ARBITRABILITY IN GENERAL. DISTINCTION BETWEEN OBJECTIVE AND SUBJECTIVE ARBITRABILITY

Hunter², "The concept of arbitrability, properly so called, relates to public policy limitations upon arbitration as a method of settling disputes. Each State may decide, in accordance with its own economic and social policy, which matters may be settled by arbitration and which may not. In international cases, arbitrability involves balancing of competing policy

' Prof., Universities of Louvain and Namur; attorney-at-law, Hanotiau & van den Berg, Brussels.

1 On the of issue of arbitrability, see in particular P. Ancel, Conventions d'arbitrage, Conditions de fond, Litiges arbitrables, Jurisclasseur, Procedure civile, Fasc. 1024 ; A. Berlinguer, La compromettibilita per arbitri, G. Giapichelli Editore, Torino, 1999, volumes I et II; K.-H. Bockstiegel, Public policy and arbitrability, in Comparative arbitration practice and public policy in arbitration, ICCA Congress Series n°

3, Kluwer, 1986, p. 177; P. Level, L 'arbitrabilite, Rev. Arb. 1992, 213; B. Hanotiau, L 'arbitrabilite, Recueil des Cours de I' Academie de droit international, La Haye, 2003 (a paraitre); L 'arbitrabilite et la favor arbitrandum: Un reexamen, JDI, 1994, 899, Objective Arbitrability, its Limits, its Problem Areas, in Objective arbitrability, Antitrust Disputes, Intellectual Property Disputes, ASA Special Series no 6, mars 1994, p. 26; L 'arbitrabilite des litiges en droit beige au regard de la pratique internationale, Melanges R.O. Dalcq, Larcier, Bruxelles, 1994, p. 269; A. Rogers, Arbitrability, Arbitration International, 1994, 623; P. Fouchard/E. Gaillard/B. Goldman, Traite de l'arbitrage commercial international, LITEC, 1996, n° 559 et sv., p. 345 et sv. ; C. Jarrosson, L 'arbitrabilite: presentation methodologique, Rev.jurispr.com, 1996, I ; L. !dot, L 'arbitrabilite des litiges, rexemple franr;ais, Rev.jurispr.com, 1996, 6; A. Kirry, Arbitrability: Current Trends in Europe, Arbitration International, 1996, n° 4, 373 ; J.-B. Racine, L 'arbitrage Commercial International et l'Ordre Public, Paris, LGDJ, 1999, p. 25 et sv. ; 0. Caprasse, Les Societes et l'Arbitrage, Bruxelles, Bruylant, 2002, p. 33 et sv. In the United States, see also J.C. Zall, International Commercial Arbitration: the Nonarbitrable Subject Matter Defense, The Denver Journal of International Law and Policy, 1980, 119; M. Hoellering, Arbitrability of Disputes, Business Lawyer, 1985, 125 ; W. Park, Private Adjudicators and the Public Interest : the Expending Scope of International Arbitration, Brooklyn Journal of International Law, 1986, 629; The arbitrability dicta in First Options v.

Kaplan: What sort of Kompetenz-Kompetenz has crossed the Ant/antic?, Arbitration International, 1996, 137; Comprendre les enjeux de /'arbitrage financier, !CC Bulletin, 2000, Special issue on arbitration, finance and insurance, p. 7; Ph. O'Neil, Jr., Recent Developments in International Commercial Arbitration:

an American Perspective, Journal of International Arbitration, n° 1, 1987, 7; E.M.Morgan, Contract Theory and the Sources of Rights : an Approach to the Arbitrability Question, Southern California Law Review, 1987, 1059; J.W. Stempel, Pitfalls of Public Policy; the Case of Arbitration Agreements, Saint Mary's Law Journal, 1990, 259 and A Better Approach to Arbitrability, Tulane Law Review, 1991, 1377; J.R.

Sever, The Relaxation of Inarbitrability and Public Policy Checks on US and Foreign Arbitration : Arbitration out of Control?, Tulane Law Review, 1991, 1661; G. Born, International Commercial Arbitration in the United States, K!uwer, 2"d ed., 2001, p. 243 et sv.; J.T. McLaughlin, Arbitrability :

Current Trend in the United States, Arbitration International, 1996, 13.

International Commercial Arbitration, Sweet & Maxwell, second edition, p. 137.

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considerations. The legislators and courts in each country must balance the importance of reserving matters of public interest (such as human rights or criminal law issues) to the courts against the public interest in the encouragement of arbitration in commercial matters."

In the United States, the concept of arbitrability is much more confused. It does not only apply to the problem of arbitrability as it was just defined but also to the determination of the scope of the arbitration clause. And according to William Park³, the concept also covers the issue of consent, namely "whether the person alleged to be bound did indeed agree to arbitration". In this article, we will refer to the concept of arbitrability as only applying to the first, generally accepted, meaning.

1.2 Objective and subjective arbitrability

A distinction is traditionally made between subjective arbitrability (or arbitrability rationae personae) and objective arbitrability (or arbitrability rationae materiae). The issue of subjective arbitrability arises in consideration of the quality of one of the parties to the transaction which is a State, a public company or a public establishment ("collectivite publique", "etablissement" or "organisme public"). On the other hand, the issue of objective arbitrability arises in relation to the matter in dispute which, according to the applicable law, may, or may not, be submitted to arbitration.

The Issue whether a dispute is arbitrable may arise at various stages of the procedure:

before the Arbitral Tribunal;

before a national court to which the dispute has been submitted notwithstanding the existence of an arbitration clause;

before the court which has to decide whether the award should be set aside;

before the enforcement judge.

In relation to subjective arbitrability, some legislations of French inspiration prohibit to the State or public entities, to some extent, to enter into an arbitration agreement. For example in France, article 2060 of the Civil Code provides that: «on ne peut compromettre sur les questions d'etat et de capacite des personnes, sur ce/les relatives au divorce et

a

3 "The arbitrability dicta in First Options v. Kaplan, op.cit., 143.

r

the importance of

etablissements publics et plus generalement dans toutes les matieres qui interessent l'ordre public. Toutefois, des categ_ories d'etablissements publics a caractere industriel et commercial peuvent etre autorisees par decreta compromettre)) ⁴•

In Belgium, article 1676 paragraph 2 of the Judicial Code provides that:

"Quiconque a la capacite ou le pouvoir de transiger peut conclure une convention d'arbitrage.

Sans prejudice des lois particulieres, les personnes morales de droit public ne peuvent toutefois conclure une convention d'arbitrage que lorsque celle-ci a pour objet le reglement de differends relatifs a !'elaboration ou /'execution d'une convention. Une telle convention d'arbitrage est soumise aux memes conditions quanta sa conclusion que la convention dont /'execution est l'objet de l'arbitrage.

En outre, les personnes morales de droit public peuvent conclure une convention d'arbitrage en toutes matieres determinees par la loi ou par arrete royal delibere en Conseil des Ministres. Cet arrete peut egalement fixer les conditions et les regles a respecter relatives

a

It is however a rule of international law, confirmed by numerous arbitral awards⁶,

that these prohibitions, whatever their scope in the relevant domestic legislation, do not have any validity in relation to international contracts. When a State or a State enterprise enters into an arbitration agreement, it must honor its commitment, notwithstanding the restrictions to subjective arbitrability contained in its domestic legislation.

For what concerns the restrictions to objective arbitrability, national legislations may be divided into three categories:

4 "One may not submit to arbitration questions of personal status and capacity, or those relating to divorce or to judicial separation or disputes concerning public collectivities and public establishments and more generally in all areas which concern public policy.

However, public establishments of a commercial or industrial nature may be authorized by decree to submit disputes to arbitration".

5 "Whosoever has capacity or power to contract may conclude an arbitration agreement.

Subject to the exceptions provided for in the law, public law legal persons may only conclude an arbitration agreement when the arbitration agreement relates to the settlement of disputes regarding the formation or the performance of an agreement. Such an arbitration agreement is subject to the same conditions regarding its formation as the agreement whose performance is the subject matter of the arbitration. Furthermore, public law legal persons may conclude an arbitration agreement in respect of any matters determined by law or by royal decree deliberated by the Council of Ministers. This royal decree may also determine the conditions and the rules to be complied with in relation to the formation of the agreement".

6 See for example the references cited in our article L 'arbitrabilite et lafavor arbitrandum, op.cit., p. 900.

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the most liberallegislations where arbitrability is the principle and is generally defmed in relation to a broad criterion like the "patrimonial" character of the dispute ("Any ?ispute involving property") - and is subject to very limited restrictions (in Switzerland and Germany for example);

the legal systems in which the legislator has determined in a statutory provision which matters are not arbitrable (in China and Bulgaria for example);

and fmally the legal systems which have defmed arbitrability in relation to very vague criteria such as the possibility to settle on a right, or the fact that the matter in dispute concerns, or is foreign to, public policy. These systems are a majority and represent the traditional approach. A few decades ago, these provisions were strictly interpreted and applied, with the consequence that from the moment a matter concerned public policy, the dispute was declared inarbitrable. The case law has evolved and it is now generally admitted in most countries that the mere fact that the matter in dispute implies the application of public policy rules does not make the dispute non-arbitrable. Arbitrators must apply public policy rules and decide on the consequences of their breach.

But on the other hand, some issues remain non arbitrable, because they touch upon the hard core of public policy (such as divorce or some issues relating to bankruptcy, for example) with the consequence that the legislator has usually provided in relation to these issues that they have to be decided by national courts.

2.