Who Decides Arbitrability? - Part 5, Chapter 48 - Practice of International Litigation - 2nd Edition
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 four works on international litigation/arbitration.
Michael Burrows, Formerly, Of Counsel, Baker & McKenzie, New York.
Originally from Practice of International Litigation - 2nd Edition
Arbitration cannot take place in the absence of an agreement to
arbitrate, but it is not always clear which particular disputes were intended
by the parties to be heard in arbitration. The oft-vexed question is: Who
decides this question of arbitrability—the courts or the arbitrators? The
U.S. Court of Appeals for the Second Circuit recently issued a decision that
sets out guidance on this issue, at least for parties to lawsuits in federal
courts in New York, Connecticut and Vermont.
The Second Circuit case, Werner Schneider v. Thailand, decided Aug.
8, 2012, addressed the issues dealt with by the U.S. Supreme Court in First
Options of Chicago v. Kaplan, 514 US 938 (1995)—in particular, how to apply
the “clear and unmistakable” standard that determines whether a court or
an arbitration panel should determine a question of arbitrability.
“Arbitrability” refers to whether or not arbitrators have the
authority to rule on a dispute. This, in turn, depends on whether certain
parties have agreed to have certain disputes between them resolved through
arbitration. Thus, there is potentially, in any dispute, a question of whether
the parties did agree to arbitrate and how the issue should be resolved. But
underlying this issue lies the question: If the parties did agree to arbitrate,
what did they agree to? In First Options, the Supreme Court said that the
parties could agree to have the issue of whether they agreed to arbitrate
dealt with by arbitrators. But the courts—not the arbitrators— have to
decide whether they did make such an agreement. Perhaps because there
was more than a bit of tautological analysis in the question of whether the
parties agreed to have arbitrators decide arbitrability, the Supreme Court
imposed a high standard to be met by a party making such an argument:
“Courts should not assume that the parties agreed to arbitrate arbitrability