Arbitrations, having their seat in England, are governed by the Arbitration Act of 1996, which is based on the UNCITRAL model law. The major international arbitration bodies affected by this jurisdiction are the London Maritime Arbitrators Association and the London Court of International Arbitration. However, it is also common for arbitrations that fall under the rules of other international bodies to base their cases in England. Based on a number of mandatory rules, the disputing parties are always at liberty to agree on the procedure for their arbitration or to employ institutional rules. Unless the parties agree otherwise, the provisions of the 1996 Act will always apply.
The proposition that even though an arbitral tribunal is not allowed to proceed with arbitration in England just because the nature of the dispute at hand excludes an award is wrong and not based on law. This is due to the uncertainties as to what really constitutes an award and what is not. The other reason is based on what The Departmental Advisory Committee on Arbitration Law (DAC), which was established by The Department of Trade and Industry states regarding on what can and cannot be arbitrated in England. The DAC states clearly that issues, which are not arbitrable in England often almost wholly, fall outside the commercial field. It does not base this on whether the case will result in an award or not.
Awards often represent a final resolution or conclusion of the dispute or of a part of it. They are subject to control and influence by the courts in proceedings that have been set aside or when the successful party makes a request to a court for its enforcement. No statutory definition exists as to what constitutes an award as distinguished from a decision or procedural order. During the course of arbitration, the arbitral tribunal may make many other decisions. As a rule, decisions are not subject to the control by courts. Some decisions, such as the decision by the arbitral tribunal that it has power to order an interim measure of protection may take the nature either of an award or of a decision or procedural order. The determination of a decision as an award or not is often not binding on a court before which it is brought. Some arbitration laws may specifically allow a party to obtain a review or enforcement of such decisions in whatever form they may be.
Not all decisions made by the arbitral tribunal are awards. The tribunal will come up with many decisions during the process of the arbitration. Some of them are administrative, for example, the scheduling of a hearing. Such decisions will normally take the form of a procedural order. Some other decisions are of more important. A determination as to the location of the arbitration or the language used in the arbitration, if the parties have not made the decision, will usually be taken as a decision. Other decisions may have a determinative effect on the arbitration without having to be a full and complete settlement of it. It is sometimes not clear whether such decisions should be regarded as “awards”, “orders” or “decisions”.
The other reason that makes the proposition under discussion not to make sense is the principle of competence-competence. This is the principle that gives an arbitral tribunal the jurisdiction to determine its own jurisdiction. The net effect would have been that the arbitral tribunal itself lacks the power to make that finding. The principle gives the tribunal the legal base to set proceedings in motion when tackled with an objection raised by an uncooperative respondent. There also arises the other issue as to whether it is the court that should have the key role of determining the existence of an arbitration agreement or whether the issue should be left to the tribunal. The accepted approach however is that the arbitral tribunal should be accorded the first say, subject to probable court review. The competence – competence principle has been enjoined into the statutes of many nations and international arbitral institutions. Article 36(6) of the Statute of International Court of Justice gives the ICJ authority to rule on its own jurisdiction. The ICSID Convention, UNCITRAL Model Law, the English Arbitration Act and the ICC Arbitration rules also possess similar provisions.
The case of CCL and GUL is best analyzed by the separability doctrine .While competence-competence gives powers to the arbitration tribunal to decide on its own jurisdiction, separability affects the results of this decision. The principle usually gives the arbitral tribunal authority to separate the arbitration agreement from the main contract. This is to enable the tribunal decide a case where one of the parties is contesting its jurisdiction on the grounds of invalidity or termination of the arbitration agreement. Other grounds of objection may no agreement existed or that the parties never finalized on the terms of the main contract. An arbitral tribunal that is faced with such an issue would usually severe the arbitration agreement from the whole contract and decide the issue despite the fact that the arbitration agreement is the subject of a challenge. Like many other arbitration laws, the UNCITRAL Model Law adopted in 1985 strictly give the provision that an arbitral tribunal shall have the authority to decide its own jurisdiction and any other objection regarding the existence or validity of the arbitration agreement.
Several cases have tried to elaborate this principle. In TOPCO v. Libya, one of the issues under dispute was whether the arbitration clause in the deed of concession had been made void by the government’s decision of nationalization. The arbitrator decided that the arbitral clause was valid based on the separability doctrine.
In the case of Elf Aquitane Iran v. National Iranian Oil Company (NIOC), the NIOC argued that the government was not obligated to arbitrate the dispute because the 1980 declaration of the Government of Iran rendered the Exploration and Production contract void ab initio. The tribunal rejected this argument based on the separability doctrine.
The doctrine was also made clear in the English Court of Appeal case of Harbour Assurance Co. Ltd. v. Kansa Insurance Ltd. In which the plaintiffs argued that the reinsurance contract signed with the defendant having an arbitral clause was illegal and void because company of the defendants had not been validly registered in the United Kingdom. The Court of Appeal rejected this argument and insisted that the separability principle applied to save arbitral clauses even when the main contract was deemed void for illegality.
With the basic principle of autonomy well-formed across jurisdictions, there remains the issue as to the extent of the applicability of the separability doctrine especially in situations where the basis of objection directly affects the arbitration agreement and not the main contract. The House of Lords was to deal with the issue of whether the allegation of bribery rendered the main contract void and consequently the arbitral clause in the Premium Nafta Products Ltd. v. Fili Shipping Co. Ltd. The House of Lords, decided that based on the separability principle, the allegation that the contract was induced by bribery did not influence the validity of the arbitration agreement and that for any objection to proceed, it had to be related directly to the arbitration agreement.
In this particular case, that the separability principle shall extend to save CLCL even though the main contract may be void for illegality based on the issues raised by GUL. The management of CLCL should thus be advised that the issues raised by GUL do not hold due to the separability principle.
The issues raised in part A and B are based on the doctrines of separability and competence-competence which have been developed to reinforce and strengthen the jurisdiction of a tribunal. A distinction has to be made between whether the issue at hand is related to the validity of the main contract or the validity of the arbitration agreement within that main contract, or both. A determination as to the validity of the main contract usually falls within the jurisdiction of an arbitral tribunal. This is due to the principle of separability. The main point of this principle, which is included in the rules of many arbitral bodies, is that regardless of the validity of the main contract, including whether the main agreement has been terminated or was void ab initio, the arbitration clause contained in that main agreement is to be treated as independent. The arbitral tribunal possesses the power to rule on its own jurisdiction, including any opposition to the initial or continuing existence, validity or effectiveness of the Arbitration Agreement. For that purpose, an arbitration clause, which forms or was intended to form part of another agreement shall be treated as an arbitration agreement that is independent of that other agreement.
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