SCOPE OF ARBITRABILITY

IN INTERNATIONAL
COMMERCIAL
ARBITRATION
 Arbitration is a binding dispute resolution procedure in which parties
to the dispute submits to an arbitral tribunal consisting of an odd or
sole number of arbitrators which makes a decision in the form of
arbitral award after going through prescribed procedure and finally
settles the dispute.
 Arbitrate means to decide and arbitration is taken to mean decision
making.
 Arbitration is the decision making by a private person(s) with
respect to a dispute submitted to him by disputants who have agreed
to accept the decision as final and binding on them.
 Objectives of arbitration are speed, economy, convenience,
simplicity of procedures, secrecy and encouragement to healthy
relationship between the parties
 Principle of Arbitrability
 Principle of arbitrability is one of the prominent principles of
International Commercial Arbitration.
 It means that the “subject matter in dispute must be capable of
settlement by arbitration.”
 It tries to ascertain as to what disputes can be resolved by
arbitration and what can be tried by courts. If the subject matter
is not found to be arbitrable, the arbitration agreement remains
without effect.
 It is the area where the contractual and jurisdictional natures of
ICA meet head on.
 There is no uniform approach as to what matters can be submitted to
arbitration for their settlement.
 There are two kinds of arbitrability: ‘subjective arbitrability’ and ‘objective
arbitrability’.
 Subjective Arbitrability- these are certain disputes or differences may not
be referred to arbitration by individuals or entities because of their status
or function, when this party is a State, a public collectivity or entity or
public body.
 Objective arbitrability- determines as to whether the subject- matter of the
dispute can or cannot be submitted to arbitration for settlement. Thus,
objective arbitrability fixes the jurisdiction of the arbitral tribunal by
drawing a line as to what are the issues which are so vital and sensitive that
cannot be resolved by private arbitration and others are not so sensitive
that can be submitted to arbitration
 The problem relating to arbitrability is a very difficult one as there are at
least three different national systems of law which may determine as to
whether or not a particular dispute is arbitrable -
1. Arbitrability under the law governing the arbitration agreement;
2. Arbitrability under the law to which the parties have subjected to it or,
failing any indication thereon, under the law of the place of arbitration;
3. Arbitrability under the law of the country of enforcement
 The Geneva Protocol on Arbitration Clauses, 1923 lays down the rule regarding
arbitrability as “all or any differences that may arise in connection with such
contract relating to commercial matters or to any other matter capable of
settlement by arbitration.
 New York Convention on the Recognition and Enforcement of Foreign Arbitral
Awards, 1958 under Article II (1) provides that each Contracting State shall
recognize an agreement under which the parties undertake to submit to
arbitration disputes or “differences which have arisen or which may arise
between them (the parties) in respect of defined legal relationship, whether
contractual or not, concerning a subject matter capable of settlement by
arbitration.”
 It is clear that as far as the arbitrability of a particular dispute under the law of
the forum is concerned, it has to be considered only at the time of recognition
and enforcement of an arbitral award and not at the time of assessing the validity
of arbitration agreement.
 UNCITRAL Model Law - reiterates that “an arbitral award may be
set aside by the court specified in article 6 only if… the court finds
that the subject-matter of the dispute is not capable of settlement by
arbitration under the law of this State”
 The Model law does not provide as to what dispute are arbitrable, it is
left open to the Legislature and Judiciary.
 The provisions of Model Law have been incorporated under Section
34(2)(b)(i) and 2(3) of Arbitration and Conciliation Act 1996. Hence,
non-arbitrability is a statutory ground to set aside an arbitral award
under Section 34(2)(b)(i).
 In Renusagar Power Co. Ltd. v. General Electric Company,the Supreme
Court of India has laid down the following four propositions regarding
the arbitrability of a dispute:
1. Whether a given dispute inclusive of the arbitrator’s jurisdiction comes
within the scope or purview of an arbitration clause or not primarily
depends upon the terms of the clause itself, it is a question of what the
parties intended to provide and what language they employ.
2. Expressions such as ‘arising out of’ or ‘in respect of’ of ‘in connection
with’ or ‘in relation to’ or ‘in consequences of’ or ‘concerning’ or
‘relating to’ the contract are of the widest amplitude and content and
include even questions as to the existence, validity and effect (scope) of
the arbitration agreement.
3. Ordinarily as a rule an arbitrator cannot clothe himself with power to decide the question of his
own jurisdiction but there is nothing to prevent the parties from investing him with power to decide
those questions, as for instance, by a collateral or separate agreement which will be effective and
operative.
4. If, however, the arbitration clause so widely worded as to include within the scope of questions
of its existence, validity and effect (scope), is contained in the underlying commercial contract
term, the arbitration clause must fall along with underlying commercial contract
 In Booz Allen v. SBI, court recognised three conditions to be satisfied for a subject matter to
come under the jurisdiction of arbitration:
1. The disputes must be capable of adjudication and settlement by arbitration;
2. The disputes must be covered by the arbitration agreement; and 
3. The parties must have referred the disputes to arbitration.
The Hon’ble Apex Court also added a caveat to reserve arbitrability of certain categories of
disputes. Such categories were rights in rem as opposed to rights in personam. Since rights in rem
determined rights not only as between the parties to the action but also against the world itself,
including any other person claiming an interest in the subject matter, the Supreme Court held that
such actions could not be arbitrated and rights in personam were held to be arbitrable.
CONCLUSION
 ICSID Tribunal has pointed out, “arbitrability is governed by the law
applicable to the arbitration or the arbitration clause”.
 arbitrators cannot decide themselves with power to decide the question of their
own jurisdiction and it will be for the Court to decide those questions.
 However, the parties confer them with power to decide those questions, by a
collateral or separate agreement which will be effective and operative.
 It is also submitted that the Court or any competent authority can decide the
arbitrability of a dispute referred for settlement by way of arbitration even
before the arbitral award is made by the tribunal.
 Thus, the arbitrability of the disputes is left to the discretion of the judiciary to
ascertain which disputes are arbitrable and which are not.