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5.2 The Arbitration Agreement5submission agreement, and his judgment – which replaces the will of the partywho has refused to sign it – is treated as a submission agreement. Lack ofcooperation by one of the parties in the execution of the submission agreementor insuperable differences between the parties as to what should go into it aresettled by a court.2The legal requirement of the submission agreement as a condition to arbitratehas been considered one of the main obstacles to arbitration, even in the casesin which it could be supplied by a court. In fact, if one of the parties resistsarbitration, the refusal to execute the submission agreement allows it to obstructthe constitution of the tribunal and delay the arbitration itself. This forces theopposite party to enter into a judicial process to obtain the submissionagreement. Arbitration is therefore deprived of one its main comparativeadvantages, i.e. expeditiousness.That is why, taking the concept from the Geneva Protocol on ArbitrationClauses, 3 the New York Convention and the new arbitration laws, modeledupon the Model Law, do not require a submission agreement and grant fulland immediate enforcement to the arbitration agreement, regardless of whetheror not it refers to future or present controversies. The arbitration laws thatstill require the submission agreement are deemed to be outmoded and shouldbe revised in order to make their provisions congruent with the modern trendson international arbitration.1.3Enforcement of an arbitration agreement under theUNCITRAL Model Law and the New York ConventionThe Model Law defines the arbitration agreement as:“An agreement by the parties to submit to arbitration all or certain disputeswhich have arisen or which may arise between them in respect of a definedlegal relationship, whether contractual or not” .article 7.1According to the New York Convention,“Each Contracting State shall recognize an agreement in writing under whichthe parties undertake to submit to arbitration all or any differences whichhave arisen or which may arise between them in respect of a defined legalrelationship, whether contractua1 or not, concerning a subject matter capableof settlement by arbitration” .article II.1As an example, the Arbitration Law of Brazil (N 9,307 of 1996) states: “There being an arbitrationclause and reluctance to submit to arbitration, the interested party may request that the other partybe summoned to appear before a court in order to conclude the submission agreement, to whicheffect the judge shall set a special hearing § 7 . The judgment granting the request shall be treated as a submission agreement” (article 7).3The 1923 Geneva Protocol on Arbitration Clauses establishes that “Each of the Contracting States recognises the validity of an agreement whether relating to existing orfuture differences ” (article 1).2

Dispute Settlement6Concerning the enforcement of an arbitration agreement, the Model Lawestablishes that:“(1) A court before which an action is brought in a matter which is the subjectof an arbitration agreement shall, if a party so requests not later thanwhen submitting his first statement on the substance of the dispute, referthe parties to arbitration unless it finds that the agreement is null andvoid, inoperative or incapable of being performed.(2)Where an action referred to in paragraph (1) of this article has beenbrought, arbitral proceedings may nevertheless be commenced orcontinued, and an award may be made, while the issue is pending beforethe court”.article 8Article 8.1 of the Model Law mostly follows the text of Article II.3 of theNew York Convention.4 However, the provision of the Model Law is morespecific, since it establishes that the request must be made “not later thanwhen submitting his first statement on the substance of the dispute”. TheConvention, on the other hand, does not say when the petition must be made.As explained above (see 1.2.1 ), the decision to decline jurisdiction and referthe parties to the arbitration proceedings they have agreed upon is notautomatic, but must be requested by the interested party. This is so becausethe obligatory nature of the arbitration agreement derives from the parties’will. They may agree to submit their disputes to a court decision even afterhaving previously agreed to enter into arbitration.We shall see later (infra4.1) that this agreement may occur tacitly if one of the parties brings an actionbefore a court and the other does not raise the arbitration agreement as adefense to prevent the court from intervening.Article II.3 of the New York Convention, as well as article 8.1. of the ModelLaw, is mandatory. When the appropriate conditions for its application aremet, the court is obliged to refer the dispute to arbitration. This means that thecourt must not intervene (i.e. it must decline its jurisdiction). It is the lawgoverning the judicial proceeding that will determine whether an appeal canbe made to the court’s decision to admit the defendant’s request and refer thecase to arbitration, or to retain its jurisdiction on the grounds that the arbitrationagreement is null and void, inoperative or incapable of being performed.The Model Law (article 8.2) provides that while this question is being addressedin court, arbitral proceedings may nevertheless be commenced or continued.What is more, the law even empowers the arbitral tribunal to render an award.This rule is meant to protect arbitration from dilatory tactics, thus preventingthe mere filing of a legal action from postponing the commencement of thearbitration process while the issue is pending before a court.“The court of a Contracting State, when seized of an action in a matter in respect of which theparties have made an agreement within the meaning of this article, shall, at the request of one of theparties, refer the parties to arbitration, unless it finds that the said agreement is null and void,inoperative or incapable of being performed”.4

5.2 The Arbitration Agreement1.3.17Competence of the arbitral tribunal to rule on its ownjurisdictionAccording to Model Law article 16 the respondent may raise the defence inthe arbitral tribunal that the tribunal has no jurisdiction. This may happen afterthe court has found that the arbitration agreement was not “null and void,inoperative or incapable of being performed” pursuant to Model Law article8.2. It more often arises because the arbitration has commenced prior to anyaction in court. The issue may even arise during the course of the arbitrationif one of the parties alleges that the arbitral tribunal is exceeding the scope ofits authority. The grounds for the plea of lack of jurisdiction may be similar tothose in article 8.2, but they may also be based on the argument that the claimput forth by the claimant is not comprehended by the arbitration agreement.The defence must be raised not later than the submission of the statement ofdefence or as soon as the matter alleged to be beyond the scope of the tribunal’sauthority is raised dring the arbitral proceedings.The court always has the last word, however. If no appeal to the court from adecision of the arbitral tribunal recognizing its own jurisdiction is permissibleduring the course of the arbitration, the courts of the place of arbitrationwould have the authority to set aside the eventual award. Furthermore, thecourt asked to enforce the award would be authorized under the New YorkConvention, article V(1)(c) to refuse enforcement of an award that “The awarddeals with a difference not contemplated by or not falling within the terms ofthe submission to arbitration, or it contains decisions on matters beyond thescope of the submission to arbitration, .” The latter two possibilities wouldmean that the parties would have had to spend considerable time, effort andmoney before a court were in a position to rule on the jurisdiction of thearbitral tribunal. On the other hand, if an appeal to the courts from the decisionof the arbitral tribunal recognizing its own jurisdiction is permitted immediately,there is the risk that the respondent will appeal for the sake of delaying thearbitration.The position taken in the Model Law, article 16(3) is that “if the arbitral tribunalrules as a preliminary question that it has jurisdiction, any party may [appealto the court], within thirty days after having received notice of the ruling, .”While the matter is pending in the court, the arbitral tribunal may continue thearbitral proceedings. The decision of the court is subject to no appeal.The combination of the provisions of articles 8 and 16 restricts the court’srole in determining whether the arbitration clause is null and void. Anydetermination of the arbitrator’s jurisdiction is made by the arbitrator pursuantto article 16.

Dispute Settlement8CASE LAW: Ontario Court of Justice-General Division, March 1st, 1991,Rio Algom Limited v. Sammi Steel Co.5The parties had agreed that the buyer would purchase some of the seller’ssteel manufacturing business. The agreement provided that the partiesshould prepare a Closing Date Balance Sheet as soon as possible afterclosing. Arbitration was provided for if the parties could not resolve anydispute arising out of the Closing Date Balance Sheets. Such a disputedid arise. The buyer followed the required procedure and submitted thematter to an arbitrator. The seller commenced an action in a Canadiancourt challenging the jurisdiction of the arbitrator and seeking an orderstaying the arbitration proceedings. The Chambers judge granted theorder finding that the arbitrator’s jurisdiction is a threshold issue ofcontract construction to be decided by the court. On appeal, theChambers judge’s order was reversed. The appellate court found thatthe Chambers judge’s decision had been erroneously based on principlesof the domestic arbitration act rather than those found in the ModelLaw as enacted by the International Commercial Arbitration Act, Statutesof Ontario, 1988, c.30. In particular the court cited article 16, whichprovides the arbitral tribunal with the power to rule on its ownjurisdiction. The court further noted article 8 that restricts courtinvolvement to a determination of whether the arbitration agreement isnull and void.The Model Law is not mandatory as to whether arbitration proceedings maybe commenced or continued while the issue is pending before a court. Therule authorizes, but does not oblige, arbitrators to do so. In practice, whenthey are in doubt about the validity or enforceability of the arbitrationagreement, arbitrators generally wait for the question to be definitively resolvedby judges in order to avoid incurring unnecessary expenses. On the contrary,arbitrators often decide to proceed with the arbitration when they are sureabout the validity or enforceability of the arbitration agreement. It is not clear,however, whether the law allows the court to order the suspension of thearbitral proceedings. This issue was addressed in article 8.2 at an early pointduring the drafting of the Model Law. One of the first versions contained aparagraph establishing that arbitrators could continue with the arbitrationproceedings “unless the Court orders a stay or suspension of the arbitralproceedings”. This paragraph was suppressed from the final text approved.Some authors6 believe that such judicial order would clash with article 5 ofthe Model Law, which restricts the court’s intervention to the questionsexpressly set forth in the Law.CASE LAW ON UNCITRAL TEXTS, http://www.uncitral.org/, Case 18.BROCHES, Aron, Commentary on the UNCITRAL Model Law, International Handbook onCommercial Arbitration, suppl. 11, January, 1990.56

5.2 The Arbitration Agreement1.49SummaryIn order to determine the enforcement of the arbitration agreement, we needto look at the requirements laid down by the applicable law.If the applicable law is one of the modern arbitration laws based upon theModel Law, the parties will not need to sign a new agreement later, and thearbitration clause may set the arbitration proceedings in motion.If, on the contrary, the applicable law requires that a submission agreement besigned even if there is a previous arbitration clause, it is necessary to see whatthe requirements for this new agreement are and how it can be executed incase one of the parties refuses to cooperate.1.5Test your understanding1. Which of these concepts, “arbitration agreement”, “arbitrationclause” or “submission agreement”, is broader?2. If the parties include an arbitration clause in a contract, are theyallowed to go to court?3. Does the arbitration clause always have full enforcement? Whatmay be needed for this? What does it depend on?4. Does the Model Law require a submission agreement?5. What main differences can you find between article 8.1 of the ModelLaw and Article II.3 of the New York Convention?6. Suppose you are a judge in Feudalia, a country that has adopted theModel Law as the arbitration law. An action for breach of contractis pending resolution before your court. In his first appearance, thedefendant raises your lack of jurisdiction as a defense and requeststhat the parties be referred to arbitration as the contract in questioncontains an arbitration clause. Can you directly resolve the matteror must you hear the plaintiff first? In what situation could youretain your jurisdiction and reject the defendant’s claim?

5.2 The Arbitration Agreement112. THE LAW APPLICABLE TO THE ARBITRATIONAGREEMENTOn the completion of this section, you will be able to:Objectives Classify the most common criteria for determining the law applicableto the arbitration agreement; Identify the predominant criterion under the Model Law; Compare the Model Law’s main criterion with the one governingthe New York Convention; Answer the question whether the New York Convention containsany choice-of-law directive to govern the issue at the awardenforcement stage?2.1Criteria for determining the law applicable to thearbitration agreementThe law applicable to the arbitration agreement governs the formation, validity,enforcement and termination of the arbitration agreement. It deals with suchaspects as the formal requirements of the arbitration agreement, the arbitrabilityof its subject matter, its autonomy in relation to the contract in which it iscontained, the arbitrators’ capacity to rule on their own jurisdiction and theextent to which judicial review is admissible. The applicable law also determineswhether or not the submission agreement is required.There are different criteria for determining the law applicable to the arbitrationagreement. We shall focus on the most common ones: The law chosen by the partiesSome laws allow the parties to choose the law applicable to the arbitrationagreement, irrespective of the law governing other question relating tothe arbitration. The law applicable to the contractSome authors claim that the law applicable to the arbitration agreementis usually the law applicable to the contract that contains the clause.7These authors nevertheless admit that the law applicable to the agreementcould be different, since the arbitration agreement is separable from themain contract (see Chapter 5 ). The procedural law applicable to the arbitrationAnother criterion consists of applying to the arbitration agreement theprocedural law that governs the arbitration. As shall be discussed (infra6.4.7 and 6.4.8 ), in the absence of an agreement the procedural law isin principle the law of the place of arbitration. Although rare in practice,SUTTON, David St. John, KENDALL, John & GILL, Judith, “Russel on Arbitration”, 25th edition,Sweet & Maxwell, London, 1997, p. 71.7

Dispute Settlement12the parties have the right to choose a procedural law other than the lawof the place of arbitration. The law of the place of the arbitrationParties seldom indicate either a special law applicable to the arbitrationagreement or a specific procedural law. Consequently, the place ofarbitration becomes important because it will then determine the lawapplicable to the arbitration agreement (see infra 6.4.7 and 6.4.8 ).2.2The Model LawIn this connection, the Model Law does not contain rules of choice of law todetermine the law applicable to the arbitration agreement. When adopted byany country, the issue of the applicable law is solved, because the Model Lawsets forth the validity requirements for an arbitration agreement providing forinternational commercial arbitration in that State.2.3The New York ConventionThe New York Convention adopts, to a greater extent than does the ModelLaw, the principle that the parties are free to determine a law different fromthe law of the place of arbitration as the law applicable to the arbitrationagreement.The question of the existence and validity of the arbitration agreement mayarise in two different situations:a)b)Initially, when one of the parties requests a court to recognize thearbitration agreement (for instance, by requesting the court todecline its jurisdiction or to appoint an arbitrator); orAt the end of the arbitration, when it is raised as a defense tochallenge recognition or enforcement of the arbitral award.The New York Convention provides rules of conflicts of law for this lastsituation, but is silent about the first case.When a dispute regarding the existence or validity of the arbitration agreementarises at the stage of enforcing an award, Article V.1 provides that“recognition and enforcement of the award may be refused, at the request ofthe party against whom it is invoked, only if that party furnishes to thecompetent authority where the recognition and enforcement is sought, proofthat: (a) The parties to the agreement referred to in Article II were, under thelaw applicable to them, under some incapacity, or the said agreement is notvalid under the law to which the parties have subjected it or, failing anyindication thereon, under the law of the country where the award was made ”.

5.2 The Arbitration Agreement13Under this provision, the parties are free to determine the rules to which theysubmit the validity and scope of the arbitration agreement. The parties’ freewill in this sense, however, is not unlimited, since it is generally required thatthe rule of law chosen must have some connection with some of the elements(the legal transaction or the controversy). If nothing has been agreed upon bythe parties, the Convention refers to the local rules of the country where theaward was made. Thus, the determination of the place of arbitration becomesparticularly important inasmuch as the award is considered made at that place(see infra, 6.4.7 ).For the situation described in a) above, Article II.3 of the Conventionestablishes:“The court of a Contracting State, when seized of an action in a matter inrespect of which the parties have made an agreement within the meaning ofthis Article, shall, at the request of one of the parties, refer the parties toarbitration, unless it finds that the said agreement is null and void, inoperativeor incapable of being performed”.As article II does not contain any choice-of-law directive, as does article V.1.a,opinions by commentators on the Convention vary: For some, the same choice-of-law rules that govern at the awardenforcement stage under article V should apply as well at the earlieragreement enforcement stage under article II.8For others, an autonomous interpretation of article II is possible.What is meant by autonomous interpretation? The formal requirements for the validity of an arbitrationagreement, laid down in article II.2, should supersedenational law.9 As the applicable law is not indicated, courts may under thiswording be allowed some latitude: they

contract; Describe the meaning and enforcement of the term "arbitration agreement" under the Model Law. 1.1 Definition. Arbitration agreement, arbitration clause and submission agreement In general, the arbitration agreement provides the basis for arbitration. It is defined as an agreement to submit present or future disputes to arbitration.