Definition and Essential Elements Chapter 3 THE ARBITRATION AGREEMENT 3.1 DEFINITION AND ESSENTIAL ELEMENTS Bibliography: General Works: de Boiss.eson, pp.15-26 paras 1-21, pp.475^177 and pp.480-482 paras 562-574; Craig, Park and Paulsson, pp.37-42 § 4.01-05 and pp.107-166 § 6.01-9.08; Fouchard, Gaillard and Goldman, paras 385-387; Huys and Keutgen, pp.41-42 para.34, pp.8J-S2 paras 82-83, pp.113-134 paras 129-146 and pp.451-455 paras 644-649; Midori, pp.107-130 paras 1-5 ad Art.4 CIA; KSP-Ehrat, p. 1437 paras 2-4 and pp.1449-1455 paras 28-4S ad Art. 178; Lalive, Poudret and Reymond, pp.45-50 paras 1-3 ad Art.4 CIA and pp.314-315 paras 1-3 ad Art. 178 PILS; Merkin, pp.30~34 ad Section 6; Poudret, FJS 464, p.7-8 para.4; Redfern and Hunter, pp.131-134 paras 3-01 to 06 and pp.152-168 paras 3-37 to 72; Rutherford and Sims, pp.53-54 paras 6.1-6.4; Schlosser, pp.193-207 paras 257-284; Schwab and Waiter, pp.19-28 Ch.3 paras 1-24; Tschanz, La convention d'arbitrage, in: Le nouvcau droit Suisse de ['arbitrage international, op. cit. ad Ch. 1.4.1.1.8, pp.749-759. See also the Handbook for all the countries considered, Ch.II.1 and for the UNCITRAL Mode! Law, ad Arl.7. Specific Studies: P. Bernardini, The Arbitration Clause of an International Contract, Jnl. Int. Arb. 1992/2 pp,45-60 (cited: Arbitration Clauses); id.. Arbitration Clauses: Achieving Effectiveness in the Law Applicable to the Arbitration Clause, in: ICCA Congress Series para.9, 1999. pp.197-203 (cited: ICCA); Pt.-A. Gelinas, Arbitration Clauses: Achieving Effectiveness, in: ICCA Congress Series para.9, 1999, pp.47-66; W. Wenger, Schiedsvereinbarung und schiedsgerichtliche Zuständigkeit, in: Schiedsgerichtsbarkeit, pp.223-247, especially 229-237; R Wyler, La convention d'arbitrage en droit du sport, RDS 1997, pp.45-62; M. Pedrazzini. Essentialia e accidentalia della clausola compromissoria, in: Travaux Suisses, pp.71—83. 3.1.1 Definition 149 As mentioned in Ch.1.1, the majority of statutes and international conventions considered here give a definition of the arbitration agreement, even though they do not define arbitration as such. The arbitration agreement is the foundation on which rest both the arbitrators' jurisdiction and the validity of their award. However, this does not imply that the will expressed by such agreement is sufficient to govern arbitral proceedings without reference to a legal system. These definitions overlap to a large extent, which limits the interest of a comparison. 150 To begin with, we will examine die definition given by Art.7 of the UNCITRAL Model Law, which served as a model to s.6 of the Arbitration Act anrl tn 7po S 1029. because this provision is one of the most comprehensive. It ij defines the arbitration agreement as "an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between \ them in respect of a defined legal relationship, whether contractual or not. An '1 arbitration agreement may be in the form of an arbitration clause in a contract or ; in the form of a separate agreement". The first element, which is to be found in all the definitions (NYC, Art.II(l); ZPO, § 1029(1); Arbitration Act, s.6(l); NCPC, Art.1442; ICCP, Art.808; WBR, Art. 1020(1) and (2); SU, Art.l), is the parties' undertaking to submit their disputes to arbitration, i.e. to the binding ; decision of one or more arbitrators. While this also results implicitly from j Art. 1676(1) of the GIB, it is absent in NCPC, Arts 1493 and PILS, 178. which \ do not strictly speaking define the arbitration agreement. However, there is no \ doubt that this element is inherent to the very definition of arbitration. The definition makes it clear that the disputes submitted to the arbitrators must result from a defined legal relationship, whether contractual or not. The parties cannot, without waiving their freedom, undertake to submit to arbitration any dispute which might arise between them in the future. This is expressly mentioned in ZPO, § 1029, but not in Arbitration Act, s.6. It is implicitly contained in Arts 1442 and 1448 of the NCPC for domestic arbitration, and in ICCP, Art.808bis, as well as in WBR, Art. 1020(1) and SU, 1(2), although the last two mentioned statutes extend the ambit of arbitration, as we have seen above, to findings of fact or the filling of gaps and the supplementing of a contract. Article 11(1) of the New York Convention similarly envisages "all or any differences which have arisen or which may arise between them [i.e. the parties] in respect of a defined legal relationship, whether contractual or not... ", while Art.I(3) allows the Contracting States to limit the application of the Convention to legal relationships, whether contractual or not, which are considered as commercial under the national law of the state making such declaration. \ Thirdly, the UNCITRAL Model Law, like the New York Convention, ZPO, § 1029(1), Arbitration Act, s.6, CJB, Art. 1676(1), and WBR, Art. 1020. applies to < "disputes which have arisen or which may arise", that is to say present or future. Art. 178(3) in fine PILS limits itself to confirming the validity of an arbitration agreement concerning a "dispute which has not yet arisen", that is to say an 1 arbitration clause, while Arts 1447 and 1442 of the NCPC, for domestic arbitration, as well as Arts 807 and 808 of the ICCP, distinguish between a submission agreement or "compromis" (for a dispute which has already arisen) and an arbitration clause or "clause compwmissoire" (for a dispute which has « not yet arisen). We shall see however that this traditional distinction which v originates from French law is no longer of importance in international arbitration. We will only note here that Art.I(2)(a) of the 1961 European Convention replaced i such distinction with the one between an "arbitral clause in a contract" and an "arbitration agreement" ("compromis"), which can have the meaning of an f arbitration agreement concluded by separate act, and not only concluded after the dispute has arisen. This new terminology probably explains the alternative given by the aforementioned Art.7 of the UNCITRAL Model Law between "an arbitration clause in a contract'" and a "separate agreement", a distinction which The Arbitration Agreement ZPO, § 1029(2) also adopts (Schiedsklausel and Schiedsabrede), but not s.6 of the Arbitration Act. To avoid terminological confusion, we will respect the traditional meaning of submission agreement ("compromis") and arbitration clause ("clause compromissoire"), and we will use the generic term of arbitration agreement, which can refer to both present and future disputes. 151 We also point out, following Redfern and Hunter,1 that even if the submission agreement ("compromis") and the arbitration clause ("clause compromissoire") follow the same legal regime under the aforementioned laws, the problems faced when drafting them are different. In the first case, it is important to precisely determine the existing dispute that is to be submitted to arbitration. In the second case, it is important to foresee all the hypotheses which might arise in the future: this might result in a broad but concise clause. Furthermore, while the parties generally agree on the choice of the arbitrators in submission agreements, they usually do not in an arbitration clause; at the most they will provide for a mechanism to appoint them when the time comes. Finally, other clarifications might be added if the dispute to be settled is already known.2 We have seen above that French domestic law still distinguishes between the submission agreement ("compromis") and the arbitration clause ("clause arbi-trale") although both are arbitration agreements. This distinction is the result of a historical evolution dating back to the Code of Civil Procedure of 1806, Art. 1006 which required that the submission agreement mention both the subject matter of the dispute and the names of the arbitrators, failing which it was null and void. For some time the Cour de cassation inferred from these requirements that an arbitration clause was invalid. While the arbitration clause has been admissible in commercial matters since 1925, Art.2061 of the Civil Code, in the version that entered into force in 1972 and was applied until being amended in 2001, provided that such clauses were null and void in non-commercial matters unless the law stated otherwise. The rule was thus nullity in principle, but admissible in commercial matters, particularly in the cases listed in Art.631 of the Commercial Code.3 Since they were bound to respect these statutory provisions, the authors of the decree of May 14, 1980"" have henceforth distinguished between these two types of arbitration agreement in NCPC, Arts 1442 and 1447 respectively. However, we have seen that some 75 years ago the courts discarded the prohibition resulting from CPC, Art. 1006 in international arbitration.5 This liberal conception was implicitly endorsed by the decree of May 12, 1981, since Art.1493 of the NCPC, which refers to international arbitration, no longer distinguishes between the submission agreement and the arbitration clause. Therefore, this distinction no longer plays any role in international arbitration. 1 Redfern and Hunter, p.139 para.3-06 and pp.161-162 paras 3-57 to 59. 2 de Boisseson, p.15 para.2. 1 de Boisseson, pp.2l-26 pam.4-2I; Schlosser, p. 198 paras 265 and 266. 4 Rev. arb. 1980, p.725 ss., Arts 2 and 7. sCh.l.3.1, para.23, particularly the judgments Mardele of 1930 and Dambricourt of 1931, cited ifwA™ In fn 1 17 Definition and Essential Elements For the reasons indicated above,6 we shall also not distinguish between 152 contractual arbitration clauses, testamentary arbitration and clauses contained in articles of association. Here we only consider contractual clauses, which does not mean that the subject matter of the dispute is necessarily a contractual relation (but see Art.808a of the ICCP 2006). 3.1.2 The essential elements of the arbitration agreement Since arbitration clauses are sometimes drafted in haste, at a point when the 153 contract is almost complete (midnight clause), or by persons with little experience of international arbitration, many commentators have provided lists of provisions to include.7 Commentators of ICC arbitration distinguish between indispensable elements, which primarily include in their view, the submission to the rules of this institution, elements which are recommended and finally those which might prove useful in a specific case.8 We shall refrain from adding a list of our own for a number of reasons. First of all, our aim is not to provide recipes to arbitration practitioners, but to point out similarities and differences between the norms governing this institution. Secondly, we feel that an essential distinction must be made between institutional and ad hoc arbitration, since an institution, once identified, can remedy most gaps in an arbitration agreement.9 Finally, we consider that the arbitration agreement should be tailored to take into account the particular circumstances of the case, so that it would be both vain and dangerous to establish abstract lists. Furthermore, several of the elements which commentators generally propose to insert in the arbitration agreement should, in our opinion, belong to either the terms of reference or a preparatory order, drawn up in full awareness of the facts by the arbitrators. It is not helpful to agree on provisions which in any event will have to be reviewed, modified or even abandoned. We already note here that nonessential clauses, such as those concerning the procedure, are not subject to the formal requirements of the arbitration agreement.10 Consequently, we shall stick to the essentials, that is the elements which must be contained in an arbitration agreement in order to ensure that it validly binds the parties. In doing so, we shall adopt the definition given above. We shall see further on, by distinguishing between form and content, which law governs the question of validity. First, the arbitration agreement must, like any contract, be concluded between 154 two or more parties who are determined or determinable. This primary requirement causes problems where there are more than two parties (multi-party 6 See Ch. 1.1.1, paras 4 and 6. 7 Notably Bernard™, op. cir. (Arbitration Clauses); Gelinas. op. cit., pp.53-65; R.H. Kreindler, Practical Issues in Drafting International Arbitration Clauses, Arbitration 1997, pp.47-55; Pedrazzini. op. cit.; Ch. Spragge and N. Aitken, Drafting the Arbitration Agreement, [1998] Int. A.L.R., 145-149. 8 Craig, Park and Paulsson, pp.85-135, Chs 6-8. 9 See Redfern and Hunter, pp.157—158 para.3-48 and p.165 para.3-65. '"F.xcent under English law Cs.Sfl i of the Arbitration Act 1996"). The Arbitration Agreement arbitration) or where the arbitration agreement is held to include persons or companies who have not signed it (extension). Furthermore, it is necessary that such persons have capacity to arbitrate and, if they act through an agent, that the latter be duly empowered. Given the complexity of these problems, we shall deal with them in a special chapter devoted to the parties (Ch.3.4). For the moment, we merely emphasise that the authors of an arbitration agreement must ensure that the parties thereto are clearly identified and validly represented. 155 Secondly, the arbitration agreement must clearly express the partie,S.Linteatipn to submit their dispute to arbitration, i.e. to the binding decision of one or more arbitrators appointed according to their agreement.103 In particular, all ambiguity between arbitration in the strict sense, mediation, expert determination, and odier modes of dispute resolution outlined above in Ch.1.2 must be avoided.10b Should the parties intend to subordinate their arbitration to prior conciliation proceedings, they should mention it in their arbitration agreement since this is a requirement of their submission to arbitration. 156 Thirdly, the arbitration agreement must specify the object of. the dispute submitted to the arbitrators, Where the dispute has already arisen, it should be precisely described. Experience in drafting terms of reference shows that the parties often have difficulties in defining their differences; each tries to present them from his own point of view. By contrast, where the arbitration agreement concerns future disputes, these should be described as broadly as possible; here authors generally recommend to extend the arbitration to all disputes in connection with a determined legal relationship. The latter can be contractual or non-contractual, as several laws expressly state. The UNCITRAL Model Law merely envisages commercial arbitration but in the broadest sense, as seen above.11 Furthermore, the object of the dispute must be arbitrable,-.a. question which we will deal with in Ch.3.7 below. While the international conventions and the afore-mentioned laws speak of disputes or differences (the latter term being used in Arts I and II of the New York Convention), Bruno Oppetit has cast doubt, in a work mentioned above,12 on whether arbitration (like court proceedings) needs to be contentious. He points out that neither arbitrators nor courts are necessarily called upon to decide l0i'The recent case law of the Swiss Federal Tribunal is very favourable to the validity of the arbitration agreement ATF 130 III 66, JdT 2004 I 83; see also ASA Bui. 2005, 128, 135-137, holding that the clause "Any dispute relating to this Agreement or its termination may be referred by either party to FIFA whose decision shall be final and binding on both parties" (emphasis added) is a valid arbitration agreement to submit the disputes to the arbitral procedures defined in the statutes and interna] rules of FIFA (and not to FIFA itself). In the present case, the Swiss Federal Tribunal however upheld the decision of the CAS to decline its jurisdiction because the reference to CAS was not yet properly implemented in the statutes of FIFA when the arbitration was militated '*In Flight Training International Inc. v IFTE [2004] 2 Al! E.R. (Comm) 568, a "Settlement of Disputes" clause referring to an institution (ACAS London, providing conciliation, mediation and arbitration services) mentioned that "legal fees and costs shall be paid by either party which does not prevail at mediation." The court held that this was no valid arbitration agreement; see on this case, Ch. Debattista, Arb. Int. 2005/2, pp.236-238. 11 Ch.1.1.5, para. 10. Definition and Essential Elements disputes in the strict sense, but also to regulate relationships between the parties, notably by adapting a contract or filling gaps therein. Such cases cannot in our opinion be qualified as voluntary jurisdiction ("juridiction gracieuse"), but are contentious, in that they determine a legal relationship with res iudicata effect. Besides, it is difficult to imagine parties invoking arbitration unless they have a disagreement, even if this is only in regard to the interpretation of a contractual clause or to the filling of a gap. In this respect, English law deserves mention for two reasons. While under the former law the courts limited a stay of court proceedings or assistance in appointing arbitrators to cases where there was a dispute between the patties,13 this prerequisite was not included in s.9 of the 1996 Arbitration Act.'4 Secondly, the definition of arbitration agreement in s.32 of the 1950 Arbitration Act used the English term "differences", also to be found in Arts I and II of the New York Convention, and the courts held that this term was wider than "dispute".Is By using the latter in s.6 of the Arbitration Act 1996, the English legislature took care to clarify in s.82 that the word "dispute" embraces all types of differences, so that it must be understood in the broadest sense. A fourth element, ignored or considered of secondary importance by numerous 157 authors, is that the arbitration agreement must directly or indirectly, connect the arbitration to a legal system which .will ensure its effectiveness in .the. absence of. any contractual mechanism to this effect. As we have seen in Ch.2.2, the direct connection" consists in designating a seat. Thus, a clause stating that the arbitration shall take place in Geneva is sufficient for Ch.12 of the PILS to be applicable and enables the parties to apply to the Geneva courts for assistance in constituting the arbitral tribunal pursuant to Art. 179(2) of the PILS. The situation is similar in the other countries considered here, notably in France where Art. 1493(2) of the NCPC empowers the President of the Tribunal de grande instance in Paris to resolve difficulties relating to the constitution of the arbitral tribunal in all arbitrations taking place in France. However, this Article also provides for an indirect connection that allows the intervention of this magistrate where the parties have agreed that French procedural law shall apply, irrespective of the seat. We have emphasised that this additional connection, a feature particular to French law, can result in unfortunate conflicts of jurisdiction when the seat of the arbitration is not in France.16 In such cases, the Paris judge and the court of the seat will both have jurisdiction for appointing or removing arbitrators, which can lead to conflicting decisions. Another form of connection consists in the submission to the rules of an arbitral institution. Such institution is generally competent, as we shall see,17 to '-'See notably Mustill and Boyd, pp.122-129, and (2001), pp.139-140; Samuel, pp.148-151. 14 See Halki Shipping v Sopex Oils [1998] 1 Lloyd's Rep. 465, CA; Merkin, pp.35-36 ad s.7 and 41-42 ad s.9. 15 Sykes (Wessex) v Fine Fare [19671 1 Lloyd's Rep. 53, CA, especially 60; see Merkin, p.30 ad Section 6. lhCh.2.5, para.141. 17 Ch A ■> I ? nara Wi The Arbitration Agreement appoint the arbitrator or arbitrators in the absence of an agreement between the parties or in case of obstruction by one of them, and even to determine the seat of the arbitration. Failing such a determination, the seat can be fixed by the appointed arbitrators.18 To take the example of ICC arbitration, these powers of the ICC Court of Arbitration result from Arts 8.3, 8.4 and 14.1 of the Rules. While the ICC Court determined the seat in almost 30 per cent of all cases in the eighties, this percentage sank to 17 per cent between 1989 and 1999, which shows that the parties are conscious of the importance of this choice, even if they do not always appreciate all the consequences thereof.19 Finally, an indirect connection can consist in the submission to rules containing a procedure for appointing arbitrators who can then determine the seat in the absence of an agreement of the parties. Article 7.2 of the UNCITRAL Rules is an example. It provides a cascading system in the absence of an appointing authority or where such authority refuses to act; in this case a party can request the Secretary General of the Permanent Court of Arbitration in The Hague to designate such appointing authority, which will appoint either the arbitrator for the party in default or the chairman of the arbitral tribunal.20 Article 16 then empowers the arbitral tribunal to determine the seat of the arbitration and thus to ensure a connection with a legal system. A similar mechanism can be found in Art.IV(3) to (7) of the 1961 European Convention, which enables the parties to have recourse to the president of the Chamber of Commerce at the seat of the arbitration or in the absence of such a designated seat at the domicile of the respondent or to a special Committee constituted pursuant to the Convention. However, this procedure is in principle not applicable in relations between the countries considered here: England, Switzerland and the Netherlands have not ratified the 1961 European Convention; the other Western European states, in particular Germany, Belgium, France and Italy waived the procedure in the relations between physical or legal persons whose habitual residence or seat is in those states by virtue of the Paris Arrangement of 17 December 1962,21 which replaced that procedure by the jurisdiction of the competent judicial authority of each country. In the absence of a seat it might be difficult to identify such authority, so that this simplification can in certain cases result in a deadlock. In such a case of deadlock, we submit that the Paris Arrangement is inoperative and that the mechanism of the 1961 European Convention can be used by the claimant (para.136). As already mentioned, a number of national laws, namely those of Germany, the Netherlands and Sweden, provide for a subsidiary connecting factor based on the domicile of one of the parties where no seat has been fixed.22 Italian and English law also contain subsidiary connecting factors designed to avoid the lsCb.2.6, para. 143. Iy Craig, Park and Paulsson, p.94 § 7.02 and App 1.7. 10 See Redfern and Hunter, pp. 192-197 paras 4-35 to 38. 21 Published by Fouchard, Gaillard and Goldman, pp.1074-1076 (French) and pp.lO58-J060 (English); see Ch.1.4.1.2.4, para.79. Definition and Essential Elements invalidity of the arbitration agreement when the seat has not been indicated.22a However, in order to ensure the effectiveness of the arbitration the conditions of such a subsidiary connection must be met. Furthermore, we have seen that the PILS and the UNCITRAL Model Law contain no subsidiary connecting factors. In other words, despite all these precautions, the determination of the seat by the parties can be an essential element of the arbitration agreement, and not merely an important or useful one, as many authors submit."3 The effectiveness of the agreement may depend on it in cases of obstruction. Having identified above the four essential elements upon which the validity or 158 effectiveness of the arbitration agreement depend, we shall now briefly review the elements which are not essential although they are deemed important and often recommended to practitioners.24 The determination of the number and qualification of arbitrators is not necessary if the agreement refers to an arbitral institution or an institutional mechanism. In such a case, the institution will determine the number of arbitrators or will even appoint them. In the contrary case, the supporting court will generally have the same powers. It can also be useful to empower the arbitrators to render partial awards or provisional measures, although the majority of recent laws already confer such powers on the arbitrators. The language of the arbitration and the rules governing the conduct of the procedure can be determined by the arbitrators if the parties have failed to do and if these issues are not dealt with in the set of rules adopted by the parties. It may be premature to determine the procedure to be followed before the exact nature of the dispute is known and it is advisable to allow the arbitrators the freedom to tailor make the procedural rules. On the other hand it is prudent, if not necessary, to empower the arbitrators to adapt contracts or fill contractual gaps, as WBR, Arts 1020(4) and SU, 1(2) provide for, or to make a subsequent agreement to this effect, which is subject to the same formal requirements.25 By contrast, if all our laws authorise the parties to choose the law applicable to the substance of their dispute, this choice need not necessarily be included in the arbitration agreement nor fulfil the same formal requirements.26 The power to decide as amiable compositeur or ex aequo et bono can also be laid down in a subsequent separate agreement.27 Furthermore, it is not always wise to confer such powers on the arbitrators without knowing the exact nature of the dispute submitted to them, The same can be said with regard to an advance waiver of the 22a Ch.2.5, paras 137 and 138; for Italy, see Cone di Cassazione, YCA 2002, p.500. "Notably Bernardini, op. cit., p.51 no.l; Craig, Park and Paulsson, p.93 § 7.02; Geljnas, op. cit., p.57: "the most important complementary component"; Pedrazzini, op. cit., p.78 no.3. 24 See in particular Craig, Park and Paulsson. pp.91-126 §7.01-8.14; and Geiinas, op. cit, pp.57-65. 25 See Ch.1.2.6, para. 19. 2(vFor Switzerland see Lalive, Poudret and Reymond. pp.389-390 para.4 ad PILS. Art. 187; see also Ch.7.2.1, paras 682 and 683. 27 See ZPO, § 1051(3); s.46(l)(b) of the Arbitration Act; CJB, Art. 1700; NCPC, Ait. 1497 (see Fouchard, Gaillard and Goldman, para.1501 who add that this clause is not subject to any requirements of form); ICCP, Art.822; WBR, Art.l054(3); PILS, Art,187(2) (see Lalive, Poudret and Reymond, p.402 para.22 ad PILS, Art. 187); UNCITRAL Model Law, Art.28(3); Art.7(2) of the F.nronp.an Convention 1961. See also Ch.7.5.1. oara.713. The Arbitration Agreement Definition and Essential Elements right to challenge the award, in as far as such waiver is admitted which is not the case in all laws considered here.28 While these various points can sometimes usefully be dealt with in the arbitration agreement, they are not crucial to its validity. However, this validity supposes that the essential elements are defined without ambiguity or contradiction. Otherwise, the clause is defective and it might prove invalid or ineffective, as we shall see below. 3.1.3 Defective arbitration clauses Bibliography: Among or in addition to the works already cited in Ch.3.1, see in particular de Boisseson, pp.480-482 para.574; Craig, Park arid Paulsson, pp.127-135 § 9.01-08; Devolve, Rouche and Pointon, pp.65-68 paras 115-121; R Eisemann, La clause d'arbilrage paihologique, in: Arbitrage commercial, Essais Eugenio Minoli, Turin 1974, pp.129-161: Fouchard, Gaillard and Goldman, paras 484-486; Mustill and Boyd, pp.106-107; Redfern and Hunter, pp.165-168 paras 3-67 to 72; h. Scalbert and L. Marville, Les clauses compromissoires pathoiogiques, Rev. arb 1988, pp.117—135; Shackleton I, pp.59-62; van den Berg, pp.158-161, no. 11-1.3.4.3 and 4. Whether caused by haste, clumsiness or ignorance of the drafter, defective or "pathological" arbitration clauses have stimulated the imagination of courts and arbitrators and aroused the curiosity of legal authors. As Eisemann pointed out. they are not necessarily null and void or ineffective. Some of them, which we shall deal with first, can give rise to difficulties in the initiation of the arbitration, but will not prevent the conduct of the procedure because case law and arbitration practice try to salvage such clauses to the largest extent possible by way of interpretation.29 One of the most widespread errors concerns the designation of the arbitral institution.29" This is not fatal where it is possible to identify what the parties really meant or where the applicable arbitration law contains provision for the appointment of the arbitrators without involving the institution.30 Thus, the parties often designate incorrectly the International Chamber of Commerce, but 28 s.69(l), Arbitration Act; Ail.1717(4), CJB; Art. 192(1). PILS; Ar(.51, SU; see Ch.9.7, paras 838-842. z'' Fouchard, Gaillard and Goldman, para.485. -'■•"For recent examples under the Swiss Rules, see Kellerhals and Berger, op. cit. ad. Ch.l.4.3.4a, pp. 161—162; In Germany, the Bavarian Highest Regional Court held that an arbitration referring to (he "chamber of handicrafts"' ("Handwerkskammer"), without specifying which of the two potentially competent chambers was chosen, was ambiguous and void for uncertainty, KroII, [2002] Int. A.L.R., N-41. !0 Paris, Rev. arb. 1987, p.325, with a note by Level: "Tribunal de la Chambre de commerce de Paris" = "Chambre arbitrate de Paris"; Rev. arb. 1990, p.521: official chamber of commerce in Paris - ICC; see the other cases died by de Boisseson, p.481 para.24, and Fouchard, Gaillard and Goldman, para.485, n. 112—113. By contrast, the German central chamber of commerce has been irl^nHfipH fi« the DTS and not thi> TCC (ASA Bui. 2000. n.3671. the latter can usually be identified with sufficient certainty. Clauses referring expressly to the International Chamber of Commerce but adding a place other than Paris are very frequent, e.g. "Arbitration of the International Chamber of Commerce of Geneva". In this case, it is the constant practice of the ICC Court of Arbitration, followed by court practice, to interpret such clauses as meaning that the parties agreed to ICC arbitration with its seat at the place named by the parties.31 More audacious was the interpretation given by the Geneva Court of Justice to an agreement providing that all disputes would be "settled by arbitration of the Geneva Commercial Court" and that this court would also appoint the third arbitrator. There is no Commercial Court in Geneva. Nonetheless, the Court of Justice held that the agreement sufficiently showed the will of the parties to arbitrate in Geneva so that the competent Geneva court had jurisdiction to constitute the arbitral tribunal.32 Although the choice of a person or a magistrate as appointing authority should not be confused with the choice of the seat of the arbitration,33 this judgment must be approved since it renders the agreement effective without violating the parties' will. Difficulties may also arise due to defects affecting the procedure for appointing arbitrators, particularly where unfortunate derogations are made to institutional rules. The Swiss Federal Tribunal has held that the International Court of Arbitration of the ICC validly replaced the appointing body designated in the agreement (the Director of the World Health Organization, WHO), given that the parties had also referred to the ICC Rules.34 The president of the Tribunal de grande instance in Paris even went so far as to ensure the effectiveness of a clause by replacing the privilege of one of the parties to appoint alone the arbitrator widi a mechanism of joint appointment.35 The ZPO, § 1034(2) provides that in cases where one party has a preponderant role in the constitution of the arbitral tribunal the other can request that the arbitrator or arbitrators be appointed by the court. The case law of the Swiss Federal Tribunal also ensured the effectiveness of the arbitration in a case where the contract contained conflicting provisions on the mechanism of selection of the arbitrators. The arbitration agreement referred to the rules of conciliation and arbitration of the Zurich Chamber of Commerce, to the UNCITRAL arbitration rules and—for the " See for instance the ICC decisions JDI 1978, p.980; JDI 1981, p.839; JDI 1984, pp.946 and 950, with a note by Jarvin; JDI 1998, p.80; Collection I, pp.316, 524 and 528; ASA Bui. 1993, p.507, and 2001, p.276; JDI 2005, p.1268, 1275 para. 34; Paris, Rev. arb. 1998, p.399, with a note by Leurent; ASA Bui. 2003. p.754 (award): ATF 129 in 675, ASA Bui. 2004, p.353, JdT 2004 I 66. the clause providing that the disputes will be "arbitrated before the Tribunal of commerce of Zurich" refers to arbitration under the auspices of the Zurich Chamber of Commerce; Procedural Order, ASA Bui. 2006, p.61 {"Arbitration Court in Geneva" refers to arbitration before the Geneva Chamber of Commerce and Industry); for other examples see Craig, Park and Paulsson, p.132; Fouchard, Gaillard and Goldman, para.485 n.113 and 114; Eisemann, op. cit., p.134 n.4; Scalbert and Marville, op. cit, p.119. "ASA Bui. 1991, p.155 = 269; see KSP-Ehrat, p.1417 para.20 ad Art.!76. 33 Lalive, Poudret and Reymond, p.295 para.6 ad PILS, Art. 176. 34 ATF 110 la 59 c 3 and 4 = Rev. arb. 1986, p.596, with a note by Budin; contra. Cas., Bui. 1983 II, 127: see Eisemann, op. cit., pp.132-138. if Rev. arb. 1987, p.184, with a note by Fouchard; see Rev. arb. 1980, p.73, with a note by Fouchard; here too. this magistrate departed from the contractually agreed mechanism. The Arbitration Agreement Definition and Essential Elements appointment of the arbitrators—to the ICC rules! The Swiss Federal Tribunal held that the arbitration agreement was partly impossible, that it was nevertheless valid and that the reference to the ICC rules was simply to be disregarded.353 Uncertainty as to which type of arbitration the parties intended can result from a reference to institutional arbitration rules with no submission to the institution itself or from a successive reference first to ad hoc arbitration and then to institutional arbitration.36 More embarrassing are contradictory references to arbitration and court jurisdiction. The courts usually find that the parties are nevertheless bound by an arbitration agreement.37 By contrast, where a clause provides alternatively for court jurisdiction or arbitration, the Court of Arbitration of the Bulgarian Chamber of Commerce and Industry logically held that the choice lay with the claimant.38 This solution has also been adopted by English39 and Italian courts.40 In Germany, it was decided that an arbitration clause granting the claimant the choice between arbitration or court proceedings was not uncertain and was valid.403 It was also decided that if the parties have concluded two separate and conflicting arbitration agreements regarding the same contractual relationship, and in the absence of a specific provision governing the order of precedence, the claimant can choose under which arbitration agreement the proceedings are to be conducted.40b This choice is binding once it has been communicated to the other party. Similarly, contradictions are found in the designation of the applicable law.41 This leads us to so-called "white clauses" which express the will of the parties to arbitrate without determining the manner of constitution of the arbitral tribunal or referring to an institution capable of assisting therewith. In addition, if such clause contains no indications as to the place or the country where the arbitration shall take place, it will be ineffective in the absence of any of the subsidiary connecting factors discussed above in Ch.2.5 paras 137 and 138. If it does Mj ATF 130 III 66, ASA Bui. 2004, p. 144, JDT 2004 I 83, c.3.3.3; the arbitration agreement read as follows, in pertinent part: "The parties agree that any dispute or difference which may arise out of this agreement or the execution or interpretation of any of the clauses hereof shall be settled amicably. If such dispute or difference cannot be settled in the aforementioned manner they shall be finally settled under the rules of conciliation and arbitration of the Zurich Chamber of Commerce, Zrieh/ Switzerland, in accordance with the UNOTRAL arbitration rules. The number of arbitrators shall be three (3). ICC shall be the appointing authority acting in accordance with the rules adopted by ICC for that purpose. I ,0 Eisemann, op. cit., pp.136—14Í, gives various examples; Rev. arb. 2002, p. 1019, award combining the appointment by the Arbitration Court of Budapest and the application of the ICC Rules. 17 QB. BLR 2000, p.65 = ASA Bui. 2000, p.421; Sonatrach Petroleum Co. (BVI) v Ferrell International Ltd, [200ÍJ All E.R. (D) 40; Paris, Rev. arb. 2001, p.575 (first case), with a note by \, Legros. 111 JDI 1998,p.767, with a note by Gueorguiev; Stein, Jonas and Schlosser, p.392para.l5 ad. § 1029. For the validity of the inverse clause, leaving the choice to the respondent, see CA, The Star Texas, YCA 1997, p.815, UK 412. 39 QB. BLR 2000, p.65 - ASA Bui. 2000, p.421. | CA Milan, Riv. dell'arb. 2000, p.753, wilh a note by Muroni; contra Cas., Riv. dell'arb. 2003, p.75. ! rightly criticized by Luiso. . \ 4tlJ Hanseatisches Oberlandesgericht Hamburg, YCA 2003, p.265. Í' 4Ub OLG Hamm Schieds VZ 2003/2, p.79. 41 r™ia Park *nň Panksnn nn 117-m S 9. 04. and Eisemann. OD. cit.. DD.145-149. contain an indication as to the seat of the arbitration, this will ordinarily suffice to implement the arbitration. This is for instance the case in France, where Art.l493(2) of the NCPC provides that the President of the Tribunal de grande instance in Paris can intervene and constitute the tribunal if the arbitration takes place in France. This means that a clause providing for "arbitration in Paris" or even "in France" is not inoperative since an application to a court having jurisdiction to constitute the arbitral tribunal can be made. This interpretation was confirmed by the courts43 and is unanimously supported by authors.43 By contrast, the clause indicating "arbitration in Switzerland" may be seen as incomplete to determine, in the absence of an indication of the Canton, which courts would have supportive jurisdiction.44 The difference is due to the decentralisation of jurisdiction in Switzerland and its distribution between the Cantons. Article 2(2) of the CIA partially fills the gap by providing that if neither the parties nor an institution have chosen the seat of the arbitration, such seat shall be at the place of the court which would have jurisdiction to decide on the merits of the case, had the matter not been submitted to arbitration. To the extent that Swiss private international law allows, this provision could be applied by analogy where there is a forum in Switzerland.45 Furthermore, we have also proposed to base the validity of a clause providing for "arbitration in Switzerland" on the principle of good faith (prohibition of an abuse of right, see Ch.2.5, para. 139). We now turn to other defects which can render a clause null and void, inoperative or inapplicable (to use the terminology of Art.II(3j of the New York Convention)46 Whether they are null and void ab initio, inoperative as a result of a subsequent event (such as, under certain laws, the death of an arbitrator appointed by the parties or the non-compliance with the time limit for rendering the award), or whether they prove inapplicable, the effect is the same: the arbitration can not be implemented and, save for the unlikely event that a new arbitration agreement is made, the claimant will have to turn to the courts. This is particularly the case where the arbitral institution chosen can either not be identified or does not exist despite the parties having made it an essential element of their agreement.47 It is also the case where they have reserved the choice of such institution and are unable to reach agreement on this point.48 Fortunately 42 Rev. arb. 1987, p.182 (second case), with a note by Fouchard. 43 de Boisseson, p.481 para.574 § 2; Cohen, Rev. arb. 1991, p.20l; Fouchard, Gaillard and Goldman, para.486; Scalbert and Marville, op. oil, p.127. ""Lalive, Poudret and Reymond, p.297 para.9 ad Art. 176 PILS. 45 Lalive, Poudret and Reymond, p.38 para.3 ad Art.2 Concordat. 4(1 See van den Berg, pp.154-161 para.n.13.4. 47 President du Tribunal de grande instance de Paris, Rev. arb. 19S3, p.485 (4th case), with a note by Moreau; Versailles, Rev. arb. 1992, p.654, with a note by Bureau: "London arbitral chamber", which does not exist; Craig, Park and Paulsson, p.134 § 9.05 n.17; Eisemann. op. cit., pp. 151—153 and 157-158. 48 Craig, Park and Paulsson, p. 134 § 9.06; Eisemann, op. cit., pp. 150-151. The Arbitration Agreement these examples are rare, and the arbitral institution and the supporting jurisdictions can usually establish sufficiently the intention of the parties to set the arbitration in motion. 3.2 THE SEPARABILITY OF THE ARBITRATION CLAUSE Bibliography: General Works: Berger. pp.119-121; Blanchin, pp.7-38; de Boisseson, pp.484-494 paras 576-580; Craig, Park and Paulsson, pp.48-52 § 5.04; Fouchard. Gaillard and Goldman, paras 388-451; Huys and Keutgen, pp. 148-150 paras 159-163; Jolidon, pp. 137-139 para.81 ad Art.4 Concordat; KSP-Wenger, pp. 1467-1468 paras 76-79 ad Art. 178; Lalive, Poudret and Reymond, p.49 para.3 ad Art.4 Concordat and p.315 pata.4 ad Art. 178 PILS; Linsmeau, pp.81-83 paras 120-125; Merkin, pp.34-37 ad Section 7; Redfern and Hunter, pp.162-165 paras 3-60 to 64; Russell, pp.32-35 paras 2.008 to 011; Rutherford and Sims, pp.55-57 ad Section 7; Schlosser, pp.291-294 paras 392-393; Schwab and Walter, pp.35-37 Ch.4 paras 16-19. Specific Studies: i.-P. Ancel, L'actualite de l'auionomie de la clause eompromissoire, Travaux du Canute francais de DIP 1991-1992, pp.75-119; S. Bollee, La clause eompromissoire et le droit commun des conventions. Rev. arb. 2005, pp.917-929; A. Dimolitsa, Autonomie et "Kompetenz-Kompetenz", Rev. arb. 1998, pp.305-357, ou ICCA, Congress Series para.9, 1999, pp.217-256 (English version); P. Mayer, Les limites de la separability de la clause eompromissoire, Rev. Arb. 1998, pp.358-368, or ICCA, Congress Series para.9, pp.261-267 (English version); F. Rigaux, L'autonomic de la clause eompromissoire en droit beige, Ann. de droit et de science politique, Louvain 1961, p.231; A. Samuel, Separability in English law—Should an Arbitration Clause Be Regarded as an Agreement Separate and Collateral to a Contract in Which It Is Contained?, Jnl. Int. Arb. 1986/3, pp.95-I09; P. Sanders, L'autonomie de la clause eompromissoire, in: Hommage a Frederic Eisemann, Paris 1978, pp.31-43; P. Schlosser, Der Grad der Unabhängigkeit einer Schiedsvereinbarung vom Hauptvertrag, in: Uber Amicorum Karl-Heinz Böekstiegel, pp.697-713; C. Svernlov, The Current Status of the Doctrine of Separabiliy, Jnl. Int. Arb. 1991/4, pp.37^-9 (cited: Current Status), and The Evolution of the Doctrine of Separability in England: Now Virtually Complete?, Jnl. Int. Arb. 1992/3. pp.115-121 (cited: Evolution); Congres international de Varbitrage, Paris 1961, with a report by F.E. Klein, Du caractere autonome et procedural de la clause eompromissoire, Rev. arb. 1963, pp.48-74. 162 The separability {"autonomie") of the arbitration clause is an ambiguous expression. Its several possible meanings can be illustrated, as we shall see, by the evolution of case law in France. This evolution, described very well in Ancel's report mentioned above, is marked by four landmark decisions, namely Gösset (1963), Hecht (1972), Menicucci (1975) and Dalico (1993). This case law led French authors to distinguish between material separability {"autonomic materielle"), i.e. from the principal contract, and legal separability ("autonomie juridique ou de rattachement"), i.e. from the law of the contract or even, according to the last two mentioned judgments, from all legal systems.49 We shall also use this threefold distinction in the following pages. 4'In particular, Ancel, op. cit., pp.81-83; Blaiichin, pp.13—15; Fouchard, Gaillard and Goldman, para. 388. The Separability of the Arbitration Clause 3.2.1 Independence of the validity of the arbitration agreement from the validity of the contract In the first and most widely used sense, separability (or severability) means 163 that the validity of the arbitration clause must be assessed separately from that of the main contract—or the legal relationship—of which it forms a part. As a consequence, the arbitrator has the authority not only to determine his own jurisdiction, but also the validity or existence of the contract. We shall now examine these two elements. When the parties conclude a contract containing an arbitration clause, they are 164 considered, according to SchwebeFs formula, as concluding not one, but two agreements, so that die destiny of each contract does not depend on that of the other.50 This distinction, which results from differences in both the nature and the object of the two agreements, applies irrespective of whether there is one document (with an incorporated clause) or two separate ones. The arbitration clause may survive the nullity, termination, repudiation or novation of the main contract,51 although two reservations should be made. First, as Pierre Mayer has pointed out,52 the arbitration clause is part of a main contract, [t even has an accessory nature, which implies that it will be transferred along with the principal contract in case of an assignment of the latter. This does not however exclude that the arbitration clause remains valid, like a jurisdiction agreement, if the contract is null or void or has been terminated, for in such cases it will be the function of the arbitration clause to enable a decision to be made on the fate of the main contract and its consequences. This depends of course on the will of the parties, but it can be presumed that this is what they intended. Of course—and this is the second reservation—there might exist a defect common to the contract and to the arbitration clause which renders them both null and void. This might be the case, to take the examples given by Pierre Mayer, in the event of lack of a power of attorney or defects in consent; but these defects might also only affect the one and not the other.53 Article 1697(2) of the CJB, like Art.22(l) of the Spanish law, emphasises this aspect by providing that a decision by the arbitrators that the contract is null and void shall not entail by itself the invalidity of the arbitration agreement. The principle of separability requires that these questions be addressed separately and, as we shall see below, successively. 50 Schwebel, p.5. 51 Fouchard, Gaillard and Goldman, para.410 and the case law cited, notably Cas., Minoteries Lochoises, Rev. arb. 1969, p.59: the clause survived the termination of the contract due to the failure of the seller to fulfill his obligations; Sonatrach, ATF 116 la 56 = JdT 1990 I 563, c.3b = Rev. arb. 1990, p.921, with a note by Tschanz: the arbitration agreement survived the settlement which put an end to (he dispute, because the parties are presumed to have intended to submit any disputes relating to the liquidation of the initial contract to arbitration; on this question see Ch.3.6.2.2. para.315. 52 Mayer, op. cit., pp.261-264, and Paris, Rev. arb. 1990, p.675, with a note on the Dueler judgment; followed by Schlosser, op. cit., p.703. s:'Notably Mayer, op. cit., p.265; Redfern and Hunter, p.164 para.3-63. The Arbitration Agreement The Separability of the Arbitration Clause 165 While the foregoing is not really disputed, it is much rarer to find an answer to the opposite question of whether the nullity of the arbitration clause can lead to the nullity of the principal contract, i.e. if the first can be considered to be an essential element of the second. In domestic arbitration, NCPC, Art. 1446 gives a negative answer since an arbitration clause which is null and void is deemed to never have been written, so it cannot affect the contract. However, this is only a presumption,54 and the parties are free to link the fate of the contract to that of the arbitration clause,53 particularly in international matters, where the guarantee of arbitration as the agreed form of dispute resolution can legitimately be considered an essential part of their agreement. 166 The ambit of the principle of separability can only be fully comprehended in relation with that of the so-called competence/competence, i.e. the power of the arbitrators to rule on their own jurisdiction.56 As Sanders emphasises, if the fates of the arbitration clause and the contract were not distinct, an arbitrator who considered the contract null and void would have to decline his own jurisdiction and would therefore be unable to examine the merits and decide on the validity of the contract in the holding of the award. An impasse would result, and the only solution would be an action before a court.57 In other words, separability means that if the arbitrator finds the main contract invalid, he does not forfeit his jurisdiction.55 The arbitrator's competence/competence is thus the procedural instrument of the principle of separability, allowing him to decide himself on the validity of the main agreement. Inversely, Art. 16 of the UNCITRAL Model Law only lays down separability to fully ensure ("for that purpose") the arbitrator's competence/competence. While, as Fouchard, Gaillard and Goldman emphasised,59 these two principles are separate and each has its own scope, there is a logical connection between them. Both are based on the presumed will of the parties to submit all disputes to the arbitrator, starting intention the issue of jurisdiction, and thus to have a single procedure.60 As Sanders pointed out, this presumption is strengthened by the clause, common in international arbitration, referring to all disputes "in relation to" the contract, including those concerning its existence and validity. We shall see that numerous sets of rules and arbitration laws point in the same direction. 167 Should this rule be extended to the case where the very existence of the contract is in dispute? Some authors have declined to do so, invoking the adage nihil ex nihilo. In his aforementioned Article, Sanders submitted that the principle of separability could not justify the arbitrator's jurisdiction where the M See de Boisseson, pp.75-76 para.78. 55 Paris, Rev. arb. 1975, p.312, with a note by Mezger; Cas., Rev. arb. 2002, p.777, recognising that the principle of separability applies in domestic arbitration, unless the parties agree otherwise. M'See Ch.5.1.1, para.457. fy Sanders, op. cit.. p.33. ™ Handbook IV, UNCITRAL-Broches, para.6 ad Art.16. w Fouchard, Gaillard and Goldman, para.416. '■Q Notably Russell, p.34 para.2-01l; Sanders, op. cit., p.33, and KSP-Wenger, p.1468 para.78 ad An 17ft PIT >spf. akn the Swiss rase law cited in n.73 and 74: criticical Samuel, pp.157-158. contract is inexistent and, therefore, the arbitration clause deprived of an object. Broches agrees with him, which can probably be explained by the fact that Art. 16(1) of the UNCITRAL Model Law, third sentence, only mentions the nullity and not the inexistence of the contract. Broches goes even further, submitting that the principle of separability is also inapplicable where the contract is null and void ab initio.61 Several authors have disagreed, in our opinion rightly. In a detailed note on the Navimpex judgment.62 Berthold i Goldman has shown that nullity ab initio or the question whether the contract >- entered into force do not necessarily lead to the nullity of the arbitration clause. Indeed, the arbitration can deal with the existence of the contract, or the consequences of its inexistence or invalidity, and in particular any liability r thereby incurred. In his opinion "the arbitral tribunal should be recognised as having jurisdiction in all cases where the existence of the main agreement or of the arbitration clause is disputed. It shall in such cases first have to determine whether the argument based on the inexistence is founded and, in the affirmative, whether this affects the arbitration clause (...). If it finds the arbitration clause is non-existent, it must of course refrain from adjudicating the merits, but otherwise it has jurisdiction to do so . .. ". This opinion is shared by several other authors.03 It has also been followed by the French courts since the afore-mentioned Navimpex judgment, even if the latter concerned the case of a contract which had not yet entered into force, and which was not, strictly speaking, inexistent. The Cour de cassation only .,, recognised in its judgment that the principle of separability allows a party to invoke the arbitration clause even though the parties' main agreement has not yet i entered into force providing the dispute relates to the conclusion of the agreement. In its judgment in the Dueler case64 the Paris Court of Appeal went a step further and held that "the arbitration clause is completely separable from ^ ... the main agreement, the inexistence or the nullity of which have no affect on it.. . ". However, soon afterwards, in its Cassia judgment which we shall , . examine below,65 the Cour de cassation seemed to cast doubt on this case law, refusing to treat as separable an arbitration clause in a contract which had been initialled, but not signed. More recently, the Cour de cassation dispelled any doubt and held that the validity of the arbitration agreement is not affected by the ' nullity or inexistence of the main contract.65'' This case law is based on the "principle of validity" and separability of the arbitration agreement. We would add that the principle of separability is expressly laid down, even in the event of • 61 Handbook IV, UNCITRAL-Broches, paras 15-16 ad Art.16. i , 62Cas.. Rev. arb. 1989. p.641, especially 645-650; also Fouchard, Gaillard and Goldman, \ . para.4l 1. ; ,i63 Notably van den Berg, van Deiden and Snijders, pp.85-86 para.7.6; Redfern and Hunter, p. 163 para.3-6l; Schlosser, op. cit., pp.704-712, who distinguishes between manifest lack of consent and \ other cases of nullity ab initio; Svernlov, op. cit. (Current Status), pp.45-46; see also ICC No. 10274, |; ' YCA 2004. p.94. L 64 Rev. arb. 1990, p.675, with a note by Mayer; Rev. arb. 2002, p.792: idem. If' w Paris and Cas., Rev. arb. 1990, p.851 and 857, with a note by Moitiy and Vergne; see para. 177 p -.' below. l; ;j; 65aCas., Omenex v Hugon, Rev. arb. 2006, p.103, with a note by Racine. The Arbitration Agreement inexistence of the main agreement, by the principal arbitration rules66 as well as in several of the laws examined below. Therefore, we can conclude, in the absence of an explicit reservation, that this is the extent of the principle of material separability of the arbitration clause in international arbitration. 168 Understood in this manner, the principle of separability is today widely recognised, although it had difficulty in establishing itself in domestic arbitration, particularly in England67 and France. It is now provided for by a number of arbitration laws68 and, in the United States of America, by case law since the Prima Paint judgment in 1967.69 In Buckeye Check Cashing Inc. v Cardegna, 126 S. Ct. 1204 (2006), the US Supreme Court held that the Prima Paint rule applies in state courts and contains no exception for contracts deemed void under state law. It further made it clear that the validity of the contact is to be examined by the arbitrators first. It is also widely recognised by decisions of arbitral tribunals.70 Hence, Antonias Dimolitsa can characterise separability as a general principle of international arbitration,71 while French authors do not hesitate to speak of "a genuinely transnational rule of international commercial arbitration".72 Confining ourselves to Western Europe, we note that the principle is also recognised in Arts 21(2) of the Portuguese law of 1986 and 22(1) of the Spanish law of 2003, as well as in the conventions and laws analysed in more detail below. 169 In Switzerland, the principle of separability has been recognised even before the entry into force of the Concordat of 1969,73 and subsequently in cases decided under this statute.74 In a judgment of 1990,75 rendered in a matter which 66 Art. 21.1 UNCITRAL Rules; 15.2 AAA Rules; 6.4 ICC Rules; 23. i LCIA Rules; 21.2 Swiss Rules; 36(b) WIPO Rules; Fouchard. Gaillard and Goldman, paras 393-397. ('7 Samuel, op. cit., who is critical of the evolution of English law; Svernlov, op. cit. (Current Status), pp .44-45. w See Dimolitsa, op. cit., pp.222-223 n.20 and 24-27; Fouchard. Gaillard and Goldman, paras 401^103. w 388 US 395; other cases are cited by Samuel, pp. 166-167 and Fouchard, Gaillard and Goldman, para.402, n.31; Handbook IV, USA-Holtzmann/Donovan. Ch.IIA; see also Art. 15.2 AAA Rules. More recently, a decision of the US Court of Appeals for the 2nd Circuit distinguished between separability of arbitral clause in a void and in a voidable contract (YCA 2002, p.700). 70 Sanders, op. cit., pp.38-42, and Fouchard, Gaillard and Goldman, paras 406^07. 71 Dimolitsa, op. cit., p.223; see Sanders, op. cit, p.42. . 72 Fouchard, Gaillard and Goldman, para.398. 13 Notably ATF 71 II 116 = JdT 1945 I 278 c.2: even where it is contained in a contract and appears as one of the contractual stipulations forming a whole, the arbitration clause constitutes an independent agreement having its own object and governed by Cantonal procedural law; ATF 88 I 100 = JdT 1963 I 158, c.2: if the cause of nullity only affects the main agreement, and not the arbitration clause, the parties are presumed to have intended to submit the question of the validity of the main agreement lo arbitration. For further references see Lalive, Poudret and Reymond, p.49 para.3 ad Art.4 Concordat. 7iCA BS, ASA Bui. 19S5. p. 19 no. 2: in case of doubt, it must be presumed that the parties intended to confer on the arbitrator jurisdiction to decide on the validity of the contract, the defects of which do not necessarily affect the arbitration clause; CJ GE, ASA Bui. 1986, p.218 no.6: in the lack of indications to the contrary, the nullity or termination of the main agreement does not affect the validity of the arbitration clause; Jolidon, pp. 137-139 para.81 ad Art.4; Lalive, Poudret and Reymond, p.49 para.3 ad Concordat, Art.4. ■« ATR 1 tfi Ta Sfi citpH in n =11 The Separability of the Arbitration Clause was governed by the procedural law of the Canton of Zurich, the Swiss Federal Tribunal applied this principle and recognised the validity of an arbitration clause contained in a contract which had subsequently been revoked by both parties. It is therefore not surprising that the Federal legislature made it clear in PILS, Art. 178(3) that "the validity of an arbitration agreement cannot be contested on the ground that the main agreement may not be valid ... ".76 It should be noted that this text refers only to the invalidity, and not the inexistence of the main agreement. Nonetheless, for the reasons given above, we submit that the solution should be the same in this case too, unless there are indications that the parties agreed otherwise. The authors of the 1961 European Convention only had in mind the procedural 170 aspect of the principle when they provided at Art.5(3) that the arbitrator has the power to rule on his own jurisdiction and to decide upon the existence or the validity of the arbitration agreement or of the contract of which the agreement forms a part. Therefore it cannot be said that this Article recognises the principle of separability.77 The fact remains that its wording clearly distinguishes between decisions on the existence or validity of the arbitration agreement on the one hand, and decisions on the contract on the other. We now turn to Art.l697(2) of the CJB, mirroring Art.18 of the Strasbourg 171 Convention. As in Fiance, Belgian case law was initially hostile to the principle of separability. It did not recognise separability in international arbitration until 1969. The text now in force rightly provides, as we have seen, that the nullity of the main agreement does not automatically ("de plein droit") lead to the nullity of the arbitration agreement but envisages defects which might affect both. We should add that Belgian law is peculiar because there is no immediate challenge against the award if the arbitrator admits jurisdiction.78 We shall return to this question later. In 1986, Art. 1053 of the WBR laid down both aspects of the principle of 172 separability. First, the arbitration agreement is considered to be "a separate agreement". Secondly, the arbitral tribunal has the power to decide on the validity of the main agreement without this affecting its jurisdiction.79 Commentators are however divided as to whether this rule also applies where the existence of the contract itself is disputed.80 For the reasons given above, we consider that this case is also covered by the principle of separability. 76 See IPRG-Volken, p.1981 paras 62 and 63 ad Art. 178; KSP-Wenger, loc. cit. in the bibliography ad Ch.3.2; Lalive, Poudret and Reymond, p.315 para.4 ad PILS, Ait. 178. 77 Hascher, YCA 1995, pp.1024-1025 para.45 and 46 ad Art.5; as to the applicable law see Ch.3.5.2 para.294. 7*Huys and Keutgen, p.149 para. 163; Ltnsmeau, p.83 para.I23. 19 See Sanders and van den Berg, para.65 ad Art. 1053 WBR and van den Berg (Handbook III, The Netherlands. Ch.II.4), who adds that a decision on the validity of the main agreement does not concern jurisdiction and thus cannot be challenged. The case where the Respondent contested the arbitrator's jurisdiction and where his arguments were dismissed should probably be reserved, for in such a case an application to set aside can be filed against the final award (WBR, Art.l052(4». 80 Pro: Snijders, in: van den Berg, van Delden and Snijders, pp.85-86 para.7.6; contra: van den Berg, loc. cit. in n.79. The Arbitration Agreement The Separability of the. Arbitration Clause 173 Article 16(1) of the UNCITRAL Model Law confirms the arbitral tribunal's jurisdiction to decide on "any objections with respect to the existence or validity of the arbitration agreement" and makes it clear that the arbitration clause "shall be treated as an agreement independent of the other terms of the contract", adding that "a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause". Mirroring the Strasbourg Convention and incorporated into Art. 1697(2) of the CJB, this last sentence appears to contradict the two previous ones because it only mentions the nullity and not the inexistence of the contract. As we have seen,81 Broches in his commentary of the Model Law acknowledges two exceptions to the principle of separability: the inexistence and the nullity ab ovo of the main contract. If the inexistence of the contract deprived the arbitrator ipso lure of his jurisdiction, we do not see how he could decide on an objection related to this question, whereas the first sentence allows him to do. We are therefore inclined to interpret Art. 16 as meaning that an arbitrator has jurisdiction even to decide whether the main contract exists or not. 174 In Germany the principle of separability had already been applied by the courts prior to the entry into force of the law of 1997.82 § 1040(1) of ZPO only adopted the first two sentences of Art. 16 of the Model Law, thereby avoiding the apparent contradiction discussed above and enabling to conclude that neither invalidity ab initio nor even the inexistence of the main contract has an impact on the arbitrator's jurisdiction.83 175 In Italy, Art.808(3) of the ICCP, introduced in 1994, limits itself to providing that "the validity of the arbitration clause is assessed independently of the main contract", thereby setting out the principle of separability which had since long been recognised by the courts and Italian authors.84 The same applies to Art.3 of the Swedish law, which contains a rule developed notably in two judgments of 1936 and 1976.85 Contrary to the Italian Corte di Cassazione,96 the aforementioned Swedish case law recognises that the validity of the arbitration clause is not affected by the fact that the main contract has not come into force. Thus it appears unlikely that the new Swedish law of 1999 has restricted the scope of the principle. 176 The reluctance of the English courts with regard to the principle of separability has been very clearly analysed by Adam Samuel who approves this prudent approach.87 Given however that such reluctance is no longer compatible with the 81 para. 167. 82 Notably BGHZ 53 (1970), p.315: in case of doubt, the arbitrator has jurisdiction to decide on the validity of the main contract and on the consequences of its invalidity; confirmed in BGHZ 69 (1978), p.260; see Schwab and Walter, pp.35-36 Ch.4 para.16; Schlosser, p.292 para.392. 83 Already under the former law, BGHZ 53 (1970), p.3i5 para.52, and Schlosser, p.293 para.393. 84 Bernardini (Rev. arb. 1994), p.486 no.2. KS Cited by Svemlov, op. cit. (Current Status), p.48, and Samuel, op. cit., p.98; J. Ramberg, Stockholm Arbitration Report 1999/1, p.28 para.12. m Cas., Riv. dell'arb. 1995, p.689. *7 Samuel, op. cit., pp.100-109; sec also Fouchard, Gaillard and Goldman, para.404; Merkin, p.34 ad Section 7; Redfern and Hunter, pp.162-163 para.3-60; Russell, pp.32-33 paras 2.010 and 011; Svernlov. on. cit. (Current Status), no.48-49. and (Evolution). law since the entry into force of the Arbitration Act 1996, we shall not dwell on it. We shall merely recall that in 1942 the House of Lords held that an arbitration clause could survive the end of the main contract, especially if it was terminated or not performed, but would be inoperative in the event of invalidity ab initio of the main contract.88 While accepting this case law, Steyn J. pointed out the paradox of denying the arbitrator's jurisdiction to decide on the nullity ab initio of a contract containing an arbitration clause, while a separate clause would confer such jurisdiction on him. He concluded that by 1991 the evolution towards the principle of separability had almost been completed.89 Indeed, two years later, the Court of Appeal took a new step towards complete separability and held that an arbitrator has jurisdiction to decide on the invalidity ab initio of a contract caused by grounds which do not affect the validity of the arbitration clause, in this case the unlawful nature of a reinsurance contract because of the absence of a licence.90 The last step was taken by s.7 of the Arbitration Act 1996, which establishes the principle of separability in its broadest sense. While it rightly reserves an agreement to the contrary by the parties, this section confirms that "an arbitration agreement which forms or was intended to form part of another agreement (... ) shall not be regarded as invalid, non-existent or ineffective because the other agreement is invalid or did not come to existence or has become ineffective, and it shall for that purpose be treated as a distinct agreement". As Merkin emphasises,91 this is not a mandatory provision because it is based on the presumed intent of the parties, and therefore it will only apply in its full scope if the arbitration clause is sufficiently wide, for instance if it covers all disputes "in connection with" the main contract, as it is usually the case. On the other hand, contrary to the last mentioned case, the text of the new law no longer makes a distinction between various grounds of invalidity of the main contract. It is always for the arbitrator to decide thereon,92 provided that he first accepts his jurisdiction or that his jurisdiction is not contested.93 For a long time, French law was distrustful of the arbitration clause, and even 177 more reluctant than English law to recognise its separability. However, once this principle had been recognised in its traditional meaning, the French courts extended its scope to extreme limits, hitherto unknown to other laws. This is the reason why we deal with it last. Forcefully advocated at the international "Hevman v Darwins [1942] AC 356, HL. "Paul Smith vL.H. & S. International Holding [1991] 2 Lloyd's Rep. 127, QB = YCA 1994, UK 35, p.725, 90 Harbour Assurance v Kansa [1993] 3 All ER 897, CA - YCA 1995, p.771, UK 39; see Dimolitsa, op. cit., p.220, and Mustill and Boyd (2001), pp.266-267 ad s.7. yl Merkin, p.35 ad Section 7. He is of a different opinion for disputes "arising under" a contract, which he considers a more restrictive term. 92 Nonetheless, in the case Azov Shipping v Baltic Shipping [1999] 2 Lloyd's Rep 159, J. Colmun seems to have inferred from the lack of initial existence of the main contract that Azov was also not bound by the arbitration clause, an approach which Shackleton (II, pp. 128-129) considers incompatible with the principle of separability. 93 See Halki Shipping v Sopex Oils [1998] 1 Lloyd's Rep 465, CA. The Arbitration Agreement The Separability of the Arbitration Clause arbitration Congress in Paris in 1961,94 the material separability of the arbitration clause was recognised, for international arbitration only, by the Cour de cassation in 1963 in the Cosset case already mentioned above.95 An application had been brought before the French courts to recognise and enforce an award made in Italy ordering the French company Gösset to pay the price of goods blocked by customs for lack of the required authorisation. The company argued that the contract was invalid due to this very fact, and that this entailed the invalidity of the arbitration. The Cour de cassation ruled in favour of the Italian ; company, admitting the principle of separability in its classical meaning: "in international arbitration, the arbitration agreement, be it concluded separately or be it part of the contract which it concerns, is always—save in exceptional circumstances which have not been invoked in the present case—completely separate from such contract, which excludes that it can be affected by the fact that the latter might be-invalid". In other words, each has an independent fate. Henri Motulsky considered this judgment as a contribution "to the emergence of an international legal order".96 Effectively, the rule hence established is specific to international arbitration, like the admissibility of the arbitration clause itself. Furthermore, this judgment rightly places on an equal footing an arbitration clause inserted in the contract and one concluded in a separate document. Finally, it reserves exceptional circumstances which might justify a joint fate. In the absence of examples in case law, we can imagine that this would be the case of a clause expressly linked to the fate of the main contract or vice versa (see para.165). This leading judgment has since been confirmed by numerous others and is beyond discussion in international and domestic arbitration.963 Its consequence is to shield the question of the validity of the arbitration clause from defects of the contract to which it refers, notably invalidity, rescission or termination 97 We have seen above that, in its Navimpex judgment of 198 8,98 the Gourde cassation extended this separability to the case where the main contract had not yet entered into force, because the seller had not provided a letter of guarantee. However, in their judgments rendered in 1988 and 1990 in the Cassia case.99 1 the Paris Court of Appeal and then the Cour de cassation seemed to reconsider the previous case law. The parties had initialled but not signed, and subsequently y" See Rev. arb. 1961, pp.48-74: based on the report by EE. Klein, the congress passed two resolutions, one in favour of the separability of the arbitration clause, the other in favour of the arbitrator's jurisdiction to decide on his own jurisdiction (competence-competence). 95 Rev. arb. 1963, p.60 = JDI 1964, p.82, with a note by Bredin; see the analysis by Ancel, op. cit, pp.76-77, and Fouchard, Gaillard and Goldman, para.391. '"' Cited by Ancel, op. cit., p.77. W,J The same principle applies in domestic arbitration, Cas. Parisot v Marie, Les Cahiers de ('Arbitrage No. 2003/2/2, Gaz. Pal. 7-8.11.2003, p.41. "7 See the examples of case law given by Blanchin, p.25 para.61, and by Fouchard. Gaillard and GoJdman, para.391, n.10 and 1J; Paris, Rev. arb. 2002. p.971: the illegality of the main contract does not affect the validity of the arbitration agreement. {. 'm Rev. arb. 1989, p.641, with a note by Goldman; see para.167. y9 Pia Investments v. Cassia, Rev. arb. 1990, p.85l and 857, with a note by Moitry and Vergne, cited in para. 167. ceased performing an architect contract containing an arbitration clause. Nonetheless the arbitral tribunal had found that the parties had consented to arbitration and consequently held that it had jurisdiction. While recalling the principle of separability, the Paris Court of Appeal took the opposite stance, holding that "in cases where the nonexistence of the [arbitration] agreement is alleged because of a defect in the formation of the contract, as in this case", the validity of the arbitration clause should be determined under the law applicable according to the conflict-of-law rules, i.e. in the case at hand the law of Pakistan, pursuant to which the parties were not bound. This was confirmed by the Cour de cassation, which held that "the separability of the arbitration clause has its limits in the formal existence of the main contract which contains the clause invoked" and "that such existence must necessarily be determined under the law which, pursuant to the principles of private international law, govern the form of the contract". This limit to the principle of separability was confirmed in subsequent judgments100 but has been abandoned by more recent case law (see para.167 n.65a). The restriction of the former case law had been justly criticised since, as we have seen, the principle of separability implies that it is for the arbitrator to rule first on his jurisdiction and then on the existence of the main contract. As Fouchard. Gaillard and Goldman rightly submitted,101 the principle of separability does not mean that the arbitration agreement "can never be held to be void or non-existent; the arbitration agreement will be non-existent or void if directly affected, but not simply as a function of the existence or validity of the main contract. In the Cassia case, the correct approach would have been to establish whether the arbitration agreement had actually been signed, and whether it was subject to any particular conditions of form. If, in the light of rules which remained to be determined, the arbitration agreement had not been signed, the decision could have been set aside on the basis of Art. 1502 1" of the New Code of Civil Procedure. Conversely, if the court were to establish that the arbitration agreement did exist and was valid as to its form, the arbitrators would then be responsible for examining the existence and formal validity of the main contract, subject to review by the courts confined to the issue of compliance with international public policy". This is a clear summary of the consequences of the principle of separability in its first meaning. However, we shall now see that in France it is not limited to this. 3.2.2 Submission of the contract and of the arbitration agreement to different laws The principle of separability not only entails that the validity of the contract 178 and of the arbitration agreement must be determined separately, but also that they 100 Paris, Rev. arb. 1996, p.66, with a note by Jarrosson, and Rev. arb. 1997, p.251, with a note by Gadlard. 101 Fouchard, Gaillard and Goldman, para.595. The Arbitration Agreement The Separability of the Arbitration Clause can—and often are—governed by different laws. This is a result both of their different natures and of the freedom generally conferred on the parties to choose the applicable law. We have already emphasised the importance of the seat of the arbitration as far as the law applicable to the arbitration is concerned in the preceding Chapter,102 and we shall see below which connecting factors apply to the formal and material validity of the arbitration agreement.103 While the parties may certainly submit both the contract and the arbitration agreement to the same law, they usually only determine the law applicable to the former. In this case, several authors104 and courts105 presume that the parties also intended to submit the arbitration agreement to the law chosen for the contract. This is only a presumption and not an absolute rule, with the result that the law applicable to the substance of the dispute and the law governing the arbitration agreement are not always identical. In addition, as we shall see, in the absence of a choice of law, the rules of law applicable to the substance of the dispute are usually different from those governing the arbitration agreement. Thus Art.V(l)(a) of the New York Convention refers in such a situation to the law of the seat of the arbitration, which is generally distinct from the law applicable to the substance of the case. In short, there is no doubt that, whatever the connecting factors involved, the arbitration agreement and the contract can be and often are governed by rules of a different nature and origin.106 Although it has been questioned,107 this diversity of the applicable rules implicitly results from Art.V(l)(a) of the New York Convention, which submits the arbitration agreement to its proper law, be it that chosen by the parties or, in the absence of such choice, that of the seat of the arbitration.108 This is confirmed by the majority of the laws considered here; they clearly distinguish between the requirements for the validity of the arbitration agreement and the law applicable to the substance. This is an additional reason justifying the material separability with which we have just dealt. In France, the second aspect of separability was underlined by the judgments of the Paris Court of Appeal109 and of the Courde cassation110 in the case Hecht v Buisman's, in 1970 and 1972 respectively. The Dutch company Buisman had ,