The term arbitration in itself cannot be universally defined. This is so because every legal system has its own definition catered to its personal requirements. Each jurisdiction thus, decides its own terms for determining the subject matters of arbitration, who may have the power to arbitrate and how the arbitral process must be carried out. However, there are certain principles which form the essence of an arbitral proceeding. The core principles include: the need for an arbitration agreement; a dispute; a reference to a third party for its determination; and an award by the third party.
The service that the arbitral tribunal provide have been stated as being ’principally and habitually those of settling a dispute between two or more parties, even though this is done on an equitable basis’. In the case Asville Investments v Elmer Contractors :
‘A non-statutory arbitrator derives his jurisdiction from the agreement of the parties at whose instance he is appointed. He has such jurisdiction as they agree to give him and none they do not.’
An arbitration Tribunal which has been established to ascertain an international commercial dispute is completely different from that of a judge sitting in a judicial court. The powers, duties, and jurisdiction of an arbitral tribunal arise from a complex mixture of the will of the parties, the law governing the arbitration agreement, the law of the place of arbitration, and the law of the place where recognition or enforcement of the award may be sought.
It is ‘the essence of arbitration that the tribunal has only the authority conferred on it by the agreement under which it is established.’ The powers of an arbitral tribunal are those conferred upon it by the parties themselves within the limits allowed by the applicable law, together with any additional powers that may be conferred by operation of law. Initially in the arbitration proceeding all the power is with the parties as they establish the tribunal and directly or indirectly confer power upon them. But this power which is conferred has to be within the limits of the relevant law. Any power which is in excess of such relevant law will be invalid, irrespective of it being a part of any international or institutional rules of arbitration.
However, once the proceeding commences there is a shift in the balance of power towards the tribunal who then presides over the arbitral proceeding.
The best way to ascertain the powers of an arbitral tribunal is to first look at the arbitration agreement; after which one must look at the law governing such arbitration agreement; and finally the law which governs the arbitration itself, i.e., lex arbitri.
An example for procedural powers conferred on international arbitral tribunal by law is provided by the English Arbitration Act of 1996. The tribunal is given various different powers, including the power:
- To order a claimant to provide security for costs;
- To administer oaths to witness;
- Generally to determine procedural matters.
The kompetenz-kompetenz principle is closely related to rules regarding the allocation of jurisdictional competence between arbitral tribunals and national Courts and to rules concerning the nature and timing of judicial consideration of challenges to an arbitral tribunal’s jurisdiction.
While the principle is widely recognized to possess a positive and a negative effect, it helps shape a very important power as well as a limitation of arbitral tribunals. To understand the dynamics between the arbitral tribunals and the court, the author wishes to divide it into three stages. The first stage refers to the pre arbitration litigation; the second stage encompasses decision making by the arbitrators on merits of the dispute during the arbitral proceedings; and the third stage refers to post-award enforcement or proceedings to set aside the award.
Through this paper the author seeks to examine the relationship between courts and the arbitral tribunal, when the doctrine of Kompetenz-kompetenz is applied. The scope of the paper is to determine the amount of judicial intervention which is permissible within boundaries set by the above mentioned doctrine in India.
Courts have always had an oversight role to play when it comes to implementing any statute. Although arbitration is a private system of justice, organized and regulated by the parties in light of the rules and procedures they have chosen, it is still governed by law, and almost always by the arbitration law ( lex arbitri) of the seat of the arbitration. Courts expect to retain a level of control to ensure that the private system of justice meets at least minimum standards of fairness – so that arbitration is not a system that is fraudulent, corrupt, or lacking in essential due process.
The doctrine of competence-competence, which is followed in most jurisdictions, provides that arbitrators are competent to determine their own competence – that is, they are empowered to decide their own jurisdiction to hear and determine the dispute before them. Fouchard, Gaillard and Goldman, ‘the competence-competence principle also allows arbitrators to determine that an arbitration agreement is invalid and to make an award declaring that they lack jurisdiction without contradicting themselves’. In a nutshell, the principle of kompetenz-kompetenz recognizes the competence of an arbitral tribunal to rule on its own jurisdiction.
Arbitration experts therefore tend to agree that the source of an arbitral tribunal’s power to determine its own jurisdiction is not the agreement to arbitrate but rather the law governing the arbitration proceedings. The court in H&H Marine Engine Services Ltd v Volvo Penta of the Americas Inc, refused to recognise the competence-competence rule as applying automatically, but found that it only applies where the law governing the arbitration proceedings or the arbitral rules enact the principle.
The doctrine of Kompetenz-Kompetenz is accepted widely as is evidenced by its express incorporation in Article 16 of the UNCITRAL Model Law [‘Model Law’], as well as the arbitration statutes in developed jurisdictions including those that have not adopted the Model Law.
Although the international arbitration community generally considers the competence-competence doctrine a “central tenet of international arbitration,” not all countries endorse it. The doctrine of competence-competence entails the path adopted by the court to either go for a full review or only a prima facie review of the validity of the arbitration agreement. In a country such as France, where this doctrine is strongly adopted the courts will go for only a prima facie review. However, in a country like China where this doctrine has not been adopted, a full review will be undertaken by the courts to ascertain the validity of the arbitration agreement. The CIETAC which is the main arbitral institution, may in some instances delegate to tribunals the power to decide their jurisdiction in limited circumstances.
The competence-competence rule is set out in Article 16(1) of the Model Law :
The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
Countries which have adopted the UNCITRAL Model Law, permit its arbitrators to decide the validity of the arbitration agreement and even their own jurisdiction in most cases. According to the Model Law, a tribunal can rule on a question of its own jurisdiction either as a preliminary question or in a final award.
If however, the tribunal rules as a preliminary matter that it has jurisdiction, a party can request within thirty days that a court review the decision and determine whether jurisdiction is proper.
In English law has been well settled since the decision of Mr. Justice Devlin in Brown v. Genossenschaft Osterreichischer Waldbesitzer which stated that:
“[Arbitrators] are entitled to inquire into the merits of the issue whether they have jurisdiction or not, not for the purpose of reaching any conclusion which will be binding upon the parties because they cannot do so– but for the purpose of satisfying themselves as a preliminary matter about whether they ought to go on with the arbitration or not.”
In England, the English court of Appeal has often held that the arbitrators were considered within their jurisdiction to determine their own competence to try a case. In the case, Harbour Assurance Co. (UK) Ltd v. Kansa General International Insurance (Kansa), an English court had held that an arbitration clause could be invalidated in two instances: (1) where a party denied that an agreement had been concluded, or (2) where there was a mistake as to who the other contracting party was. In such cases, an arbitral tribunal would have no jurisdiction. But an allegation of illegality was not enough to invalidate the entire agreement, including the arbitration clause, according to the Kansa court.
In Nasharty v. J. Sainsbury PLC, the court held that even though claims had been made of duress in connection to the main contract it did not invalidate the arbitration clause. Fiona Trust & Holding Corporation (and 20 Others) v. Yuri Privalov (and 17 Others) went on to hold that even accusations such as bribery were insufficient to invalidate the authority of the arbitrators to determine their own jurisdiction. These cases establish that the courts in UK strongly apply the principle of competence-competence as in the cases where there is misconduct in the main contract, the arbitrators retain the power to determine their own jurisdiction.
“Even if the underlying contract is alleged to be void or voidable, the parties are presumed to have wanted their disputes resolved by an arbitral tribunal. In the light of the presumption of ‘one-stop adjudication’, the Court will usually strive to give effect to the arbitration agreement by… allowing the tribunal to investigate whether the contract is valid…”
In Premium Nafta Products Ltd. & Ors. v. Fili Shipping Co. Ltd. & Ors, Lord Hoffmann remarked “it is very unlikely that rational businessmen would intend that the question of whether the contract was repudiated should be decided arbitrators but the question of whether it was induced by misrepresentation should be decided by a Court.”
The competence-competence rule is sometimes said to have a negative and a positive effect. The positive effect is that parties gain a right to have their jurisdictional dispute determined by an arbitral tribunal, at least in the first instance. However, the negative aspect is that once a tribunal assumes jurisdiction of the dispute, the parties lose their right to approach the court. But an important factor is that an arbitral tribunal’s decision regarding its jurisdiction is not final. All such decisions are capable of review by or appeal to courts in the seat of arbitration.
The parties have the right to approach the domestic courts before the arbitral tribunal has ruled on its jurisdiction. The most common is when a party has commenced an action on the merits of the dispute in a domestic court and the opposing side contests the court’s jurisdiction on the basis of the arbitration agreement. In such a circumstance, it is often seen that the domestic courts would refer the matter to an arbitral tribunal. However, till what extent does the domestic court look into the scope, existence and the validity itself of the arbitration agreement?
There is no definitive answer to the above mentioned question. The approach adopted by the courts in deciding how much power to give the arbitral tribunals varies. Article 1458 of the French New Code of Civil Procedure gives a lot of power to the arbitral tribunal as this doctrine is strongly adopted by France. Some courts, once the tribunal has been established, will not intervene in the proceedings. They will wait for the parties to contest the arbitral tribunal´s decision and only then look into the matter.
Some courts will in certain circumstances accept to rule definitively on arbitral jurisdiction before an arbitral tribunal does, thus usurping the arbitral tribunal’s competence-competence powers. But the real majority of courts lie somewhere in the middle of these two cases, where they do a prima facie examination of the arbitration agreement. The parties have to satisfy the court that there indeed exists an arguable case for the jurisdiction of the arbitration tribunal.
Article 8 of the Model Law mirrors Article II of the New York Convention in relation to stays of domestic court proceedings when there is an arbitration agreement. Both provisions aim to ensure that when there is an arbitration agreement and a party objects to the domestic court’s jurisdiction, the court immediately refers the parties to arbitration. Article 8(1) of the Model Law states :
A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
The New York Convention states that a court must refer the parties to arbitration ‘unless it finds that the said agreement is null and void, inoperative or incapable of being performed.’ This suggests that a court must make a ‘finding’ regarding the arbitral jurisdiction before it passes the dispute to the tribunal. If the court is to make a finding then it must look into the dispute in hand, this in a way undermines the competence-competence principle as the tribunal no longer has the power to decide its own jurisdiction. After looking into the dispute, if the court finds that the tribunal is not competent to adjudicate upon the concerned matter, it will then decide to not send the dispute and try it itself in the domestic courts.
The extent of a court’s authority to rule on jurisdiction before an arbitral tribunal has had the opportunity to do so is a subject of judicial and academic debate. “Some commentators feel that, ‘domestic courts should not, in parallel and with the same degree of scrutiny, rule on the same issue [of jurisdiction], at least at the outset of the arbitral process. In other words, the court should limit, at that stage, the review to prima facie determination that the agreement is not ‘null and void, inoperative or incapable of being performed”.
Frederic Bachand argues strongly in favour of the prima facie approach. To substantiate his argument he looked into the drafting history of the Model Law. His analysis leads him to conclude that:
“The Model Law’s travaux preparatoires, basic structure and underlying principles reveals that the drafters considered the prevention of dilatory jurisdictional objections to be a more important objective and, consequently, that Article 8(1) ought to be interpreted as requiring courts seized of referral applications to apply a prima facie standard while reviewing the tribunal’s jurisdiction.”
However, many commentators have differed considerably from Bachand’s assessment of the Model law. They have stated that a literal interpretation would indeed present quite the opposite result as claimed by Bachand. Scholars such as Julien Lew, have propagated the difference between ‘substantive’ and ‘formal validity of arbitration agreements.
The categories of substantive invalidity of arbitration agreements are limited to cases where such agreements are invalid on generally-applicable contract law grounds, such as mistake, fraud, impossibility, waiver, etc. Formal validity, on the other hand, refers to those form requirements that are relevant to the validity of an arbitration agreement, that is, if these requirements are not met, then the agreement to arbitrate is invalid. The most significant and universally-accepted of these is the ‘writing’ or ‘written form’ requirement, together with the signature and/or an exchange of written communications.
Thus, “while [substantive validity] relates to the question whether there was a valid meeting of the minds of the parties with respect to dispute settlement through arbitration, [formal validity] concerns special formal validity rules established to ensure that the parties are aware that by concluding the arbitration agreement, they oust the jurisdiction of the otherwise competent State Courts.”
Thus, what the author concludes from the above discussion is that to uphold the principle of Kompetenz-Kompetenz the courts should have the power to look into the formal validity of the agreement, however leave the substantive validity to the arbitral tribunals.
INDIA
Section 16(1) of the Indian Arbitration and conciliation Act, 1996 incorporates the principle of competence-competence in the Indian legal system. The principle gives the arbitral tribunals to determine their own limitation while limiting this power by allowing the Indian courts to review the arbitral tribunal’s jurisdiction. The Indian courts have not had much faith in the arbitral process which has led to extensive intervention by the courts. This order of priority is known as the negative effect of kompetenz-kompetenz.
Accordingly, while the positive effect of kompetenz-kompetenz refers to an arbitral tribunal’s power to rule on its jurisdiction , the more controversial negative effect takes the said principle a step further by establishing a presumption of chronological priority for the tribunal with respect to resolving jurisdiction questions.
Section 8 of the Indian Arbitration and conciliation Act, have interpreted the interference of the courts in arbitral proceedings very broadly. This has led to a number of conflicted decisions amongst the various Indian courts. Section 8 of the act deals with arbitration agreements when the seat of arbitration is within India. Section 45 of the same act deals with the arbitration agreement when the seat is outside India. However, Section 45 has an added element to it, this section states: ‘unless it finds that the said agreement is null and void, inoperative or incapable of being performed.’
Shin-Etsu Chemical Co Ltd v Aksh Optifibre Ltd, the Supreme Court of India considered its power under Section 45 of the Indian Act to rule on the validity of the arbitration agreement. Section 45 came into play as the arbitration agreement called for an ICC arbitration with its seat in Japan and the Japanese substantive law governing the arbitration. The main question in front of the Indian court was to determine the most appropriate time to control the arbitral jurisdiction. Is it at the time of hearing the stay application before the arbitral proceedings have started or at the time of the enforcement of the award once the proceedings have finished.
The majority explained that the proper time for a court to examine jurisdiction fully was at the stage of an action in connection with the enforcement of an award. However, Justice Sabharwal had given a dissenting opinion where he opined that on comparison of section 45 and section 8, one can conclude for the sake of efficiency a complete examination of the arbitral jurisdiction by the courts.
The court held that, “Unlike Section 45, the judicial authority under Section 8 has not been conferred the power to refuse reference to arbitration on the ground of invalidity of the agreement. It is evident that the object [of Section 8] is to avoid delay and accelerate reference to arbitration leaving the parties to raise objection, if any, to the validity of the arbitration agreement before the arbitral forum and/or post award under Section 34 of the Act.”
Therefore, despite the extensive literature available on the principle of Kompetez-kompetenz the author is mindful that, “the precept that arbitrators may rule on their own authority possesses a chameleon-like quality that changes color according to the national and institutional background of application.” To be able to understand the role of the Indian judiciary vis-à-vis the arbitration process the author has divided the Arbitral procedure three stages, i.e., Pre-arbitration phase, Judicial review phase and the post award phase.
First Stage of the Arbitration process
This is the pre-arbitration litigation stage which may stem out of the power vested in the statute. Section 8 gives the power to make an application to a ‘judicial authority’ by making an application, Section 9 gives the power to refer the dispute to a court and Section 11 gives the power to the Chief justice or an appropriate High Court judge for the appointment of an arbitrator. At this stage the question arises before the courts regarding, whether to intervene in the matter by determining the jurisdiction of the arbitral tribunal or whether to pass the dispute to the arbitral tribunal and let it determine its own jurisdiction.
As the legal history of Indian courts demonstrates, the courts have often been hesitant to delve into this contentious issues and often contended itself prima facie determination of the facts before referring the matter to the arbitral tribunal.
In 2002 a five judge bench in the case, Konkan Railway Corp. Ltd.v. Rani Construction Pvt. Ltd. , The Supreme Court held that under section 11 the chief justice acted in an administrative capacity alone. All judicial questions pertaining to the dispute, including the validity of the arbitration agreement, were to be taken up by the arbitral tribunal. This interpretation is consistent with the understanding associated with the UNCITRAL Model Law, wherein the decision of a Court under Art 11 of the Model Law is widely acknowledged to be an administrative decision.
In 2005, the Supreme Court once again reassessed the question the legal stance taken by it in the decision of Konkan Railways and ascertain the nature of the function dispensed by the Chief Justice or his designate as given under section 11 of the Act. This question was dealt in the case, M/s. S.B.P.& Co. v. Patel Engineering Ltd. The Apex court after much deliberation came to the following conclusions:
- When the highest judicial authority of the country is given power by the statute, it is de facto also given the authority to act judicially unless the statute specifically states otherwise. Therefore, the authority vested in the Chief Justice under section 11of the act is of a judicial nature.
- A tribunal before it exercises its jurisdiction must be satisfied with the existence of conditions, known as jurisdictional facts which permit is to do so. Further, since a court under section 8 has the power to determine the validity of the arbitration agreement then by the same logic, the highest judicial authority under section 11 should be entitle for the same.
- Since the highest judicial authority has decided the on the jurisdiction of the tribunal, then the tribunal will have no power to question the same. The jurisdictional decision shall be binding on the tribunal. To answer the jurisdictional question, the chief justice has the power to look into the facts and the evidence of the dispute.
Nevertheless, despite being a highly detailed judgement by a seven judge bench the decision in Patel engineering has been susceptible to heavy criticism. In Patel Engineering, the court expounded the scope of section 8, 9 and 11 by categorically allowing the court to intervene so as to determine the preliminary issues with respect to a valid arbitration agreement.
One can easily infer, that the power of the judicial authority would be futile when upon the commencement of arbitral proceedings the arbitral tribunal concludes that it does not have the jurisdiction to solve the dispute. Thus a mere mechanical outlook adopted by the chief justice or any other judicial authorities so designated by him cannot be permissible.
However, what needs to be seen is the balance of such implementation of judicial power and the principle of Kompetenz-kompetenz. Pursuant to the negative effect of the principle, any judicial authority should defer all jurisdictional issues pertaining to the arbitration proceedings to the arbitration tribunal itself at the first instance. In fact, the basic requirement that the parties to an arbitration agreement honour their undertaking to submit to arbitration any dispute covered by their agreement entails the consequence that the Courts of a given country are prohibited from hearing such disputes. Thus if the decision of the chief justice, after a full and final review, is binding on the arbitral tribunal, then the power of the tribunal to rule upon its own jurisdiction under Kompetenz-Kompetenz becomes redundant.
Therefore, by following the substantive approach as envisioned by Patel engineering the court looks into the merits of the case, which not only undermines the principle of Kompetenz-Kompetenz but also drastically increases the workload of already burdened Indian courts.
Second stage of Judicial stage
The conclusion arrived at in Patel Engineering to adopt the full and final review approach is inconsistent with, and travels far beyond what was envisaged by the scheme of the 1996 Act. The objective behind the 1996 Act was to prevent the widespread abuse of the arbitral process under the old 1940 Act which gave scope for “interminable, time consuming, complex and expensive Court procedures”; and to achieve expedition and effective disposal of the arbitral matters. The underlying principle was “to minimize the supervisory role of Courts in the arbitral process”, which can be clearly inferred from a bare reading of Section 5 of the Act.
Section 5 is based on Article 5 of UNCITRAL Model Law, “it is a clear recognition of the policy of party autonomy underlying the Act and the desire to limit and define the Court’s role in arbitration so as to give effect to that policy.” Thus, when the statute clearly mandates little or no interference by the courts a full and final review is clearly against the intent of the legislature. When a prima facie assessment would have sufficed, conducting an intensive inquiry is unnecessary and irrelevant for delivering justice.
Pursuant to the same, a reference to Article 8(1) of the Model Law shall be of immense assistance because the Indian Parliament enacted the 1996 Act as a measure of fulfilling its obligations under the international treaties and conventions; and drafted the legislation with the Model Law as the basis. As to its interpretation, few commentators argue, on the basis of the then Article 17 of the early drafts of the Model Law, that the legislative history of the Model Law is either inconclusive or supportive of a mandatory prima facie judicial review standard in all cases. But this does not completely obliterate the need for a full review in certain special circumstances.
Though the 1996 Act is based upon the Model Law, with its Article 8(1) corresponding to Section 8 of the Act, it is certainly not identical. There are some important differences from the Model law. Significantly, the expression “unless it finds that the agreement is null and void, inoperative or incapable of being performed”, which is present in Article 8(1) of the Model Law has been omitted from section 8 of the 1996 Act. However, even though this expression has been omitted from Section 8 it still finds its presence in section 45 of the Act. These appear to be deliberate acts borne out of a conscious decision to make the Model Law suitable to the Indian industrial climate.
Therefore, judicial discipline requires that Courts do not tamper with the provisions of the statute, especially when the deviation from the Model Law, is clearly a result of a conscious decision.
The Post Award Stage
This stage deals with the question that what if the party was to raise no objection regarding the jurisdiction of the arbitral during the proceeding but instead questioned the award passed by the tribunal on the basis of the lack of jurisdiction of the arbitral tribunal. On the one hand, multifarious judicial decisions have been of the view that once there has been a failure to exercise the right to object during the arbitral proceeding, it would lead to a deemed waiver. Such a waiver operates to preclude the party from raising a jurisdictional challenge for the first time after the award has been passed by the tribunal.
Just like two sides of the same coin, many courts also believe that the right to raise a jurisdictional objection can, in no circumstance, be waived because such a fundamental defect in the proceedings should never be subject to a rule of deemed waiver.
Section 4 of the Act, corresponding to Article 4 of the Model Law, codifies the rule of deemed waiver in Indian Arbitration. This provision states that, if a party who is aware of a non-compliance of an abasing provision, continues with the arbitration without stating his objection to such non-compliance within the prescribed or a reasonable time as the case may be, the party shall be deemed to have waived its right to object. However, such an interpretation to the rule of waiver, as stipulated under Section 4 of the Act extends only to derogable non-mandatory provisions. The UNCITRAL Working Group’s Report on Article 4 of the Model Law, further cements the position to the rule of waiver, stating that if it were to cover fundamental procedural defects, would be extremely rigid. But the rule of waiver does not only find its merit in section 4 alone and may be invoked independently as well. One must understand that certain flexibility in law is required to emanate its dynamic nature.
However, when it comes to the applicability of the doctrine of waiver to mandatory statutory provisions the stance taken by the court has often been very controversial. The Supreme Court of India, on a number of occasions, has held in unequivocal words that a mandatory provision can be waived by an individual, provided that the provision was enacted for the benefit of the individual and not the public.
The Apex court has taken a firm stand that the right to object due to a jurisdictional dispute has to be exercised before the tribunal, if not done so it will be deemed to be waived and the party will not be entitled to take the plea with the courts at a later stage.
Participating in the arbitration without voicing one’s objections is often termed as an ‘ambush strategy’ whereby the party deliberately decides to let the arbitration proceed, and chooses to ‘wait and see’ if the award is made in its favor before challenging the jurisdiction.
Conclusion
The author through this paper has tried to look into the principle of Kompetenz-Kompetenz of arbitral tribunals to determine its own jurisdiction with a special reference to India. There were two questions which the author aimed to answer; firstly, till what extent is the judicial intervention permissible in the arbitral proceedings, and secondly what is the consequence of not raising a jurisdictional objection during the arbitration process, despite having the opportunity to do so. Thus trying to understand the extent of power and limitation within which an arbitral tribunal functions.
Firstly, so as to determine the extent of judicial intervention in the arbitral process, the author disagrees with the stand taken by the Supreme Court in the Patel engineering. When an entire procedure has been created to deliver justice by not involving the courts then the judicial intervention to examine every fact is inconceivable. It defeats the very purpose of such a legislation.
However, there is always a need to ensure that justice is delivered by the arbitral process. This can be accomplished by the courts by looking into the relevant details but not by holding the entire trial itself. There is a need for a distinction to be made regarding the various grounds of challenge to the arbitral tribunal’s jurisdiction.
Both, scholars and legal practitioners, consider the propensity of recalcitrant respondents to bring Court proceedings in hopes of delaying the resolution of claims fairly subject to arbitration on the merits as the greatest single threat to modern commercial arbitration. It is indeed unwise to be ignorant of the fact that litigating parties often seek tactical advantages, and consider challenging jurisdiction as an effective way to delay an arbitration proceeding for tactical reasons.
The judicial authority must satisfy itself with issues such as the existence of the arbitration agreement, its legal validity and the adherence to all statutory procedure as required by the relevant statutes. The tribunal on the other hand should have the power to decide upon any objections or challenges raised on the substantive validity of the arbitration agreement, the arbitrability of the dispute, independence and impartiality of the tribunal as well as any other inscrutable issue that may arise due to the dispute.
Therefore, the standard of review adopted by the judicial authorities needs to be revisited. Where just a prima facie review would suffice to examine the existence of an arbitration agreement then such should be adopted. The need for adopting a full and final review lacks any merit is intrinsically against the spirit of the statute.
Secondly, the author finds merit in the argument that if the party did not raise an objection regarding the Arbitral jurisdiction during the proceeding then it is a deemed waiver. If a party waits until the award is handed down before it objects to the tribunal’s jurisdiction; it may well have lost its opportunity to challenge.
“Two possibilities are open to a party wishing to challenge the jurisdiction of the arbitral tribunal. The first is to challenge jurisdiction at the outset of an arbitration (or at the latest, as soon as the reasons for objection are known) and ask the tribunal to deal with this challenge, either by means of an interim award or as part of its award on merits. The second is to wait until the award is made and then challenge it, or attempt to resist enforcement, on the basis that the tribunal had no jurisdiction and so its award has no validity. The second course is usually adopted by a party that has decided to ‘boycott’ the arbitration – that is, to take no part in the proceedings… parties that take part in an arbitration but fail to raise a jurisdiction issue when they may have been entitled to do so, risk losing their right to object.”
The rule of waiver is not only based on Section 4 of the 1996 act but also functions independently through section 16(2).By simply agreeing to the jurisdiction of the tribunal will not automatically give it the comooetence to try the dispute if it lacks the same. However, waiting to see the tribunal deliver the award and then contesting its jurisdiction goes to show the deliberate non action by the party.
Voluntary participation in proceedings manifests a waiver of the right to object, and in order to rebut the presumption that the right to object has been waived, the challenging party must show that it did not know, and could not with reasonable diligence have discovered, the grounds for objection.
Therefore, the entire power of the arbitration tribunal would be nullified if every part who was aggrieved by the award raised an objection in the domestic courts.
Originally published 15.10.2019