Originally from International Arbitration Checklists - 3rd Edition

The Doctrine of Separability and “Kompetenz-Kompetenz”

When a dispute is referred to arbitration, the question frequently arises as to what effect invalidity – alleged or actual – of the main agreement setting out the commercial rights and liabilities will have on the agreement to arbitrate itself (which will often be in the same document).  If the main agreement is invalid, does that mean the arbitration clause is also ineffective? Also, who should decide this important question?  If the arbitration agreement does not bind the parties, how can the arbitrator(s) have any power or right to make any decision on this subject?  Such jurisdictional pleas have often been made particularly by the respondent in arbitral proceedings. 

The argument is often that since the main agreement is invalid, so is the arbitration agreement, since the latter was reached at the same time, in the same way and is in the same document as the former. There is a good deal of common sense in this argument.  Arbitration is a contractual right between the parties, albeit one which has a most unusually high level of support from the legislatures and courts around the world.  If there is no contract, there is no agreement to arbitrate, the argument runs.  How can any arbitrator claim to have power to decide if he has been properly appointed?  Why should the arbitrator’s answer, whether it be “I have no power” or the contrary, have any binding force on, particularly, the disappointed party?  It is a rule of physics that no one can lift themselves from the ground by pulling upwards on their own bootlaces.  Arbitrators, it is said, should be subject to the same natural laws.  

This question is starkly illustrated in arbitral proceedings where there is a dispute as to whether a contract was ever formed at all.  In those circumstances, there might easily be a dispute as to whether there was ever an agreement to arbitrate.  The answer to this question is fundamental to the successful continuation of any part of the arbitration. However, the very appointment of an arbitrator and any acknowledgement that he can reach binding decisions could be seen as prejudging the issue.