Judicial Intervention in Arbitrability of International Claims - Part 5 Chapter 1
Lawrence W. Newman has been a partner in the New York office of Baker & McKenzie since 1971, when, together with the late Professor Henry deVries, he founded the litigation department in that office. He is the author/editor of 4 works on international litigation/arbitration.
Michael Burrows, Formerly, Of Counsel, Baker & McKenzie, New York.
Arbitration has become an important dispute resolution mechanism in transnational commercial transactions. One of the most attractive aspects of arbitration to contracting parties is its avoidance of the parochialism often associated with court proceedings in the home territory of either of the parties.
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), implemented in the United States in Chapter 2 of Title Nine of the United States Code, was enacted to foster arbitration of disputes by international contracting parties. In implementing the federal policy in favor of arbitration, the courts have held that arbitration agreements are to be given the broadest possible effect. The courts thus interpret arbitration clauses to encompass all disputes that the parties arguably manifested the intention to arbitrate. If an international commercial dispute is covered by an arbitration clause, under the New York Convention a court must direct the parties to arbitrate:
The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.
Despite the unequivocal mandate of the New York Convention in favor of international commercial arbitration, contracting parties that have agreed to even the broadest of arbitration clauses may nevertheless find themselves in court in the United States in connection with claims (including counterclaims) ostensibly falling under their agreement to arbitrate.