ARBITRAL TRIBUNAL: JURISDICTION AND

POWERS
 Overview of Key Issues

1. What are the sources of the arbitral tribunal’s power?

2. What are the limits on the arbitral tribunal’s jurisdiction?
3. What are the obligations of the tribunal?
4. What constitutes arbitrator bias?
5. How is an arbitrator challenged?
6. What is the role of a party-appointed arbitrator?
7. What is the role of the presiding member?
8. Do the arbitrator enjoy immunity from suit?
9. What consequences flow if parties breach tribunal’s directions?
 Introduction

 Unlike a judge, an arbitrator does not necessarily have the imprimatur of

the State to exercise his powers.

 Rather than deriving power from a statute or constitution as with national

courts, the tribunal’s power derives from the agreement between the
parties.

 Therefore, the scope of its power depends on the breadth of power given
to it by the parties.
 Where institutional arbitration is used, the institution’s rules will typically set out
the powers of the tribunal (usually expressed as being subject to any contrary
agreement by the parties).

 This gives the parties the certainty of powers with the flexibility to change them
in accordance with the fundamental principle of “party autonomy” in arbitration.

 The precise nature of the powers, even if provided for expressly in the arbitration
agreement, may still be open for interpretation.

 This means that the challenges to the jurisdiction of an arbitral tribunal are fairly
common.
 Jurisdiction vs Powers

 Jurisdiction?

 Powers?
 Sources of the Arbitral Tribunal’s Powers,
Obligation and Jurisdiction

 A well-drafted arbitration agreement should incorporate institutional arbitration rules

which will be more expansive in their coverage of the arbitral tribunal’s power and
jurisdiction.

 The nomination of the ‘seat’ of the arbitration will also be a source of power.

 In most jurisdictions, the ‘seat’ permits the parties to agree upon a course of action.

 If parties fail to agree then the ‘law of the seat’ will fill the gap by setting out the
relevant course of action an arbitral tribunal can take or a level of power that the
arbitrator can exercise.
 The tribunal’s contract with the parties is the primary source of the tribunal’s key duty,
namely, the obligation to resolve the dispute between the parties.

 The procedural rules also provide additional powers. Art 22 of the LCIA Arbitration Rules
sets out the tribunal’s power to:

 Conduct its own enquiries (Art 22.1 (c));

 Order production of documents (Art. 22.1 (d)); and
 Decide whether to enforce the rules of evidence (Art. 22.1 (f))

 It also imposes obligations on the arbitrators such as, the duty to (1) decide the dispute in
accordance with the rules of law chosen by the parties; and (2) decide ex aequo et bono
where the parties have agreed to do so in writing.
Common Powers of the Arbitral Tribunals

 (i) Establishment of the procedure of the arbitration

 (ii) Determine the applicable law and the seat

 (iii) Determine the language of the arbitration

 (iv) Document production

Common Powers of the Arbitral Tribunals

 (v) Requiring presence of witness/subpoenas

 (vi) Administration of oaths

 (vii) Appoint experts

 (ix) Interim measures

 (x) Security for costs

 Kompetenz-Kompetenz

 One of the most important powers is the arbitral power’s to ‘rule on its own
jurisdiction’.

 Kompetenz-kompetenz is a practical necessity of international arbitration and,

like the doctrine of seperability, is consistent with the parties’ implied or express
intent that any disputes arising out of their relationship should be arbitrated in a
neutral forum.

 Most arbitration rules and procedural laws expressly recognise this principle. Art
16 of Model Law provides that ‘the arbitral tribunal may rule on its own
jurisdiction, including any objections with respect to the existence or validity of
the arbitration agreement.’
 SNE v Joc Oil
Bermuda Court of Appeal (1990) XV Ybk

Comm Arb 31.
A Bermudian company (Joc Oil) entered into a contract with a Soviet foreign trade
organisation (SNE) for the purchase of oil.

 SNE brought arbitration proceedings in Soviet Union, in accordance with the terms of the
contract for payment under the contract. Joc Oil was ordered to pay SNE almost US$200
million.

 The defence of Joc Oil, both at the time of the arbitration and during enforcement
proceedings in Bermuda, was that there was no valid agreement to arbitrate because
there was no valid contract.

 The basis of the argument was that, under a Soviet law, a contract for the foreign sale of
oil required the signature of two authorised officials and this contract was signed by only
one official.
 The tribunal accepted that there was no valid contract, as did the CoA
Bermuda but this was not a ‘non-existent’ contract as claimed by Joc Oil.

 The Court held that, even if the main agreement were void ab initio, the
arbitration agreement did come into existence and it was open to the
arbitrators to award the sum otherwise payable under the contract on the
basis of restitution or unjust enrichment.

 The distinction made is between the nullity of a contract and its non-existence.
If the contract does not exist (i.e. because of a forged signature or signature
was procured under duress) it is difficult to see how such a document can give
rise to a valid arbitration clause and hence to a valid arbitration).
 However, where there is a main contract, even if it were always a legal nullity, the
arbitration clause that it contains constitutes a genuine juridical ‘platform’ upon which the
arbitral tribunal may stand, to judge the validity of the main body of the contract.

 This is logically sound. Although many institutional rules and national laws draft their
‘seperablity’ rules to preserve the validity of arbitration clauses that are part of the ‘non
existent’ contracts, this non-existent cannot mean ‘never existed’ but must mean ‘ceased
to exist.’

 If a contract has ceased to exist by the time of the arbitration, an arbitral tribunal still has
the platform on which it may stand.

 If the contract never existed at all, then there was never an agreement. So the tribunal
can have no valid existence, authority or jurisdiction.
 The kompetenz-kompetenz principle permits arbitrators to consider challenges to their
jurisdiction and to proceed with the arbitration notwithstanding such challenges, subject
to judicial review of the jurisdictional challenges which, if they are procedural, may arise
at anytime.

 Art 16 of the Model Law provides that the arbitral tribunal may rule on its own jurisdiction,
and may determine the issue as a preliminary question or in an award on the merits.

 Art 16 (3) of the Model Law:

 If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within
thirty days after having received notice of that ruling, the court specified in Article 6 to decide the matter,
which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may
continue the arbitral proceedings and make an award.
 The question of jurisdiction

 CIArb has set out the following as the common types of dispute that may be
regarded as jurisdictional, being disputes over:

 1. Identity of the parties

 2. Identity of the contracts governed by the arbitration clause

 3. Formal validity of the agreement to arbitrate

 4. The effect of a problem with the main contract on the validity of the arbitration
clause (seperability)
 5. Whether a particular subject can be arbitrated

 6. Time limits for commencing arbitration

 7. Failure of a condition, possibly contained in an agreement to mediate in advance,

which precedes the right to arbitrate;

 8. Whether an arbitrator may apply a law other than the one expressly chosen by
the parties; and

 9. Whether a particular remedy can be awarded.

 On these jurisdiction issues, the following three situations involve the
tribunal’s power to rule on its own jurisdiction:

 1. The existence of an arbitration agreement;

 2. The scope of authority; and

 3. Public policy
 The existence of an arbitration agreement is the foundational issue that must
be determined before any other issue.

 The question of whether there is a valid arbitration agreement between the

parties, if successfully challenged, will bring an end to the arbitration.

 For example, arbitration agreement may be invalid if it is not in writing (Art

7(3), (4) of the Model Law).

 Since the arbitral tribunal’s powers derive from the arbitration agreement
itself, the non-existence of an arbitration agreement means that the
arbitration cannot proceed.
The Rep of Kazakhstan v Istil Group [2007] EWHC
2729 (Comm)

 The Claimant was the RoK and the defendants, Istil was an American company
incorporated in Delaware.

 Istil was the successor to a company called Metalrussia BVI. In 1991, this company
changed its name to Metalrussia Corp Ltd and then merged into its parent
company Matalrussia Group Holdings Ltd and then in April 2002 merged into Istil.

 The consequences of the mergers was that Metalrussia BVI Ltd, Metalrussia Corp
Ltd and Metalrussia Group Holdings ceased to exists.

 Metalrussia Corp Ltd entered into three contracts for the purchase of rolled steel
with three different entities.
 Each contract contained an arbitration clause under the LCIA Arbitration rules.

 Istil contended that the three contracts were made by those entities as agents for
Karaganda Metalurgical Combine Karmet, which Istil contended was no different from
ROK as the contracting entities were wholly owned or controlled by the ROK.

 No steel was ever delivered pursuant to the sale contracts and, in November 1997,
Metalrussia commenced arbitration proceedings in the Paris Commercial Court.

 Istil relied on the arbitration clause in the contracts and the Paris Commercial Court
upheld the contention that it had no jurisdiction, directing the parties to go before the
courts having jurisdiction in Kazakhstan.
 In defiance of the order of the Paris Commercial Court, in July 2001, Metalrussia (as it was then)
commenced arbitration in London. ROK disputed the arbitrators’ jurisdiction on the grounds that
there was an issue of estoppel arising out of the decision by the Paris Commercial Court and that
the tribunal did not have jurisdiction.

 In a partial award dated 15 July 2001, the tribunal found that there was no issue estoppel. By the
time of the partial award, Metalrussia had been through the mergers resulting in it becoming Istil.
However, the tribunal was not informed of this.

 The tribunal made a final award dated 11 June 2004 and held that because Metalrussia had ceased
to exist by the time the partial award was made, the award was a nullity.

 It also held that Istil was entitled to be substituted as Claimant in the arbitral proceedings (in place
of Metalrussia Corp Ltd which did not exist anymore) and that the arbitral tribunal had jurisdiction in
respect of the claims brought by Istil. The tribunal ordered ROK to pay Istil US5.9 million plus
interest and costs.
 ROK commenced proceedings in the English Court to set aside the final
award on the grounds that the tribunal had no jurisdiction in respect of the
claims brought by Metalrussia because:

 1. Neither ROK nor Istil were or became parties to the arbitration

agreement; and

 2. Istil was estopped from contending otherwise as a result of the decision

of the Paris Commercial Court.
 Istil claimed that the tribunal had jurisdiction because:

 1. ROK had lost its right to challenge the final award since it did not
challenge the partial award;

 2. The tribunal had no power to make the partial award a nullity; and

 3. ROK’s conduct in the French proceedings (in relying on an arbitration

agreement) and its conduct thereafter gave rise to an ad hoc agreement,
and that the tribunal’s award on the jurisdiction issue should be final.
 At first instance, a retrial of the jurisdiction question was ordered. Istil did not
appeal that decision. After a retrial of the action, the final award was set aside and
the judge held that:

 1. Istil had lost its right to object to the finding that the partial award was a nullity;
 2. ROK was not and never became a party to the contracts;
 3. Istil was in any event, as a result of the decision of the French Commercial
Court, estopped from contending that ROK was or had become a party to any
arbitration agreement;
 4. There was no ad hoc arbitration agreement as a result of ROK’s stance in the
French proceedings; and
 5. ROK had no ac hoc agreement that the Tribunal’s award on jurisdiction should
be final.
 Undeterred, Istil sought to argue that the court’s judgment did not affect the
validity of the partial award and asked the tribunal to reconvene and to make a
new award on liability.

 ROK sought an injunction restraining Istil from pursuing any further proceedings
in respect of any claims advanced by it against ROK in the arbitration.

 An injunction was granted and the final award was set aside on the ground that
the arbitral tribunal lacked substantive jurisdiction.

 The court said that ‘arbitrators simply lacked competence to determine the
disputes between the parties.’
 Limits on the Jurisdiction of the Arbitral
Tribunal

 Even though the arbitrator’s jurisdiction is contractual in nature, it is

subject to the applicable procedural rules and procedural laws.

 Other limits will be imposed by the arbitrability of certain disputes as well

as by public policy.

 In addition, the power of the court to intervene may have the practical
effect of limiting the arbitral tribunal’s jurisdiction.

 For instance, national courts misinterpret the sources of authority, thereby

limiting the jurisdiction of the arbitral tribunal.
 PT Branita Sandhini v PT Panen Buah Emas
(unreported, Commercial Court of Indonesia, 6
January 2004)
 The parties entered into a contract involving cotton processing.

 The contract contained a arbitration agreement which provided (in cl 19 of

the agreement) that “any dispute arising under this agreement shall be
referred to and finally resolved by arbitration in Singapore in accordance
with the Arbitration Rules of the Singapore International Arbitration Centre”.

 The contract also provided that Indonesian law shall govern the contract.

 The Claimant, Branita, commenced an action in an Indonesian court for

US$25 million in damages for wrongful termination of the agreement.
 The defendant, Panen, made an application to stay of the court proceedings on
the ground clause 19 of the arbitration agreement provided for disputes to be
referred to arbitration under the SIAC Arbitration Rules and to be determined in
Singapore.

 The Court held that:

 The arbitration clause involved a conflict as to which law was applicable;

 Since the parties had agreed that Indonesian law should govern the contract,
any stipulation to the contrary, such as the determination of disputes under
the SIAC Arbitration Rules, meant the clause should be struck down; and
 The tribunal appointed to decide the dispute had no jurisdiction ab initio.
 The court confused the governing law with the venue and the procedural rules chosen by the
parties.

 In denying a stay, the court decided to retain jurisdiction, ruling that termination of an
agreement did not come within the scope of the arbitration agreement which provided for
arbitration of “any dispute under this agreement”, and that termination fell outside the ambit of
a dispute arising under the agreement.

 The court’s interpretation ignored the widely accepted doctrines of ‘seperability and
kompetenz-kompetenz’ and is contrary to generally accepted principles in international
practice.

 It would appear that the decision stemmed more from a lack of understanding of international
commercial arbitration and the principles that underpin it rather than resistance to arbitration
per se.
 When should a challenge to jurisdiction be brought?

 See Singapore Court of Appeal case of PT First Media TBK v Astro Nusantara International BV
& Ors [2013] SGCA 57

 Companies belonging to Indonesian conglomerate Lippo and Malaysian media group Astro had
signed up to a joint venture whose terms were contained in a subscription and shareholders
agreement to which certain Astro companies were not party. That agreement included an arbitration
agreement appointing SIAC – the Singapore International Arbitration Centre – to resolve any
disputes.

 When a dispute arose, Astro commenced arbitration in Singapore against Lippo, including PT First
Media TBK, and sought to add as additional claimants related entities which were not party to the
subscription and shareholders agreement. Predictably, PT First Media contested that joinder. The
tribunal determined at a preliminary hearing that it had the power to join the additional claimants to
the arbitration under rule 24(b) of the SIAC Rules. As the additional claimants consented to being
joined, the arbitral tribunal exercised its power to join them.
 The tribunal rendered four other awards, including an interim final award on the merits which
required PT First Media to pay various sums to the additional claimants and only a comparatively
small sum to Astro.

 The High Court in Singapore granted leave to enforce the awards, and enforcement orders were
duly served. PT First Media did not apply to set aside the enforcement orders within the time
allowed. Astro entered judgments in Singapore on the awards. Only then did PT First Media apply
to set aside the judgments and for leave to set aside the enforcement orders, which was granted.
PT First Media then applied to set aside the enforcement orders on the ground that there was no
arbitration agreement between PT First Media and the additional claimants.

 The High Court dismissed PT First Media’s application in Astro Nusantara International BV v PT
Ayunda Prima Mitra [2012] SGHC 212. It held that the exclusive route to challenge a preliminary
decision on jurisdiction is contained in the UNCITRAL Model Law (article 16(3)), which is
incorporated into the Singapore International Arbitration Act (Cap 143A), and PT First Media’s
failure to challenge the tribunal’s joinder decision within the prescribed time precluded it from
subsequently resisting enforcement on the basis of a jurisdictional challenge.
 Issue - whether parties who did not challenge a tribunal’s jurisdictional
ruling at an earlier stage were later prohibited from challenging an award
on grounds of an alleged lack of jurisdiction on the part of the tribunal at
the enforcement stage

 High Court held:

 Article 16(3) of the Model Law (which provides that the court may
decide on the arbitral tribunal’s ruling on the preliminary question of its
jurisdiction) was an “exclusive route”.

 As such, once the time limit for bringing a challenge under Article 16(3)
has elapsed without such an application being made, the preliminary
 Court of Appeal overturned the High Court’s decision:

 After considering the working papers of the Model Law and the New York
Convention, and the legislative history of Singapore’s arbitration statutes, the
Court of Appeal took the view that an award debtor has “a choice of remedies”
which is at the “heart” of the entire design of the Model Law enforcement
regime.

 In short, the award debtor may pursue the active remedy of setting aside or
challenging a preliminary ruling under Article 16(3) or the passive remedy of
challenging jurisdiction when resisting enforcement.
 The Singapore Court of Appeal considered in detail the purposes of the Model Law and
the legislative background to the Singapore International Arbitration Act. The court found in
favour of PT First Media, holding that article 16(3) of the Model Law was not intended to
be a ‘one-shot remedy’ or to affect the availability of defences at the recognition and
enforcement stages. It was intended to provide parties with an additional option: not curtail
their options.

 The court held that the idea of a ‘choice of remedies’ – active and passive – which de-
emphasised the seat of arbitration was fundamental to the Model Law’s philosophy. Its
removal could have an impact on ‘… the practice and flourishing of arbitration in
Singapore’. It ruled that a party which sought to challenge a preliminary ruling but did not
actively initiate (i) proceedings under article 16(3) of the Model Law; or (ii) setting aside
proceedings under article 34 of the Model Law, could, as an alternative, passively rely on
a defence in enforcement proceedings under section 19 of the International Arbitration Act
(which contains the same grounds as those set out in article 36 of the Model Law),
provided it had not waived its right to do so.
 Comments:

 The practical effect of the Court of Appeal’s decision is that award

debtors can adopt a more strategic approach and choose to only
expend resources to prevent enforcement of the award against
their assets.

 This decision also evinces that while judicial intervention is limited

in arbitration proceedings in Singapore, the Singapore courts will
not hesitate to do so when it deems intervention to be appropriate.