Relativity of Contracts and Severability of the Arbitration Clause in Multi-Contract Transactions: A Comparative Analysis - ARIA - Vol. 32, No. 3
Aldo Berlinguer is full professor of comparative law at the University of Cagliari, Italy. He holds a PhD in comparative law at the University of Florence and an LLM in comparative law studies at Georgetown University. He is the author of various publications, including books, articles and comments, on international and domestic arbitration, and ADR.
M. Veronica Saladino is a Comparative Law Expert at the University of Cagliari, Italy, where she focuses her research and teaches classes on U.S. law and comparative private law. Ms. Saladino holds a J.D. from the University of Cagliari and a J.D. from the William S. Boyd School of Law, University of Nevada, Las Vegas. She has authored several scholarly articles and book chapters
Should a dispute regarding the nullity or invalidity of an agreement that contains an arbitration clause be heard by an arbitrator, or by a court of ordinary jurisdiction? If a transaction is accomplished by signing multiple agreements, but only one of these agreements contains an arbitration clause, will arbitration be mandatory only for disputes related to that specific agreement, or also for disputes deriving from the transaction in general?
When the written intent of the parties is ambiguous, the interpreter is called to “fill” such a void and apply general law principles to resolve the dispute. This article aims to present the arguments, principles, and solutions applied by various jurisdictions (of both civil law and common law traditions, inter alia the United States, Italy, France, Spain, Germany, etc.) to problems related to the applicability of an arbitration clause, particularly in the context of multi-contract transactions.
I. ARBITRATION CLAUSES AND THEIR RELATIVE EFFECTS: A COMPARATIVE OVERVIEW
Comparative law scholars agree on a fundamental principle: in almost all jurisdictions the parties’ choice to submit to arbitration is contractual in nature. This concept is most critical when evaluating the viability of various countries’ attempts to make arbitration mandatory by law rather than subject to negotiation; attempts that, in most cases, have failed. The contractual nature of arbitration draws arbitration clauses into the sphere of the long-standing legal doctrine of the principle of relativity of contracts. Under this principle, arbitration clauses bind only the parties who agreed to them and govern only the disputes that arise from the contract in which they are inserted. Two main precepts concerning the relative effects of an arbitration clause emerge from this principle of relativity, which are especially relevant when arbitration is part of multiple contracts forming a single transaction. First, at least in theory, disputes from each contract containing an arbitration clause would have to be submitted to a different arbitration proceeding from those stemming from other arbitrable contracts. Hence, even if multiple contracts are meant to constitute one transaction, if each of them contains an arbitration clause, each will allow the establishment of a unique and separate arbitration proceeding with a separate arbitration panel, unless the parties agree to consolidation. Second, if only one of such contracts contains an arbitration clause, then only that contract will be subject to arbitration while any disputes arising under the other contracts, although part of the same transaction, will likely be heard in traditional court proceedings.