(4) Enforcement of Arbitration agreement ("AA") (textbook ((B)…
(4) Enforcement of Arbitration agreement ("AA")
What happens when one party breaches AA by trying to resolve issue by litigation in cts; instead of adhering to AA
while parties agree to arbitrate, they may reconsider that commitment when disputes arise. notwithstanding this agreement to arbitrate, parties may turn to litigation in local cts or obstruct the arbitral process.
ultimately, the efficacy of an AA depends on the parties ability to enforce the agreement
while the legal landscape evolves, it has gone from one of relative disfavor to one of essentially "universal support" (Born).
this legal landscape consists of intl concentions (nyc), national law (UNCITRAL ML) and institutional arbi rules.
disputes over enforceability can take many forms (1) claims by party that it never consented to any agreement including any AA and therefore no agreement to arbi exists (2) claims that AA between parties is invalid i.e. formal invalidity (requirements for written form) or substantive invalidity (unconscionability, termination,f frustration or fraud)
consideration of JO by arbitrators:
respondent in an arbi will raise JO in the arbi itself, arguing to arbitrators it is not bound by valid AA/AA does not encompass dispute.
arbitrators have auth to consider such JO and make decisions per A16 UNCITRAL ML
16.2 ML: any objection to tribunal's jurisdiction be raised no later than statement of defense, failing which the jurisdictional objection is waived
tribunals will resolve j.disputes condcted in proceedings w written submissions, hearings, followed by decision by arbitrators.
if tribunal upholds JO, it will dismiss claimant's claims and arbi concludes (this negative j.award may be subject to JReview)
if tribunal rejects the objections, it will make a positive juris award (also subject JR)) and arbi will proceed to merits
consideration of JO by natcts
if parties commence litigation in natct.. other party will often invoke AA requesting natct "stay"s or "refers" party to arbi (contemplated by A2 NYC) and 8UNCITRAL ML (see below)
in determining whether to refer parties to arbi, natct will generally consider if parties are bound by valid AA which applies to their dispute
party may choose not to appear in arbi proceedings or commence parallel liti, subsequently seeking annulment of arbitral award or resist enforcement. in both cases on jurisdictional grounds of A34,36 ML.
in each case, natct will be req to consider whether parties are bound by valid AA which encompassed their dispute
Contracting state must recognize AA
New York Convention 1958 Art II: ‘(1)
Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration
Art II (2), (3): if a ct is faced w AA, it has to refer to arbitration
‘(2) The term “
agreement in writing
” shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams. (3) The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.’
NOTE: NYC is a treaty agreement between 2 contracting states, sth must be done in order for it to be brought within a domestic legal system.
not too important
must fulfil requirements (7) in NYC to qualify as subject to the convention
agreement to arbitrate (A2.1/2 NYC)
commercial rs req (A1.3 NYC)
disputes requirement A2.1 NYC, A7 ML
existing or future dispute req (A2.1 NYC) A7 ML
defined legal rs req (A2.3 NYC, A7 ML)
Foreign or intl AA
reciprocity requirement 1.3 NYC
:star: Model Law
Art 8(1) ML (key provision) enacting what is in Article 2.
‘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.’
Art 8’s sphere of application: irrelevance of the seat (art 1.2 ML) and of the law governing the agreement -> article 1.2 says the ML provisions apply where the relevant juris is the seat of arbi. But there are a few provisions that apply irrespective of seat, and A8 is one of them.
If u have a ML country and this issue comes up, it will still apply A8 even if its not seat of arbi.
if u have a valid arbit agreement, and a party wants commence proceedings in liti (against what was previously agreed) the ct is obliged to refer parties onto arbi and not deal w dispute on ct proceedings.
When parties are in breach of arbitration agreement and A8 comes up, arguments will be focused in the following aspects:
Note the various aspects of art 8(1) (and art 7)
‘an action ... in a matter which is the subject of an arbitration agreement’: i.e. dispute within scope of arbitration agreement
‘not later than when submitting his first statement on the substance of the dispute’: i.e. no waiver
‘A court ... shall ... refer the parties to arbitration’
‘ … unless it finds that the agreement is null and void, inoperative or incapable of being performed’
(B) obligation not to litigate
although a clauses do not provide expressly that "all disputes shall be resolved by arbi, to the exclusion of natcts", the negative obligation is the clear intent of virtually all AA.
dges for breach of AA (usually uncertain n inadequate remedy bc quantum is speculative)
but it works well as a supplement. US and Eng have either awarded dges for breach of AA or indiciated the possibility for soing so existst
(4) non recognition of judgements
if party pursues liti in breach of AA, resulting judgement should not be entitled to recognition
it violates NYC A2.1,2.3 ... SG ct in WSG Nimbus (2003) SG,HC: 'parties had agreed to submit disputes to arbi in SG. it would be manifestly against public policy to give recognition to the foreign judgement at the behest of defendants who have procured it in breach of order emanating from this ct'
party ability oto obtain stay of liti is not always suff to efectively enforce an AA. bc a party may be able to pursue liti of underlying dispute in a natct that does not fully honor its NYC undertakings. -> in this case, stay is not an effective remedy
an additional means of enforcement of negative obligation to refrain from litigating arbitrable disputes
cts in some common law juris prepared to issue "ASI" to prohibit liti in a foreign forum
ASI are directed against parties to liti (not the foreign ct) but are intended to preclude liti from proceeding in foreign ct
under english law: injunction may ordinarily be granted against a foreign liti if (a) eng forum has suff int in the matter (b) foreign proceeding causes suff prejudice to the applicant (c) asi would not unjustly deprive the claimant in the foreign ct of a legit adv
this is echoed in SG Canada, Bermuda, Aus (issuing asi)
FYI: civil law courts are usually not even requested to issue ASI orders bc it is clear no such remedy is avail
(1) stay or dismissal of litigation
some arbi legis expressly provides for stay of litigation brought in violation of AA: US, Eng, Canada, SG and other common law
civil law: france, switz and germany = legislation requires ct to decline juris over arbitrable disputs. uniform practice to refuse to hear merits of claims
(C) anti-arbitration and anti-suit orders
rare cases, cts may issue anti arbi injunctions, forbidding party from pursuing claims in a-proceedings. these rest on the cts conclusion that there is no valid AA providing a basis for arbi to proceed. there are doubts as to legitimacy of anti arbi injunctions (bc they interfere w artrib czcz)
in even rarer cases, cts may issue an antisuit order, forbidding one party from pursuing arbitrable claims in a liti. the basis for suchorders is a conclusion that parties are bound to arbitrate, not litigate their dispute
(A) positive obligation to arbitrate:
7.1 UNCITRAL ML "an agreement by the parties to submit to arbitration all or certain disputes" and 8 ML enforced by "referring the parties to arbi"
obligation to arbitrate i ngood faith: obligation is a sui generis one
souces: 7.1 UNCITRAL ML, A8. NYC "recognise"... "to submit to arbi"
remedies for breach
dismiss or stay (suspend) litigation brought in breach of an agreement to arbitrate
A2.3 NYC and A8.1 UNCITRAL ML .. if a valid AA exists, cts shall "refer the parties to arbitration".