Bitter Tiers: BG Group and the Future of Multi-Tiered International Arbitration in the United States - ARIA - Vol. 25, Nos. 3-4, 2014

Author(s):

Stuart M. Boyarsky

Page Count:

38 pages

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Published:

April, 2015

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INTRODUCTION

“International arbitration may be defined as the substitution of
many burning questions for a smoldering one.”1

An estimated ninety percent of international contracts include an arbitration

clause.2 This widespread use is due to the recognition that the establishment of a

process of dispute resolution creates a “neutral playing field,” while enhancing

“the parties’ comfort level and promoting future involvement in international

commercial transactions.”3 However, with this increased utilization comes the

equally increased threat of litigation over the existence, validity and scope of an

arbitration agreement between parties from different nations.4 The doctrine of

competence-competence mitigates this potential risk by allowing the arbitral

tribunal itself to determine whether such an agreement is enforceable.5 As the

United Nations Commission on International Trade Law (“UNCITRAL”)

explained, competence-competence allows “[t]he arbitral tribunal … to rule on its

own jurisdiction, including any obligation with respect to the existence or validity

of the arbitration agreement.”6

This doctrine has been adopted by numerous countries that view the

empowerment of an arbitral tribunal to decide its own jurisdiction as a means to

maintain the integrity and efficiency of arbitration as well as a way to deter

potentially obstructive behavior by a dissatisfied party.7 For example under

French law a court must decline to hear a dispute over the validity of an

arbitration agreement unless “the arbitration agreement is manifestly void or

manifestly not applicable.”8 Similarly, India’s Supreme Court has held that a

court may do nothing more than conduct a prima facie review of an arbitration

agreement’s validity before compelling arbitration.9 Hong Kong courts follow a

similar broad approach, holding that agreements to arbitrate will be enforced as

long as there is “a plainly arguable case” that a valid arbitration agreement

exists.10 Under the English Arbitration Act 1996, a court is barred from

determining whether the parties have agreed to arbitrate a dispute absent mutual

consent from the parties or the arbitrators.11 Lastly, under German law, a contract

containing a “kompetenz-kompetenz” clause insulates the arbitration panel from
any form of judicial review.