Article 8.

Arbitration agreement and substantive claim before court

(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if
a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties
to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

(2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may
nevertheless be commenced or continued, and an award may be made, while the issue is pending in court.

 Article 8 deals with the relationship between the arbitration agreement and resort to courts.
 It is patterned after Article II (3) of the 1958 New York Convention which provides that:

The court of a Contracting State, when seized of an action in a matter in respect of which the
parties have made an agreement within the meaning of this article, shall, at the request of one
of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and
void, inoperative or incapable of being performed

 As worded, the referral is dependent on a request, which a party may make not later than when
submitting his first statement on the substance of the dispute.

 Binds the courts of an adopting state, it is not restricted to agreements providing for arbitration in that
State and, thus, helps to give universal recognition and effect to international commercial arbitration
agreements.

 Article 8 (1) relates to the so-called “negative” effect of the arbitration agreement, which prevents the
parties from commencing court actions in relation to matters falling within the scope of the agreement.

 Said article compels the courts to refer an action to arbitration under certain conditions, namely:

First, subject-matter of the dispute falls within an arbitration agreement which is neither null and void,
inoperative nor incapable of being performed (substantive).

Second, referral to arbitration be sought no later than when the party requesting it submits its frist
statement on the substance of the dispute (procedural).

Some cases hold that as an additional condition, article 8 requires that there exist a dispute between the
parties.

 Par. 2 allows arbitration proceedings to be commenced or continued even where an application to refer
a case to arbitration is pending.
 The effect of which is to delegate to the arbitral tribunal, the decision as to whether the arbitration
should proceed while a referral application is pending.

Scope of application

 The fact that the place of arbitration is located in a foreign jurisdiction has no bearing on the
applicability of article 8.
 Similarly, the law chosen by the parties to govern the contract in which the arbitration clause is inserted
has no impact on the conditions under which a referral application will be granted.
 Conditions are always governed by the law of the jurisdiction in which the court operates.
  It applies where a court is seized of an action. Hence, if it has not seized such, said article is not
applicable and no referral order may be obtained.
 Inapplicable incases other than ordinary contractual or extra-contractual actions and when the court is
seized of applications seeking interim measures of protection as provided in article 9.
 Case law provides that it applies to instances where; pre-action application seeking to obtain documents
from a prospective defendant; liquidation of a company; application to set aside a default judgment on
the merits of an action; summary documents-only proceedings.
 The purpose of article 8(1) is to grant parties limited access to the courts to resolve jurisdictional
disputes of a legal nature due to the court’s expertise compared with that of an arbitrator, the desire to
avoid multiple legal disputes over the jurisdiction of the arbitral tribunal, and the interest of finality.

The public policy favoring the enforcement of arbitration agreements

 Party autonomy is one of the law’s cornerstones.

 As held by the Supreme Court of Canada “the intention of the parties who have agreed to resort to
arbitration ought to be fully given effect to.
 Similarly, lines of cases affirmed that “predictability in the enforcement of dispute resolution
provisions is an indispensable precondition to any international business transaction and facilitates
and encourages the pursuit of freer trade on an international scale.”
 It is the court’s duty to actively encourage resort to arbitration and other means of extrajudicial
dispute resolution.

Courts may not refer an action to arbitration on their own motion

 Article 8 only mentions cases where referral to arbitration is requested by a party to the action. It does
not explicitly state whether a court can refer an action to arbitration on its own motion.
 Said article prevents a court from doing so, and courts have confirmed that they may only refer an
action to arbitration if a request to that effect has been made by a party.

Mandatory nature of referral to arbitration where the conditions set out in article 8 are met

 Where the conditions set out therein are met, courts have no other option than to refer the action to
arbitration.

The substantive condition: an action falling within an arbitration agreement that is neither null and void,
inoperative nor incapable of being performed

The court must be satisfied that the arbitration agreement is:

1. Neither null and void, inoperative, nor incapable of being performed, and;

2. Applicable to the dispute to which the action relates.

Cases where a referral order may be found to be non-existent, null and void, inoperative nor incapable of
being performed

1. No consent or no valid consent to the alleged arbitration agreement

  Respondent to the referral application never undertook, or never validly undertook (did not consent), to
resort to arbitration as alleged by the party seeking a referral order.
 Respondent contends that it did so with parties other the party seeking a referral order, who is thus
alleged not to be a party to the arbitration agreement it invoked.
 Consent was vitiated by deceit or fraud.
 Instances when whether the terms in a contract express an intention to resort to final and binding
arbitration.

2. Arbitration agreement not validly transferred to the party making the referral application or to the party
responding thereto

 Obligation to arbitrate arising out of the original agreement has not transferred to the respondent to the
referral application, or that the party seeking a referral order has not acquired the right to compel the
respondent to resort to arbitration.

3. Formal requirements not met

 Even though there may have been a meeting of the minds between the parties, applicable formal
requirements were not met.
 Whether the writing requirement set out in article 7 (2) had been met.

4. Condition precedent to the arbitration agreement taking effect not fulfilled

 The arbitration would only become binding after the setting up of an arbitral tribunal, which had not yet
occurred.

5. Arbitration agreement no longer in effect

 Once existing arbitration agreement has ceased to be binding on grounds of termination, recission,
abandonment, repudiation, waiver, is superseded by a new one and the like.

6. Arbitration agreement invalid because the dispute is not arbitrable

 Inarbitrable pursuant to mandatory, public policy based rules which prohibit enforcement of arbitration
agreements in certain areas, such as issues pertaining to marriage, labor disputes and the like.

7. Arbitration agreement invalid because it is abusive or unconscionable

 Unfair or one-sided as to be non-binding under the rules of contract applicable to the case.
 An arbitration agreement is substantively unconscionable if it denies the persons benefits conferred by
statute

8. Arbitration agreement invalid because of the invalidity of non-severable provisions thereof

 Provisions of the arbitration agreement relating to the constitution of the arbitral tribunal were contrary
to public policy and therefore null.
 In Debois v. Industries A.C. Davie Inc. the court refused to uphold the agreement that provided that the
tribunal would be constituted by one of the parties to the contract or dispute.
9. Arbitration agreement designating an arbitral institution or appointing authority that is either non-existing
or uncooperative

 In a Canadian case, the arbitral institution chosen by the parties had ceased to exist, and the parties
disagreed as to whether another institution created subsequently was the legal successor of the first.
 Arbitral institution designated therein- which had become practically inactive- was unwilling to
administer the arbitration.
 However, there are cases which ruled otherwise (that it did not entail that the arbitration agreement
was inoperative or incapable of being performed).

10. Failure to commence arbitration within the deadline provided for in the arbitration agreement.

 Agreements sometimes provide that arbitration must be commenced within a given period following
certain pre-determined occurrences.
 Conversely, despite the fact that the arbitration clause was time barred several courts held that it does
not justify the dismissal of a referral application.

11. Other circumstances

 An arbitration agreement was held incapable of being performed where the party against whom it was
invoked did not have the financial resources needed to proceed to arbitration.
 Arbitration agreement became inoperative because of the defendant’s refusal to participate in the
arbitration.