Originally from Arbitration Law of Canada: Practice and Procedure, Fourth Edition

PREVIEW

5.1          SOURCES OF JURISDICTION

A tribunal has no jurisdiction to do anything until it is fully and properly constituted. This is specifically set out in the Domestic Acts and is implicit in the definition of the “arbitral tribunal” in the Model Law.

5.1.1  Jurisdiction by Agreement – Party Autonomy

There is no “inherent” jurisdiction in an arbitral tribunal. The arbitral tribunal takes its jurisdiction to decide a particular dispute from the agreement between the parties. An arbitral tribunal usually does not get its jurisdiction from any legislation or from the State, although the State may feel obliged to permit or restrict arbitration. In some circumstances, legislation will require arbitration, but in private commercial arbitration jurisdiction comes primarily from the parties. The scope of the tribunal’s jurisdiction will be determined by the scope of the arbitration agreement, subject only to any mandatory legislative enactments governing the arbitration agreement. Under the theory of party autonomy, if two parties have the legal right to settle a dispute between themselves, then they can give jurisdiction to a third party to settle it for them.

For example, suppose there are three people on a desert island somewhere in the South Pacific. A coconut falls from a tree and is seen by A, who claims it as his own. B says, “But the coconut fell on the land that we all agreed would be mine, therefore the coconut belongs to me.” A and B agree to take their dispute to the third inhabitant, C, who decides the coconut belongs to B, but that one half of the coconut’s milk should be given to A as a finder’s fee.

This simple example demonstrates that C needed no state’s legislation to decide the issue or to craft an appropriate remedy. The power to settle the dispute came from A and B’s agreement to bring the dispute to C and abide by her decision. If the place of arbitration in our example is moved to Canada, the only effect of Canadian arbitral legislation would be to set standards for procedure that may, if mandatory, circumscribe the otherwise unfettered jurisdiction of the arbitrator to settle the dispute. The arbitrator in our example did not need Canadian arbitral law to give her either the power to make a decision, or the power to craft any remedy that seemed appropriate. That jurisdiction comes from the parties.

A broadly drafted arbitration agreement gives an arbitral tribunal full power to decide matters not only sounding in contract, but also tort and equity,  either using the law the parties have agreed to or, failing agreement, applying the rules of law appropriate to the circumstances.  If appropriate, an arbitral tribunal has power to apply the Canadian Charter of Rights and Freedoms, and consider the validity of any issue in light of the Charter, including the power to declare any provision of a contract unconstitutional as between the parties.  Any commercial remedy available at law, in equity, or capable of being granted by a court can be awarded by the tribunal if the agreement to arbitrate is broad enough.