Shattering the Barrier of Inarbitrability - Chapter 02 - International Arbitration and the Courts

Author(s): 

Thomas E. Carbonneau

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42 pages

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Published: 

September, 2015

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Originally from International Arbitration and the Courts

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I. THE BARRIERS TO ARBITRABILITY

 

The federal preemption doctrine became the vehicle by which the

U.S. Supreme Court demanded absolute allegiance to the federal law on

arbitration. It eliminated state law resistance to the uniformly favorable

federal policy in the area.1 By applying the doctrine, the Court quelled

the fear expressed in Robert Lawrence2 about the impact of legislative

diversity on arbitration. Deviant provisions in state jurisdictions would

not undermine the federal regulation.3 Federal preemption thereby

purged the American legal system of any lingering or modern-day

hostility to arbitration. At a minimum, it mandated state acquiescence to

an accommodative legal regime. Federal law prevailed as long as an

even tenuous link existed to interstate commerce.4

 

As with inhospitable state laws, inarbitrability was an obstacle to

unimpeded recourse to arbitration. It stood as a possible barrier to the

reign of arbitrability. It came in two forms: contract inarbitrability

and subject-matter inarbitrability. Under contract inarbitrability,

opposing parties claimed that the contract of arbitration either did not

exist, was defectively made, or did not cover the submitted dispute.

By invoking one of these grounds, parties contended that the arbitral

tribunal lacked any authority to rule. Party consent is instrumental

to the arbitrators’ exercise of lawful adjudicatory power. Attacks

against the arbitrators’ jurisdictional authority often were brought

to delay the recourse to the process or make access to it more

expensive.6

 

The kompetenz-kompetenz doctrine allowed arbitrators to decide

initially whether they possessed the legal authority to rule. It generally

foiled dilatory tactics.7 Although courts, in theory, could later reject the

arbitrators’ decision, these determinations became relatively impervious

to judicial scrutiny and revision.8 Deferring court scrutiny, in conjunction

with the premium the law placed on arbitral autonomy, rendered judicial

surveillance perfunctory in most cases.9 The FAA’s early date of

enactment rendered the incorporation of the kompetenz-kompetenz

doctrine into the statute impossible. Under FAA

§ 3, courts have the authority to decide on the validity of arbitral

jurisdiction. In later rulings, the Supreme Court gave contracting parties

the authority to authorize arbitrators to rule on jurisdiction.10 In other

legal systems, the arbitrators’ right to rule on the propriety of their

authority is well-settled.11 Moreover, in most of these systems, the

contract inarbitrability defense can be brought on the basis that, in

organizing the arbitration, the arbitrators or arbitral administrator failed

to comply with the provisions in the arbitration agreement.12 Unilateral

third-party modifications of the contract of arbitration violated the

contract freedom principle and the parties’ autonomy and right to
choose.13