Recent U.S. Cases Affecting The Power Of An International ArbitraL Tribunal To Determine Its Own Jurisdiction - Chapter 3 - The Swedish Arbitration Act of 1999, Five Years On: A Critical Review of Strengths and Weaknesses
One of the hallmarks of international arbitration is the arbitrators’ power to decide upon their own jurisdiction. If the process is to be viable, many defenses directly challenging, or dependent upon, continuing arbitral jurisdiction must, as a practical matter, be presented to the arbitrators for determination. The classic example is a party who raises a defense alleging that it was fraudulently induced to enter into a contract containing an arbitration clause. If the claim of fraudulent inducement is upheld, the contract falls like a house of cards and, together with it, the arbitration clause that it contains. If, however, that defense must be litigated initially by a national court, much of the value of international arbitration (or domestic arbitration for that matter)—relative speed, a final disposition of the dispute on its merits, and an avoidance of national courts that might favor the home party—would be lost.
To avoid this result, the rules of virtually all international arbitral organizations provide that arbitrators are empowered to decide their own jurisdiction and, in doing so, are further empowered to rule on whether the underlying agreement containing an arbitration clause is valid or void.