KluwerArbitration
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Publication
Comparative International
Commercial Arbitration
Bibliographic reference
'Chapter 7 Arbitraiton
Agreements - Validity and
Interpretation', in Julian D.
M. Lew , Loukas A. Mistelis ,
et al., Comparative
International Commercial
Arbitration, (© Kluwer Law
International; Kluwer Law
International 2003) pp. 129 -
164
Chapter 7 Arbitraiton Agreements - Validity and
Interpretation
7-1 An arbitration agreement is the expression of the intent of the parties to withdraw their
disputes from a national court system and to submit them to arbitration. The arbitration
agreement will deliver the intended results if it is enforceable. Only if it was validly entered
into and covers the dispute in question will courts deny jurisdiction.
P 129 7-2 The special procedural effects of the arbitration agreement find their expression primarily
P 130 in the limitation to the admissibility of such agreements, known as arbitrability. Certain
types of disputes cannot be referred to arbitration but are reserved for the exclusive
jurisdiction of state courts. In addition the procedural effects have lead in most countries to
form requirements and influenced the means of enforcement of the agreement.
7-3 Despite its procedural effects, the arbitration agreement is primarily a substantive
contract by which the parties agree to refer their disputes to arbitration instead of the state
courts. This implies that for the agreement to come into existence the requirements for the
conclusion of a contract must be fulfilled. The parties must have agreed the extent of the
referral to arbitration and there should be no factors present which may vitiate their consent
under general contract law. Furthermore, the parties must have had capacity to enter into an
arbitration agreement. In this respect the arbitration agreement is a contract like any other
contract.
7-4 This chapter deals with (1) the formal validity of the arbitration agreement, (2) the capacity
of the parties to enter into an arbitration agreement, (3) its substantive validity, (4) its scope
and interpretation, (5) the effects and the enforcement of arbitration agreements, and (6) its
termination and the waiver of the right to arbitrate.
1 Formal Validity of the Arbitration Agreement
7-5 The formal validity of an arbitration agreement is closely related to the issue of whether
the party actually consented to arbitration. The formal requirements are intended to ensure
that the parties actually agreed on arbitration. Consequently questions as to the fulfilment of
the form requirements and the necessary consent are often interwoven and treated jointly.
However, there are cases where national courts despite an agreement to arbitrate have
accepted jurisdiction over a dispute because the arbitration agreement did not fulfil the
necessary form requirements. (1)
7-6 Most international conventions and national arbitration laws contain substantive conflict
P 130 of laws provisions in relation to form requirements. Few national laws allow for an oral
P 131 arbitration agreement. (2) However, the majority of arbitration laws, including the Model
Law, in line with the international conventions, require arbitration agreements to be either in
writing or at least to be evidenced in writing. (3) This is now also the case in the new German
and Dutch laws, which traditionally allowed for oral agreements. (4)
1.1 Form Requirement: Function and Criticism
7-7 The rationale underlying the writing requirement has two aspects. First, in light of the legal
consequences connected with the conclusion of an arbitration agreement the writing
requirement is intended to ensure that the parties actually agreed on arbitration. As the
agreement to arbitrate may lead to renunciation by the parties of their constitutional right to
have their disputes decided in court, the written form aims to prevent the agreement going
unnoticed. Second, writing provides a record of the agreement which helps to prove the
existence and the content of an arbitration agreement in subsequent proceedings. (5) In fact
under the New York Convention enforcement of the arbitration agreement and any award
requires a written arbitration agreement. The drafters of the Model Law did not want to set up
form requirements in conflict with the New York Convention. (6)
7-8 Form requirements sometimes do not always reflect business practice. While in certain
areas of trade parties often rely on oral agreements, strict form requirements can defeat an
P 131 agreement to arbitrate, the existence of which is beyond doubt. It has been criticised correctly
P 132 that the parties can orally agree a multi-million dollar contract which will be considered to
be valid but for the arbitration clause. (7) The arbitration agreement would be invalid
irrespective of whether it can be established that the parties actually agreed on arbitration. A
party can enforce the substantive provisions of a contract while being able to walk away from
the agreement to arbitrate concluded at the same time.
7-9 There is no justification to submit arbitration agreements to stricter form requirements
than other contractual provisions. Arbitration is no longer considered a dangerous waiver of
substantial rights. In fact the selection of arbitration is not an exclusion of the national forum
but rather the natural forum for international disputes. (8) Form requirements do not
necessarily promote legal certainty; they are often the source of additional disputes. For these
reasons the writing requirements in most national laws and under the New York Convention
have been liberally interpreted.
 7-10 This all supports the complete abolition of the “in-writing” requirement (9) or at least the
submission of the issue of formal validity to a substantive rule of international arbitration. (10)
In any event, the writing requirement should be interpreted dynamically in the light of modern
means of communication. Arbitration clauses included in contracts negotiated and concluded
by e-mail should be accepted as fulfilling the writing requirement in line with the general
development that contracts which require written form but are concluded by e-mail are valid.
(11)
P 132
P 133
1.2 Different International and National Rules
7-11 Despite significant harmonisation, national laws differ considerably as to what satisfies
the requirement of a written agreement. This is partly due to the different times at which
various rules were drafted. The New York Convention, for example, adopted in 1958, contains a
very narrow definition of “writing”. Article II(2) provides
The term “agreement in writing” shall include an arbitral clause in a contract or an arbitration
agreement, signed by the parties or contained in an exchange of letters or telegrams. (12)
7-12 The drafters of the Convention did not foresee the revolution in telecommunication
technology. Telefax and e-mail were not thought of in 1958. Furthermore the “exchange”
requirement has created uncertainties and diverging views. (13)
7-13 The Model Law contains a broader functional definition of the “agreement in writing” in
Article 7(2)
The arbitration agreement shall be in writing. An agreement is in writing if it is contained in a
document signed by the parties or in an exchange of letters, telex, telegrams or other means of
telecommunication which provide a record of the agreement, or in an exchange of statements of
claim and defence in which the existence of an agreement is alleged by one party and not
denied by another. The reference in a contract to a document containing an arbitration clause
constitutes an arbitration agreement provided that the contract is in writing and the reference
is such as to make that clause part of the contract. [Emphasis added.]
P 133
P 134
7-14 This provision recognises modern means of telecommunication and can accommodate
future developments. The writing requirement will be satisfied provided the means of
communications provides a record of the agreement. (14) However, the Model Law still requires
an exchange of documents, more or less as evidence of consent. It is doubtful whether a tacit
or oral acceptance of a written purchase order or confirmation letter would be valid. The same
applies to orally concluded contracts referring to written general conditions, certain brokers'
notes, bills of lading or other instruments granting rights to non-signing third parties. (15) The
last sentence of Article 7(2) is intended to satisfy the writing requirement when there is
reference in a written contract to a separate written arbitration agreement, such as general
terms and conditions sent in previous or possibly subsequent communications. An open
question remains whether there is an affirmative duty to accept or reject the clause. (16)
7-15 The German Law extended the “in writing” requirement of the Model Law in several
respects. Section 1031(2)–(4) ZPO provides
(2) The form requirement of subsection 1 shall be deemed to have been complied with if the
arbitration agreement is contained in a document transmitted from one party to the other
party or by a third party to both parties and - if no objection was raised in good time - the
contents of such document are considered to be part of the contract in accordance with
common usage.
(3) The reference in a contract complying with the form requirements of subsection 1 or 2 to a
document containing an arbitration clause constitutes an arbitration agreement provided that
the reference is such as to make that clause part of the contract.
(4) An arbitration agreement is also concluded by the issuance of a bill of lading, if the latter
contains an express reference to an arbitration clause in a charter party.
7-16 Section 1031(4) addresses a well known problem under the New York Convention. Section
1031(2) takes account of the German practice, that the absence of an objection in certain
circumstances is a tacit consent. Contrary to the Model Law a written assent by both parties is
P 134 no longer required; it is sufficient that the arbitration agreement is evidenced in writing.
P 135 German law imposes an affirmative duty to reject the clause on the party which does not wish
to be bound by it.
7-17 The problematic requirement of an exchange of documents has also been discarded in
other non-Model Law jurisdictions. For example, article 178(1) Swiss PIL provides
As regards its form, an arbitration agreement shall be valid if made in writing, by telegram,
telex, telecopier or any other means of communication which permits it to be evidenced by a
text.
7-18 The English Arbitration Act 1996 even recognises certain categories of oral arbitration
agreements. Section 5 provides in pertinent part
 (2) There is an agreement in writing-
(a) if the agreement is made in writing (whether or not it is signed by the parties),
(b) if the agreement is made by exchange of communications in writing, or
(c) if the agreement is evidenced in writing.
(3) Where parties agree otherwise than in writing by reference to terms which are in writing,
they make an agreement in writing.
(4) An agreement is evidenced in writing if an agreement made otherwise than in writing is
recorded by one of the parties, or by a third party, with the authority of the parties to the
agreement.

1.3 Interpretation of the Writing Requirement by Courts and Arbitration Tribunals (17)
7-19 National differences are also reflected in the judicial interpretation of the writing
requirement pursuant to Article II(2) New York Convention. Indeed adjustments are
necessitated by business and technological developments, such as electronic and digital
telecommunication which were unknown when the Convention was drafted. The Geneva Court of
Appeal, for example, held in 1983
P 135 It is clear that by treating an arbitration clause contained in an exchange of telegrams as an
P 136 ‘agreement in writing’, Article II New York Convention contemplates in a general way the
transmission by telecommunication of messages which are reproduced in a lasting format. In
this respect a telex produces messages whose senders and receivers can be identified in a
better manner than was the case for the traditional telegrams. (18)
7-20 What adjustments should be made to the requirement of an assent in writing by all parties
differs from country to country. The approach taken by national courts to Article II(2) often
reflects the general attitude of the courts towards arbitration. The general problem and
conflicting interests involved were illustrated by the Swiss Tribunal Fédéral in Tradax Export v
Amoco Iranian Oil Company. (19) It dealt with the question whether or not a generic reference in
the written communications to general conditions is sufficient or if the reference must
specifically mention the arbitration clause. The court held that Article 11(2) New York
Convention
… has to be interpreted in accordance with its object, and with a view to the interests it is
clearly designed to protect. The purpose of the Convention is to facilitate the resolution of
disputes through arbitration, taking particular account of the needs of international
commerce; nonetheless, the requirement of writing prescribed in Article II of the Convention
has the effect of protecting the parties concerned from entering into ill-thought-out
commitments involving the renunciation of the right of access to normal courts and judges.
From the standpoint of the interests at stake, the validity of an arbitration clause has to be
evaluated in the light of the circumstances of the particular case. This being so, regard should
be had to such considerations as whether it was entered into by seasoned businessmen, or by
people with little experience; in the same way, a different degree of awareness is required of
the signatories depending on whether the contract refers back to the provisions of another
contract which is deemed to be known to them, or to general conditions which may or may not
be known to them. (20)
7-21 The above case related to bills of lading signed by both parties. The Swiss Federal
P 136 Tribunal decided that a general reference to a separate document containing an arbitration
P 137 clause was sufficient to constitute an “arbitral clause in a contract signed by both parties” in
the sense of Article II(2). (21) Courts in other countries have come to the same conclusion that
no specific reference to the arbitration clause is required. (22)
7-22 The main differences relate to the interpretation of the second alternative form
requirement, i.e. the exchange of documents. Problems do arise where only one party has
clearly consented in writing to arbitration. The typical examples are purchase orders or letters
of confirmation with an arbitration clause upon which the other party acts without sending a
written reply.
7-23 A restrictive interpretation can be found in the judgment of the Italian Supreme Court in
Robobar v Finncold in 1993 (23) . The contract concerned the supply of refrigerating units by
Finncold to Robobar for the manufacture of refrigerators. The purchase confirmations sent by
Robobar contained a clause providing for arbitration but Finncold never replied to them. Two
years later Robobar suspended payments alleging bad quality of the units. In the proceedings
for payment and damages brought by Finncold in the Italian courts, Robobar tried to rely on
the arbitration clause. The Court held that the Italian courts had jurisdiction since the
arbitration clause lacked formal validity. Article II recognises as valid an arbitration clause
contained in a document signed by the parties or in an exchange of letters or telegrams. None
of these formalities were met in the Robabar case. (24)
7-24 A wide interpretation of Article II(2) was adopted by the US courts in Sphere Drake
Insurance v Marine Towing. (25) A contract for marine insurance provided for arbitration in
London. After the broker procured the policy but before it was delivered to the insured party
P 137 and signed the insured vessel sank. In an action for coverage in the US courts the insured party
P 138 argued that the arbitration agreement did not fulfil the requirements of Article II(2) since it
neither signed the contract nor was there an exchange of correspondence. The Court of Appeal
for the Fifth Circuit held that there was no requirement for signature or exchange of documents
if the arbitration clause is part of a contract. (26)
 7-25 The Sphere Drake interpretation applies intent over form. It does not follow the legislative
history or a strict textual interpretation of Article II(2): the New York Convention requires
signature or exchange of documents for arbitration agreements and clauses.
7-26 This is also the understanding prevailing in most countries. (27) The Swiss Federal Tribunal
in Compagnie de Navigation et Transport v MSC (28) expressed the opinion that abolishing or at
least relaxing of the signature requirement may become an issue as
… with the development of modern means of communication, unsigned written documents
have an increasing importance and diffusion, that the need for a signature inevitably
diminishes, especially in international commerce, and that the different treatment reserved to
signed and unsigned documents is under discussion. (29)
7-27 Abolishing the express language of Article II(2) is a matter for future legislative action.
However, it is generally accepted that the New York Convention may be interpreted in the light
of wider provisions in national laws. (30) This will not be helpful in all cases where national
laws contain the requirement of an “exchange” of written communications which is at the heart
P 138 of the problem. This restriction of Article II(2) may be overcome if it is interpreted dynamically
P 139 in accordance with laws which have abolished the requirement that both parties must
consent in writing. (31)
7-28 If a contract containing the arbitration clause is signed only by one party, the question is
whether it is necessary to find another document containing the written consent of the other
party. It is widely accepted that this second document does not have to be signed. The
signature requirement only applies to the first alternative of Article II(2) but not to the second,
the exchange of documents. (32)
7-29 In bills of lading and other three party situations it frequently happens that the third
party signs a document or engages in written communications. In such cases it may be possible
to attribute those written communications to the party which has not expressly consented to
arbitration in writing. The third party may be considered to have acted as an agent or a broker
when consenting in writing. (33)
7-30 Where the consent of both parties to the arbitration clause was clear, despite the non-
fulfilment of formal requirements, courts have resorted to considerations of good faith and
estoppel to uphold the arbitration agreement. The Swiss Federal Tribunal in Compagnie de
Navigation et Transport v MSC stated (34)
… in particular situations, a certain behaviour can replace compliance with a formal
requirement according to the rules of good faith. This is exactly the case here. The parties,
which have a long standing business relationship, base it in fact on general conditions
containing, at Art. 2, the arbitration clause at issue. Further, the shipper itself has filled in the
bill of lading before returning it to the carrier, which signed it. Leaving aside the fact that this
procedure is not different from an exchange of declarations by telex or similar documents, the
P 139 carrier had the right to believe in good faith that the shipper, its business partner since several
P 140 years, approved of the contractual documents which it had filled in itself, including the
general conditions on the back, among which the arbitration clause. [References omitted] (35)
7-31 Another issue which has given rise to divergent views is whether the form requirements
applicable to the arbitration agreement also extend to the authority of an agent to enter into
such an agreement. For example, Article 216 Greek Civil Code requires that the evidence of
authority of an agent always has to comply with the same form as the main agreement to be
signed by the agent. (36) Even where no such provision exists it has often been required that
the authority of any agent entering into an arbitration agreement be evidenced in writing. (37)
With the relaxation of the protective element in the form requirements there are, however,
good reasons to allow oral conferrals of power on an agent, especially where the agent is
authorised to enter into the contract on behalf of the principal. (38)
7-32 An UNCITRAL working group is currently working on a new draft of Article 7 Model Law as
well as an interpretative instrument relating to Article II(2) New York Convention. (39) The
discussion in the working group takes account of most problems and seeks legislative solutions.

2 Capacity of the Parties to Enter into an Arbitration Agreement

7-33 The capacity of parties to enter into an arbitration agreement is governed by the law
applicable to the parties. The general rule is that any natural or legal person who has the
capacity to enter into a valid contract also has the capacity to conclude a valid arbitration
agreement. (40) Except for restrictions aimed at protecting consumers, national laws rarely
P 140 impose restrictions on the capacity to enter into arbitration agreements. In state controlled
P 141 economies there may be a lack of capacity where the necessary foreign trade licence is
missing. (41) A frequent challenge is that the person who signed the contract for one of the
parties was not properly authorised. (42)

3 Substantive Validity of the Arbitration Agreement

7-34 An arbitration agreement must fulfil the ordinary requirements for the conclusion of a
contract. The parties must have agreed on arbitration and their agreement must not be
vitiated by related external factors.

3.1 Agreement between the Parties

7-35 Consent to arbitration is easy to establish if the arbitration clause is contained in a
contract negotiated between and signed by the parties. In practice, however, many contracts
 are concluded by reference to general conditions. The arbitration clause may not have been
the object of specific attention by the parties, since they generally conditions or any other
document containing the arbitration clause may not be attached to the contract itself. The
parties may conclude a contract without reference to an arbitration clause but in the context
of a series of contracts which include an arbitration agreement.
7-36 Questions as to consent to arbitration may arise if claims are brought by or against parties
who are not expressed to be a party to the contract containing the arbitration agreement. This
could be where such party is closely involved with the implementation or performance of the
contract or where the contract and arbitration agreement have been assigned to a third party.
In these cases the central issue is whether under general principles of contract law the
arbitration agreement can be extended to a non-signatory. In US law these principles include
“(1) incorporation by reference; (2) assumption; (3) agency; (4) veilpiercing/alter ego; and (5)
estoppel.” (43)
P 141
P 142
a Reference to standard terms and conditions
7-37 It is generally accepted that an arbitration clause can be included in general conditions.
(44) If these standard terms and conditions are on the reverse side of a document usually a
generic reference to the conditions is sufficient to incorporate the arbitration clause in the
contract. No special reference to the arbitration clause is required to assume that the parties
consented to arbitration.
7-38 The situation is more complex where the general conditions and the arbitration
agreement are contained in a separate document. The prevailing view is that provided the
document is available to both parties at the time of contracting a valid arbitration agreement
exists. (45) There are, however court decisions which require a specific reference to the
arbitration agreement contained in the general conditions (46) and that the arbitration clause
is conspicuous. (47)
7-39 If the parties have a long standing relationship based on the general conditions of one
side it is unnecessary for the general conditions to be referred to in each new contract. As long
as no objection is raised it is sufficient that the other side has received the general conditions
at an earlier stage. (48)
P 142 7-40 Arbitration agreements may also be incorporated by reference to other documents,
P 143 including earlier contracts between the parties. The question has been how specific the
reference must be. The prevailing view seems to be that a general reference is sufficient. (49)
7-41 The reference may be to a contract between only one of the parties and a third party. This
is typically the case where an arbitration clause in a charterparty is included in a bill of lading.
There are divergent views as to whether a general reference to the charterparty is sufficient to
incorporate the arbitration agreement. According to US courts broadly worded arbitration
clauses not restricted to the immediate parties can be included in the bill of lading by a mere
general reference. (50)
7-42 In other countries the prevailing view seems to be that a specific reference is required.
The position in England was summarised by Lord Justice Bingham (as he then was) in The
Federal Bulker
… it is clear that an arbitration clause is not directly germane to the shipment carriage and
delivery of goods. … It is, therefore, not incorporated by general words in the bill of lading. If it
is to be incorporated, it must either be by express words in the bill of lading itself … or by
express words in the charterparty itself … If it is desired to bring in an arbitration clause, it
must be done explicitly in one document or the other. (51)
7-43 Similarly, the German ZPO section 1031(4) provides that a specific reference to the
P 143 arbitration clause in the charterparty makes it part of the bill of lading. Once there is such a
P 144 specific reference it is irrelevant that the wording of the clause in the charterparty only
refers to the original parties. The same applies in English law. (52)
b Related agreements
7-44 Consent to arbitration may also exist if a contract does not contain an arbitration clause
but forms part of a contractual network which includes an arbitration agreement. This happens
where parties enter into a framework agreement, containing an arbitration clause, governing
their future relationship within which they conclude a number of separate contracts. (53)
7-45 An arbitration agreement may also exist if the contract is part of a series of contracts
between the same parties the majority of which consistently contain arbitration clauses. (54)
This depends on the facts of the case. In ICC Case 7154 (55) three out of four ship repair
contracts contained an arbitration clause, a tribunal sitting in Geneva in relation to the fourth
contract denied jurisdiction because Article 178 PIL required an express reference to the other
contracts.
7-46 The arbitration clause in the main contract may also extend to follow up or repeat
P 144 contracts concluded in close connection and in support of a main contract. This is usually a
P 145 question of interpretation; this may be the case if the subsequent agreements amend or
complete the main contract (56) but not where the additional contracts go beyond the
implementation of the main contract. (57)
7-47 In general no consent to arbitration can be assumed if third parties are involved.
Therefore the arbitration clause contained in a construction contract with the general
 contractor does not usually cover the general contractor's contract with the subcontractor. (58)
7-48 The same applies in relation to bank guarantees or letters of credit issued on the basis of
a contract containing an arbitration clause. It cannot be assumed that the bank has consented
to arbitration on the basis of the underlying contract if the guarantee or the letter of credit
does not provide for arbitration. (59) However, in Choctaw Generation v American Home
Assurance the US Court of Appeal for the Second Circuit held that a signatory to an arbitration
clause may be bound under the doctrine of estoppel to arbitrate claims against the bank,
where the issues “the nonsignatory is seeking to resolve in arbitration are intertwined with the
agreement the estopped party has signed.” (60)
7-49 An arbitration agreement may exceptionally exist by virtue of trade usages in a certain
industry. In the light of the writing requirement such an option is primarily limited to countries
which do not require any strict form for arbitration agreements. (61)
P 145
P 146
c Consent by third parties
7-50 Questions of consent also arise if an arbitration clause is to be extended to third parties
which have not signed the contract or have signed it in a different capacity. In ICC Case 5721,
(62) the person who had signed an arbitration agreement in his capacity as a managing
director of a company was personally made respondent in an arbitration. The tribunal found
that the legal entity was the normal business vehicle, and refused jurisdiction over the
director. The tribunal stated the following principle
A tribunal should be reluctant to extend the arbitration clause to a director who has acted as
such. The extension requires that the legal person is nothing but a business instrument of the
natural person in such a way that one can transfer the contract and obligations entered into by
the former to the latter. The presumptions listed below do not permit to reach an absolute
certainty in this respect. (63)
7-51 The certainty required has been found in a number of cases where the arbitration clause
was extended to parent (64) and subsidiary (65) companies from the same group which had not
signed the arbitration agreement. The underlying argument, where a parent or subsidiary
company plays an active role in the conclusion and performance of the contract, is that the
agreement is with the group and not with a single member of the group. In such cases it would
P 146 be contrary to good faith and economic reality to treat the companies of a group as separate
P 147 legal entities. (66) This argument has also been extended to the relations between a state
and its oil and trading company. (67) Such an extension is justified if the applicable company
law allows the corporate veil to be lifted or the companies have created an appearance of or
been presented as having the power of agency for another company. (68)
d Assignment
7-52 Parties are generally free to assign their contractual rights to a third party. (69) Where
those rights are covered by an arbitration agreement the prevailing view in international
arbitration is that the assignee automatically becomes a party to the arbitration agreement.
P 147 Courts in various countries, such as France, (70) England, (71) Sweden (72) and Germany, (73)
P 148 have consistently held that the assignee can sue and be sued under the arbitration
agreement. (74) The Cour d'appel Paris went as far as considering it a general principle of
arbitration law. (75)
7-53 The reason for this automatic assignment is that arbitration agreements are not personal
covenants (76) but form part of the economic value of the assigned substantive right. (77)
Furthermore, as the Court of Appeal of New York stated in Hosiery Mfg Corp v Goldston
arbitration contracts would be of no value if either party could escape by assigning a claim
subject to arbitration between the original parties to a third party. (78) Otherwise it would be
possible for a party to circumvent the arbitration agreement by assigning the main claim.
7-54 However, there are cases where tribunals and courts have rejected the idea of an
automatic transfer of the arbitration agreement. (79) An express approval by the assignee or
the original debtor was a precondition for the transfer of the right to arbitrate.
7-55 No automatic transfer takes place when the parties have excluded an assignment of the
P 148 arbitration agreement. Non-assignment clauses in relation to the substantive right are often
P 149 considered to exclude any assignment of the arbitration agreement as well. (80) An
exclusion may exist where the agreement to arbitrate is entered into on the basis of a special
personal relationship. Furthermore the assignment should not lead to a deterioration of the
original debtors position. That would be the case, for example, where due to the financial
situation of the assignee the reimbursement for costs may be endangered.
7-56 An automatic transfer may also be excluded when the assignment takes place while
arbitration proceedings are already pending. Under English law, for example, the assignee
does not automatically become a party to those proceedings; a notification to the other party
and the arbitrators is required. (81) This may be of particular importance where the original
party no longer exists. If the necessary notifications are not made in time, the tribunal may
lose jurisdiction as one of the parties has been dissolved. Any award rendered in such a
situation will be null and void. (82)
7-57 The extent to which the assignor remains bound by the arbitration agreement is primarily
an issue of interpreting the arbitration agreement. On the basis of an arbitration agreement
contained in the shareholders' agreement arbitration proceedings could be initiated against a
shareholder who had left the company, where the dispute related to a breach of contract in
 connection with leaving the company. (83)

3.2 Other Factors Affecting the Validity of the Agreement

7-58 An arbitration agreement might be invalid for other reasons, such as misrepresentation in
relation to the arbitration agreement, or the dissolution of the chosen institution. Other factors
P 149 which might affect the validity of the arbitration agreement are ambiguity, (84) mistakes as to
P 150 the relationship between an arbitrator and the parties, (85) the insolvency of the parties, the
exclusion of statutory rights or remedies (86) and the lack of arbitrability. Where a contract is
invalid due to illegality, as a result of the doctrine of separability the arbitration agreement
will remain valid. (87)

4 Scope and Interpretation of the Arbitration Agreement

7-59 Invariably, where an issue arises concerning the validity, existence or scope of the
arbitration agreement, the court or tribunal will have to interpret the parties' intention. If this
is not possible the arbitration agreement may be void for uncertainty or contradiction.
7-60 Arbitration agreements are in general submitted to the same type of rules of
interpretation as all other contracts. All relevant circumstances have to be taken into account.
Declarations should be interpreted in good faith and the parties' conduct, both at the time of
contracting and subsequently, considered. If the arbitration agreement is based on the
standard conditions of one party the other party can rely on existing uncertainties as to the
scope of the arbitration agreement to resist applications for referral to arbitration or to resist
court proceedings.
7-61 In older decisions the jurisdictional effect of arbitration agreements sometimes led to a
restrictive interpretation. They were seen as a renunciation of the constitutional right to have a
dispute decided by the courts. (88) In today's arbitration-friendly climate the opposite view
prevails. In particular, the US courts have consistently held that arbitration agreements must
be interpreted in favour of arbitration. In Mitsubishi v Soler the Supreme Court stated
P 150 questions of arbitrability [jurisdiction] must be addressed with a healthy regard for the federal
P 151 policy favouring arbitration … The Arbitration Act establishes that, as a matter of federal
law, any doubts concerning the scope of arbitrable issues should be resolved in favour of
arbitration, whether the problem at hand is the construction of the contract language itself or
an allegation of waiver, delay, or defense to arbitrability. (89)
7-62 Comparable views can be found in most countries which have adopted a pro-arbitration
policy. (90) This rule can apply only once it has been ascertained that the parties actually
agreed on arbitration. In cases where the main issue is whether the parties agreed to
arbitration at all there is no justification for such an interpretive rule in favour of arbitration.
Though it is the primary mode of dispute settlement in international business every party has a
legitimate and a constitutional right to choose to have its rights determined by the courts. (91)

4.1 Disputes covered by the Arbitration Agreement

7-63 Most arbitration agreements are broadly worded. The ICC model clause for example
covers “All disputes arising out of or in connection with the present contract.” It is generally
recognised that this wording covers all differences and claims arising from a given contractual
P 151 relationship and even to non-contractual and tortious claims. In Kaverit Ltd v Kone Corp (92) the
P 152 Alberta Court of Appeal defined the ambit of such clauses
A dispute meets the test set by the submission if either claimant or defendant relies on the
existence of a contractual obligation as a necessary element to create the claim, or to defeat
it. (93)
7-64 Narrower formulations, particularly in common law jurisdictions, have been interpreted
not to cover all disputes arising out of a contractual relationship. Tort and other non-
contractual claims have been held not to arise “under” a contract. (94) The same applies to
disputes concerning the formation of the contract or the pre-contractual phase. (95) In a worst
case scenario a party may be forced to bring part of its claim in arbitration and the other part,
not covered by the clause, in a state court.
7-65 This is illustrated in the decision of the Australian Supreme Court in Hi-Ferty Pty Ltd v
Kiukiang Maritime Carriers. This case concerned a contract for the shipment of fertilizer from
the US to Australia. When the Australian Quarantine Inspection Service denied unloading for
contamination the claimant initiated court proceedings for negligence, breach of contract and
a violation of section 52 Australian Trade Practice Act in respect of misleading and deceptive
conduct. The defendant challenged the jurisdiction of the court invoking an arbitration clause
which provided for arbitration in London. The Supreme Court held that only the claims for
breach of contract were covered by the arbitration clause and had to be arbitrated in London.
The other pre-contractual and non-contractual claims did not “arise from the charter” and
therefore could be determined by the Australian courts. (96)
P 152 7-66 This situation is undeniably cumbersome and may cause unfair results. Accordingly there
P 153 is a strong tendency to favour a broad interpretation of arbitration clauses. This is in line
with the general principle of interpretation stated by the ICSID tribunal in Amco v Indonesia
that
any convention, including conventions to arbitrate, should be construed in good faith, that is to
say by taking into account the consequences of their commitments the parties may be
considered as having reasonably and legitimately envisaged. (97)
 7-67 In the absence of clear intention to the contrary “it would be illogical to suppose that the
parties would have wanted a ‘split’ jurisdiction.” (98) Therefore arbitration agreements without
an express limitation should in general be interpreted to cover all claims in connection with a
contract, irrespective of whether they are claims in contract, in tort or of statutory nature.

4.2 Set-off and Counterclaims

7-68 In many cases a respondent party will seek to introduce a counterclaim or raise a set-off
against the claim. Generally this is admissible provided the counterclaim or set-off relates to
the same contract as the main claim. (99) The difficult problem is where a respondent wishes to
counterclaim or raise a set-off arising under a different contract between the same parties. In
this situation the counterclaim or set-off is not covered by the arbitration agreement.
Therefore, the arbitration tribunal does not have jurisdiction to deal with the counterclaims
and set-off claims. (100)
7-69 The situation may be different if the contracts underlying the main claims and on which
the counterclaims and set-off are based are closely related and form part of the same
economic venture. For example, set-off was allowed between a contract of sale and loan
P 153 contract, where the loan was to finance the sale. (101) In an ICC case arbitrators allowed a set-
P 154 off between claims arising under a joint venture and a contract for the purchase of
equipment for that joint venture, even though both contracts contained arbitration clauses
referring to different institutions. The tribunal treated both contracts as an economic and legal
unity, since the purchase agreement only settled details, the basics of which had already been
fixed in the joint venture contract. (102) In general, however, the existence of a separate
arbitration or choice of forum clause is considered to exclude the possibility of a set-off. (103)
7-70 A set-off of a claim from a different contract is also possible if the chosen arbitration rules
allow a set-off to be raised. For example, Article 27 Zurich Chamber of Commerce Rules
provides
The Arbitral Tribunal also has jurisdiction over a set-off defense if the claim that is set off does
not fall under the arbitration clause, and even if there exists another arbitration clause or
jurisdiction for that claim. (104)

4.3 Defective Arbitration Clauses

7-71 As a general rule courts and tribunals seek to interpret arbitration clauses positively.
Defective or pathological arbitration clauses (105) give rise to uncertainty and different views
as to the meaning of the particular clause.
7-72 Some arbitration clauses use permissive language, for instance merely providing the
parties with an option to choose arbitration. The Ontario Court of Appeal held that a clause
which provided that “the parties may refer any dispute to arbitration” was a binding
arbitration agreement. It held that this manifested an intention to arbitrate and it stayed the
court proceedings. (106) In every case the court or arbitrators take a positive view in
determining the parties' intention.
P 154
P 155
7-73 Ambiguity also can arise where it is not conclusive from the arbitration clause whether the
parties actually agreed on arbitration or some other form of dispute resolution such as expert
determination. It is not necessary that the clause uses the term arbitration or expressly states
that the decision rendered should be final and binding. (107) Where the clause provided that
any dispute “shall be referred to a Queen's Counsel of the English Bar” the English Court of
Appeal held that any agreement which refers “disputes to a person other than the court who is
to resolve the dispute in a manner binding on the parties to the agreement” would constitute
an arbitration agreement. (108)
7-74 Disputes arise where the contract contains a conflicting dispute resolution provision, for
example one choice of forum clause and one arbitration clause. It may be possible through
rules of construction to determine which jurisdiction is appropriate for a specific dispute.
Where one clause is contained in the general conditions while the other is typewritten into the
contract, the latter as a specially agreed provision will generally prevail. It also may be that
the parties intended to have the choice between two options, which is preferable to holding
the clause void for uncertainty. (109)
7-75 A typical defect is the incorrect reference to the institution under the rules of which an
P 155 arbitration should take place. There have been references to the “Official chamber of
P 156 commerce in Paris” (110) , the “Arbitration Court at the Swiss Chamber for Foreign Trade in
Geneva” (111) or “International trade arbitration organization in Zurich.” (112) While these
clauses refer to non existing institutions they show clearly that the parties intended to submit
their disputes to arbitration. For this reason courts and tribunals are reluctant to consider
these clauses void for uncertainty. In general the reference to a particular city, the type of
dispute or industry sector involved have allowed the courts to identify the chosen institution.
(113) Only in exceptional cases where it was not possible to ascertain which institutional rules
should govern the arbitration have tribunals found such agreements invalid. (114)
7-76 Arbitration agreements which refer to the International Chamber of Commerce in some
city are generally interpreted as referring to ICC arbitration with the place of arbitration in the
P 156 specified city. Difficulties can arise where the clause uses an ambiguous title of the institution.
P 157 (115) Where there is a well known local arbitration institution at the designated place and it
is unclear which institution has been selected, a court or tribunal may be able to resolve the
difficulty by the name of the institution's rules. (116)
 7-77 Courts have generally made considerable efforts to give effect to the parties' agreement to
arbitrate. (117) An extreme case in this respect is the decision of the High Court of Hong Kong in
Lucky-Goldstar v Ng Moo Kee Engineering. (118) The arbitration agreement provided for
arbitration in a “3rd country, under the rule of the 3rd country and in accordance with the rules
of procedure of the International Commercial Arbitration Association.” Though no country was
specified the judge considered the clause to be valid
I believe that the correct approach in this case is to satisfy myself that the parties have clearly
expressed the intention to arbitrate any dispute which may arise under this contract. I am so
satisfied…. As to the reference to the non-existent arbitration institution and rules, I believe
that the correct approach is simply to ignore it. I can give no effect to it and I reject all
reference to it so as to be able to give effect to the clear intention of the parties.
P 157 7-78 The designation of a non existent appointing authority has also given rise to problems in
P 158 practice. There are decisions which have considered these clauses to be void. (119) It is often
possible to rely on provisions of the applicable rules or law which provide for a fall back
mechanism in cases where the appointment procedure agreed upon by the parties fails. A wide
interpretation of the relevant provisions will generally cover the ineffective appointment
procedures.
7-79 Another defect which has given rise to dispute is badly drafted pre-arbitration stages in
multi-tier dispute resolution clauses. For example, in a contract between a Swedish licensor
and a Chinese manufacturer the dispute resolution clause provided that where the parties
were unable to reach an amicable settlement the party wishing to proceed to arbitration had
to submit “documentary evidence” of a breach of contract to be issued by the AAA or the China
Council for Promotion of International Trade. The claimant started arbitration proceedings
without having gone through this process and the respondent tried to rely on the non-fulfilment
of the precondition to resist arbitration. The tribunal held that it had jurisdiction since the
agreed pre-arbitration stage was unworkable. It was not clear what types of documents were
required and the two named institutions would not issue these documents. (120)
7-80 Arbitration agreements may also become defective through subsequent events, such as
the dissolution of the named institution. That happened in the aftermath of the German
unification where the Arbitration Court attached to the Chamber of Foreign Trade of the GDR
was dissolved. It raised questions as to the effect and future of arbitration clauses in favour of
this institution. The German Bundesgerichtshof held these arbitration agreements to be
inoperative. It considered the difference between the privately organised Berlin Arbitration
Courts and the state controlled Arbitration Court at the Chamber of Foreign Trade, with its
special features affecting the composition of the tribunal, to be too great to assume that the
P 158 parties consented to arbitration before the Berlin Arbitration Court. (121) The opposite
P 159 conclusion was reached by the Austrian Supreme Court in relation the dissolved Court of
Arbitration at the USSR Chamber of Commerce and Industry. (122)

5 Effect and Enforcement of the Arbitration Agreement

7-81 The direct effect of a valid arbitration agreement is to confer jurisdiction on the
arbitration tribunal to decide the dispute between the parties. (123) By corollary it is a
contractual obligation of the parties to have their disputes submitted to arbitration. The
arbitration agreement vests the arbitrators either expressly, or through the rules chosen or the
law which governs the arbitration, with all powers necessary for this task.
7-82 According to Article 11(3) New York Convention and comparable provisions in the national
laws (124) the existence of a valid arbitration agreement prevents courts from entertaining
jurisdiction when faced with an action on the merits. Unless the arbitration agreement is “null
and void, inoperative or incapable of being performed” a court should refer the parties to
arbitration. Under some laws, the courts do not even have jurisdiction to decide on the validity
of the arbitration agreement before the arbitrators have ruled on the issue. (125)
7-83 It is this indirect effect of the arbitration agreement which plays the central role in its
enforcement. It is not really practical to enforce an arbitration agreement in the same way as
an ordinary contract. Damages is not an appropriate remedy as it is hard, if not impossible, to
quantify the damages which result from the referral of a dispute to state courts. (126)
P 159
P 160
7-84 Specific performance is also not an appropriate remedy. It is not practical to force a party
to take part in arbitration proceedings, appoint its arbitrator and to cooperate in the conduct
of the proceedings. However, the US Federal Arbitration Act provides for an action to compel a
reluctant party to go to arbitration. (127) A party that does not follow the order of the court to
go to arbitration will be in contempt of court. While this may be sufficient to ensure a minimum
participation of the party concerned it is doubtful whether the ensuing arbitration proceedings
will lead to the originally anticipated type of dispute resolution.
7-85 Enforcement of arbitration agreements against reluctant parties must be done indirectly.
A claimant trying to breach the arbitration agreement by initiating court proceedings is
prevented from doing so by the courts' obligation to stay such proceedings. The claimant can
either commence an arbitration or not pursue its claim at all as, if a stay is granted, there is no
third option of having the issue dealt with by the courts. (128) There is no other legal course of
action open to it. In some countries it may be possible to apply for an antisuit injunction
ordering a claimant who initiated court proceedings in breach of the arbitration to desist from
taking any further step in the proceedings. (129)
7-86 The respondent's obligation to participate in an arbitration is also enforced indirectly. If
 it does not participate, it may be faced with a binding and enforceable default award. (130)
P 160
P 161

6 Termination and Waiver of the Right to Arbitrate

7-87 Parties can agree to terminate or waive the arbitration agreement and have their disputes
decided by the courts. This can be done by agreement or by not objecting to the jurisdiction of
the court in which proceedings are brought. In general, the right to rely on the arbitration
agreement is lost once a party has taken the first step in court proceedings without objecting
to the court's jurisdiction. Article 8(1) Model Law provides
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. [Emphasis added] (131)
7-88 In interpreting the German version of this provision (132) the Bundesgerichtshof held that
the time limit for raising a defence to court proceedings on the basis of an arbitration
agreement is not affected by shorter time limits set by the courts for answering a claim. (133) In
this case the defendant had not raised any defence within the time limit set by the court for
answering the claim brought against him but had invoked the existence of an arbitration
agreement before making any statements on the merits. The Supreme Court held that section
1032 ZPO was the only relevant provision.
7-89 What constitutes a “statement on the substance of the dispute” or “a step in the
proceedings” has given rise to considerable case law. Lord Denning held in Eagle Star Insurance
P 161 v Yuval Insurance that, to constitute a “step in the proceedings” depriving a party of its
P 162 recourse to arbitration, the action of this party
must be one which impliedly affirms the correctness of the proceedings and the willingness of
the [party] to go along with a determination by the Courts of law instead of arbitration. (134)
7-90 Consequently a step is generally taken when the defendant answers the substantive claim.
It does not matter whether that answer is in accordance with the procedural rules or not. (135)
Any conduct of a party which indicates its intention to abandon its right to arbitration and has
the effect of invoking the jurisdiction of the court will be considered a step in the proceedings.
This is not the case with an application to have a default judgment set aside which does not
constitute a step in the action. (136)
7-91 The English Court of Appeal held that where the defendant challenged the jurisdiction of
the court but applied for a summary judgment in the case, the arbitration agreement should
be upheld. The application for a stay led to
… the result that a step which would otherwise be a step in the proceedings, namely the
application for summary judgment, is not so treated. (137)
7-92 The right to arbitrate may be waived if a party, after an unsuccessful challenge to the
court's jurisdiction, defends on the merits. (138) In these cases where a court assumes
jurisdiction despite a challenge a party is faced with a difficult choice. It can either allow the
court proceedings go undefended on the merits and pursue its claims by arbitration, which is a
risky strategy, or it can defend itself in front of the state courts and thereby waive its right to
arbitration.
P 162
P 163
7-93 Several national laws (139) and the Model Law recognise that an application to a court for
interim relief cannot be considered a waiver of the right to arbitrate. However, if the request
for relief goes beyond the preservation of evidence or the maintenance of the status quo it may
be considered a waiver. US courts have held on several occasions that a party cannot invoke its
right to arbitration after having initiated or participated in pre-trial discovery proceedings.
(140)
7-94 The inaction of a party to commence arbitration proceedings for a certain time may also
be seen as a waiver of the right to arbitrate or a frustration of the arbitration agreement. (141)
In general, however, the mere inaction of a party is not sufficient to constitute a waiver. (142)
7-95 US courts have consistently held that given the strong policy in favour of arbitration in the
Federal Arbitration Act and the New York Convention no waiver should be assumed in the
absence of clear and unambiguous language. Ambiguities are generally resolved in favour of
the right to arbitrate so that, for example, a service of suit clause, does not operate as a waiver
of the right to arbitrate. (143) In cases where litigation had already been started a waiver was
only assumed when the party seeking to enforce the arbitration agreement had substantially
invoked the judicial process to the other parties detriment. (144)
7-96 In Downing v Al Tameer (145) the English Court was faced with the situation that one party
denied the existence of any contractual relationship with the other party. The case concerned
an alleged contract for the joint exploitation of a patent to separate crude oil from water. The
P 163 dispute resolution clause provided that the parties should try to settle disputes amicably and,
P 164 should that fail, for arbitration. In pre-action correspondence the defendant always denied
having concluded any binding agreement with the claimant. When the claimant initiated court
proceedings in England the defendant applied for a stay relying on the arbitration clause
contained in the alleged contract.
7-97 The Court of Appeal rejected this application on the basis that the arbitration agreement
 had been repudiated by the defendant's constant denial of the existence of any contractual
relationship. It held that by alleging that there is no contract between the parties “prior to the
issue and service of proceedings, the defendants were plainly evincing an intention not to be
bound by the agreement to arbitrate.” This repudiatory breach of the agreement to arbitrate
was accepted by the claimant when it initiated court proceedings.
7-98 The consequence of this decision is that a party who alleges that it is not bound by an
agreement risks loosing any right to rely on the arbitration agreement. If this party wants to
P 164 reserve the right to arbitrate it must say so clearly when contesting the existence of the
contract.

References
1) Corte di cassazione, 28 October 1993, Robobar Ltd v Finncold sas, XX YBCA 739 (1995) 740;
Germany, Bayerisches Oberstes Landesgericht, 12 December 2002, 4 Z Sch 16/02.
2) French law is an exception with regard to international arbitration. See Cour d'appel
Paris, 8 June 1995, Sarl Centro Stoccaggio Grani v SA Granit, Rev Arb 89 (1997); Fouchard
Gaillard Goldman on International Commercial Arbitration, paras 608 et seq. In England,
common law still recognises an oral arbitration agreement but it cannot be enforced
under the Arbitration Act; see Merkin, Arbitration Act, 27.
3) Model Law Article 7(2); for other Model Law countries see Sanders, Quo Vadis Arbitration?,
101, 155; Austria, CCP Article 577(3); China, Arbitration Law Article 16; England, Arbitration
Act section 5; France, NCPC Articles 1443, 1449 (for domestic arbitration); US, FAA section 2;
for a more complete list see Alvarez, “Article II(2) of the New York Convention and the
Courts”, ICCA Congress series no 9, 67, 68; see also survey of national laws in preparation
for the Model Law: First Secretariat Note, A/CN9/207, paras 40 et seq.
4) See for Germany, ZPO section 1027(2) pre-1998 version, Schlosser, Internationale
Schiedsgerichtsbarkeit, 261 para 360; for Netherlands see van den Berg, van Delden,
Snijders, Netherlands Arbitration Law, 36 para 4-8-2.
5) ICC case no 5832, 115 Clunet 1198 (1988) 1202; Herrmann, “The Arbitration Agreement as the
Foundation of Arbitration and Its Recognition by the Courts”, ICCA Congress series no 6, 41,
44; Reiner, “The Form of the Agent's Power to Sign an Arbitration Agreement and Article
II(2) of the New York Convention”, ICCA Congress series no 9, 82, 85 et seq.
6) See First Working Group Report, A/CN9/216, para 23; Commission Report, A/40/17, paras
85 et seq.
7) Kaplan, “Is the Need for Writing as Expressed in the New York Convention and the Model
Law Out of Step with Commercial Practice?”, 12 Arb Int 27 (1996) 30 et seq; Herrmann, “The
Arbitration Agreement as the Foundation of Arbitration and Its Recognition by the Courts”,
ICCA Congress series no 6, 41, 46; Blessing, Introduction to Arbitration, para 486.
8) Lionnet, “Rechtspolitische Bedeutung der Schiedsgerichtsbarkeit”, in Berger, Ebke, Elsing,
Grossfeld & Kuehne (ed), Festschrift für Otto Sandrock (Recht und Wirtschaft 2000), 603,
606.
9) Herrmann, “Does the World Need Additional Uniform Legislation on Arbitration? The 1998
Freshfields Lecture”, 15 Arb Int 211 (1999) 216; Herrmann, “The Arbitration Agreement as the
Foundation of Arbitration and Its Recognition by the Courts”, ICCA Congress series no 6, 41,
45 et seq; Sanders, Quo Vadis Arbitration?, 157 et seq.
10) Blessing, “The Laws Applicable to the Arbitration Clause and Arbitrability”, ICCA Congress
series no 9, 169, 172.
11) The UNCITRAL Model Law on Electronic Commerce Article 6 provides that where the law
requires information to be in writing, that requirement is met by a data message if the
information contained is accessible so as to be useable for subsequent reference. Many
countries with a developed e-commerce practice consider electronic and data messages
to be equivalent to written documents. There are also US cases which upheld the validity
of arbitration agreements which form part of an online contract. See Lieschke v
RealNetworks, Inc, no 99C 7274, 99C 7380, 2000 WL, XXV YBCA 530 (2000) (ND Ill, 2000),
where the arbitration clause was held to be binding on the parties; on the other hand in
Brower v Gateway 2000 Inc, 676 NYS 2d 569 (NYAD 1998), where the contract was formed,
the particular term relating to arbitration was unconscionable and, at least in part,
unenforceable. See, however, the misguided, Norway, Hålogaland Court of Appeal, 16
August 1999, Charterer (Norway) v Shipowner (Russian Federation), XXVII YBCA 519 (2002)
where enforcement of an award was refused because the arbitration agreement was
contained in e-mails.
12) A wider provision is included in the European Convention Article I(2)(a); it refers to an
arbitration agreement contained in communications by teleprinters; see Hascher,
“European Convention on International Commercial Arbitration of 1961”, XX YBCA 1006
(1995) 1014.
13) See van den Berg, New York Convention, 190 et seq, and the various court decisions
reported in the YBCA. See also Wang, “International Judicial Practice and the Written Form
Requirement for International Arbitration Agreements”, 10 Pacific Rim Law and Policy
Journal 375 (2001).
14) Holtzmann & Neuhaus, Model Law, 262 et seq.
15) Ibid, 261; Herrmann, “Does the World Need Additional Uniform Legislation on Arbitration?
The 1998 Freshfields Lecture”, 15 Arb Int 211 (1999) 214 et seq. For the unsatisfactory
consequences which may result from that see the Hong Kong case Small v Goldroyce,
[1994] 2 HKC 526.
16) See UNCITRAL Working Group II (Arbitration and Conciliation), Preparation of uniform
provisions on written form for arbitration agreements, UN Document A/CN9/WGII/WP118.
17) The writing requirement for arbitration agreements is currently being reviewed by an
UNCITRAL working group considering a redraft of Article 7 Model Law and an interpretive
instrument relating to Article II(2) New York Convention. See UNCITRAL Working Group II
(Arbitration and Conciliation), Preparation of uniform provisions on written form for
arbitration agreements, UN Document A/CN9/WGII/WP118.
18) Cour de justice Canton de Genève, 14 April 1983, Carbomin SA v Ekton Corporation, XII YBCA
502 (1987); see also Corte di appello Napoli, 17 March 1979, VII YBCA 297 (1982); Austria,
Oberster Gerichtshof, 17 November 1971, I YBCA 183 (1976).
19) Tribunal Fédéral, 7 February 1984, Tradax Export SA (Panama) v Amoco Iran Oil Company
(US), XI YBCA 532 (1986).
20) Ibid, para 10; see also Obergericht Basel, 5 July 1994, XXI YBCA 685 (1996).
21) See for the same ruling in relation to the second alternative, the exchange of documents,
Switzerland, Tribunal Fédéral, 12 January 1989, XV YBCA 509 (1990).
22) France, Cour de cassation, 9 November 1993, Bomar Oil NV v ETAP - l'Entreprise Tunisienne
d'Activités Pétrolières, XX YBCA 660 (1995); Spain, Tribunal Supremo, 30 January 1986, X v Y,
XIII YBCA 512 (1988). Specific reference was required in Tryff Hansa v Equitas [1998] 2
Lloyd's Rep 439 and in another case cited by Merkin, Arbitration Act, 30.
23) Corte di cassazione, 28 October 1993, no 10704/93, Robobar Ltd v Finncold sas, XX YBCA 739
(1995). See also: Corte di cassazione, 18 September 1978, no 4167, Gaetano Butera v Pietro e
Romano Pagnan, IV YBCA 296 (1979) 299 et seq; see also the German decision by the
Landgericht München, 20 June 1978, V YBCA 260 (1980) 261; and the Hong Kong case Small v
Goldroyce [1994] 2 HKC 526.
24) In Robabar, ibid, 740,741, the clause was contained in Robabar's confirmation letters.
Finncold did not appear to have agreed by letter or telegram.
25) Sphere Drake Insurance Plc v Marine Towing, Inc, 16 F 3d 666, 669 (5th Cir 1994).
26) See however Sen Mar Inc v Tiger Petroleum Corp, 774 F Supp 879, 882 (SDNY 1991) which
requires that an arbitration clause be found in a signed document or an exchange of
letters to be enforceable; see also Kahn Lucas Lancaster, Inc v Lark International Ltd, 956 F
Supp 1131 XXIII YBCA 1029 (1998) 1036 (SDNY 1997) rev'd 186 F 3d 210 (2d Cir 1999).
27) For other cases and an overview of arguments see Friedland, “US Courts' Misapplication of
the ‘Agreement in Writing’ Requirement for Enforcement of an Arbitration Agreement
under the New York Convention”, 15(5) Mealey's IAR 21 (1998) 28 et seq; van den Berg, New
York Convention, 191 et seq.
28) Swiss Tribunal Fédéral, 16 January 1995, Compagnie de Navigation et Transport SA v MSC
(Mediterranean Shipping Company), XXI YBCA 690 (1996).
29) Ibid, 697 para 12.
30) The Swiss Federal Tribunal in Compagnie de Navigation et Transport v MSC, ibid,
interpreted the New York Convention in the light of the wider Article 7 Model Law.
31) Alvarez, “Article II(2) of the New York Convention and the Courts”, ICCA Congress series no 9,
67, 81; for a very wide interpretation see also Rechtbank Rotterdam, 26 June 1970, Israel
Chemicals & Phosphates Ltd v NV Algemene Oliehandel, I YBCA 195 (1976).
32) Switzerland, Tribunal Fédéral, 5 November 1985, Tracomin CA v Sudan Oil Seeds Co Ltd, XII
YBCA 511 (1987); Obergericht Basel, 5 July 1994, DIETF Ltd v RF AG, XXI YBCA 685 (1996); see
also Di Pietro and Platte, Enforcement of International Arbitration Awards, 70.
33) See, e.g., Swiss Tribunal Fédéral, 7 February 1984, Tradax Export SA (Panama) v Amoco Iran
Oil Company (US), XI YBCA 532 (1986).
34) Swiss Tribunal Federal, 16 January 1995, Compagnie de Navigation et Transport SA v MSC
(Mediterranean Shipping Company), XXI YBCA 690 (1996) 698 para 13.
35) There are decisions where for reasons of legal certainty it has been impossible to
overcome the lack of form in the arbitration agreements. See, e.g., ICC case no 5832, 115
Clunet 1198 (1988) 1202; Aughton Ltd v MF Kent Services Ltd, (1991) 31 Con LR 60 (CA).
36) See also Italy, CCP Article 1392.
37) See ICC case no 5832, 115 Clunet 1198 (1988) 1199 (Austrian Law); Areios Pagos, 14 January
1977, IV YBCA 269 (1979); Landgericht Hamburg, 16 March 1977, III YBCA 274 (1978).
38) See ICC case no 5730 of 1988, 117 Clunet 1029 (1990) 1036; Reiner, “The Form of the Agent's
Power to Sign an Arbitration Agreement and Article II (2) of the New York Convention”, ICCA
Congress series no 9, 82, 88 et seq.
39) See UN Document A/CN9/WGH/WP118.
40) See, e.g., Belgium, Judicial Code Article 1676(2)(1).
41) See decision of the German Bundesgerichtshof, 23 April 1998, XXIVb YBCA 928 (1999) where
an arbitration clause was held invalid because the Yugoslav party did not have the
required foreign trade permission and therefore lacked capacity to enter into an
arbitration agreement.
42) See, e.g., ICC case no 6850, XXIII YBCA 37 (1998); Court of Cassation Dubai, 25 June 1994, Int
ALR N-62 (1998), where the person agreeing to the arbitration clause was acting under a
power of attorney which the Court held did not cover the submission to arbitration.
43) Thomson-CSF, SA v American Arbitration Ass'n, 64 F 3d 773, 776 (2d Cir 1995); see also Smith
Enron Cogeneration Ltd Partnership, Inc et al v Smith Cogeneration International Inc (Brit
Virgin Islands), XXV YBCA 641 (2000); Choctaw Generation Ltd Partnership v American Home
Assurance Company, 17(1) Mealey's IAR C-1 (2002) (2d Cir 2001).
44) In domestic consumer contracts the inclusion of an arbitration agreement in standard
conditions may be invalid according to the legislation on unfair contract terms; see, e.g.,
the German decision, Bundesgerichtshof, 10 October 1991, XIX YBCA 200 (1994) 202 et seq.
See also Drahozal, “Unfair” Arbitration Clauses, U Ill L Rev 695 (2001) 696 et seq, reporting
on the non enforcement of such arbitration clauses in the US for consumer protection
reasons.
45) See, e.g., Progressive Casualty Insurance Company (US) et al v CA Reaseguradora Nacional
de Venezuela, XIX YBCA 825 (1994) (2d Cir, 6 April 1993) with further references.
46) Concordia Agritrading Pte Ltd v Cornelder Hoogewerff Pte Ltd, 3 Int ALR N-42 (2000)
(Singapore High Court, 13 October 1999).
47) See, e.g., Brower v Gateway 2000 Inc, 676, NYS 2d 569 (NYAD 1998), where a particular term
relating to arbitration was unconscionable and, at least in part, unenforceable. This is
particularly relevant in relation to consumer contracts.
48) See Oberlandesgericht Schleswig, 30 March 2000, 46 RIW 706 (2000) 707. See further the
Belgian cases referred to in van Houtte, “Consent to Arbitration Through Agreement to
Printed Contracts: The Continental Experience”, 16 Arb Int 1 (2000) 10 et seq.
49) See Macon (BVI) Investment Holding Co Ltd v Heng Holdings SEA (PTE) Ltd, (2000) 3 Int ALR
N-54 (Singapore High Court, 28 December 1999), where a general reference to joint venture
agreement containing arbitration clause sufficient to incorporate it in a supplement
agreement. However, see Concordia Agritrading Pte Ltd v Cornelder Hoogewerff (Singapore)
Pte Ltd, (2000) 3 Int ALR N-42 (Singapore High Court, 13 October 1999).
50) Compania Espanola de Petroleos SA v Nereus Shipping SA 527 F 2d 966, 973 (2d Cir 1975); see
also for the same problem in the insurance/reinsurance area Progressive Casualty Ins Co v
CA Reaseguradora Nacional de Venezuela, XIX YBCA 825 (1994) 833, para 24, 991 F 2d 42 (2d
Cir 1993); see also Philippines Supreme Court, 26 April 1990, National Union Fire Insurance
Company of Pittsburgh et al v Stolt-Nielson Philippines, Inc, XXVII YBCA 524 (2002).
51) Federal Bulk Carriers Inc v C Itoh & Co Ltd, The “Federal Bulker” [1989] 1 Lloyd's Rep 103,
108; see also The “Delos” [2001] 1 Lloyd's Rep 703. The same view is taken by Canadian and
Italian courts; see Thyssen Canada Ltd v Mariana Maritime SA, (2001) 1(1) Arbitration
Monthly 5 (Federal Court of Appeal of Canada, March 2000); Corte di cassazione, 22
December 2000, Granitalia v Agenzia Marittima Sorrentina, XXVII YBCA 506 (2002).
52) The Rena K [1978] 1 Lloyd's Rep 545; The Nerano [1996] 1 Lloyd's Rep 1. Under US law,
however, the wording of the arbitration clause was considered to be an obstacle to
inclusion by reference; see Steel Corp v Mississippi Valley Barge Line Co, 351 F 2d 503, 506
(2d Cir 1965); Continental UK Ltd v Anagel Confidence Compania Naviera SA, 658 F Supp 809,
814-815 (SDNY 1987).
53) See, e.g., Cour d'appel Paris, 31 May 2001, UNI-KOD sarl v Quralkali, XXVI YBCA 1136 (2001)
1138: arbitration agreement in joint venture covers contracts concluded between
members in the implementation of the joint venture; JJ Ryan & Sons, Inc v Rhône Poulenc
Textile, SA et al, 863 F 2d 315, XV YBCA 543 (1990) 547 et seq (4th Cir 1988): arbitration
agreement in exclusive distributorship agreement covered all contracts concluded under
the agreement; in Germany, Oberlandesgericht Schleswig, 19 October 2000, 16 Sch 1/00:
arbitration agreement in framework agreement for the sale of cabbage covers all sales
executed under the agreement; Raeschke-Kessler and Berger, Recht und Praxis, para 276.
54) David, Arbitration in International Trade, para 227; Raeschke-Kessler and Berger, Recht und
Praxis, para 277; Cour d'appel Paris, 25 March 1983, Société Sorvia v Weinstein International
Disc Corp, Rev Arb 363 (1984) 365; see also A & B v C & D [1982] Lloyd's Rep 166. For the
opposite case where the lack of an arbitration agreement in one contract led to an
interpretation of a connected contract which struck out an arbitration agreement see MH
Alshaya Company WLL v RETEK Information Systems (2000) WL 33116470.
55) ICC case no 7154, 121 Clunet 1059 (1994).
56) Maxum Foundation, Inc v Salus Corp, 779 F 2d 974, 978 (4th Cir 1985); Hart Enterprises Int,
Inc v Anhui Provincial Import & Export Corp, 888 F Supp 587-591, XXI YBCA 767 (1996) (SDNY
1995).
57) See ICC case no 8420, XXV YBCA 328 (2000) 338-340.
58) Under US law this may be so even where the subcontract contains a reference to the main
contract, the arbitration clause of which is, however, in its wording limited to the original
parties. See the decision in Intertec Contracting A/S et al v Turner Steiner International SA,
XXVI YBCA 949 (2001) 955, para 15-21, 34 (SDNY 2000, 2d Cir 2001).
59) Grundstatt v Ritt, 106 F 3d 201 (7th Cir 1997).
60) Choctaw Generation Ltd Partnership v American Home Assurance Company, 17(1) Mealey's
IAR C-1 (2002) C-2 (2d Cir 2001); see also JA Jones, Inc et al v The Bank of Tokyo-Mitsubishi
Ltd et al, XXV YBCA 902 (2000) 904 (EDNC 1999); for the application of the doctrine of
equitable estoppel in other cases see International Paper Company v Schwabedissen
Maschinen & Anlagen GmbH, XXV YBCA 1146 (2000) 1149-1150.
61) See, e.g., Bundesgerichtshof, 3 December 1992, XX YBCA 666 (1995) 668 para 5, with note
Berger, DZWiR 466 (1993); see also Chelsea Square Textiles Inc et al v Bombay Dyeing and
Manufacturing Company Ltd, 189 F 3d 289, XXV YBCA 1035 (2000) (2d Cir 1999): illegible
arbitration clause becomes part of contract as trade usage; David, Arbitration in
International Trade, para 226.
62) ICC case no 5721 (1990), 117 Clunet 1019 (1990).
63) Ibid, 1021: authors' translation. See generally Blessing, “The Law Applicable to the
Arbitration Clause and Arbitrability”, ICCA Congress series no 9, 169, 177. See also another
example from the US, First Options of Chicago, Inc v Kaplan, et uxor and MK Investments,
Inc, 115 S Ct 1920; 131 L Ed 2d 985 (1995), 1995 US LEXIS 3463, XXII YBCA 278 (1997).
64) JJ Ryan & Sons v Rhone Poulenc Textile, S A, 863 F 2d 315, 320-321, XV YBCA 543 (1990) (4th
Cir 1988); Interim Award in ICC case no 4131 of 1982, Dow Chemical France et al v Isover
Saint Gobain, IX YBCA 131 (1984) 133 et seq; see also ICC case no 5730 (1988), 117 Clunet 1029
(1990), where the corporate veil was pierced to reach the owner of the company
personally; for further references see Blessing, “The Law Applicable to the Arbitration
Clause and Arbitrability”, ICCA Congress series no 9, 169, 175 et seq.
65) ICC case no 2375, 103 Clunet 973 (1976); denied in ICC case no 4504, 113 Clunet 1118 (1986)
1119 et seq; for further references see Blessing, “The Law Applicable to the Arbitration
Clause and Arbitrability”, ICCA Congress series no 9, 169, 175.
66) Interim award in ICC case no 4131 (1982), Dow Chemical France et al v Isover Saint Gobain,
IX YBCA 131 (1984) 134 et seq; ICC case no 6519, 118 Clunet 1065 (1991) 1066 et seq; ICC case
no 1434, 103 Clunet 978 (1976) 979; ICC case no 2375, 103 Clunet 973 (1976) 974; Cour d'appel
Paris, 30 November 1988, Société Korsnas Marma v Société Durand-Auzias, Rev Arb 692
(1989) 694.
67) This was rejected in Cour d'appel Paris, 16 June 1988, Société Swiss Oil v Société Petrogap
et Republique du Gabon, Rev Arb 309 (1989) 314.
68) Raeschke-Kessler and Berger, Recht und Praxis, para 301 et seq; ICC case no 6519, 118
Clunet 1065 (1991) 1067; ICC case no 4381, 113 Clunet 1102 (1986); ICC case no 5730 (1988), 117
Clunet 1029 (1990) 1030; ad hoc award, 15 September 1989, E v Z, ICA Z and Société M, ASA
Bulletin 270 (1990) 272; ad hoc award, 1991, ASA Bulletin 202 (1992) 215; for US law see Rhône
Poulenc and Resin Intermediates SAS et al v EI Du Pont de Nemours and Company, XXVII
YBCA 779 (2002) 781 et seq.
69) See Kötz, in IECL, Vol VII, Chapter 13, para 60 et seq; Girsberger and Hausmaninger,
“Assignment of Rights and Agreement to Arbitrate”, 8 Arb Int 121 (1992); see also discussion
on validity of assignment in Iran-US Claims Tribunal award in case no 255 (176-255-3), 26
April 1985, DIC of Delaware, Inc et v Tehran Redevelopment Corp, The Government of The
Islamic Republic of Iran, XI YBCA 332 (1986) 333-335.
70) Cour de cassation, 5 January 1999, Banque Worms v Bellot, Rev Arb 85 (2000) 86; Cour de
cassation, 8 February 2000, Société Taurus Films v Les Film du Jeudi, Rev Arb 280 (2000);
Cour d'appel Paris, 25 November 1999, SA Burkinabe des ciments et matériaux v société des
ciments d'Abidjan, Rev Arb 165 (2001) 168; but see the decision in Cour d'appel Paris, 26
May 1992, Société Guyapêche v Abba Import Aktiebolag, Rev Arb 624 (1993) 626, where the
assignment of single rights was held not to entail the assignment of the arbitration clause.
71) Shayler v Woolf [1946] Ch 320; Schiffahrtsgesellschaft Detlev Von Appen GmbH v Voest
Alpine Intertrading [1997] 2 Lloyd's Rep 279; this follows also from English Arbitration Act
section 82(2) which states that “a party to an arbitration agreement includes any person
claiming under or through a party to the agreement.”
72) Supreme Court of Sweden, 15 October 1997, case no Ö 3174/95, MS Emja Braack Schiffahrts
KG v Wärtsila Diesel Aktiebolag, XXIV YBCA 317 (1999), Swedish original in Nytt Jurisdixkt
Arkiv 866 (1997), French translation in Rev Arb 431 (1998).
73) Bundesgerichtshof, 18 December 1975, WM 331 (1976); Bundesgerichtshof, 5 May 1977, BGHZ
68, 356; Bundesgerichtshof, 28 May 1979, NJW 2567 (1979); Bundesgerichtshof, 20 March
1980, BGHZ 77, 32; Hanseatisches Oberlandesgericht, 17 February 1989, XV YBCA 455 (1990)
para 11-14; Schlosser, Internationale Schiedsgerichtsbarkeit, 326; Raeschke-Kessler and
Berger, Recht und Praxis, 93.
74) See also for Swiss law, Tribunal Fédèral, 9 May 2001, Nextron Holding SA v Watkins
International SA, 5 IntALR N-15 (2002); Tribunal Fédèral, 16 October 2001, Societé X v
Societé O, ATF 128 III 50 where the assignment was denied since the parties excluded
assignments; for a recent clarification of Chinese arbitration law by the PRC Supreme
Court, 16 August 2000, CNIEC Henan Corporation v Liaoning Bohai Nonferrous Metals I/E Ltd,
4 Int ALR N-11 (2001); for further cases see Girsberger and Hausmaninger, “Assignment of
Rights and Agreement to Arbitrate”, 8 Arb Int 121 (1992) 123-136.
75) Cour d'appel Paris, 25 November 1999, SA Burkinabe des ciments et matériaux v société des
ciments d'Abidjan, Rev Arb 165 (2001) 168; see also Banque de Paris et des Pays-Bas v
Amoco Oil Company, 573 F Supp 1464 (SDNY 1983) 1469 which considered it to be a basic
principle of case law.
76) Shayler v Woolf [1946] Ch 320, 324; Swedish Supreme Court, 15 October 1997, MS Emja
Braack Schiffahrts KG v Wärtsila Diesel Aktiebolag, XXIV YBCA 317 (1999).
77) See France, Cour d'appel Paris, 28 January 1998, CCC v Filmkunst, Rev Arb 567 (1988);
Germany, Bundesgerichtshof, 2 March 1978, NJW 1585 (1978) 1586.
78) (1924) 143 NE 779, 780; 238 NY 2d 22.
79) The Foreign Trade Arbitration Commission at the USSR Chamber of Commerce and
Industry, award in case no 109/1980, 9 July 1984, All-Union Foreign Trade Association
“Sojuznefteexport” (USSR) v Joc Oil Ltd (Bermuda), XVIII YBCA 92 (1993) para 17. For further
US cases see Girsberger and Hausmaninger, “Assignment of Rights and Agreement to
Arbitrate”, 8 Arb Int 121 (1992) 124 referring to Kaufman v William Iselin & Co, Inc 143 NE 780
and Lachmar v Trunklin LNG Co, 753 F 2d 8 (CA 2d Cir, 1985).
80) See, e.g., Swiss Tribunal Fédéral, 9 April 1991, 8(2) J Int'l Arb 21 (1991); Tribunal Fédéral, 16
October 2001, Societé X v Societé O, ATF 128 III 50; United States v Panhandle Eastern Corp,
672 F Supp 149 (D Del 1987): assignee not deemed to be bound to the arbitration clause
because the assignment contract excluded any transfer of obligations to the assignee; see
for English law Bawejem Ltd v MC Fabrications [1999] 1 All ER (Comm) 377.
81) Merkin, Arbitration Act, para 2-33, 2-37; Montedipe SpA v JTP-RO Jugotantier [1990] 2 Lloyd's
Rep 11; Charles M Willie & Co (Shipping) Ltd v Ocean Laser Shipping Ltd, The Smaro [1999] 1
Lloyd's Rep 225, 241-243; Baytur SA v Finagro Holdings SA [1992] QB 610.
82) Baytur SA v Finagro Holdings SA [1992] QB 610.
83) See German Bundesgerichtshof, 1 August 2002, III ZB 66/01.
84) See, e.g., Hissan Trading Co Ltd v Orkin Shipping Corp, (1994) XIX YBCA 273 (High Court of
Hong Kong, 8 September 1992).
85) See Cour de cassation, Consorts Ury v SA Galeries Lafayette, 13 April 1972, Rev Arb 235
(1975).
86) See, in relation to the exclusion of punitive damages, the US decisions in Graham Oil Co v
ARCO Products, 43 F 3d 1244, 1249 (9th Cir 1994); in relation to costs Perez v Globe Airport
Sec Services, Inc, 253 F 3d 1280, 1285 (11th Cir 2001).
87) See, e.g., the decision by the Court for the Southern District of New York, Bleship
Navigation Inc v Sealift Inc, XXI YBCA 799 (1996) where the arbitration clause in a charter
party violation the US embargo against Cuba was held to be valid despite the illegality of
the main contract. On this issue see also the decision by the English High Court in
Westacre Investment v Jugoimport-SDPR Holdings Co Ltd et al (1998) XXIII YBCA 836, 859.
88) See, e.g., ICC case no 4392, 110 Clunet 907 (1983) 908.
89) Mitsubishi Motors Corp v Soler Chrysler Plymouth Inc, 473 US 614, 105 S Ct 3346, 3355 et seq
(1985); see also Remy Amerique, Inc v Touzet Distribution, SARL, XIX YBCA 820 (1994) 823
(SDNY, 16 March 1993).
90) Karrer and Kälin-Nauer, “Is there a Favor Jurisdictionis Arbitri? – Standards of Review of
Arbitral Jurisdiction Decisions in Switzerland”, 13(3) J Int'l Arb 3 (1996) 31; Raeschke-Kessler
and Berger, Recht und Praxis, para 282 et seq; but see the decision of the Italian Corte di
cassazione, 10 March 2000, Krauss Maffei Verfahrenstechnik GmbH et al v Bristol Myers
Squibb, XXVI YBCA 816 (2001) 821 para 11 according to which a restrictive interpretation
must be preferred.
91) Generally critical to an in interpretation in favor of arbitration Fouchard Gaillard
Goldman on International Commercial Arbitration, para 481; Schlosser, Internationale
Schiedsgerichtsbarkeit, 320; see also the award on jurisdiction in Amco Asia Corp and
others v Republic of Indonesia, 23 ILM 351 (1984) 359 et seq; compare further the decision in
Ashville Investment Ltd v Elmer Contractors Ltd [1988] 3 WLR 867, 873.
92) Kaverit Steel and Crane Ltd et al v Kone Corporation et al, (1994) XIX YBCA 643 (Alberta
Court of Appeal, 16 January 1992).
93) Ibid, 648.
94) See the US decisions in In re Kinoshita & Co, 287 F 2d 951 (1961); Mediterranean Enters v
Ssangyong Corp, 708 F 2d 1458 (9th Cir 1984); Tracer Research Corp v National Environment
Services Co, 42 F 3d 1292, 1295 (9th Cir 1994); Gerling Global Reinsurance Co v ACE Property &
Casualty Insurance, 17(8) Mealey's IAR 7 (2002); see also the discussion by the English
courts Government of Gibraltar v Kenney and Another [1956] 2 QB 410; The Playa Larga
[1983] 2 Lloyd's Rep 171. See also: Working Group on the ICC Standard Arbitration Clause,
Final Report, 3 March 1992, ICC Doc no 420/318 Rev 16; Nakamura, “The Distinction
between ‘Narrow’ and ‘Broad’ Arbitration Clauses under the Federal Arbitration Act – Still
problematic in the United States”, 17(8) Mealey's IAR 20 (2002).
95) Michele Amoruso et Figli v Fisheries Development, 499 F Supp 1074 (SDNY 1980).
96) Hi-Ferty Pty Ltd et al v Kiukiang Maritime Carriers Inc et al, (1999) 159 ALR 142, 12(7) Mealey's
IAR C-1 (1997) (Federal Court of Australia); excerpts also in XXIII YBCA 606 (1998) which do
not, however, include the relevant part.
97) Decision on Jurisdiction, Amco Asia Corp and others v Republic of Indonesia, 23 ILM 351
(1984) 359 et seq.
98) Landgericht Hamburg, 20 April 1977, IV YBCA 261 (1979); Ashville Investment Ltd v Elmer
Contractors Ltd [1989] QB 488, 517: “very slow to attribute to a reasonable party an
intention that there should in any foreseeable eventuality be two sets of proceedings”;
see also Ethiopian Oilseeds & Pulses Export Corp v Rio del Mar Foods Inc, [1990] 1 Lloyd's
Rep 86, 97: presumption against having two sets of proceedings arising from a particular
transaction.
99) See, e.g., UNCITRAL Rules Article 19(3); Berger, “Set-Off in International Economic
Arbitration”, 15 Arb Int 53 (1999) 64-65.
100) Berger, “Die Aufrechnung im Internationalen Schiedsverfahren”, 44 RIW 426 (1998) 427 et
seq.
101) See an award rendered under the auspices of the Court of Arbitration at the Chamber of
Commerce and Industry in Sofia, 1 October 1980, case no 60/1980, XII YBCA 84 (1987).
102) ICC case no 5971, ASA Bulletin 728 (1995); in favour of such a wide approach see also Reiner,
“Aufrechnung trotz (Fehlens einer) Schiedsvereinbarung nach österreichischem Recht”, in
Mayer, von Schlabrendorff, Spiegelfeld and Welser (ed), Recht in Österreich und Europa –
Festschrift, FS Karl Hempel (Manz 1997), 119.
103) Berger, “Set-Off in International Economic Arbitration”, 15 Arb Int 53 (1999) 74-79.
104) See further Blessing, “The Law Applicable to the Arbitration Clause and Arbitrability”, ICCA
Congress series no 9, 169, 180 et seq.
105) The notion goes back to a seminal article by Eisemann, “La clause d'arbitrage
pathologique”, in Commercial Arbitration Essays in Memoriam Eugenio Minoli (UTET 1974)
129 et seq; see also Schmitthoff, “Defective Arbitration Clauses”, JBL 9 (1975).
106) Canadian National Railway Co v Lovat Tunnel Equipment Inc, 3 Int ALR N-5 (2000), 174 DLR
(4th) 385 (Ontario Court of Appeal, 8 July 1999); but see the US decision in Hoogovens
Ijmuiden Verkoopkantoor BV v MV Sea Cattleya and others, 852 Fed Supp 6, XXII YBCA 881
(1997) (SDNY 1994), where a clause providing for “General Average and arbitration to be
settled in the Netherlands” was interpreted as determining only the situs if the parties
agreed on arbitration; for further examples see Craig, Park & Paulsson, ICC Arbitration,
para 9-02.
107) See also partial award in ICC case 9759 reported by Grigera Naon, “Choice of Law Problems
in International Arbitration”, 289 RCADI 88 (2001).
108) David Wilson Homes Ltd v Survey Services Ltd and Others, [2001] 1 All ER 449.
109) Arbitration Court, Japan Shipping Exchange, interlocutory award, 1 September 1981, MS
“Sun River”, 11 YBCA 193 (1986) 194 where a clause referring the disputes to “The Korean
Commercial Arbitration Association, Seoul, Korea” and “The Japan Shipping Exchange, Inc,
Japan” was interpreted to give the claimant the choice between the two institutions (and
= or); see also partial award ICC case 6000 reported by Grigera Naon, “Choice of Law
Problems in International Arbitration”, 289 RCADI 87 (2001); William Company v Chu Kong
Agency Co Ltd et al, (1994) XIX YBCA 274 (HCHK 17 February 1993). For a case where the
clause was held to be void see Hissan Trading Co Ltd v Orkin Shipping Corp (1994) XIX YBCA
274, (HCHK 8 September 1992); see also the very restrictive Swiss decision by the Cour
civil, Canton de Vaud, 30 March 1993, Nokia-Maillefer SA v Mazzer, 13(1) ASA Bulletin 64
(1995).
110) Reference to the ICC, Tribunal de Grande Instance Paris, 13 December 1988, Société Asland
v Société European Energy Corporation, Rev Arb 521 (1990); Cour d'appel Paris, 24 March
1994, Société Deko v Dingler et société Meva, Rev Arb 514 (1994) (Chamber of Commerce of
Paris = ICC); for an overview of clauses considered to be referring to the ICC see Davis,
“Pathological Clauses: Frédéric Eisemann's Still Vital Criteria”, 7 Arb Int 365 (1991).
111) Reference to the Chamber of Commerce and Industry of Geneva; Interlocutory award in
case no 117, 29 November 1996, 15(3) ASA Bulletin 534 (1997); see also Chamber of
Commerce and Industry of Geneva, Interlocutory award, 30 June 1987, 15(1) ASA Bulletin 122
(1997) (Arbitration Court in Geneva working beside the Swiss Chamber of Commerce).
112) Zurich Chamber of Commerce, preliminary award, 25 November 1994, XXII YBCA 211 (1997),
14(2) ASA Bulletin 303 (1996).
113) See also Cour d'appel Paris, 14 February 1985, Société Tuvomon v Société Amaltex, Rev Arb
325 (1987) (Tribunal of the Chamber of Commerce of Paris = Paris Arbitration Chamber);
Cour de cassation, 14 December 1983, Epoux Convert v Société Droga, Rev Arb 483 (1984)
484 (Belgrade Chamber of Commerce = Foreign Trade Arbitration Court at the Economic
Chamber of Yugoslavia); PRC Supreme People's Court, 16 August 2000, CNIEC Henan
Corporation v Liaoning Bohai Nonferrous Metals I/E, 4 Int ALR N-11 (2001) (Arbitration: FTAC
of China = CIETAC Arbitration);
114) See, e.g., Germany, Bayerisches Oberstes Landesgericht, 28 February 2000, 4 Z SchH 13/99,
1 RPS 15 (2000) (not clear which of two different Chambers of Commerce, none of which
provided arbitration services, was meant); France, Cour d'appel Versailles, 3 October 1991,
Ltd Capital Rice Co v SARL Michel Come, Rev Arb 654 (1992) (Arbitrage eventual: Chambre
arbitrale Londres); Lebanon, Cour de cassation, 27 April 1987, Rev Arb 723 (1988) (“Chamber
of Commerce in Bucarest or Arbitration Commission at the International Chamber of
Commerce in Paris”); Scotland, Court of Session (Outer House), 15 May 2001, Bruce v
Kordula and others, 4 Int ALR N-6 (2002).
115) Oberlandesgericht Dresden, 5 December 1994, XXII YBCA 266 (1997); for other examples see
ICC case no 5946, XVI YBCA 97 (1991) (International Chamber of Commerce in Geneva);
Eisemann, “La clause d'arbitrage pathologique”, in Commercial Arbitration Essays in
Memoriam Eugenio Minoli (UTET 1974), 129 et seq; Davis, “Pathological Clauses: Frédéric
Eisemann's Still Vital Criteria”, 7 Arb Int 365 (1991); Hochbaum, Mißglückte Internationale
Schiedsvereinbarungen (Recht und Wirtschaft 1995), 57; Hochbaum, “Pathological
Arbitration Clauses in German Courts. German Courts Interpret Arbitration Clauses Wrong
Designation of the Seat of an Arbitral Institution”, 11(1) Mealey's IAR 20 (1996).
116) ICC case no 5294, XIV YBCA 137 (1989) 139 (International Chamber of Commerce, Zurich); ICC
case no 4472, 111 Clunet 946 (1984) 947 (International Chamber of Commerce, Zurich); the
same applies for Geneva where the Chamber of Commerce and Industry also has its own
arbitration rules; see ICC case no 7290, XXIII YBCA 80 (1998) 81; ICC case no 4023, 111 Clunet
950 (1984); ICC case no 3460, 108 Clunet 939 (1981); for the invalidity of such clauses see the
German decision, Oberlandesgericht Hamm, 15 November 1994, XXII YBCA 707 (1997),
German original at 41 RIW681 (1995).
117) Kammergericht Berlin, 15 October 1999, 3 Int ALR N-30 (2000), German original at 1 RPS 13
(2000); see also Cour de cassation, 14 December 1983, Epowc Convert v Société Droga, Rev
Arb 483 (1984) 484 (Belgrade Chamber of Commerce = Foreign Trade Arbitration Court at
the Economic Chamber of Yugoslavia); Cour d'appel de Paris, 14 February 1985, Société
Tuvomon v Société Amaltex, Rev Arb 325 (1987) (Tribunal of the Chamber of Commerce of
Paris = Paris Arbitration Chamber); PRC Supreme People's Court, 16 August 2000, CNIEC
Henan Corporation v Liaoning Bohai Nonferrous Metals I/E, 4 Int ALR N-ll (2001)
(Arbitration: FTAC of China = CIETAC Arbitration); See also Davis, “Pathological Clauses:
Frédéric Eisemann's Still Vital Criteria”, 7 Arb Int 365 (1991).
118) Lucky-Goldstar International (HK) Ltd v Ng Moo Kee Engineering Ltd, excerpts published in
[1993] 2 HKLR, 73; case summary in XX YBCA 280 (1995); see also HZI Research Center, Inc
(US) v Sun Instruments Japan Co, Inc (Japan), XXI YBCA 830 (1996).
119) Cour d'appel Grenoble, 24 January 1996, Société Harper Robinson v Société internationale
de maintenance e de realisation industrielles (SIMRI), 124 Clunet 115 (1997).
120) Stockholm Institute, interim award of 17 July 1992, XXII YBCA 197 (1997) 201.
121) Bundesgerichtshof, 20 January 1994, BGHZ 7, 11 et seq; Bundesgerichtshof, February 1995,
WM 1198 (1995) 1201; see also Rechtbank van Koophandel Brussels, 6 May 1993, Pierreux NV
(Belgium) v Transportmaschinen Handelshaus GmbH (Germany), XXII YBCA 631 (1997); for a
different view see Kirchner and Marriot, “International Arbitration in the Aftermath of
Socialism - The Example of the Berlin Court of Arbitration”, 10(1) J Int'l Arb 5 (1991).
122) Oberster Gerichtshof, 30 November 1994, XXII YBCA 628 (1997), German original in 41 RIW,
(1995) 773, considering the newly formed Court of Arbitration at the Chamber of Commerce
and Industry of the Russian Federation to be the legitimate successor; see also Cour
d'appel Paris, 25 March 1999, SA Caviar Petrossian v Société OAO Vneshintorg, 127 Clunet 66
(2000) with note Kahn, where the parties, however, had confirmed the jurisdiction of the
tribunal.
123) Lew, “The Law Applicable to the Form and Substance of the Arbitration Clause”, ICCA
Congress series no 9, 114, 125.
124) See, e.g., Model Law Article 8; England, Arbitration Act section 9; Switzerland, PIL Article 7;
France, NCPC Article 1458; Germany, ZPO section 1032.
125) See, e.g., France, NCPC Article 1458.
126) See Schiffahrtsgesellschaft Detlev VonAppen GmbH v Voest Alpine Intertrading GmbH, [1997]
2 Lloyd's Rep 279 (CA); for one of the rare cases where damages for the breach of an
arbitration agreement were granted see the decision of the arbitral tribunal reported by,
Wessel and North Cohen, “In tune with Mantovani: the “Novel” case of damages for Breach
of an arbitration agreement”, 4 Int ALR 65 (2001) 68: Legal costs of Chinese proceedings
brought in breach of arbitration agreement were awarded as damages; see also
Mantovani v Caparelli SpA, [1980] 1 Lloyd's Rep 375.
127) See FAA sections 4, 206, 303; Filanto, SpA v Chilewich Int'l Corp, 789 F Supp 1229, XVIII YBCA
530 (1993) para 31 (SDNY 1992); Samuel, “Arbitration Statutes in England and the US”, 8
ADRLJ 2 (1999) 11, has described this provision as a “curious throwback” to section 1 of the
English 1698 Act, where the “rule of court” was needed to exclude the free revocability of
an arbitration agreement; see also Born, International Commercial Arbitration, 381-395.
128) Russell on Arbitration, 7-002; Herrmann, “The Arbitration Agreement as the Foundation of
Arbitration and Its Recognition by the Courts”, ICCA Congress series no 6, 41, 43; see also
Lord Mustill in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd and Others,
[1993] 1 Lloyd's Rep 291, 301.
129) This option exists in particular in common law countries; See, e.g., US, Smith Enron
Cogeneration Ltd Partnership, Inc v Smith Cogeneration International Inc, XXV YBCA 1088
(2000) paras 30 et seq (2d Cir); England, Aggeliki Charis Compania Maritima SA v Pagnan
SpA (The Angelic Grace), [1995] 1 Lloyd's Rep 87, 96.
130) Model Law Article 25; England, Arbitration Act section 41; US, FAA section 4; Netherlands,
CCP Article 1040.
131) English Arbitration Act section 9(3) provides that no right to apply for a stay to court
proceedings exists after a party “has taken any step in those proceedings to answer the
substantive claim.”
132) Section 1032 ZPO modified Model Law Article 8 so that the relevant event is not the “first
statement on the substance of the dispute but the “beginning of the oral hearing on the
substance of the dispute.”
133) Bundesgerichtshof, 10 May 2001, III ZR 262/00. For an English summary and comment see
Kröll, “German Supreme Court: Missed Deadline Does Not Bar Defendant from Invoking
Existence of Arbitration Clause”, 17(4) Mealey's IAR 25 (2002).
134) Eagle Star Insurance Co Ltd v Yuval Insurance Co Ltd, 1 Lloyd's Rep 357, 361; see also
Capital Trust Investment Ltd v Radio Design TJ AB and others [2002] All ER (Coram) 514
paras 56 et seq.
135) London Central and Suburban Developments Ltd v Gary Banger, 8 ADRLJ 119 (1999) 122 et
seq. In Malaysia there are conflicting decision as to whether the entrance of an
unconditional appearance can already be considered as a step in the proceedings; for an
overview see Nathan, “Section 6 of the Malaysian Arbitration Act 1952”, 4 Int ALR N-35
(2001).
136) Patel v Patel [1999] 1 All ER 923.
137) Capital Trust Investment Ltd v Radio Design TJ AB and others [2002] All ER (Comm) 514, 530
para 60.
138) Marc Rich & Co AG v Societa Italiana Impianti PA (The “Atlantic Emperor” No 2), [1992] 1
Lloyd's Rep 624 (CA), where an injunction to restrain Impianti to pursue proceedings in
Italy was denied, since it was held that Marc Rich had waived its right to arbitration by
pleading on the merits in the Italian proceedings after its challenge to the jurisdiction of
the Italian courts had been rejected by the Corte di cassazione.
139) See, e.g., Netherlands, CCP Article 1022(2); Germany, ZPO section 1033; European
Convention Article VI(4).
140) See PPG Industries, Inc v Webster Auto Parts, Inc, 128 F 3d 103 (2d Cir 1997); SATCOM
International Group pic v ORBCOMM International Partners, LP, XXV YBCA 949 (2000) 955,
para 11, 49 F 2d 331 (SDNY 1999).
141) Terminix Co v Carroll, 953 SW 2d 537 (Tex Ct App 1997).
142) See Multiplex Construction Pty Ltd v Suscindy Management Pty Ltd, [2000] NSWSC 484
(Supreme Court New South Wales); see also Consorcio Rive SA de CV v Briggs of Cancun Inc
et al, 16(5) Mealey's IAR C 1 (2001) C 5-6 (District Court for the Eastern District of Louisiana).
143) Suter v Munich Reinsurance Co, 15(8) Mealey's IAR B 1 (2000) B 6-9 (3rd Cir 2000).
144) Certain Underwriters at Lloyd's et al v Bristol-Myers Squibb Co et al, XXV YBCA 968 (2000)
para 22-41 (9th District, Texas Court of Appeals).
145) John Downing v Al Tameer Establishment, Shaikh Khalid Al Ibrahim [2002] All ER (Comm)
545.
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