KluwerArbitration
Document information Chapter 2: International Arbitration Agreements: Legal
Framework
Publication Although parties frequently agree to arbitrate, in practice they also sometimes reconsider that
commitment after disputes arise. In particular, notwithstanding their agreement to arbitrate, parties
International Arbitration:
may seek either to litigate their dispute in local courts or to obstruct the arbitral process. Ultimately,
Law and Practice
the efficacy of an arbitration agreement often depends on the parties’ ability to enforce that
(Third Edition)
agreement.
Bibliographic The legal framework for enforcing international arbitration agreements has undergone important
changes over the past century, evolving from a position of relative disfavor to one of essentially
reference universal support. That legal regime consists of international conventions (principally the New York
'Chapter 2: International Convention), national law (such as the UNCITRAL Model Law) and institutional arbitration rules.
Arbitration Agreements: When their jurisdictional requirements are satisfied, these instruments provide a robust and highly
Legal Framework', in Gary B. effective framework for enforcing international arbitration agreements.
Born , International
Arbitration: Law and Practice §2.01 INTERNATIONAL ARBITRATION
(Third Edition), 3rd edition
(© Kluwer Law International;
AGREEMENTS: CHALLENGES TO EXISTENCE,
Kluwer Law International VALIDITY AND SCOPE
2021) pp. 53 - 80
Challenges to international arbitration agreements can take a variety of forms (e.g., to the existence,
validity, scope or enforceability of the arbitration agreement). They can also arise in different
procedural settings, including both arbitral proceedings and national courts.
[A] Challenges to Existence, Validity and Scope of
International Commercial Arbitration Agreements
There are a variety of possible challenges to the validity of an international commercial arbitration
agreement. These challenges include (a) claims by a party that it never consented to any
agreement, including any arbitration agreement, with its counter-party, and therefore that no
agreement to arbitrate exists; (b) claims that any arbitration agreement between the parties is
invalid, either on grounds of formal invalidity (e.g., failure to satisfy requirements for a written or
other form) or substantive invalidity (e.g., unconscionability, termination, frustration, fraud);
P 54
or (c) claims that, while the parties agreed to arbitrate some disputes, they did not agree to arbitrate
the dispute which has actually arisen (e.g., the parties’ arbitration agreement covers disputes
relating to a lease agreement, but not claims for libel or unfair competition).
[B] Procedural Settings for Jurisdictional Objections
Challenges to the existence, validity or scope of an international arbitration agreement can arise in
a variety of different procedural settings.
[1] Consideration of Jurisdictional Objections by Arbitrators
In some cases, the respondent in an arbitration will raise a jurisdictional objection within the
arbitration itself, arguing to the arbitrators that it is not bound by a valid arbitration agreement or that
the arbitration agreement does not encompass the parties’ dispute. As discussed below, it is
universally recognized that arbitrators have the authority (competence-competence) to consider
such jurisdictional objections and to make a decision on them (as provided, for example, by Article
16 of the UNCITRAL Model Law and parallel provisions of other arbitration statutes). (1) In practice,
tribunals will resolve jurisdictional disputes conducted in proceedings much like those to resolve
substantive disputes – with written submissions, evidentiary hearings and witness testimony,
followed by a decision of the arbitrators. If the arbitral tribunal upholds the jurisdictional objection, it
will dismiss the claimant’s claims and the arbitration will conclude (with the arbitrators’ negative
jurisdictional decision potentially subject to judicial review). Conversely, if the tribunal rejects the
objections, it will make a positive jurisdictional decision (which will potentially be subject to judicial
review) and the arbitration will proceed to the merits.
[2] Consideration of Jurisdictional Objections by National Courts
In other cases, one of the parties to a dispute may commence litigation in a national court (often its
own home courts), notwithstanding its putative agreement to arbitrate. In that event, the other party
will often invoke the arbitration agreement, requesting that the national court stay any litigation and
1
© 2021 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
, “refer” the parties to arbitration. As discussed below, this relief is contemplated by Article II of the
New York Convention and Article 8 of the UNCITRAL Model Law (and parallel provisions of other
national arbitration statutes). (2) In determining whether or not to refer the parties to arbitration, a
national court will generally consider whether the parties are bound by a valid arbitration agreement
which applies to their dispute.
Alternatively, a party may choose not to appear in the arbitral proceedings or to commence parallel
litigation, and instead subsequently either seek annulment of any eventual arbitral award or resist
enforcement of any award (in both cases, on jurisdictional grounds, as provided for by Articles 34(2)
(a)(i) and (iii) and 36(1)(a)(i)
P 55
and (iii) of the Model Law). In each case, a national court will be required to consider whether the
parties are bound by a valid arbitration agreement which encompasses their dispute.
§2.02 JURISDICTIONAL REQUIREMENTS OF
INTERNATIONAL AND NATIONAL COMMERCIAL
ARBITRATION REGIMES
The New York Convention and most national arbitration statutes are “pro-arbitration,” providing
robust mechanisms for enforcing international arbitration agreements and awards. In particular,
Article II of the Convention imposes obligations on Contracting States to recognize international
arbitration agreements and enforce them by referring the parties to arbitration; like many other
arbitration statutes, Articles 7, 8 and 16 of the Model Law provide a parallel enforcement
mechanism for international arbitration agreements.
Both international arbitration conventions and national arbitration statutes contain jurisdictional
requirements that define which arbitration agreements are (and are not) subject to those
instruments’ substantive rules. These jurisdictional requirements have important consequences,
because they determine when the pro-enforcement regimes of the Convention and many arbitration
statutes are applicable – rather than other means of enforcement, which are sometimes archaic and
often ineffective.
There are many arbitration agreements to which the New York Convention does not apply. In
particular, seven jurisdictional requirements must be satisfied for an agreement to be subject to the
Convention; there must be: (1) an agreement to “arbitrate”; (2) a “dispute” or “difference”; (3) a
dispute or difference arising out of a “commercial” relationship; (4) an agreement to arbitrate
differences which “have arisen or which may arise”; (5) an agreement “in respect of a defined legal
relationship, whether contractual or not”; (6) an international arbitration agreement or, alternatively,
an agreement that would produce a “foreign” or “non-domestic” award; and (7) a showing that any
reciprocity requirement is satisfied.
Like the Convention, most international arbitration statutes contain jurisdictional limitations. These
jurisdictional requirements have substantial practical importance, because they determine when the
generally “pro-arbitration” provisions of contemporary arbitration legislation apply to arbitration
agreements (and arbitral awards). The jurisdictional requirements of national arbitration statutes
vary from state to state. In general, however, these limits are broadly similar to those contained in
the Convention.
[A] “Arbitration” Agreement Requirement
As discussed above, Article II(1) and II(2) of the New York Convention limit the Convention’s
coverage to “arbitration agreement[s]” and “arbitral clause[s].” Article 7 of the Model Law contains a
similar requirement, as do other national arbitration statutes. These requirements for an “arbitration”
agreement are discussed above. (3) As
P 56
a consequence, the Convention and most national arbitration legislation only apply to agreements to
arbitrate, as distinguished from other agreements (e.g., mediation agreements, forum selection
clauses).
[B] “Disputes” or “Differences” Requirement
Article II(1) of the Convention and Article 7 of the Model Law (like many other arbitration statutes)
applies to agreements to arbitrate “disputes” or “differences.” These provisions impliedly require
that a real “dispute” or “difference” exists before an arbitration agreement may be enforced. In
general, national courts and arbitral tribunals have found this requirement satisfied when a party
seeks relief that its counter-party refuses to comply with. (4)
2
© 2021 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
, [C] “Commercial” Relationship Requirement
The New York Convention and many arbitration statutes are potentially applicable only to
“commercial” relationships. Article 1(3) of the Convention provides that Contracting States may
make a “commercial declaration,” i.e., declare that the Convention applies only to “relationships …
which are considered as commercial under the national law of the State making [the] declaration.” A
number of nations, including the United States, have made declarations under Article 1(3). (5)
Similarly, many arbitration statutes are limited to “commercial” matters. Article 1(1) of the Model
Law limits the Law’s application to “international commercial arbitration,” while §1 of the FAA is
limited to arbitration agreements in “transaction[s] involving commerce.” In general, national courts
have adopted broad definitions of the “commercial” requirement, including almost any conceivable
profit-making activity within its scope.
[D] “Existing or Future” Disputes Requirement
Article II(1) of the Convention provides for the recognition of agreements to arbitrate “differences
which have arisen or may arise”; Article 7 of the Model Law contains a similar requirement. These
provisions are more in the nature of clarifications than limitations: by confirming that arbitration
agreements may apply to either “existing or future” disputes, these provisions supersede the
historic reluctance of courts in some jurisdictions to enforce agreements to arbitrate future disputes.
[E] “Defined Legal Relationship” Requirement
Article II(3) of the Convention requires that an arbitration agreement be “in respect of a defined legal
relationship, whether contractual or not”; Article 7 of the Model Law contains a parallel requirement.
In virtually all cases, arbitration agreements relate to a written contract and Article II(3)’s requirement
is clearly satisfied. Indeed,
P 57
it is difficult to envisage circumstances in which an arbitration agreement would not refer to a
relationship with a “defined legal relationship.” The requirement is more relevant in confirming that
international arbitral tribunals may decide non-contractual, as well as contractual, disputes. (6)
[F] “International” Arbitration Agreement Requirement
Both the Convention and most statutes that govern international arbitration apply only to arbitration
agreements that have some sort of “foreign” or “international” connection. This requirement is
consistent with the purpose of both types of instruments, which is to facilitate the international
arbitral process, without disturbing domestic arbitration matters.
Article I(1) of the Convention provides a definition of the arbitral awards to which the Convention
applies. Under that definition, the Convention is applicable only to awards that: (i) are “made” in a
state other than the Contracting State where recognition is sought; or (ii) are “not considered as
domestic awards” under the law of the recognizing state. (7) In contrast, the Convention does not
provide any equivalent definition of those arbitration agreements to which it applies.
New York Convention, Article I(1)
This Convention shall apply to the recognition and enforcement of arbitral awards made in the
territory of a State other than the State where the recognition and enforcement of such awards are
sought, and arising out of differences between persons, whether physical or legal. It shall also apply
to arbitral awards not considered as domestic awards in the State where their recognition and
enforcement are sought.
Different approaches have been adopted to defining the scope of the Convention as applied to
arbitration agreements. Some authorities have applied Article I(1) by analogy to arbitration
agreements, holding that Article II applies only to arbitration agreements with a foreign seat (outside
the state asked to enforce the agreement), while other authorities have correctly extended the
Convention more broadly to any “international” arbitration agreements (even if the arbitration is
seated in the relevant Contracting State). (8)
The limitation of the Convention to international arbitration agreements is paralleled by similar
jurisdictional requirements in many arbitration statutes. For example, Article 1(1) of the Model Law
provides that the Law applies only to “international commercial arbitration”; in turn, Article 1(3)
defines “international” expansively to include almost any agreement or relationship involving parties
from different states or conduct in different states. Most other national laws adopt similarly broad
definitions.
P 58
3
© 2021 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
Document information Chapter 2: International Arbitration Agreements: Legal
Framework
Publication Although parties frequently agree to arbitrate, in practice they also sometimes reconsider that
commitment after disputes arise. In particular, notwithstanding their agreement to arbitrate, parties
International Arbitration:
may seek either to litigate their dispute in local courts or to obstruct the arbitral process. Ultimately,
Law and Practice
the efficacy of an arbitration agreement often depends on the parties’ ability to enforce that
(Third Edition)
agreement.
Bibliographic The legal framework for enforcing international arbitration agreements has undergone important
changes over the past century, evolving from a position of relative disfavor to one of essentially
reference universal support. That legal regime consists of international conventions (principally the New York
'Chapter 2: International Convention), national law (such as the UNCITRAL Model Law) and institutional arbitration rules.
Arbitration Agreements: When their jurisdictional requirements are satisfied, these instruments provide a robust and highly
Legal Framework', in Gary B. effective framework for enforcing international arbitration agreements.
Born , International
Arbitration: Law and Practice §2.01 INTERNATIONAL ARBITRATION
(Third Edition), 3rd edition
(© Kluwer Law International;
AGREEMENTS: CHALLENGES TO EXISTENCE,
Kluwer Law International VALIDITY AND SCOPE
2021) pp. 53 - 80
Challenges to international arbitration agreements can take a variety of forms (e.g., to the existence,
validity, scope or enforceability of the arbitration agreement). They can also arise in different
procedural settings, including both arbitral proceedings and national courts.
[A] Challenges to Existence, Validity and Scope of
International Commercial Arbitration Agreements
There are a variety of possible challenges to the validity of an international commercial arbitration
agreement. These challenges include (a) claims by a party that it never consented to any
agreement, including any arbitration agreement, with its counter-party, and therefore that no
agreement to arbitrate exists; (b) claims that any arbitration agreement between the parties is
invalid, either on grounds of formal invalidity (e.g., failure to satisfy requirements for a written or
other form) or substantive invalidity (e.g., unconscionability, termination, frustration, fraud);
P 54
or (c) claims that, while the parties agreed to arbitrate some disputes, they did not agree to arbitrate
the dispute which has actually arisen (e.g., the parties’ arbitration agreement covers disputes
relating to a lease agreement, but not claims for libel or unfair competition).
[B] Procedural Settings for Jurisdictional Objections
Challenges to the existence, validity or scope of an international arbitration agreement can arise in
a variety of different procedural settings.
[1] Consideration of Jurisdictional Objections by Arbitrators
In some cases, the respondent in an arbitration will raise a jurisdictional objection within the
arbitration itself, arguing to the arbitrators that it is not bound by a valid arbitration agreement or that
the arbitration agreement does not encompass the parties’ dispute. As discussed below, it is
universally recognized that arbitrators have the authority (competence-competence) to consider
such jurisdictional objections and to make a decision on them (as provided, for example, by Article
16 of the UNCITRAL Model Law and parallel provisions of other arbitration statutes). (1) In practice,
tribunals will resolve jurisdictional disputes conducted in proceedings much like those to resolve
substantive disputes – with written submissions, evidentiary hearings and witness testimony,
followed by a decision of the arbitrators. If the arbitral tribunal upholds the jurisdictional objection, it
will dismiss the claimant’s claims and the arbitration will conclude (with the arbitrators’ negative
jurisdictional decision potentially subject to judicial review). Conversely, if the tribunal rejects the
objections, it will make a positive jurisdictional decision (which will potentially be subject to judicial
review) and the arbitration will proceed to the merits.
[2] Consideration of Jurisdictional Objections by National Courts
In other cases, one of the parties to a dispute may commence litigation in a national court (often its
own home courts), notwithstanding its putative agreement to arbitrate. In that event, the other party
will often invoke the arbitration agreement, requesting that the national court stay any litigation and
1
© 2021 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
, “refer” the parties to arbitration. As discussed below, this relief is contemplated by Article II of the
New York Convention and Article 8 of the UNCITRAL Model Law (and parallel provisions of other
national arbitration statutes). (2) In determining whether or not to refer the parties to arbitration, a
national court will generally consider whether the parties are bound by a valid arbitration agreement
which applies to their dispute.
Alternatively, a party may choose not to appear in the arbitral proceedings or to commence parallel
litigation, and instead subsequently either seek annulment of any eventual arbitral award or resist
enforcement of any award (in both cases, on jurisdictional grounds, as provided for by Articles 34(2)
(a)(i) and (iii) and 36(1)(a)(i)
P 55
and (iii) of the Model Law). In each case, a national court will be required to consider whether the
parties are bound by a valid arbitration agreement which encompasses their dispute.
§2.02 JURISDICTIONAL REQUIREMENTS OF
INTERNATIONAL AND NATIONAL COMMERCIAL
ARBITRATION REGIMES
The New York Convention and most national arbitration statutes are “pro-arbitration,” providing
robust mechanisms for enforcing international arbitration agreements and awards. In particular,
Article II of the Convention imposes obligations on Contracting States to recognize international
arbitration agreements and enforce them by referring the parties to arbitration; like many other
arbitration statutes, Articles 7, 8 and 16 of the Model Law provide a parallel enforcement
mechanism for international arbitration agreements.
Both international arbitration conventions and national arbitration statutes contain jurisdictional
requirements that define which arbitration agreements are (and are not) subject to those
instruments’ substantive rules. These jurisdictional requirements have important consequences,
because they determine when the pro-enforcement regimes of the Convention and many arbitration
statutes are applicable – rather than other means of enforcement, which are sometimes archaic and
often ineffective.
There are many arbitration agreements to which the New York Convention does not apply. In
particular, seven jurisdictional requirements must be satisfied for an agreement to be subject to the
Convention; there must be: (1) an agreement to “arbitrate”; (2) a “dispute” or “difference”; (3) a
dispute or difference arising out of a “commercial” relationship; (4) an agreement to arbitrate
differences which “have arisen or which may arise”; (5) an agreement “in respect of a defined legal
relationship, whether contractual or not”; (6) an international arbitration agreement or, alternatively,
an agreement that would produce a “foreign” or “non-domestic” award; and (7) a showing that any
reciprocity requirement is satisfied.
Like the Convention, most international arbitration statutes contain jurisdictional limitations. These
jurisdictional requirements have substantial practical importance, because they determine when the
generally “pro-arbitration” provisions of contemporary arbitration legislation apply to arbitration
agreements (and arbitral awards). The jurisdictional requirements of national arbitration statutes
vary from state to state. In general, however, these limits are broadly similar to those contained in
the Convention.
[A] “Arbitration” Agreement Requirement
As discussed above, Article II(1) and II(2) of the New York Convention limit the Convention’s
coverage to “arbitration agreement[s]” and “arbitral clause[s].” Article 7 of the Model Law contains a
similar requirement, as do other national arbitration statutes. These requirements for an “arbitration”
agreement are discussed above. (3) As
P 56
a consequence, the Convention and most national arbitration legislation only apply to agreements to
arbitrate, as distinguished from other agreements (e.g., mediation agreements, forum selection
clauses).
[B] “Disputes” or “Differences” Requirement
Article II(1) of the Convention and Article 7 of the Model Law (like many other arbitration statutes)
applies to agreements to arbitrate “disputes” or “differences.” These provisions impliedly require
that a real “dispute” or “difference” exists before an arbitration agreement may be enforced. In
general, national courts and arbitral tribunals have found this requirement satisfied when a party
seeks relief that its counter-party refuses to comply with. (4)
2
© 2021 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
, [C] “Commercial” Relationship Requirement
The New York Convention and many arbitration statutes are potentially applicable only to
“commercial” relationships. Article 1(3) of the Convention provides that Contracting States may
make a “commercial declaration,” i.e., declare that the Convention applies only to “relationships …
which are considered as commercial under the national law of the State making [the] declaration.” A
number of nations, including the United States, have made declarations under Article 1(3). (5)
Similarly, many arbitration statutes are limited to “commercial” matters. Article 1(1) of the Model
Law limits the Law’s application to “international commercial arbitration,” while §1 of the FAA is
limited to arbitration agreements in “transaction[s] involving commerce.” In general, national courts
have adopted broad definitions of the “commercial” requirement, including almost any conceivable
profit-making activity within its scope.
[D] “Existing or Future” Disputes Requirement
Article II(1) of the Convention provides for the recognition of agreements to arbitrate “differences
which have arisen or may arise”; Article 7 of the Model Law contains a similar requirement. These
provisions are more in the nature of clarifications than limitations: by confirming that arbitration
agreements may apply to either “existing or future” disputes, these provisions supersede the
historic reluctance of courts in some jurisdictions to enforce agreements to arbitrate future disputes.
[E] “Defined Legal Relationship” Requirement
Article II(3) of the Convention requires that an arbitration agreement be “in respect of a defined legal
relationship, whether contractual or not”; Article 7 of the Model Law contains a parallel requirement.
In virtually all cases, arbitration agreements relate to a written contract and Article II(3)’s requirement
is clearly satisfied. Indeed,
P 57
it is difficult to envisage circumstances in which an arbitration agreement would not refer to a
relationship with a “defined legal relationship.” The requirement is more relevant in confirming that
international arbitral tribunals may decide non-contractual, as well as contractual, disputes. (6)
[F] “International” Arbitration Agreement Requirement
Both the Convention and most statutes that govern international arbitration apply only to arbitration
agreements that have some sort of “foreign” or “international” connection. This requirement is
consistent with the purpose of both types of instruments, which is to facilitate the international
arbitral process, without disturbing domestic arbitration matters.
Article I(1) of the Convention provides a definition of the arbitral awards to which the Convention
applies. Under that definition, the Convention is applicable only to awards that: (i) are “made” in a
state other than the Contracting State where recognition is sought; or (ii) are “not considered as
domestic awards” under the law of the recognizing state. (7) In contrast, the Convention does not
provide any equivalent definition of those arbitration agreements to which it applies.
New York Convention, Article I(1)
This Convention shall apply to the recognition and enforcement of arbitral awards made in the
territory of a State other than the State where the recognition and enforcement of such awards are
sought, and arising out of differences between persons, whether physical or legal. It shall also apply
to arbitral awards not considered as domestic awards in the State where their recognition and
enforcement are sought.
Different approaches have been adopted to defining the scope of the Convention as applied to
arbitration agreements. Some authorities have applied Article I(1) by analogy to arbitration
agreements, holding that Article II applies only to arbitration agreements with a foreign seat (outside
the state asked to enforce the agreement), while other authorities have correctly extended the
Convention more broadly to any “international” arbitration agreements (even if the arbitration is
seated in the relevant Contracting State). (8)
The limitation of the Convention to international arbitration agreements is paralleled by similar
jurisdictional requirements in many arbitration statutes. For example, Article 1(1) of the Model Law
provides that the Law applies only to “international commercial arbitration”; in turn, Article 1(3)
defines “international” expansively to include almost any agreement or relationship involving parties
from different states or conduct in different states. Most other national laws adopt similarly broad
definitions.
P 58
3
© 2021 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
