An Essay On Arbitration Agreement And Doctrine Of Separability

     An Essay On Arbitration Agreement And Doctrine Of Separability

Author: Divyanshi Gupta, Faculty of law, Lucknow University.

Abstract

The major argument against the doctrine of separability is that it refutes the contractual approach to arbitration law. It has been criticized as it takes away the rights of the parties to move to court. Unfortunately, the effect of this doctrine is so wide that the practitioners fail to apply it in its limited context. Arbitration practitioners and scholars often venture out from its restricted context and apply it to generally separate the arbitration agreement from the carrier agreement. This has opened a Pandora’s box for habitual litigants to impede the determination of disputes. As a result of this, parties are burdened with mounting expenses, and the courts are also burdened with frivolous cases.

Introduction:

Arbitration is dispute settling technique in which a neutral party review the case and gives decision which is binding on both the parties.  An arbitration agreement is agreement by the disputing parties who submit to arbitration their dispute in any legal relationship which may or may not be contractual. In more clear language, arbitration agreement is an agreement between the disputing parties to submit their disputes to arbitral tribunal.

Features Of Arbitration Agreement:

Supreme Court stated the essential features of arbitration agreement as:

  • There should be a present dispute or possibility of future dispute.
  • The intention on the part of parties to settle their disputes by private tribunal.
  • The arbitration agreement should be in written form in order to be binding. Oral agreement are not binding.

Nature Of Disputes:

  • Present and future disputes: All disputes of civil nature except can be submitted to arbitration agreement irrespective of the fact whether they are related to present or future disputes.
  • The dispute whether present or future must be in respect of legal relationship irrespective of the fact it is contractual or not. It must be of legal nature.

Attributes Of Arbitral Agreement:

  • It must contemplate that the decision of tribunal is binding on the parties.
  • The jurisdiction of the tribunal to decide the dispute between the parties must be derived from consent of the parties, or order of the court or from a statute.
  • The  agreement must contain the rights of the parties to be determined.

Doctrine Of Separability:

Doctrine of separability provides that an arbitration agreement is a distinct and autonomous agreement. The rationale behind the separability doctrine is that the parties’ agreement to arbitrate consists of promises that are distinct and independent from the underlying contract. The doctrine is considered having important conclusions for the arbitral process: “Acceptance of autonomy of the international arbitration clause is a conceptual cornerstone of international arbitration.” 

The doctrine of separability provides that when one of the disputing parties claims that there has been a complete breach of the contract by the other contracting party, the contract is not demolish the contract for all purposes. Doctrine of separability is also embodied  in UNCITRAL Rules. According to Article 23(1), the arbitration clause which forms the part of underlying contract should be treated independent of other terms of the contract. Article 16(1) of UNICTRAL Model Laws, also contains this doctrine.

Need Of doctrine:

The doctrine became crucial for arbitration to work when a tribunal confronted a challenge concerning its jurisdiction. A party wishing to avoid its obligation to arbitrate could contend that as an outcome of the main agreement being invalid, the arbitration clause forming part of the main agreement is also invalid. Further, parties argued that the arbitral tribunal set up pursuant to it has no jurisdiction to make an award.

Such an argument, if accepted, could lead the arbitration to a disastrous climax. As a conclusion, the parties will be left with no option but to litigate, which is against the express intention of the parties to resolve their dispute through arbitration. The doctrine was needed to act as a shield.

Cases On Doctrine Of Separability:

In the case of  Bremer Vulkan Schiffbau und Naschinefabrik vs. South India Shipping Corporation cited that the arbitration clause constitutes a self-contained contract collateral to the shipbuilding agreement itself. In Harbour Assurance vs. Kansa General International Assurance Co. Ltd. Case, it was held that the arbitration agreement and substantive contract are two distinct agreements. The invalidity of substantive contract does not affect the validity of arbitration agreement. In the case of  Soleimany vs. Soleimany, it was declined to enforce an illegal contract where the contract was to smuggle carpet out of Iran.

Analysis Of The Doctrine In Context Of Arbitration Agreement

Though there is a limited scope of doctrine of separability but authorities have given it a wider purpose. It is argued that why arbitration agreement not governed by contract law why it is distinct from the underlying contract. The separability doctrine presumes that arbitration agreement can be governed by a different law from that of underlying contract. The purpose of doctrine is safeguard the jurisdiction of arbitral tribunal by enforcing the agreement of the parties to arbitrate and not distinguishing arbitration agreement from the underlying agreement.

References:

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