Originally from Leading Arbitrators' Guide to International Arbitration - 2nd Edition

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The arbitrator’s jurisdiction is based on the will of the parties, whether expressed in a contract in general terms covering a future dispute or in a separate agreement covering an existing dispute. The authority to hear the parties and make an award exists only through the agreement of the parties. It stems from a voluntary act.

The problem can briefly be described as follows: Situations arise where jurisdiction is challenged, despite the parties’ original will to grant an arbitrator authority to decide the dispute. Typically, the respondent objects to jurisdiction at the outset, i.e. as soon as the claimant has requested arbitration, or as soon as an arbitrator has been appointed. A party who has lost an arbitration sometimes challenges the arbitrator’s jurisdiction in setting aside proceedings in order to prevent the award from taking effect. A challenge of jurisdiction is sometimes the last, desperate action by a party who senses that the end is near.

Practice shows that there are many possible objections to arbitral jurisdiction. The most straightforward one is that the parties never entered into an arbitration agreement. One frequent objection is that the arbitration clause is pathological, e.g., it refers to a non-existing arbitral institution such as the “International Chamber of Commerce of Geneva,” or the “Association Internationale d’Arbitrage.” Another frequent objection is that a party did not sign the agreement to arbitrate although it performed the contract which had been signed by a sister or parent company (the Dow doctrine). In yet another case the rights under the contract containing the arbitration clause were assigned to a third party who did not agree to arbitrate possible disputes. Or, following a merger, the merged company may not be bound by the arbitration clause entered into by one of the merging companies. Another objection might be that the agent who was empowered to sign the business contract was somehow not empowered to enter into an arbitration clause. Not unusual is the objection that a state party is protected by sovereign immunity and that no arbitrator has jurisdiction over it. In some cases a party asserts that the dispute is not arbitrable rationae materiae or rationae personae. Where a party has instigated court proceedings the issue arises whether the party has waived the arbitration agreement, and the arbitrator then no longer has the power to decide the dispute.

It is generally accepted that the arbitrator has a wide authority to decide his own jurisdiction. But the arbitrator’s decision on jurisdiction is not the last word and a court of law may refuse enforcement of the arbitral award if it finds that the arbitrator erred regarding jurisdiction. The court at the place of arbitration may, at least in some countries, intervene during the arbitration – before an award is made – to stop the arbitration proceedings if the court upholds an objection raised to the arbitrator’s jurisdiction. The arbitrator’s freedom to decide his own jurisdiction thus does not exclude court control. This can be exercised either during an arbitration or later when a party seeks recognition or enforcement of the arbitral award.