurisdiction, that is, as to—
(a)whether there is a valid arbitration agreement,
(b)whether the tribunal is properly constituted, and
(c)what matters have been submitted to arbitration in accordance with the arbitration agreement.
(2)Any such ruling may be challenged by any available arbitral process of appeal or review or in accordance
with the provisions of this Part.”
25
Arbitration Act 1996, Section 82(1): “(1)In this Part—“arbitrator”, unless the context otherwise requires,
includes an umpire; “available arbitral process”, in relation to any matter, includes any process of appeal to
or review by an arbitral or other institution or person vested by the parties with powers in relation to that
matter; “claimant”, unless the context otherwise requires, includes a counterclaimant, and related expressions
9
is addressing the topic indirectly and most of the times the method to assess arbitrability is not
easily to detect, because the provisions are not clear enough and there does not exist a specific
section pointing out this issue. Despite this obvious silence, there are other statutes which can
provide the necessary guidance on how courts shall decide if a certain dispute is arbitrable, when
using concepts as “court will decide” or “court will order”.26 This is the point where the difference
between the UK approach towards arbitrability and the U.S. perspective can be seen, as the courts
go beyond the agreement to arbitrate and touches the subject matter of the dispute. 27

To sum up, as demonstrated with the shown examples, European states shaped their law
systems regarding arbitration in order to fit their attitude towards the international community,
especially towards the international business community. Even if some states narrowed the
possibility for certain disputes to be referred to arbitration, it is observable that most European
countries have a more and more liberal position regarding this dispute resolution mechanism. It can
be observable in the way arbitration is lesser and lesser limited when it comes to the possibility to
access it, legislators turning it into a mechanism almost equal to the courts of law procedures, from
the perspective of who can access it and what matters can be resolved following this procedure.

In the United States, the issue of arbitrability is a matter of evolving case-law, because,
being a common law system, no statutory act defined the term in a precise manner. Firstly, the only
reference was the Federal Arbitration Act, Chapter 1, Article 1, which stated as considering non-

shall be construed accordingly; “dispute” includes any difference; “enactment” includes an enactment
contained in Northern Ireland legislation; “legal proceedings” means civil proceedings in England and Wales
in the High Court or the county court or in Northern Ireland ] in the High Court or a county court;
“peremptory order” means an order made under section 41(5) or made in exercise of any corresponding
power conferred by the parties; “premises” includes land, buildings, moveable structures, vehicles, vessels,
aircraft and hovercraft; “question of law” means— (a) for a court in England and Wales, a question of the
law of England and Wales, and (b) for a court in Northern Ireland, a question of the law of Northern Ireland;
“substantive jurisdiction”, in relation to an arbitral tribunal, refers to the matters specified in section 30(1)(a)
to (c), and references to the tribunal exceeding its substantive jurisdiction shall be construed accordingly.
26
For instance, Companies Act 2006, Section 996: “(1) If the court is satisfied that a petition under this Part
is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained
of.
(2)Without prejudice to the generality of subsection (1), the court's order may—
(a)regulate the conduct of the company's affairs in the future;
(b)require the company—
(i)to refrain from doing or continuing an act complained of, or
(ii)to do an act that the petitioner has complained it has omitted to do;
(c)authorise civil proceedings to be brought in the name and on behalf of the company by such person or
persons and on such terms as the court may direct;
(d)require the company not to make any, or any specified, alterations in its articles without the leave of the
court;
(e)provide for the purchase of the shares of any members of the company by other members or by the
company itself and, in the case of a purchase by the company itself, the reduction of the company's capital
accordingly.”
27
Leonardo V. P. de Oliveira, The English Law Approach to Arbitrability of Disputes.
10
arbitrable the disputes regarding employment of seamen, railroad employees, or any other class of
workers engaged in foreign or interstate commerce. 28 Besides that, other limitations were imposed
through the Wilko w. Swan case29, which implemented a doctrine according to which disputes
which fall under the provisions of the Security Act are non-arbitrable. It stated that any arbitration
agreement of this kind had a disadvantageous effect, because they deprive the claimer from the
possibility to find a remedy in the U.S. courts.

However, the U.S. approach towards arbitration and arbitrability changed once the Scherk
case30 was rendered. In this case, the United States Supreme Court held that the claim submitted
under the Securities Exchange Act of 1934 was subject to arbitration due to its international nature
of commercial transaction between Scherk, a German citizen, and Alberto-Culver, a U.S.
corporation, denying the old U.S doctrine according to which all disputes must be resolved under
the United States laws and by the United States courts. The same conclusion was reached in
Mitsubishi v. Soler Chrysler-Plymouth case31 which affirmed a more liberal approach towards
arbitrability, admitting the inevitable growth of international arbitration in the United States. In this
case, the court stated that “international comity, respect for the capacities of foreign and
transnational tribunals, and sensitivity to the need of the international commercial system for
predictability in the resolution of disputes require that we enforce the parties’ agreement, even
assuming that a contrary result would be forthcoming in a domestic context (...).”

Thus, the U.S. courts are paving their way for a permanently expanding arbitration system,
taking seriously the role they have in regulating this system, since states play the main role in
creating a coherent arbitration legislation within its borders.

Even if the legislation regarding arbitrability evolved in the U.S. in a comparable manner to
the European one, the term can still create unclear interpretations. In the U.S. perspective,
arbitrability also means the preliminary question of whether an arbitral tribunal has the authority to
decide, as an initial matter, that a given dispute should be submitted to arbitration, turning
arbitrability into a matter of jurisdiction. 32 It offers arbitrability a wider conceptual dimension than
it has in European countries. Legal researcher Shore stated that, in dealing with matters relating to
the jurisdiction of arbitral tribunals, arbitrability refers to the complicated balance between courts
and arbitrators regarding who should be the initial decision-maker on issues such as the validity of

28
The Federal Arbiration Act, title 9, United States Code, codified July, 1946.
29
Wilko v. Swan et al, No. 39. Supreme Court of The United States, 346 U.S. 427, 74 S.Ct. 182 U.S. 1953,
December 7, 1953.
30
Scherk v. Alberto-Culver Co., U.S., 1974.
31
Mitsubishi v. Soler Chrysler-Plymouth, Supreme Court of The United States, July 2, 1985.
32
L. Shore, Defining Arbitrability. The United States v. The Rest of The World, (2009) New York Law
Journal.
11
the arbitration agreement.33 Thus, the United States are mixing the scope of arbitrability, as
understood by the European legislator, and the scope of the arbitration agreement itself.

Moreover, some authors suggested that the list of questions which fall under the umbrella of
arbitrability is even longer, covering questions regarding the validity of the arbitration agreement,
the real will of the parties concerning arbitration or if the dispute falls within the scope of the
arbitration agreement.34

The case-law of the United States Courts of Appeal contains some relevant examples for the
concept of arbitrability. For instance, when it decided over the validity of an allegedly fraudulent
contract, in the case China Minmetals Materials Imp. & Exp. Co. v. Chi Mei Corp. 35, the court
confirmed the principle according to which a party can be forced to arbitrate only those issues it
specifically agrees to submit to arbitration, suggesting that the court had an obligation to determine
independently the existence of an agreement to arbitrate. In the case Howsam v. Dean Witter
Reynolds Inc. 36, where a brokerage firm sue a customer seeking to stop him from arbitrating the
dispute with National Association of Securities Dealers, the court held that interpretation of the rule
imposing six-year time limit for arbitration was a matter for the arbitrator, not for the court,
implementing once again the U.S. perspective towards arbitration.

Hence, the U.S. perspective is slightly different from the European perspective. Even the
jurisdictional perspective which it covers has its differences from the continental one. One of the
reasons why between the two perspectives can appear differences is the implementation of the two
main principles for international arbitration: the competence-competence principle and the principle
of separability.

The first principle refers to the fact that an arbitral tribunal may have jurisdiction to rule on
its own jurisdiction in the eventuality of such a matter being raised before it. The principle of
separability is a legal doctrine according to which the invalidity of the contract containing an
arbitration clause does not affect the clause itself, which means that the arbitral tribunal is not
prevented from determining if the contract is valid or void.

These principles are not so firmly established in the U.S. legislation as they are in European
countries. Only in recent years, courts of the Unites States have issued opinions in accordance with
the principles of competence-competence and separability, facts which rearranged once again the
33
Idem, p.21.
34
E.J. Brunet, R.E. Speidel, J.R. Sternlicht, S.J. Ware, Arbitration Law in America: Critical Assessment,
New York, Cambridge University Press, 2006.
35
China Minmetals Materials Imp. & Exp. Co. v. Chi Mei Corp., Court of Appeals of The United States,
June 26, 2003.
36
Howsam v. Dean Witter Reynolds, Inc., Court of Appeals of The United States, December 10, 2002.
12
U.S. perspective towards arbitration, aligning it with the international perspective. For example, the
U.S. Court of Appeal stated in the case Will-Drill Resources Inc. v. Samson Resources Co.37 that
“where parties have formed an agreement which contains an arbitration clause, any attempt to
dissolve that agreement declared voidable or void is for the arbitrators. Only is the arbitration clause
is attacked on an independent basis can the court decide the dispute; otherwise, general attacks on
the agreement are for the arbitrator.” Furthermore, the Pacificare 38 and Green Tree39 decisions
implemented into the system even more the principle according to which when there exists an
ambiguity in the contract or in the arbitration agreement, the arbitrator is entitled to make the
necessary clarifications.

In conclusion, it should be stated that, in the United States, arbitrability is a concept

applicable to a matter referred to an arbitral tribunal, determining if that particular matter will pass
all the preliminary conditions to be finally decided on the merits. This approach has been
considered confusing by many legal scholars 40, but it also found the necessary support in others41.
The supporting point of view is stating that treating the issues altogether has the advantage of
making the arbitration process more foreseeable for the parties, because a matter becomes arbitrable
only if it passes all the potential legal obstacles.

By analysing these perspectives one can understand that arbitrability remains one of the
most important aspects regarding arbitration and its interpretation is very complex. In order to
understand this concept, one must navigate through various principles and methods of its
determination, but the starting point is the law applicable to

CHAPTER II. THE LAW APPLICABLE TO ARBITRABILITY

The law applicable to arbitrability, meaning the law which determines whether a dispute is
arbitrable or not, is an issue strongly connected to the interests of states for the arbitration
proceedings which have elements connected to their jurisdiction. In order to determine the
applicable law to this concept, a distinction needs to be made between subjective arbitrability and
objective arbitrability.

37
Will-Drill Resources Inc. v. Samson Resources Co., 5th Cir. 2003.
38
Pacificare Health Sys. Inc. v. Book, 538 U.S. 401 (2003).
39
Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003).
40
J. Paulsson, Jurisdiction and Admissibility, in Global Reflections on International Law, Commerce and
Dispute Resolution. Liber Amicorum in honour of Robert Briner, ICC Publishing, 693, 2005, at p.611.
41
G.A. Bermann, The “Gateway” Problem in International Commercial Arbitration, (2012) Yale Journal of
International Law, p.11.
13
 The subjective arbitrability regards the quality of one of the parties to an arbitration
agreement, namely, if the party is a state or a state-controlled body, while the objective arbitrability
is a more complex problem, regarding the matters removed by the applicable law from the domain
of arbitration. Being a more delicate aspect, objective arbitrability raises more questions, such as the
ones connected to the body named to decide on the applicable law or the ones regarding the stage of
the proceedings.

It is important to highlight from the beginning that there exists a well-known principle
according to which a state, a state enterprise or a state entity may not invoke its own incapacity to
enter into an arbitration agreement to refuse to participate in an arbitration to which it has
previously consented.

Even if, for the purpose of the analysis, attention is being paid to the dichotomy subjective-
objective arbitrability, as legal researcher Böckstiegel precisely points out, these criteria supplement
one another.42 Therefore, the answer to the questions whether the arbitral agreement is valid and
whether arbitration is admissible, can only be given after the examination of these tow aspects
concurrently.

Section 1. Subjective arbitrability

Subjective arbitrability is one of the interpretations arbitrability can receive. The concept is
connected to the national laws having prohibiting or limiting provisions regarding the referral to
arbitration of disputes in which parties are states or states entities.

There are various methods in which the legislator can implement such provisions. For
example, Article 2060 of the French Civil Code prohibits the recourse to arbitration in some cases43.
In other situations, the mechanism involves obtaining an authorisation from a governmental body.
The same article of the French Civil Code continues as follows: “However, some categories of
public institutions of an industrial or commercial character may be authorized by decree to enter
into compromise agreements”.44 In the same direction, examples are given by the Iranian
Constitution which provides in Article 139 that “the settlement of claims relating to public and state
property or the referral thereof to arbitration is in every case dependent on the approval of the

42
K.-H. Böckstiegel, Public Policy as a Limit to Arbitration and its Enforcement, (2008) IBA Journal of
Dispute resolution, “The New York Convention – 50 Years”, p.5.
43
See Article 2060 French Civil Code, “One cannot enter into a compromise agreement about matters of
status and capacity of the persons, matters relating to divorce and judicial separation or matters of disputes
involving public bodies and institutions and more generally in all matters concerning public order.”,
https://wipolex.wipo.int/en/text/450530 [accessed 6th April, 2019].
44
https://wipolex.wipo.int/en/text/450530 [accessed 6th April, 2019].
14
Council of Ministers”45 or by the law of arbitration of Saudi Arabia, promulgated by the Royal
Decree No. M/34 dated 24/5/1433H (April 16, 2012), which states that “government bodies may
not agree to enter into arbitration agreements except upon approval by the Prime Minister, unless
allowed by a special provision of law.”46

On the other side of the spectrum are the states where arbitration laws are very liberal, such
as Singapore. In Singapore, it does not matter the quality of a party when entering into an
arbitration agreement to which the Arbitration Act or the International Arbitration Act applies. Both
the Arbitration Act 47 and the International Arbitration Act 48 are binding on the Singapore
government, making no difference if the party who enters into an arbitration agreement has
connections to state authorities or not.

Summarizing, the subjective arbitrability’s essential characteristics are the following: 1) it

exists in legal debate, in particular, in arbitration law debate; 2) it proposes granting of rights to
individual or legal entity’s right to enter into arbitration agreement; 3) such rights must be
established by law. 49 These characteristics are easily seen in the arbitration laws around the world.
By analysing these provisions others determining characters can result, too.

For example, a provision which needs attention, because of the historically importance of
Switzerland for arbitration proceedings, is Article 177 (2) of the Swiss Private International Law, in
force since December 18, 1987, as amended until January 1, 200750. It was created with the scope
of increasing certainty in judicial proceedings and in total accordance with the fundamental
principle of good faith which shall bring harmony in international commerce. However, this
provision needs to be interpreted in the light of the circumstances relevant to each concrete case.
For example, a party cannot rely on the principle of good faith if it was fully aware, and had
accepted, the restrictions imposed for states or states-controlled entities regarding arbitrability or
their capacity to enter into arbitration agreements with private parties.

Furthermore, it is notable that in 1989 the Institute of International Law emphasised this
principle in the resolution “Arbitration Between States, State Enterprises, or State Entities, and

45
https://www.constituteproject.org/constitution/Iran_1989.pdf?lang=en [accessed 6 th April, 2019].
46
https://wipolex.wipo.int/en/legislation/details/14759 [accessed 6 th April, 2019].
47
Part X – Miscellaneous, 2002 Rev. Ed., Arbitration Act.
48
Part IV General, 2002 Rev. Ed., International Arbitration Act.
49
Natalja Freimane, Arbitrability: Problematic Issues of The Legal Term, Riga Graduate School of Law,
2012.
50
It states that: “ If one party to an arbitration agreement is a State or an enterprise dominated by or an
organization controlled by a State, it may not invoke its own law to contest the arbitrability of a dispute or its
capacity to be subject to an arbitration.”
15
Foreign Enterprises” according to which “a state, a state enterprise, or a state entity cannot invoke
incapacity to arbitrate in order to resist arbitration to which it has agreed”.51

To sum up, the applicable law to subjective arbitration appears to be the law determined by
the conflict of law rules, as it is a matter of capacity to enter into an arbitration agreement. The
problems appear when States tries to avail of their own law provisions to avoid arbitration. This is
the reason why progressively the rule was changed and transformed into a principle of international
private law connected to the public policy rule. 52

Section 2. Objective arbitrability

Beside the subjective arbitrability, which is a limitation imposed on parties’ autonomy in

relation with the quality of the parties, there exist limitations imposed because of the subject-matter
of the dispute. This is a vaster understanding of arbitrability, because the solution to this issue
depends on the entity in front of whom it is raised and on the moment it is submitted. Namely, the
problem and its solution may vary depending on whether it is raised in front of the arbitral tribunal
itself or in front of a state court, in the situation when a party has submitted the dispute concurrently
in front of such a body, or in the course of a setting-aside or enforcement procedure.

So, the issue regarding objective arbitrability is very complex. The main question is which is
the applicable law to arbitrability, specifically, according to which law should the arbitrator or the
court determine if a dispute is arbitrable or not.

Bernard Hanotiau offers a practical example in his article about arbitrability. 53 The author
takes the example of a French company and an Italian company entering into a trademark licence
agreement to emphasise the complex nature of the problem. The dispute which raises between these
parties involves the validity of the trademark and it will be settled by an arbitral tribunal. The seat
of arbitration is in Geneva. According to the law governing the licence agreement, the issue is not
arbitrable. On the other hand, according to Art. 177 of the Swiss Private International Law Act, all
disputes involving pecuniary matters may be submitted to arbitration. Therefore, the dispute is
arbitrable in Switzerland.

51
See Art. 5, Arbitration Between States, State Enterprises, or State Entities, and Foreign Enterprises,
Institut de Droit International, Session of Santiago de Compostela – 1989.
52
See Art. 177(2) of the Swiss Private International Law Act of 18 Decembre 1987: “If a party to the
arbitration agreement is a State or an enterprise held, or an organization controlled by it, it cannot rely on its
own law in order to contest its capacity to be a party to an arbitration or the arbitrability of a dispute covered
by the arbitration agreement.”
53
Bernard Hanotiau, The Law Applicable to Arbitrability, Singapore Academy of Law Journal, 2014.
16
 Considering the factual background, there are multiple questions which need to be
answered. Should the arbitral tribunal apply the law governing the validity of the licence agreement
or the law of the seat of arbitration, taking into consideration that by doing so there exists a risk of
rendering an award which might not be recognised or enforced by the court of that country?

The answer to this question is expressly given by Art. II (1) and Art. V (1)(a) of the
Convention of the Recognition and Enforcement of Foreign Arbitral Awards and by Art. VI (2) of
the European Convention on International Commercial Arbitration54. According to these texts, the
arbitral tribunal shall apply the law chosen by the parties, respecting their autonomy in deciding the
law governing the arbitration agreement. However, in most cases the parties did not choose the law
applicable to the arbitration agreement and the arbitrators are allowed, in those cases, to establish
this aspect. It must be taken into consideration that the arbitration agreement is distinct from the
main contract and, because of that, the solution to this problem can vary, from the domestic law
governing the main agreement to the law of the seat of arbitration. The decision made by the
arbitrators is very important, because, according to it, the problem of arbitrability is resolved.

In Romania, the principle is that all matters are arbitrable, but there exist some exceptions.
The provisions applicable to national arbitration are different from the ones applicable to
international arbitration. Regarding international arbitration, a dispute may have certain
characteristics in order to be arbitrable: it is of a patrimonial nature; it deals with rights the parties
may freely dispose of (this excludes, among others, disputes over personal civil status and legal
capacity, inheritance and family matters and labour law disputes); it falls outside the exclusive
jurisdiction of the courts pursuant to the law of the seat of arbitration. 55 In addition, article 542 of
the Romanian Civil Procedural Code has the following provision: “1) Persons with full legal
capacity may agree to resolve disputes between themselves through arbitration, expect for those
disputes concerning personal status, personal capacity, inheritance, family relations, as well as those
rights of which parties cannot freely dispose. 2) The State or public authorities have the right to
enter into arbitration agreements only if authorized by law or by international conventions to which
Romania is party. 3) Legal entities of public nature whose scope of activity includes entering into

54
It states that: “In taking a decision concerning the existence or the validity of an arbitration agreement,
courts of Contracting States shall examine the validity of such agreement with reference to the capacity of
the parties, under the law applicable to them, and with reference to other questions: (a) under the law to
which the parties have subjected their arbitration agreement; (b) failing any indication thereon, under the law
of the country in which the award is to be made; (c) failing any indication as to the law to which the parties
have subjected the agreement, and where at the time when the question is raised in court the country in
which the award is to be made cannot be determined, under the competent law by virtue of the rules of
conflict of the court seized of the dispute. The courts may also refuse recognition of the arbitration
agreement if under the law of their country the dispute is not capable of settlement by arbitration.”
55
http://www.inhouselawyer.co.uk/wgd_question/are-any-types-of-dispute-considered-non-arbitrable-what-
is-the-approach-used-in-determining-whether-or-not-a-dispute-is-arbitrable [accessed 10th April, 2019].
17
economic transactions may conclude arbitration agreements, unless their statute or by-laws provide
otherwise.”56

A different approach can be seen in the France legislation. In France, a limited number of
disputes may not be resolved via arbitration. Those include the ones relating to civil status and
capacity of natural persons, and divorce and judicial separation of spouses. 57

Apparently, there does not exist a similar approach all over the word and no general
applicable guidelines which can make the job of arbitrators easier in this aspect. However, the
English Court of Appeal established in Sulamerica CIA Nacional de Seguros S.A. v. Enesa
Engenharia S.A. (“Sulamerica”) 58 the three characteristics which shall determine the proper law
applicable to the arbitration agreement. Firstly, the arbitral tribunal has to look into the arbitration
agreement and establish if the parties made an express choice of the law to govern the arbitration
agreement. If not, they have to look for an implied choice, the last resort being the law which has
the closest and most real connection with the arbitration agreement. In Sulamerica decision it has
been established that, in the absence of other factors, the implied law of the arbitration agreement
will often be the same as the law of the substantive contract. This means that the English Court
established a presumption that the substantive law of the parties’ contract indicates the parties’
implied choice of the law to govern the arbitration agreement. However, determining the law to
govern the arbitration agreement still remains a problem of contractual interpretation, namely, of
determining the factors which can contradict the presumption. Additionally, if the applicable law
cannot be determined in neither the first stage, nor the second one, the law to govern the arbitration
agreement will be the law with which the arbitration agreement has the closest and most real
connection.

The Sulamerica test was applied in a more recent case, Arsanovia Ltd & Ors v. Cruz City 1
Mauritius Holdings59, where the important circumstance was that the parties had expressly chosen
Indian law to govern the substantive contract and London as the seat of arbitration. The case gave
rise to debate concerning the relative significance of a governing law clause compared to a choice
of seat when determining the law of an arbitration agreement. It was determined that, although the
choice of London as the seat of the arbitration was a factor to be considered, it was not by itself
enough to displace the conclusion that the parties wanted Indian law to govern the arbitration

56
Unofficial translation by Dr. Ileana M. Smeureanu in Crenguta Leaua, Flavius A. Baias, Arbitration in
Romania: A Practitioners Guide, Wolters Kluwer, 2016.
57
https://iclg.com/practice-areas/international-arbitration-laws-and-regulations/France [accessed 10th April,
2019].
58
Sulamerica Cia Nacional De Seguros S.A. v. Enesa Engenharia S.A. [2012] EWCA Civ 638.
59
See Arsanovia Ltd and others v Cruz City, [2012] EWHC 3702 (Comm).
18
agreement, the choice of the same law to govern the substantive contract being seen as “a strong
pointer” that the parties intended the same law to be applied to the arbitration agreement. Moreover,
the parties intended to have the arbitration agreement governed by Indian law because they made an
express reference in the arbitration clause to the exclusion of certain provisions of the Indian
Arbitration Act. However, the tribunal also noted that, if it would have been in the position to
decide which system of law has the closest and most real connection with the arbitration agreement,
it would have decided in the favour of English law.

Considering that arbitrability appears most often as a question of jurisdiction, it may be the
case of one of the parties commencing the arbitration proceedings according to the arbitration
agreement and the other party starting a procedure in front of the national court, because it does not
see the dispute arbitrable. In this case, the national court is in the position to decide on the matter of
arbitrability of the dispute. According to the doctrine, the most favourable solution would be for the
national court to decide that arbitrability is governed by the provisions of the law of the national
court itself. 60

On this jurisprudential principle was based the decision of the Court of appeal in Genoa
which was faced in the case Fincantieri v. Iraq61 with the question whether disputes as to the effects
of the United Nations embargo against Iraq were arbitrable. The court decided that “the answer
must be sought in Italian law, according to the jurisprudential principle that, when an objection for
foreign arbitration is raised in court proceedings concerning a contractual dispute, the arbitrability
of the dispute must be ascertained according to Italian law as this question directly affects
jurisdiction, and the court seized with the action can only deny jurisdiction on the basis of its own
legal system. This also corresponds to the principles expressed in Arts. II and V of the [New York
Convention]. Hence, the answer to the question [of arbitrability] can only be that the dispute was
not arbitrable due to [Italian embargo legislation]”. 62

Regarding the national laws, there are some aspects which need to be clarified, because
problems can appear in this field. Most of the national laws do not determine directly which are the
arbitrable disputes, rather they determine which matters cannot be arbitrated. Differences exist

60
Julian Lew, Loukas Mistelis & Stefan Kroll, Comparative International Commercial Arbitration, Kluwer
2003, para. 9-13: “the better view is that the law applicable to the question of arbitrability in court
proceeding should be governed by the provisions of the law of the national court which determines the case”.
61
See also Gary B. Born, International Commercial Arbitration (Second Edition), Kluwer Law International
2014.
62
Julian Lew, Loukas Mistelis & Stefan Kroll, Comparative International Commercial Arbitration (Kluwer,
2003), para. 9-14; Corte di Appello Genoa, 7 May 1994, Fincantieri – Cantieri Navali Italiani SpA and Oto
Melara Spa v Ministry of Defence, Armament and Supply Directorate of Iraq, Republic of Iraq, 4 Riv Arb
505 (1994), XXI YBCA 594 (1996).
19
between common law countries and civil law countries, because for the first category the case law
is regulating arbitrability in the approach named above, and for the second one, the problem of
arbitrability is legislated by the competent governmental body. Moreover, in civil law countries,
arbitrability can be defined in two ways, one which relies on a substantive criterion, rather
completely self-sufficient or with certain distinct elements included, and another which relies on the
power of the parties to dispose of the rights involved in the dispute or to reach a compromise. For
example, Swiss PIL Article 177 provides that “any dispute involving property can be subject-matter
of an arbitration”, giving to the concept of arbitrability an extended understanding, while Article
806 of the Italian Code of Civil Procedure provides that parties are free to have their disputes settled
by arbitration, excepting for the cases strictly named by the legislator, such as the disputes
involving individual labour or the ones involving social security and obligatory medical aid.

In conclusion, above all the difficulties which may raise regarding the applicable law, it still
is an essential factor for each dispute referred to arbitration and, implicitly, for the concept of
arbitrability. It helps the interested person to assess whether a specific matter is arbitrable and, so,
imposes limits over the parties’ autonomy concerning arbitration. Hence, after the analysis of the
applicable law, in order to gain an even deeper understanding of arbitrability, the limits prescribed
by it shall be explored.

CHAPTER III. THE LIMITS TO ARBITRABILITY

As it was analysed in the last chapter, national laws determine if a certain dispute is
arbitrable or not, they being the mirror of the political, social and economic approach of states
towards arbitration as a dispute resolution mechanism. However, the umbrella of arbitrability opens
ampler in case of an international dispute than in case of domestic disputes. It was stated even in the
Mitsubishi v. Soler case 63, where the U.S. Supreme Court held that in an international context the
ambit of arbitration may be wider than in a national context. It also evidences the recent increasing
number of international disputes referred to arbitration.

Nevertheless, worldwide still exist limitations to arbitrability, most of them arising from the
public policy rules. Although it was considered to be too vague by some legal scholars64, it is one of
the classic limitations to arbitrability, along with the exclusive jurisdiction of national courts and the
impact on third parties.

Section 1. Public policy/ Mandatory rules

63
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985).
64
Julian D.M. Lew, Comparative International Commercial Arbitration, 2001st Edition.
20
 Traditionally, it is held that the disputes considering matters subject to mandatory rules are
not arbitrable. However, the view towards arbitrability has changed over the years as states
understood that arbitration is an important dispute resolution mechanism designed to complement
the freedom of the parties, gaining more popularity. In modern arbitration it might be possible that
even for matters subject to mandatory rules to be settled by arbitral tribunals. 65

Hence, as far as public policy is concerned, from the perspective of its relation to
66
arbitrability, some arbitration laws continue to consider certain issues non-arbitrable. Even in
such systems, the trend has changed and now public policy is not stopping the parties to go in front
of an arbitral tribunal. However, the arbitrators have to respect the rules imposed to the subject-
matters’ nature in order to render an enforceable award.67

From the perspective of corporate law, there are certain areas which have raised problems
regarding arbitration and arbitrability. Firstly, a matter which have been considered non-arbitrable,
because it is generally regulated by mandatory rules, is the one concerning the validity of a
shareholders’ meeting and the grounds for invalidating an assembly. The reason is that the result of
such dispute might affect third parties, social and public interest. However, it depends on the type of
action considered. If the action is looking for the total nullity of the act rendered in a shareholders’
meeting, then public policy is involved and the dispute is non-arbitrable. If the dispute involves an
annulment based on the contradictions of that act with the law or the statues of the corporation, then
arbitration is possible. Hence, there can be found a more favourable approach towards arbitrability
of disputes, even in this area. 68

65
For example, for French Law, Charles Jarrosson, La notion d’arbitrage (Libraire Generale de Droit et de
Jurisprudence 1987):
« L’arbitrage est l’institution par laquelle un tiers, regle le differend qui oppose deux ou plusieurs
parties, en exercant la mission juridictionnelle qui lui a ete confiee par celles-ci. »
However, some uncertainty exists in certain areas. For Spanish Law: the validity of the company’s meeting
affecting the information right of the shareholders has been considered inarbitrable due to the imperative
character of such a right (SAP Barcelona, 17 February 1999, 16 May 2003; and Auto del Juzgado de lo
Mercantil de Bilbao, no. 1,2 November 2005). More recent cases state the contrary: SAP Santa Cruz de
Tenerife, 27 October 2006; and Auto Audiencia Provincial Barcelona, 5 March 2008.
66
French Civil Code, Arts. 2059 and 2060
67
Berthold Goldman, La situation en France, in Competition and Arbitration Law (Institute of International
Business Law and Practice, ICC 1993), 111; Bernard Hanotiau, L’Arbitrabilite et le favor arbitrandum: un
reexamen, 47 Clunet (1994); Jose Carlos Fernandez Rozas, Le role des juridictions etatiques devant
l’arbitrage Commercial International, in Recueil de Cours – Collected Courses of the Hague Academy of
International Law (2001) Tome 290, (The Hague Boston London, Martinus Nijhoff Publichers, 2002) at 111-
112.
68
For Spanish Law, a decision of the High Supreme Court changed the view, in 18 April 1998: “La
impugnación de acuerdos sociales está regida por normas de “ius cogens” pero el convenio arbitral no
alcanza a las mismas, sino al cauce procesal de resolverlas; el carácter imperativo de las normas que regulan
la impugnación de acuerdos sociales, no empecé el carácter negocial y, por tanto, dispositivo de los
mismos.”
21
 Another aspect relating to corporations which may raise problems in regard to arbitrability is
the nullity of a corporation. An action in this domain may be admissible in some states, such as
Belgium, Switzerland, Sweden or U.S. In France or Italy, but the opinions concerning this aspect
are divided, as the majority states consider this issue non-arbitrable. At the other extreme is Spain,
where the nullity of a corporation cannot be, by any means, arbitrable.69

The dissolution of the corporation is another subject-matter which creates issues involving
arbitrability. The matter is controversial in some jurisdictions, for instance in the U.S., Singapore
and Spain, and it is determined in disfavour of arbitration in French law. However, in Finland the
matter is considered arbitrable thanks to a decision of the High Supreme Court. 70

The limit imposed by public policy or mandatory rules analysed above is the starting point
for the analyzation of arbitrability in different law fields where problems regarding arbitrability
have traditionally raised, such as anti-trust and competition, securities transactions, insolvency,
intellectual property rights, illegality and fraud, bribery and corruption, and investment contracts
relating to infrastructure and natural resources.

First of all, some essential statements shall be drafted. The Model Law does not contain
dispositions regarding the non-arbitrable disputes and provides the freedom the national legislator
has in determining the disputes which are arbitrable and which are not. However, certain disputes
are expressly excluded from arbitration is German law. Former Section 28 Securities Exchange Act
provided that arbitration agreements in contracts for transactions on a German securities exchange
were only valid when the consumer was a registered businessperson (Volkaufmann) or a company
or businessperson established outside of Germany. Disputes with other private parties could not be
referred to arbitration. 71

1. Antitrust and Competition Laws

In this domain, the U.S. and European countries have legislations which restricts antitrust
and competition disputes to be referred to arbitration, because such issues have an important impact
on states’ economy. If such a prohibition is violated, the agreement can be considered illegal, a
potential award not enforceable and even damages can be issued.

69
M. Pilar Viscasillas, Arbitrability of (Intra-) Corporate Disputes, in Arbitrability: International &
Comparative Perspectives, p. 206, 14-21.
70
Idem, p. 207, 14-22.
71
Replaced by 37h WpHG. Further examples are Germany, ZPO section 1030(2) (rent of housing), BGB
section 1822(12) (Representations of a child); see also France, NCPC Article 2060; Belgium, Judicial Code
section 1678(2) (exclusion of labour disputes); Jordan, Law no. 35 of 1980 section 2 (disputes relating to
bills of lading) apud Julian D.M. Lew, Comparative International Commercial Arbitration, 2001st Edition.
22
 In order to support this statement, the first example to be analysed are the dispositions of the
EC Treaty72 which provides that agreements which restrict competition and have an effect on the
Community market are forbidden and are void unless entitled to exemption under Article 81(3). 73
However, other issues connected to this area are considered arbitrable 74, they finding approval in
the Eco Swiss v. Benetton case 75 and in other cases where one party tries to resist contractual claims
by invoking the infringement of competition law by the agreement. The same approach can be
found in U.S. case law. The Supreme Court decided in Mitsubishi v. Soler 76 that the post-award
control is sufficient to safeguard the state’s interest in antitrust disputes.

In this case, the Puerto Rican distributor had entered into a distributor agreement with
Chrysler International (CISA), according to which it was to sell automobiles produced by
Mitsubishi Motors, a Japanese car manufacturer, a joint venture between CISA and Mitsubishi
Heavy Industries. The distributorship agreement required Soler to buy a certain number of cars
from Mitsubishi per year, and provided to any disputes should be resolved by arbitration in Japan
under the rules of the Japan Commercial Arbitration Association. After a period of successful

72
Treaty establishing the European Community (Consolidated version 2002), OJ C 325, 24.12.2002.
73
Article 81 EC Treaty states: “1. The following shall be prohibited as incompatible with the common
market: all agreements between undertakings, decisions by associations of undertakings and
concerted practices which may affect trade between Member States and which have as their object
or effect the prevention, restriction or distortion of competition within the common market, and in
particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing
them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary
obligations which, by their nature or according to commercial usage, have no connection with the
subject of such contracts.
2. Any agreements or decisions prohibited pursuant to this article shall be automatically void.
3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:
- any agreement or category of agreements between undertakings,
- any decision or category of decisions by associations of undertakings,
- any concerted practice or category of concerted practices,
which contributes to improving the production or distribution of goods or to promoting technical or
economic progress, while allowing consumers a fair share of the resulting benefit, and which does
not:
(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment
of these objectives;
(b) afford such undertakings the possibility of eliminating competition in respect of a substantial
part of the products in question.”
74
It is accepted that under EC law private enforcement of competition remedies is permissible apud B.
Hanotiau, Arbitration and European Competition Law, in Arbitration and European Law (Bruylant 1997).
75
Eco Swiss China Time Ltd v Benetton International NV., Case C-126/97.
76
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985).
23
selling, Soler was unable to maintain the required sales volumes. It requested permission from
CISA to sell cars outside the designated area, but this was refused. Soler brought an action in the
District Court of Puerto Rico for breach of the U.S. Sherman Act and other competition laws. CISA
sought a stay of the court proceedings and an order to compel Soler to arbitrate in Japan. 77

The Supreme Court decided that the issue was arbitrable despite the subject-matter involved
and compelled the parties to go to arbitration in Japan, indicating the obligation to respect their
agreement. The most important argument states as follows:

“There is no reason to assume at the outset of the dispute that international arbitration will
not provide an adequate mechanism. To be sure, the international arbitral tribunal owes no prior
allegiance to the legal norms of particular States; hence, it has no direct obligation to vindicate their
statutory dictates. The tribunal, however, is bound to effectuate the intentions of the parties. Where
the parties have agreed that the arbitral body is to decide a defined set of claims which includes, as
in these cases, those arising from the application of American antitrust law, the tribunal therefore
should be bound to decide that dispute in accord with the national law giving rise to the claim. And
as long as the prospective litigant effectively may vindicate its statutory cause of action in the
arbitral forum, the statute will continue to serve both its remedial and deterrent function.” 78

Even if the argumentation appears convincing, the J. Lew point of view is more reasonable.
He states that this protection offered to competition matters is available only in the United States, in
any other state a dispute involving competition issues having the possibility to be enforced.
Moreover, such an award can be enforced even partially, when the losing party has assets in other
states different from the U.S.

2. Securities Transactions

This area is especially important for the U.S. legislation which faced different changes in the
domain. It protects both the interest of the state in the market business and the interest of the
consumers. For instance, U.S. Securities Act 1933 and the Securities Exchange Act 1934 grant
statutory rights to consumers, providing that all agreements limiting these agreements are void. This
negative attitude toward arbitration in this field started with the Wilko v. Swan decision. 79 In this
decision, the Supreme Court ruled that any dispute involving the Securities Act may be referred

77
Apud J.D.M. Lew, Comparative International Commercial Arbitration, 2001st Edition.
78
Idem; See also U.S. Supreme Court decision in relation to the protection granted under the Carriage of
Goods by Sea Act, Vimar Seguros y Reasegurs, SA v M/V SKY REEFER, her Engines, etc, et al, 115 S. Ct.
2322 1995, 132 L. Ed. 2d 462 where comparable reasoning was adopted.
79
Wilko v. Swan, 346 US 427 (1953).
24
exclusively to national courts, because arbitration is not a mechanism which can offer consumers
the right protection of their rights.

The next step the Supreme Court made was in the way of changing completely the
perspective towards arbitration presented in the above-named decision. So, in Scherk v. Alberto-
Culver Co80, the U.S. case-law changed in the way of recognising the arbitrability of federal
securities claims with an international element. Starting with this point, international disputes
involving securities transactions were arbitrable, whereas the purely national disputes in this
domain were still referred to the exclusive jurisdiction of national courts. An important argument
was: “a parochial refusal by the courts of one country to enforce an international arbitration
agreement […] would damage the fabric of international commerce and trade and imperil the
willingness and ability of businessmen to enter into international commercial agreement”. 81

The Rodriquez de Quijas v. Shearson/American Express Inc 82 changed for good the image
of arbitration for the securities transaction disputes, because the Supreme Court decided that all
federal securities claims are arbitrable, regardless of the nature of the transactions. Moreover, it
stated that the Wilko decision was rendered under the influence of a hostile attitude to arbitration.
This change has an important positive impact of arbitration in the securities area, impact which is
reflected in the creation of organisations administering arbitration services, such as the New York
Stock Exchange (NYSE) or the National Association of Securities Dealers (NASD).

The same trend can be observed in European countries, which established their own
arbitration bodies to administer arbitration proceedings tailored for the securities disputes. For
example, Austria and Hungary, which has a rapid growth in this industry, ended with a clear
definition of the rules settling such disputes. 83

3. Insolvency Law

In this field, it is important to understand the difference between insolvency disputes which
are rather proceedings for the collective execution or reorganization of the debtor and the disputes
involving an insolvent party. Whereas the first category of disputes is surely non-arbitrable as they
regard the collective interest, the second category raises questions, the trend being to consider them
as being non-arbitrable for uniformization purposes and to give exclusive jurisdiction to national
courts in this respect.

80
417 US 506 (1974).
81
Apud J. Lew, Comparative International Commercial Arbitration, 2001st Edition.
82
490 US 477 (1989).
83
Apud J. Lew; Comparative International Commercial Arbitration, 2001st Edition, p. 205.
25
 The problem was apparently solved by an U.S. court84 which stated: “Such a conflict is
lessened in non-core proceedings which are unlikely to present a conflict sufficient to override by
implication the presumption in favour of arbitration. Core proceedings implicate more pressing
bankruptcy concerns, but even a determination that a proceeding is core will not automatically give
the bankruptcy court discretion to stay arbitration. Certainly not all core bankruptcy proceedings are
premised on provisions of the Code that inherently conflict with the Federal Arbitration Act; nor
would arbitration of such proceedings necessarily jeopardize the objectives of the Bankruptcy Code.
[…] However, there are circumstances in which a bankruptcy court may stay arbitration, and in this
case the bankruptcy court was correct that it has discretion to do so. In exercising its discretion over
whether, in core proceedings, arbitration provisions ought to be denied effect, the bankruptcy court
must still carefully determine whether any underlying purpose of the Bankruptcy Code would be
adversely affected by enforcing an arbitration clause. […] The Arbitration Act as interpreted by the
Supreme Court dictates that an arbitration clause should be enforced unless [doing so] would
seriously jeopardize the objectives of the Code. In the instant case, the declaratory judgement
proceedings are integral to the bankruptcy court’s ability to preserve and equitably distribute the
Trust’s assets. Furthermore, as we have previously pointed out, the bankruptcy court is the
preferable venue in which to handle mass tort actions involving claims against an insolvent debtor
… The need for a centralized proceeding is further augmented by the complex factual scenario,
involving multiple claims, policies and insurers.”85

This decision promulgates the idea that arbitrability in insolvency cases is rather a matter of
interpretation. So, disputes relating to “non-core matters”, as described above, are mostly arbitrable,
whereas the “core matters” disputes are mostly non-arbitrable.

In Europe, there are some jurisdictions which support the distinction made by the U.S. case-
law, meaning that they have similar approaches. 86 However, there are countries where the
insolvency of one party does not even influence the arbitrability of the dispute, a good example
being Germany. In Germany, in such cases, the concept of arbitrability becomes irrelevant, its place
in the legal interpretation being taken by the term “inoperability” of the arbitration clause. German
courts have declared an arbitration agreement inoperable if a party lacks the necessary funds for
arbitration proceedings, which might be the case when the party is insolvent. 87

84
Idem, p. 207; United States Lines, Inc et al (US) v. American Steamship Owners Mutual Protection and
Indemnity Association, Inc, et al (US), In re United States Lines, XXV YBCA 1057 (2000) (2d Cir, 1
November 1999).
85
Apud J. Lew, Comparative International Commercial Arbitration, 2001st Edition, p. 207.
86
Idem, p. 208, 9-61.
87
See Bundesgerichtshof, 14 September 2000, BB 2330 (2000) with further references.
26
 4. Intellectual Property Rights

Intellectual property rights afford a person to have exclusive rights to use and exploit certain
plans, ideas, or other intangible assets without the worry of competition. Their existence often
requires the registration within a legally recognised agency. The scope behind this practice is to
encourage innovation and to protect third parties from the otherwise arbitrary effects of these rights.
This need for protection of these rights lead many legislators to consider disputes involving them
non-arbitrable. For instance, the disputes directly involving the existence or validity of a registered
intellectual property right is non-arbitrable in the EU.88

On the other hand, the disputes which do not involve the existence or the validity of these
rights are usually arbitrable, because they do not have direct effect on third parties. Form part of this
category the disputes arising from transfer of property rights’ contracts, or research and
development agreements intended to lead to intellectual property rights.

According to J. Lew, while two legal systems accept the arbitrability of almost all
intellectual property disputes, namely Switzerland and the U.S., a large majority of states exclude
intellectual property rights as a whole from the jurisdiction of arbitral tribunals, in exceptional cases
leaving the possibility for parties to refer their dispute to arbitration and even then imposing an inter
partes effect to the arbitral award. The issues which can be freely arbitrated in most jurisdictions are
related to problems of ownership, infringement of rights, transfer or violation of the patent
involved.

5. Illegality and Fraud

In this area, the principle of separability plays an important role. On the basis of this
principle, even if this hypothesis is not largely accepted, a dispute can still be arbitrable even if the
main contract is suspected to be illegal, which breaks the bound between arbitrability and validity of
the contract once again. However, some divergent opinion appeared, especially in the context of
United States embargoes. This dualism is perfectly illustrated in the examples presented below.

J. Lew analyses two cases involving the Iraq embargo legislation, where two different
courts, namely the Italian and the Swiss court, came to different rulings. In the Italian Fincantieri

88
J. Lew, Comparative International Commercial Arbitration, 2001st Edition; Blessing, Arbitrability of
Intellectual Property Disputes apud J. Lew, Comparative International Commercial Arbitration, 2001st
Edition.
27
case89, some Italian providers of army technology had entered into contracts with agencies of the
Republic of Iraq for the supply of corvettes for the Iraqi Navy. When the embargo was declared by
the European Union, the dealings with Iraqi became automatically illegal. At a later time, the Italian
party commenced proceedings against the Iraqi party in front of ordinary courts, but the respondent
in this dispute objected to the court’s jurisdiction and asked for the dispute to be referred to
arbitration as the contract stated. The Court of Appeal rules that Italian courts have jurisdiction over
the case, because the dispute was not arbitrable under the applicable Italian and European embargo
legislation, having the same opinion as the Italian party who alleged that this law prescribes rights
of which the parties cannot freely dispose, even if they are contractual rights.

However, the Swiss Supreme Court came to the opposite conclusion in a similar dispute. It
stated that “the arbitrability of the dispute does not depend on the material existence of the claim.
Thus, it cannot be denied for the only reason that mandatory provisions of law or a given material
public policy make the claim null and void or its execution impossible; it could be denied only as
far as the claims are concerned which should have been heard exclusively by a State court,
according to provisions of law which were to be taken into consideration for reasons of public
policy. This is not the case here. The commercial measures taken against the Republic of Iraq arise
indeed the issue of the validity of the contracts concluded before these measures were taken, or the
issue of the subsequent impossibility to perform under the named contracts. It does not seem,
however, and in any case do not prove, that all this must lead us to find that the claims arising out of
related contracts, like the agency contract or the ones on which M. bases his claims, are not
arbitrable.”90

When it comes to fraud, there exists a legal system which made things clear in this aspect.
The U.S. Supreme Court decided, in Prima Paint Corporation v. Flood & Conklin Mfg Co 91 case,
that even if the claim is arising out of a contract induced by fraud, the dispute is arbitrable in the
absence of any evidence that the parties excluded arbitration as dispute resolution mechanism for
their dispute.

6. Bribery and Corruption

The 1993 ICC case 1110 states that bribery cases are not arbitrable, because bribery not only
affects the main contract, but even turns the dispute into a non-arbitrable one. The rationale behind

89
Fincantieri–Cantieri Navali Italiani S.P.A. and Oto Melara S.P.A v. Ministry of Defence, Armament and
Supply Direcorate of Iraq, Republic of Iraq, 1994.
90
J. Lew, Comparative International Commercial Arbitration, 2001st Edition, p. 212, 9-73.
91
Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967).
28
this is that such disputes involve a criminal element and they must be referred to national courts
which have the possibility to conduct the investigation more efficiently.

However, the new tendency is to accept arbitration as a dispute resolution mechanism even
in cases of bribery and corruption. This new viewpoint relies on the principle of separability,
according to which bribery and corruption affects only the main contract. Moreover, national courts
still have a controlling power over arbitral awards rendered in these cases as enforcement is sought
in front of them.

The case-law is decisive in this direction, too. For instance, in the Westacre v. Jugoimport 92
case, the arbitral tribunal made a strong case for the principle of separability and the capacity of
illegality to transform an arbitration agreement into a void one. In addition, the arbitration
agreement expressly stated that it was entitled to decide on an allegation of bribery.

It is important to point out that, by allowing arbitral tribunals to deal with disputes involving
allegations of bribery, it does not generally lead to a public policy problem, in a sense that illegal
contracts will automatically be enforced. As a general rule, arbitral tribunals have refused to enforce
proved illegal contracts and, where the awards were wrongly issued, courts had the possibility to
refuse enforcement themselves. 93

Nevertheless, contracts can still be enforced, in certain cases, even if they are illegal. It is a
problem of procedural law, because courts go behind the facts established by the arbitral tribunals
only when rules of ascertaining the facts have been violated, but sometimes the facts may be
established wrongly from the beginning. In England, this treat is considered of less importance than
sustaining the parties’ agreement to arbitrate their disputes, but in other legal systems, for example
in Pakistan, it is the other way around. 94

It may appear that international arbitration is paving the way to enforce illegal contracts, but
the importance arbitration has for the business community is worth assuming this risk. For instance,
investment is a domain where arbitration became the only imaginable dispute resolution mechanism
as the foreign investor cannot obtain a fair chance to present his case otherwise. In such cases, it is
better to prevent the appearance of errors in the determination of facts by arbitral tribunals, so that
no illegal contract will be enforced.

92
United Kingdom / 12 May 1999 / England and Wales, Court of Appeal / Westacre Investments Inc v.
Jugoimport-SDRP Holding Co Ltd / QBCMI 1998/0485/3.
93
See, e.g., ICC case no 3913, 111 Clunet 920 (1984); ICC case no 3916 (1982), 111 Clunet 930 (1984)
apud idem, p. 2017.
94
J. Lew, Comparative International Commercial Arbitration, 2001st Edition, p.217, 9-87.
29
 7. Investment Contracts relating to Infrastructure and Natural Resources

The reasoning behind considering disputes arising out or in connection to these types of
contracts as being non-arbitrable states in the sovereign power of states over infrastructure and
natural resources. However, this opinion can lead to disadvantageous contracts between states
entities and investors, because states have the possibility to easily breach the agreement they
concluded in this domain. So, some countries already changed their view regarding this field and
adopted laws which allow arbitration in these types of contracts.95

Section 2. Exclusive jurisdiction of national courts

Regarding the exclusive jurisdiction of national courts, there can be registered an

evolutionary process. Similar to the issue of public policy, in this field, any matter subject to the
exclusive jurisdiction of national courts was considered non-arbitrable, because it was perceived as
something parties could not freely dispose of. Such an example is the validity of shareholders’
meetings according to Spanish law, which, before 8 April 1998 when the case-law changed, was a
non-arbitrable matter, because courts mentioned in the Corporation Act 96 had exclusive jurisdiction
to hear such cases.

Nowadays, in most jurisdictions, it is believed that, even if a court is pointed as being

competent to hear certain disputes, this fact does not necessary exclude arbitration. 97 It is important
to point out that today the exclusive competence of courts is not an intrinsic component of
arbitrability, because, in most systems of law, the matters considered important for the states are
expressly excluded from the competence of arbitral tribunals and leaved to be decided by national
courts or other administrative bodies. 98

95
Idem, p. 2019, 9-92; See also Kroeger, Kauz, Acikel, Turkey Revisited: Developments in Energy Project
Arbitration in the context of Bilateral Investment Treaties and ICSID apud ibidem.
96
Spanish Corporation Act of 1951 (Ley de Sociedades Anonimas), Art. 70.2. and Art. 118 Ley de
Scoedades Anonimas 1989.
97
For French Law: Nathalie Coipel-Cordonnier, Les Conventions d’arbitrage et d’election de for en droit
international prive (LGDJ 1999); But, for Portuguese Law: Art. 1.1 Arbitration Act of Portugal 1986, which
considers the exclusive competence of Courts as a component of arbitrability; and Arbitration Act of
Guatemala of 1995, that considers matters inarbitrable those subject to a special process apud idem.
98
For example, Swiss law reveals that the exclusive competence of the Courts is a limit to arbitrability in
domestic arbitration but not in international commercial arbitration. See Marc Blessing, Introduction to
Arbitration-Swiss and International Perspectives, in International Arbitration in Switzerland: An
Introduction to and a Commentary on Articles 176-194 of the Swiss Private International Law Statute,
Stephen V. Berti (ed), (Helbing & Lichtenhahn/Kluwer 2000). The opposition solution in Croatia, Art. 3.2
Arbitration Act 2001, where the exclusive competence is a limit to arbitrability in international commercial
arbitration. Same solution in regard to both domestic and international commercial arbitration in Argentina,
see Horacio A. Grigera Naon, Public Policy in International Commercial Arbitration: An Argentine View, in
30
 The European legal order has a special regulation which needs to be taken into account. The
Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the recognition and
enforcement of judgements in civil and commercial matters99 states in Art. 22(2) that validity of the
constitution, the nullity or the dissolution of companies or other legal persons or associations of
natural or legal persons, or the validity of the decisions of their organs, should be rendered
exclusively by the courts. Art. 22(4) has similar provisions, providing the exclusive jurisdiction of
the courts for matters concerning the registration or validity of patterns, trademarks, designs, or
other similar rights requires to be deposited or registered.100

Section 3. The impact on third parties

Generally, it is considered that a dispute is non-arbitrable when the rights of a third party are
affected, considering the impact they have on that party which is not involved in any way into the
dispute. The main argument involved the effects of the arbitral award, namely, the inter partes
effect. According to this effect, the decisions of the arbitrators can bind only the parties involved in
the dispute and not the third parties. Moreover, the arbitral award is rendered on the base of an
arbitration agreement concluded by the parties and the third party did not even consented to that
agreement. This argument is especially important for corporate disputes, because, in such cases, the

Comparative Arbitration Practice and Public Policy in Arbitration: ICCA Congress Series no. 3 (Kluwer Law
and Taxation Publishers 1986) apud idem.
99
Official Journal 16 January 2001, L 12/1.
100
Article 22 of the Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the
recognition and enforcement of judgements in civil and commercial matters: “The following courts shall
have exclusive jurisdiction, regardless of domicile:
1. in proceedings which have as their object rights in rem in immovable property or tenancies of immovable
property, the courts of the Member State in which the property is situated.
However, in proceedings which have as their object tenancies of immovable property concluded for
temporary private use for a maximum period of six consecutive months, the courts of the Member State in
which the defendant is domiciled shall also have jurisdiction, provided that the tenant is a natural person and
that the landlord and the tenant are domiciled in the same Member State;
2. in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of
companies or other legal persons or associations of natural or legal persons, or of the validity of the decisions
of their organs, the courts of the Member State in which the company, legal person or association has its seat.
In order to determine that seat, the court shall apply its rules of private international law;
3. in proceedings which have as their object the validity of entries in public registers, the courts of the
Member State in which the register is kept;
4. in proceedings concerned with the registration or validity of patents, trade marks, designs, or other similar
rights required to be deposited or registered, the courts of the Member State in which the deposit or
registration has been applied for, has taken place or is under the terms of a Community instrument or an
international convention deemed to have taken place.
Without prejudice to the jurisdiction of the European Patent Office under the Convention on the Grant of
European Patents, signed at Munich on 5 October 1973, the courts of each Member State shall have
exclusive jurisdiction, regardless of domicile, in proceedings concerned with the registration or validity of
any European patent granted for that State;
5. in proceedings concerned with the enforcement of judgments, the courts of the Member State in which the
judgment has been or is to be enforced.”
31
other shareholders, who are not part to the arbitration agreement and did not participate in the
dispute finalised with an arbitral award, can obtain another award, if they have a legitim interest.
The legislator can even impose the creation of a public registry in order to recognise an award erga
omnes, but it can be a real limitation to the submission of certain disputes to arbitration.

A relevant example can be found in the Spanish legislation, which provides in Art. 222(3) of
Spanish Civil Procedure Code that a decision of a court binds all the shareholders even those who
did not participate in the court proceedings. However, these provisions do not affect arbitrability,
but rather some procedural aspects of the dispute. The recognition of the erga omnes effect can be
turned into a limitation to arbitrability in the Italian law system, which imposes a mandatory
procedure even when the dispute is international. 101

CHAPTER IV. THE LACK OF ARBITRABILITY. THE THEORY OF INARBITRABILITY

Two important theoretical opinions govern the theory of inarbitrability. The first one
considers inarbitrability as a matter of validity of the arbitration agreement, meaning that a non-
arbitrable arbitration agreement is by default null and void. 102 The second one indicates that
inarbitrability is an issue of jurisdiction rather than a problem of the validity of the agreement.

Even if the first theory is based on good arguments, the second one finds more support from
a practical point of view. For example, the New York Convention is providing a difference between
inarbitrability and invalidity, affirming the two concepts in different articles of the convention.
Whereas inarbitrability is provided as a ground for non-enforcement in Art. V(2)(a), the invalidity
of the arbitration agreement is stated in Art. V(1)(a). Moreover, in many arbitration laws,
inarbitrability is not a condition required for the arbitration agreement, such as the UNCITRAL
Model Law Art. 7, the English Arbitration Act 1996 s. 6, the German ZPO s. 1029 or the Swiss
PILA Art. 178.103

101
See M. Perales Viscasillas, Arbitrability in (Intra-) Corporate Disputes, in Arbitrability: International &
Comparative Perspectives, Loukas A. Mistelis, p. 290, 14-29; Art. 35 Legislative Decree of 17 January
2003, no. 5 as amended by Legislative Decree of 6 February 2004, no. 37, Title V – On Arbitration.
102
B. Hanotiau, What law governs the issue of arbitrability?: “Arbitrability is indeed a condition of validity
of the arbitration agreement and consequently, of the arbitrators’ jurisdiction.”; Switzerland, Federal
Tribunal, 23 June 1992, Fincantieri- Cantieri Navali Italiiani and Oto Melara v. M and arbitration tribunal:
“Arbitrability is a requirement for the validity of the arbitration agreements”; Cf. J. Lew, L. Mistelis & S.
Kroll, Comparative International Commercial Arbitration, (Kluwer 2003): “though arbitrability is often
considered to be a requirement for the validity of the arbitration agreement it is primarily a question of
jurisdiction”.
103
S. Brekoulakis, Arbitrability – Persisting Misconceptions & New Areas of Concern, in Loukas A.
Mistelis, Arbitrability: International & Comparative Perspectives.
32
 However, it must be considered that any arbitration agreement is a contract with two main
characteristics, the contractual one and the jurisdictional one. Hence, arbitration agreements differ
from ordinary contracts because they offer to an arbitral tribunal the power to decide over a dispute,
excluding the jurisdiction of national courts.

It is true that the two characteristics named above are interconnected, but, according to the
legal scholar S. Berkoulakis104, the jurisdictional character has a wider scope, because it depends on
more factors than the validity of the arbitration agreement. Lots of examples can be given to sustain
this opinion, such as the fact that an arbitral tribunal cannot have jurisdiction, even if the arbitration
agreement is valid, because the claim has already been resolved by a decision of a national court, or
because the claim falls outside the scope of the arbitration agreement.

Thus, arbitrability is a condition related more to the jurisdictional aspect of the arbitration
agreement than a condition of validity of that agreement. If the arbitral tribunal finds that it does not
have jurisdiction and it cannot determine the merits of the claim, it does not mean that the
arbitration agreement is null and void. Moreover, it can be difficult to determine at the moment of
conclusion of the arbitration agreement if a dispute is arbitrable or not, because the disputes
connected to the contract or which may arise out of that contract can vary so much one cannot
anticipate them. For example, if an arbitration agreement is concluded in relation with a contract
including even labour law, the arbitral tribunal may decline jurisdiction over a certain dispute and
rule on the merits in case of another type of dispute, this meaning that the arbitration agreement
remains valid and active either way.

The conclusion that can be drawn from the above analysis is that inarbitrability is not a
condition of validity of the arbitration agreement, but a condition of jurisdiction of an arbitral
tribunal. It is important to point out that the terminology used by legislators can help the interpreters
of law to determine if, in a particular legal system, arbitrability and, implicitly, inarbitrability are
aspects concerning jurisdiction or validity. For example, the Swiss PILA 105 and the German ZPO106
uses the term “dispute” and “claim” when stating about arbitration, which makes the interpretation
very clear, whereas the New York Convention uses the term “subject-matter”, creating confusions
between the terms.

Taking into consideration the facts presented above, it is important to mention and to
observe the power states have in deciding which matters are arbitrable and which one are not. Each
state makes this decision in accordance with its economic and social policy, the arbitration-friendly

104
Idem.
105
Art. 177: “Any dispute involving property…”.
106
S. 1030 (1): “Any claim involving an economic interest”.
33
states having the advantage to have a more prosper economy, because they attract more arbitration
users.

The lack of arbitrability resulting from the policy towards arbitration can have a serious
visible negative impact on the economic development of a state. This negative impact can be more
proper analysed through the analyzation of the positive impact arbitrability can have on another
state’s economy. An important example can be extracted from the field of investment law, where
arbitration was implemented to protect both the investor and the host state, and this industry as a
whole.

In fact, countries worldwide, in this field and in many others, had to develop a judicial
mechanism which could facilitate the transfers between locals and strangers from other countries,
which bring with them a different commercial and legal background. So, there was a need for a
legal mechanism independent from the already existing public institutions which the foreigners
could not trust, because there existed a suspicion of national governmental interference into the
operations and decisions of such institutions.

In economics, it is commonly known the beneficial relation between a foreign direct

investment (FDI) and economic growth and arbitration as the mechanism invented in order to
facilitate the creation of such a relation. The reason behind this economic growth relies on the
transfer of technology and capital in the host country which increases the production capacity of
this country.

Another important world area which can be taken into consideration when talking about
economic growth and the disadvantage of considering a certain matter non-arbitrable is Latin
America. According to researchers107, international arbitration has indeed a positive effect on
economic growth, even if the number of arbitration processes are not too big. However, the most
important determinant is the average duration of an arbitration process in a country. Hence, a state
which, in the need to protect its public interests, imposes a large number of matters as being non-
arbitrable will not have the same economic growth as a state which understands the importance of
international commercial arbitration and acts in accordance with these considerations.

Considering these advantages of arbitrability over the economy of a state, one is entitled to
question the rationale states have when stating the inarbitrability of certain types of disputes. The
main issue seems to be the belief that arbitration of public law cases can injury society, because
public law problems are too complicated for arbitrators, the proceedings are too informal, and

107
Juan Santiago Correa, Edgardo Cayon Fallon, Does international arbitration affect economic growth in
Latin America?, in WSEAS Transactions on Business and Economics, January 2018.
34
“arbitrators are like foxes guarding the chicken coop, with a pro-business bias that will lead to
under-enforcement of laws designed to protect the public. Lack of appeal on the merits of arbitral
awards in the United States makes arbitration seem to some as a “black hole” to which the rights are
sent and never heard from again” 108. The legal scholars L.A. Mistelis and S.L. Brekoulakis
expressed the opinion that the existence of a vast majority of disputes regarding public law
excluded from arbitration has the basis on the belief that arbitration is not controlled by the state
and it goes against sovereign dignity109. This was the point when states started to develop a non-
arbitrability doctrine, in an attempt to protect the rights of individuals and the interests of the state
itself.

The non-arbitrability doctrine was implemented by the Wilko v. Swan110 decision of the
U.S. Supreme Court. This decision was seen as a mandate to not recognize any pre-dispute contract
to arbitrate a claim that was “of a character inappropriate for enforcement by arbitration” 111. All
these aspects lead to a big problem in the centre of which was the public interest in the enforcement
process and the supposition that arbitration is unfair and does not provide for the parties sufficient
professional competence. This opinion has no limit as all regulations can be understood to some
extend as serving the functions of society. In the U.S., where the doctrine was created, courts tended
to apply it to a very large variety of contracts, invalidating almost any pre-dispute arbitration
agreements.112

Nowadays, things are not so harsh as they were back in the days when the Wilko v. Swan
decision was rendered, but inarbitrability is still determinant for the subject-matters excluded by a
national legislator from the competence of arbitral tribunals. Hence, inarbitrability is a concept
strongly connected to public policy and mandatory rules, fact which does not mean that parties are
not free to refer any claim to arbitration. They have the right to do so, the exception being the
matters preserved for the exclusive competence of national courts. However, it does not mean that
when a dispute involves issues of public policy, that dispute does automatically lacks arbitrability.

108
WW Park, National law and Commercial Justice, Safeguarding procedural integrity in International
Arbitration, Tulane Law Review, 1989; M. Lourens, The issue of “Arbitrability” in the context of
international commercial arbitration, South African Mercantile Law Journal, 1999.
109
L.A. Mistelis and S.L. Brekoulakis, Arbitrability: International & Comparative Perspectives, Kluwer
Law International, 2009.
110
Wilko v. Swan, 346 U.S. 427 (1953).
111
Am. Safety Equip. Corp. v. J.P. Maguire & Co., 391 F.2d 821, 825 (2d Cir. 1968) (internal quotation
marks omitted) (quoting Wilko v. Swan, 201 F.2d 439, 444 (2d Cir. 1953), rev’d, 346 U.S. 427 (1953),
overruled by Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477 (1989)) (“[W]e conclude that
the antitrust claims raised here are inappropriate for arbitration.”).
112
David Horton, Arbitration and Inalienability: A Critique of the Vindication of Rights Doctrine, Kansas
Law Review.
35
For example, the competition law disputes are arbitrable most of the times even if they include
problems of public policy. 113

Even the New York Convention distinguishes the concept of non-arbitrability from the one
of public policy. They are established separately in the Article V (2) (a) and Article V (2) (b). This
is the basis of the difference between the doctrine of non-arbitrability and the doctrine of public
policy. The first one provides that, in accordance with the will of a state, a subject-matter is
excluded from arbitration, meaning that the parties cannot obtain a binding award through
arbitration. The public policy doctrine, on the other hand, means that, if a certain award rendered by
an arbitral tribunal contradicts public policy, it cannot be enforced in that particular state.114

Nevertheless, it is important to point out that some domestic arbitration laws still hold on the
idea of public policy forbidding arbitration, fact that makes the judicial process an unclear one, and,
as it was presented above, prevents the state’s economy to grow.115 This is the reason why the case-
law is important for the supporting process of arbitration as a dispute resolution mechanism.

So, the French Court stated in Ganz 116 and Labinal117 that “…the arbitrators have
jurisdiction to rule on the arbitrability of the dispute which is submitted to them, having regard to
the notion of international public policy, and if they conclude that the dispute is arbitrable they may
apply rules that are relevant to the dispute, regardless of whether these are public policy rules” 118,
confirming again that, when determining the arbitrability of a dispute, public policy is not relevant
for the arbitrators. The Swiss court ruled in the same direction, stating that a dispute concerning the
validity or termination of a contract may be arbitrable despite the fact that one of the parties bring
up arguments that rely on public policy considerations.119

On the other side of the coin are the legal scholars who still believe that public policy is an
influential criterion in the determination of a matter as being arbitrable or not. The main argument
used by the opponents of arbitrability of public policy issues regards procedural aspects, such as the
laconic reasoning of the arbitral award or the less stable fact-finding process found in arbitration
proceedings. Even some courts took this position in their decisions, for example, the U.S. Supreme

113
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., (1985) 473 U.S. 614, 626-27 (U.S. S. Ct).
114
Gary B Born, International Commercial Arbitration, Kluwer Law International, 2009.
115
L A Mistelis and S L Brekoulakis, Arbitrability: International & Comparative Perspectives, Kluwer Law
International, 2009.
116
Ganz, 1991 Court of Appeal of Paris in Kirry, Arbitrability: Current Trends in Europe, Arbitration
International, Vol 12, Nr. 4, 1996, p. 376.
117
Labinal, 1993 Court of Appeal of Paris in Kirry, Arbitrability: Current Trends in Europe, Arbitration
International, Vol 12, Nr. 4, 1996, p. 376.
118
Kirry, Arbitrability: Current Trends in Europe, Arbitration International, Vol 12, Nr. 4, 1996, p. 376
119
Ampalgas, 1975 Chambre des Recours du Canton de Vaud; (1981) Journal des tribunaux III, 71.
36
court which ruled that “…the fact-finding process in arbitration usually is not equivalent to judicial
fact-finding. The record of arbitration proceedings is not as complete; the usual rules of evidence do
not apply; and rights and procedures common to civil trials, such as discovery, compulsory process,
cross-examination, and testimony under oath, are often severely limited or unavailable” 120. Another
decision of the same court states that “an arbitral awards can be made without explanation of
reasons and without development of a record, so that the arbitrator’s conception of out statutory
requirement may be absolutely incorrect yet functionally unreviewable, even when the arbitrator
seeks to apply our law”121. However, it is important to point out that this dispute resolution
mechanism is conform to the fundamental principles of a due process and are under the umbrella of
the Article 6 of the European Convention of Human Rights, which transforms arbitration into a
perfectly tailored method of dispute resolution, having all the necessary rigid safeguards and fair
proceedings.122

Starting from this premise, it is important to understand if the arbitrators have all the duties
of judges, as arbitration seems to have all the characteristics of a normal court proceeding. There
exist many opinions which contradict this hypothesis, saying that arbitrators do not have the same
high ability to rule, especially in matters regarding public policy issues. In the American Safety
Equipment Corp. v. J.P. Maguire & Co. 29 the U.S.123 the court affirmed that: “… decisions as to
antitrust regulation of business are too important to be lodged in arbitrators chosen from the
business community-particularly those from a foreign community that has had no experience with
or exposure to our law and values”. An even bigger distrust towards arbitrators can be observed in
University Life Insurance Co. v. Unimarc Ltd.124 decision: “… antitrust issues are considered to be
at once too difficult to be decided competently by arbitrators- who are not judges, and often not
even lawyers- and too important to be decided otherwise than by competent tribunals”. Moreover,
arbitrators are often pictured as unable to resolve the disputes between the parties of unequal
bargaining powers, whereas consumers or employees are often presented as weak parties contrary to
the entrepreneurs who, by “forcing” to sign arbitration agreement, deprive them of the access to
courts. The reasoning behind this approach is that arbitrators, being private judges, are more
sympathetic to private companies and will not address properly the interests of weaker parties.
Weaker parties are said to have no real options other than to accept arbitration since due to the fact

120
Alexander v. Gardner-Denver Company 415 US 60 (1974).
121
Scherk v. Alberto-Culver Co. (1974). 417 US 506, S. Ct.
122
Dr. Beata Kozubovska, Trends in Arbitrability.
123
American Safety Equipment Corp., Plaintiff-appellant, v. J. P. Maguire & Co., Inc., a Delaware
Corporation, Defendant-appellee.american Safety Equipment Corp., Plaintiff-appellant, v. Hickok
Manufacturing Co., Inc., Defendant-appellee, 391 F.2d 821 (2d Cir. 1968), US Court of Appeals for the
Second Circuit - 391 F.2d 821 (2d Cir. 1968).
124
University Life Insurance Co v Unimarc Ltd 699 F 2d 846 (CA7 1983).
37
that a growing amount of commercial parties are adopting arbitration clauses, and other parties have
no choice but to accept them while signing job contract or entering into the purchase of goods or
services contracts. It is said that arbitrators being privately funded might favour the ones who will
come back in order to assure that they will opt in for arbitration in the future. “How much profit it
and individual arbitrators make depends on how often they work. Thus, an almost symbiotic
relationship exists between the arbitrator and repeat-player”.125

The opinions presented in these decisions do not support their arguments, because public
policy can be both an enemy and an ally in such cases. These public policy rules which protect the
interest of a party have clear terms and do not leave space for misinterpretations. “For instance,
statutory rights of the consumers as to the period of time for returning unwanted goods is clearly
stated and not expressed as abstract norm.”126 Hence, it is obvious that any arbitrator would take
into account the public policy rules of the country where the award might be enforced, if not from a
moral duty, then from a legal one.

Arbitrators have the duty to render enforceable awards, it is a fundamental principle in

international arbitration. The legal scholar J. Lew stated that “the ultimate purpose of an arbitration
tribunal is to render an enforceable award” 127. Moreover, this principle finds support in Article 42
of the ICC Rules, which stipulates that “the arbitral tribunal shall act in the spirit of the Rules and
shall make every effort to make sure that the award is enforceable at law”. 128 So, arbitrators will
never ignore a particular state policy when rendering a decision, which turns arbitration, once again,
into a trustworthy legal institution.

To summarize, arbitrators are acting like judges in most of the cases, having a duty to render
awards that can be enforced in determined countries and, automatically, the duty to respect
mandatory rules of certain states. A legitimate question which arises is if, when facing a problem of
non-arbitrability, the arbitrators have the duty to invoke it ex officio.

Even if in the majority of cases the problem of non-arbitrability is raised by a party seeking
to preclude arbitration, there are cases when the parties do not invoke this issue, for different
reasons, acting in good or bad faith. For instance, parties can have an interest in having their dispute
settled through arbitration in the situation of an illegal conducted contract. In these cases, the

125
A Brafford, Arbitration Clauses in Consumer Contracts of Adhesion: Fair Play or Trap for the Weak and
Unwary?, 21 Journal of Corporate Law 332, 1995-1996, p. 1257.
126
Dr. Beata Kozubovska, Trends in Arbitrability.
127
Julian D.M. Lew, The Law Applicable to the Form and Substance of the Arbitration Clause, in Albert Jan
van den Berg (ed.), Improving the Efficiency of Arbitration Agreements and Awards: 40 Years of
Application of the New York Convention, ICCA Congress Series, 1998 Paris Volume 9 (Kluwer Law
International 1999), p. 114-145.
128
International Chamber of Commerce Arbitration Rules, in force March 2017.
38
question whether the arbitral tribunal is entitled to invoke inarbitrability ex officio, even if the
parties did not challenge the jurisdiction of that tribunal, seems legitimate. It is important to
consider also that the problem of inarbitrability can be raised in different stages of the proceedings,
namely either in front of the arbitral tribunal itself and in front of the court in front of which the
enforcement is sought. When one finds itself in the last stage, meaning in the stage of the
enforcement of the award, the solution can be found in the dispositions of the New York
Convention129. According to Article V (2), the enforcement of an arbitral award might be refused if
the subject-matter of the dispute is not capable of settlement by arbitration under the law of that
country, or the enforcement would be contrary to the public policy of that country.

In the first stage of the proceedings, things are not so clear, the principal argument against
the ex officio duty to invoke inarbitrability being that the will of the parties should prevail for the
arbitral tribunal which must render an award irrespective of the fact that it will not be enforced after
that. However, there exist decisions where it was stated in favour of the duty to invoke
inarbitrability.

Hence, in the ICC case 1110130 was stated: “In this respect both parties affirmed the binding
effect of their contractual undertaking and my competence to consider and decide their case in
accordance with the terms of reference. However, in the presence of a contract in dispute of the
nature set out hereafter, condemned by public decency and morality, I cannot in the interest of due
administration of justice avoid examining the question of jurisdiction on my own motion.”

To sum up, the preferred opinion is in favour of the duty of the arbitral tribunal to have
initiative in deciding over its own jurisdiction in the situation of a non-arbitrable dispute because of
the nature of the subject-matter. It finds support in the application of the law to the facts, because an
arbitral tribunal must rely on both the freedom of the parties to decide the provisions applicable to
the merits and on the mandatory rules governing the issue of arbitrability. As J. Lew stated “the
arbitral tribunal, despite being a creation of the parties, not only owes a duty to the parties, but also
to the public”.131 Moreover, it is important to understand that the popularity of arbitration as a
dispute resolution mechanism relies especially on its ability to exclude the intervention of national
courts during and after it took place. It can happen only if the arbitrators are aware of the
importance of public policy rules when rendering an award. It implies that arbitrators shall exercise
the above-named duty so that the parties cannot later refuse the voluntary enforcement of the award.

129
See also Model Law, Articles 34(2)(b), 36(1)(b).
130
ICC case no. 1110, Argentine engineer v. British company, 3 Arb. Int. 282 (1987) with note Wetter, 10
Arb. Int. 277 (1994), XXXI YBCA 47 (1996).
131
Julian D.M. Lew, Comparative International Commercial Arbitration, 2001st Edition.
39
CHAPTER V. ARBITRABILITY AND THE SETTING ASIDE PROCEDURE

First of all, some specifications regarding terminology shall be made. According to legal
scholars,132 there are multiple terms which defines the same procedure, meaning that the legal term
“set aside” is synonym to other terms, such as “challenge”, “annul”, “recourse”, or “review”. These
terms are used interchangeably. For instance, the UNCITRAL Model Law uses the term “recourse”
and “set aside” in Article 34, in Article 190 of the Swiss PIL is used the term “setting aside” and the
U.S. FAA Section 10 use the term “vacation”.

In arbitration, the premise of a challenging procedure is the dissatisfaction of a party towards

the arbitral award or its reluctant attitude towards it. If a party finds itself in one of these situations,
it has three options. It can make an appeal against the award, if the applicable law allows it, can
challenge the award in the courts of the rendering place of the award, or can seek to resist
enforcement in the moment the successful party initiates the enforcement proceedings. In the first
two situations, the unsuccessful party is the most important actor, because it invokes the challenging
grounds, but in the third case, it has to wait for the initiation of the enforcement proceeding by the
successful party. The decisional forum is different, because it may depend on the will of the
successful party or it may be the forum from the place where the awards was rendered.

Hence, the first option a party has to look for when challenging an award is the permission
to request an appeal. The applicable law or the arbitration rules are the legal documents which may
permit it. In some cases, even the arbitration agreement itself may provide this possibility. 133 It is
not common in commercial arbitration, but it is a used practice in GAFTA commodity
arbitrations.134 According to its rules, the parties have the right to appeal to a Board of Appeal135
within 30 days after the award was rendered. 136

It is notable that most arbitration regulations allow the appeal of final decisions compelling
arbitration, but prohibits the appeal of similar interlocutory orders. For instance, the FAA section 16
provides that the issue of arbitrability of a dispute may be resolved by a U.S district court and, if

132
Idem.
133
See, e.g., Netherlands, CCP Article 1050(1); Argentina, CCP Article 763; Peru, Decree no 25935 of 1992
Article 54(2); Also J. Lew, Comparative International Commercial Arbitration, 2001st Edition, p. 664.
134
See also Court of Arbitration for Sports Ad Hoc Rules Article 20(c)(iii).
135
Consisting of three members of the Association if the award was made by a sole arbitrator or five
members if the award was made by three members tribunal. See further GAFTA rule 11; J. Lew, op. cit.
136
GAFTA rule 10(1).
40
this court rules in favour of arbitration, the decision may be appealed only when the award is
final.137

The term “final order” was defined in Sphere Drake Insurance PLC v. Marine Towing,
Inc.138 as the one that “ends the litigation on the merits and leaves nothing for the court to do but
execute the judgment”.139 This decision is important for the issue of arbitrability because it provides
an essential distinction between embedded and independent proceedings. 140 These are the
characteristics analysed when a court has to determine if an award is final or interlocutory. As a
general rule, when the only issue raised before a court is arbitrability, the action is considered
independent, and, in such cases, the court renders a final award. However, if the action contains
multiple claims, including arbitrability, its ruling is considered interlocutory and not final. 141

Legal scholars considered the distinction made above as being of real importance since
Section 16142 “fails to address one of the most important of the situation in which the appellate
process has been impeding arbitration: the independent proceeding brought into court to test
arbitrability”. 143

137
9 U.S.C. § 16 (1994) provides: (a) An appeal may be taken from - (1) an order- (A) refusing a stay of any
action under section 3 of this title, (B) denying a petition under section 4 of this title to order arbitration to
proceed, (C) denying an application under section 206 of this title to compel arbitration, (D) confirming or
denying confirmation of an award or partial award, or (E) modifying, correcting, or vacating an award; (2) an
interlocutory order granting, continuing, or modifying an injunction against an arbitration that is subject to
this title; or (3) a final decision with respect to an arbitration that is subject to this title. (b) Except as
otherwise provided in section 1292(b) of title 28, an appeal may not be taken from an interlocutory order -
(1) granting any stay of any action under section 3 of this title; (2) directing arbitration to proceed under
section 4 of this title; (3) compelling arbitration under section 206 of this title; or (4) refusing to enjoin an
arbitration that is subject to this title.
138
16 F.3d 666 (5th Cir. 1994).
139
Brian T. McCartney, Rethinking Appeal of Arbitrability Decisions: When to Review That Which Long
Process Could Not Arbitrate - F.C. Schaffer & (and) Associates, Inc. v. Demech Contractors, Ltd., 1997 J.
Disp. Resol. (1997).
140
Brian T. McCartney, Rethinking Appeal of Arbitrability Decisions: When to Review That Which Long
Process Could Not Arbitrate - F.C. Schaffer & (and) Associates, Inc. v. Demech Contractors, Ltd., 1997 J.
Disp. Resol. (1997).
141
Idem.
142
Section 16 of the U.S. Code provides that: “(a)An appeal may be taken from—(1)an order— (A) refusing
a stay of any action under section 3 of this title, (B) denying a petition under section 4 of this title to order
arbitration to proceed, (C) denying an application under section 206 of this title to compel arbitration, (D)
confirming or denying confirmation of an award or partial award, or (E) modifying, correcting, or vacating
an award; (2) an interlocutory order granting, continuing, or modifying an injunction against an arbitration
that is subject to this title; or (3) a final decision with respect to an arbitration that is subject to this title.
(b)Except as otherwise provided in section 1292(b) of title 28, an appeal may not be taken from an
interlocutory order— (1) granting a stay of any action under section 3 of this title; (2)
directing arbitration to proceed under section 4 of this title; (3) compelling arbitration under section 206 of
this title; or (4) refusing to enjoin an arbitration that is subject to this title.”
143
See David Siegel, Practice commentary apud Brian T. McCartney, Rethinking Appeal of Arbitrability
Decisions: When to Review That Which Long Process Could Not Arbitrate - F.C. Schaffer & (and)
Associates, Inc. v. Demech Contractors, Ltd., 1997 J. Disp. Resol. (1997).
41
 On the other hand, if the law or the arbitration agreement does not provide the possibility to
set aside an award through an appeal procedure, the unsatisfied party may seek another option and
go to the courts from the place of arbitration to obtain a setting aside award. In such cases, the claim
will be governed by the national law in discussion. For example, the Singapore IAA provides in
Article 34(2)(b) of the First Sched that arbitral awards may be challenged before the Singapore
courts if the courts find that the subject-matter of the dispute is not capable of settlement by
arbitration under the law of Singapore or if the award is in conflict with the public policy of the
State.144 These provisions follow the UNCITRAL Model Law, which mirrors the New York
Convention clauses. However, even if the grounds for setting aside are provided by law, parties are
free to provide in their arbitration agreement to what extend the legal provisions from the place of
arbitration are available for their arbitration.

As it may result from the points made above, arbitration laws or international conventions
are important legal instruments for the challenging procedure in arbitration. The grounds for this
procedure are provided by these documents and the party introducing an action of setting aside must
prove one of these exclusive grounds. The named party has to use the arguments and the standards
of proof required by these laws for the particular grounds invoked. 145 The majority of grounds146
can be raised only by the party invoking them, but some reasons may be invoked also by the court
itself, especially when the procedure involves a dispute which is not capable of settlement by
arbitration or violates public policy. 147

Under the New York Convention, arbitrability appears to be essential only for the last and
most practical option an unsatisfied party has to set aside an award, meaning to resist the
enforcement of that award. However, the understanding of arbitrability under the convention is
covering also the first two options, because they are interrelated procedures which do not exclude
each other.

According to the Convention, when a national court is asked to enforce an arbitral award,
the arbitrability of that award is decided ex officio and in accordance with the provisions of the
judge’s lex fori. 148 Hence, if the lex fori gives exclusive jurisdiction to national courts over that

144
Bernard Haanotiau, The Law Applicable to Arbitrability, Singapore Academy of Law Journal 2014.
145
See, e.g., Model Law Article 34(2)(b); China, Arbitration Law Article 58; Germany, ZPO section
1059(2)(1).
146
The grounds for challenge can be distinguished as: grounds for the lack of jurisdiction (e.g., validity of
arbitration agreement, constitution of tribunal, scope of arbitration agreement, arbitrability of matters
submitted to arbitration) and other grounds (e.g. substantive grounds). See Redfern and Hunter, International
Commercial Arbitration apud J. Lew, op. cit.
147
See, e.g., Model Law Article 34(2)(b); Germany, ZPO section 1059(2)(2).
148
Homayoon Arfazadeh, Arbitrability under the New York Convention: the Lex Fori Revisited.
42
particular subject-matter, the award is automatically non-enforceable. However, a foreign state
cannot invoke the exclusive jurisdiction of its courts, because, in such cases, the agreement to
arbitrate is in itself considered to be a waiver of the immunity from the jurisdiction of other
States.149

So, restrictions imposed by other laws different from lex fori are irrelevant at this stage, but,
as a general rule, an award rendered in discordance with the rules on arbitrability in force at the
place of arbitration can be challenged before the courts of that country. It is important to know this
because, according to Article V(1)(e) of the Convention, an award which is suspended or set aside
in its country of origin may not be enforced. If the award has survived the setting aside procedure at
the place of arbitration, then the foreign enforcement court will dismiss the defence.

However, some scholars argue that the grounds established in Article V(1)(e) of the New
York Convention should be limited to cases in which an “International Standard Annulment” (ISA)
has been applied.150 Considering this opinion, under the Convention, an arbitral award set aside in
the country of origin can be recognized and declared enforceable if the ground of the procedure is a
“Local Standard Annulment” (LSA). The difference between the two concepts would be: “The rich
experience of international trade law since 1958 has told us what an ISA is: a decision consistent
with the substantive provisions of the first four paragraphs of Article V (1) of the New York
Convention and Article 39(1)(a) of the UNCITRAL Model Law. Everything else would be an LSA,
and entitled only local effect”.151

However, this interpretation is not entirely correct and the opposite has been confirmed by
many courts. The premise is that if the arbitral award is annulled by the forum from the place of
arbitration applying its lex fori, the mentioned award no longer exists and cannot, in this respect, be
enforced.152

From another perspective, one more determinant law for the concept of arbitrability might
be the law chosen by the parties, as the party who wishes to resist enforcement might use it in an
attempt to do so. In such cases, the party’s objections will be rejected by the enforcement court,
because such private agreement is not essential for the public administration of justice. So, the

149
Idem.
150
Jan Paulsson, Enforcing Arbitral Awards Notwithstanding a Local Standard Annulment (LSA), (1998)
9(1) ICC Intl Ct Arb Bull 14; Albert Jan van den Berg, Should the Setting Aside of the Arbitral Award be
Abolished?, ICSID Review Advance Access, (2014), pp. 1-26.
151
Albert Jan van den Berg, Should the Setting Aside of the Arbitral Award be Abolished?, ICSID Review
Advance Access, (2014), pp. 1-26.
152
Idem.; Albert Jan van den Berg, Enforcement of Annulled Awards? (1998) 9(2) ICC Intl Ct Arb Bull 15,
16.
43
named court will respect the arbitrators’ ruling on their jurisdiction unless the parties’ consent to
refer the dispute to arbitration is fundamentally invalid. 153

In addition, the differences between non-arbitrability and public policy is visible once again,
as demonstrated before, with the help of the articles of the New York Convention. Article V (2)
calls for two different types of grounds for non-enforceability, subparagraph (a) pertaining to the
jurisdiction of national courts, and subparagraph (b), to the merits of the dispute, setting standards
to be respected by arbitrators when rendering an award. Regarding this article, reference is often
made to the decision of the US Second Circuit Court of Appeals in Parsons & Whittemore Overseas
Co. v. Societe Generale de L’Industrie du Papier 154, in which the court decided that the enforcement
of an arbitral award should be refused if public policy referred to “would violate the forum State’s
most basic notions of morality and justice”. 155 However, the case-law in which the mentioned
article has been applied is not very rich, the most popular decision in this aspect being Sebastian
International Inc. V Common Market Cosmetics Nv.156

In conclusion, the problems which may appear regarding the concept of arbitrability in
connection with the setting aside procedure of a dispute are very complex and interpretations or
legal opinions may vary from case to case. An essential factor to be reminded is the importance of
arbitrability even in this stage of the proceedings, it being the strong foundation on which the entire
arbitration is build from the beginning to the end.

CONCLUSIONS

Despite the significant progress made in the domain of arbitration, the discussion on
arbitrability remains nowadays more relevant than ever, considering the context of international
business development and the legal globalization that the world is facing. Thus, it is critical to
discuss arbitrability in the right context and to understand the concept and the boundaries it applies
on arbitration. This is easier to be done when analysing arbitrability from a comparative
perspective, because the legal concepts worldwide are coming closer and tighter every moment.

153
Homayoon Arfazadeh, Arbitrability under the New York Convention: the Lex Fori Revisited.
154
508 F 2d 969 (2d Cir, 1974).
155
I YB Com Arb 205 (1976) apud Bernard Hanotiau, The Law Applicable to Arbitrability, Singapore
Academy of Law Journal 2014.
156
In its ruling of 2010, the Court decided that Art. II of the New York Convention does not determine which
law applies to the arbitrability of a dispute and, moreover, does not prevent a court from examining the issue
of arbitrability according to its own law. The Court added that when the arbitration agreement is governed by
a foreign law, “the court which is seized of a motion to decline jurisdiction in favour of arbitration, must
deny the possibility to arbitrate the dispute when according to all relevant rules of the lex fori, the dispute
cannot be withdrawn from the jurisdiction of national court”. apud Patrick Wautelet, Arbitration of
Distribution Disputes Revisited, A Comment on Sebastian International Inc. v. Common Market Cosmetics
NV).
44
 As was argued in this paper, the theory of arbitrability was creating two main perspectives
for the purpose of understanding the concept. Following this, the European perspective seems to be
clearer than the approach of the U.S. law towards arbitrability. Although the European view may
seem like an amalgam of different approaches, since the legislations of European countries are
distinct from one another, it is indeed a whole picture, because all these separate approaches are
following the same directions. This means that, while, from an European perspective, arbitrability is
understood as a limitation to the parties’ autonomy when referring their dispute to arbitration,
considering the subject-matter involved in that dispute, arbitrability is a matter of jurisdiction from
the U.S. perspective, the entitled legal body being called to decide on its competence to resolve a
particular dispute.

From a more general understanding, the classification of arbitrability into subjective and
objective is very important, proving once again that this term has to be viewed from a global
perspective, not a limited national one. As it was presented, subjective arbitrability and objective
arbitrability are two concepts which are applicable to any legal system, the importance of the
differences between the common law legal system and the civil law one not being relevant from this
point. Hence, any legal system which has provisions that limit the access to arbitration of certain
entities are approaching the concept of arbitrability from a subjective point of view, while an
objective point of view is involving a concern towards the subject-matter in dispute.

From a more general approach can be understood also the limitations to arbitrability, which
are regulated repeatedly by different legislators from various states. The reason behind this rationale
is the importance of certain disputes for the social, economic, and politic life of a particular state.
These limits can be imposed by public policy or by mandatory rules, such as the antitrust and
competition matters, the ones involving insolvency law, intellectual property rights, illegality and
fraud, bribery and corruption, securities transactions, or investment in the domain of natural
resources and infrastructure. Additionally, in order to protect the public interest, the national
legislator can stipulate that certain disputes are to be resolved only by the national courts, offering
them exclusive jurisdiction towards such disputes. Under the umbrella of protection of the public
interest falls also the third parties to a contract potentially arbitrable. For the reason that arbitration
is a dispute resolution mechanism based entirely on the will of the parties, the national legislator
feels entitled to offer more protection for third parties on which an arbitration decision may have
impact, considering that there is not other way to control these proceedings.

Furthermore, inarbitrability is a fundamental aspect regarding arbitration, the two concepts

being interdependent. In this context, inarbitrability appears to be the connecting link between
arbitration, as a dispute resolution mechanism based on the parties’ free will, and the state courts,
45
because the scope of inarbitrability is to delimitate the area of exclusive jurisdiction of state courts
in a specific aspect. The importance of these affirmations is revealed by the duty of arbitrators to
render enforceable arbitral awards which implies the fact that they have a duty to respect the
provisions on which inarbitrability is based and to effectively apply them to the facts.

However, even if the arbitral tribunal did not follow correctly the rules involving
arbitrability and decided on a dispute which is not arbitrable, the unsatisfied party still has the
possibility to set aside this decision. Hence, arbitrability is an essential concept for the post-award
phase of the dispute settlement proceeding, having particular methods in which it can be determined
in this final stage. What is important is that, when analysing this final stage, arbitrability appears
once again as the concept connecting the arbitral tribunals and the state courts in large interesting
system, created in order to protect the interests of persons in the best way possible.

In conclusion, arbitrability can be understood in various distinct ways, depending on the

stage in which the dispute connected to it is situated and the interpretation offered by the entity
designated to look at it. In order to expressly point out the subject of the paper, it is important to
understand that the principles and methods for interpretation of this concept can vary, but
arbitrability still remains a fundamental matter for the legal community, in general, and for the
alternative dispute resolution mechanism, which is arbitration, in particular.

46
 BIBLIOGRAPHY

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A. Brafford, Arbitration Clauses in Consumer Contracts of Adhesion: Fair Play or Trap for the
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Review Advance Access, 2014.

Bernard Hanotiau, The Law Applicable to Arbitrability, Singapore Academy of Law Journal, 2014.

Bernard Hanotiau, What law governs the issue of arbitrability?.

Brian T. McCartney, Rethinking Appeal of Arbitrability Decisions: When to Review That Which
Long Process Could Not Arbitrate - F.C. Schaffer & (and) Associates, Inc. v. Demech Contractors,
Ltd., 1997 J. Disp. Resol. (1997).

Buys, The Tensions Between Confidentiality and Transparency in International Arbitration.

American Review of International Arbitration, Volume 14.

David Horton, Arbitration and Inalienability: A Critique of the Vindication of Rights Doctrine,
Kansas Law Review.

Dr. Beata Kozubovska, Trends in Arbitrability.

E.J. Brunet, R.E. Speidel, J.R. Sternlicht, S.J. Ware, Arbitration Law in America: Critical
Assessment, 2006.

G.A. Bermann, The “Gateway” Problem in International Commercial Arbitration, Yale Journal of
International Law, 2012.

Gary B. Born, International Commercial Arbitration (Second Edition), Kluwer Law International
2014.

Homayoon Arfazadeh, Arbitrability under the New York Convention: the Lex Fori Revisited.

J. Paulsson, Jurisdiction and Admissibility, in Global Reflections on International Law, Commerce

and Dispute Resolution. Liber Amicorum in honour of Robert Briner, ICC Publishing, 693, 2005.

Jan Paulsson, Enforcing Arbitral Awards Notwithstanding a Local Standard Annulment (LSA),
1998/

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Juan Santiago Correa, Edgardo Cayon Fallon, Does international arbitration affect economic
growth in Latin America?, in WSEAS Transactions on Business and Economics, January 2018.

Julian Lew, Loukas Mistelis & Stefan Kroll, Comparative International Commercial Arbitration,
Kluwer 2003.

K.-H. Böckstiegel, Public Policy as a Limit to Arbitration and its Enforcement, (2008) IBA Journal
of Dispute resolution, “The New York Convention – 50 Years”.

Kirry, Arbitrability: Current Trends in Europe, Arbitration International, Vol 12.

Laurence Shore, Defining ‘Arbitrability’. The United States vs. the rest of the world, New York
Law Journal, 2009.

Leonardo V. P. de Oliveira, The English Law Approach to Arbitrability of Disputes.

Loukas A. Mistelis, Arbitrability: International & Comparative Perspectives, Kluwer Law

International B.V., 2009.

M. Lourens, The issue of “Arbitrability” in the context of international commercial arbitration,

South African Mercantile Law Journal, 1999.

Natalja Freimane, Arbitrability: Problematic Issues of The Legal Term, Riga Graduate School of
Law, 2012.

Patrick Wautelet, Arbitration of Distribution Disputes Revisited, A Comment on Sebastian

International Inc. v. Common Market Cosmetics NV.

WEBOGRAPHY

http://www.inhouselawyer.co.uk.

https://iclg.com/practice-areas/international-arbitration-laws-and-regulations.

https://wipolex.wipo.int.

https://www.constituteproject.org/constitution.

https://www.globallegalinsights.com/practice-areas/international-arbitration-laws-and-regulations.

TABLE OF CASES

Alexander v. Gardner-Denver Company 415 US 60 (1974).

American Safety Equipment Corp., Plaintiff-appellant, v. J. P. Maguire & Co., Inc., a Delaware
Corporation, Defendant-appellee.american Safety Equipment Corp., Plaintiff-appellant, v. Hickok
48
Manufacturing Co., Inc., Defendant-appellee, 391 F.2d 821 (2d Cir. 1968), US Court of Appeals for
the Second Circuit - 391 F.2d 821 (2d Cir. 1968).

Arsanovia Ltd and others v Cruz City, [2012] EWHC 3702 (Comm).

China Minmetals Materials Imp. & Exp. Co. v. Chi Mei Corp., Court of Appeals of The United
States, June 26, 2003.

Fincantieri–Cantieri Navali Italiani S.P.A. and Oto Melara S.P.A v. Ministry of Defence, Armament
and Supply Direcorate of Iraq, Republic of Iraq, 1994.

Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003).

Howsam v. Dean Witter Reynolds, Inc., Court of Appeals of The United States, December 10,
2002.

ICC case no. 1110, Argentine engineer v. British company, 3 Arb. Int. 282 (1987) with note Wetter,
10 Arb. Int. 277 (1994), XXXI YBCA 47 (1996).

Mitsubishi v. Soler Chrysler-Plymouth, Supreme Court of The United States, July 2, 1985.

Pacificare Health Sys. Inc. v. Book, 538 U.S. 401 (2003).

Parsons & Whittemore Overseas Co. v. Societe Generale de L’Industrie du Papier

Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967).

Scherk v. Alberto-Culver Co. (1974). 417 US 506, S. Ct.

Sebastian International Inc. V Common Market Cosmetics Nv.

Sphere Drake Insurance PLC v. Marine Towing, Inc.

Sulamerica Cia Nacional De Seguros S.A. v. Enesa Engenharia S.A. [2012] EWCA Civ 638.

United Kingdom, 12 May 1999, England and Wales, Court of Appeal, Westacre Investments Inc v.
Jugoimport-SDRP Holding Co Ltd / QBCMI 1998/0485/3.

University Life Insurance Co v Unimarc Ltd 699 F 2d 846 (CA7 1983).

Wilko v. Swan et al, No. 39. Supreme Court of The United States, 346 U.S. 427, 74 S.Ct. 182 U.S.
1953, December 7, 1953.

Will-Drill Resources Inc. v. Samson Resources Co., 5th Cir. 2003.

49
 TABLE OF LEGISLATION

French Civil Code and Civil Procedural Code.

German Civil Code and Civil Procedural Code.

International Chamber of Commerce Arbitration Rules.

Italian Civil Code and Civil Procedural Code.

Romania Civil Code and Civil Procedural Code.

Spanish Corporation Act of 1951 (Ley de Sociedades Anonimas).

Swiss Rules on International Arbitration.

The Federal Arbiration Act, title 9, United States Code, codified July, 1946

UNCITRAL Model Law on International Commercial Arbitration.

United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New
York, 10 June 1958).

50