What is the Jurisdiction of the Arbitral Tribunal?

Introduction

An arbitral tribunal's jurisdiction refers to its authority to hear and decide disputes under the rules of arbitration. It is based on the parties’ agreement to resolve issues outside court through arbitration. Key factors determining the tribunal’s jurisdiction include the terms of the arbitration agreement, the nature and scope of the dispute, and the applicable legal framework or institutional rules governing the arbitration process.

Key elements of the Jurisdiction of Arbitral Tribunal

There are certain key elements to the Jurisdiction of arbitral tribunals that are:

1. Arbitration Agreement

The arbitration agreement serves as the tribunal's primary source of jurisdiction. This agreement, generally in the form of a contract clause, expresses the parties' willingness to arbitrate disputes. The agreement may specify:

• Parties to the arbitration: Typically, this includes the parties that signed the arbitration agreement.
• The types of conflicts that will be arbitrated: Some arbitration agreements are extensive and cover all problems originating from the contract, while others are more restrictive.
• The arbitration seat: The arbitration venue, which can have an impact on both procedural and substantive law.
• Rules of Arbitration: The controlling rules are those of the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), or UNCITRAL.

2. Scope of the Dispute

The tribunal's jurisdiction is confined to the subject matter of the dispute, as established in the arbitration agreement. If the disagreement does not come within the scope of the agreement, the tribunal may be unable to hear the case. A common challenge in this regard is interpreting the scope of the arbitration clause, particularly when the phrase is wide. However, if the case is outside the established scope, a tribunal may declare that it lacks jurisdiction.

3. Competence-Competence Principle

According to this concept, an arbitral tribunal has the ability to determine its own jurisdiction, even if one of the parties disputes it. This principle enables the tribunal to resolve concerns about its jurisdiction, such as whether the dispute fits within the scope of the arbitration agreement, if the agreement is legal, and whether it applies to all parties concerned. If one party challenges the tribunal's jurisdiction, the tribunal will often rule first on its own authority. This ruling may be challenged to a court, depending on the jurisdiction and appropriate arbitration procedures.

4. Consent of the Parties

Jurisdiction in arbitration is determined by the parties mutual accord. A party can contest the tribunal's jurisdiction by claiming that it never agreed to arbitrate the case, that the arbitration agreement is unlawful, or that it was entered into under duress or fraud. However, the principle of estoppel may preclude a party from disputing jurisdiction if they have already participated in the arbitration without objection.

5. Decision on Jurisdiction by the Tribunal

If a party disputes jurisdiction, the tribunal will typically first determine whether it has jurisdiction over the matter. If it determines that it lacks jurisdiction, the arbitration may be terminated. If it determines that it has jurisdiction, it will proceed to decide the matter. In some circumstances, partial awards may be issued in which the tribunal handles jurisdictional problems independently before determining on the case's merits. These decisions can be challenged, and in some situations, courts might intervene to resolve jurisdictional issues.

6. Intervention of Court

Courts can intervene in arbitration procedures, but their involvement is typically limited. They may assess:

• Whether the arbitration agreement is legitimate or not.
• Whether the tribunal has the authority to hear the case.
• Whether a judgment can be enforced or overturned, especially if jurisdictional difficulties arose during the arbitration procedure.

However, in many jurisdictions, courts are often hesitant to intervene in arbitrations unless there is a clear violation of the arbitration agreement or the tribunal's jurisdiction.

7. International vs. Domestic Jurisdiction

International arbitration: In International disputes, jurisdiction is frequently determined by international treaties as well as the laws of the arbitration venue.

Domestic arbitration: In most cases, the tribunal's jurisdiction is governed by national arbitration laws, which may be based on the UNCITRAL Model Law or other domestic statutes.

8. Subsequent Jurisdictional Challenge

A party may contest the tribunal's jurisdiction at the following stages:

• Preliminary stage: If a party believes that the disagreement falls outside the scope of the arbitration agreement, it may raise the matter before the tribunal considering the merits of the case.
• During the proceedings: If any jurisdictional questions arise, the tribunal will decide on them.
• Post-award challenge: After the tribunal announces its award, a party may dispute the tribunal's jurisdiction in a court where the award was executed.

9. Effect of the Arbitration Agreement's Invalidity

If the arbitration agreement is found to be invalid (for example, because it was not properly performed or because the subject matter of the dispute is not arbitrable), the tribunal will lack jurisdiction. However, courts will normally defer to the tribunal's decision on the legitimacy of the arbitration agreement.

10. Arbitration Clauses for Multi-Party or Multi-Contract Disputes

In circumstances involving many parties or contracts, the arbitration agreement's scope may become more complex. An arbitral tribunal must determine whether it has jurisdiction over each of the parties and the issues. This could include concerns like joining parties or consolidating arbitrations. A tribunal may also need to determine whether the arbitration clause is binding on third parties, such as subcontractors, assignees, or affiliates of the original contracting parties.

Jurisdiction/ Competence of the Arbitral Tribunal

Jurisdiction refers to the ability to make decisions. The Arbitral Tribunal has the power to:

1. Rule on its own Jurisdiction[1]

The present act of 1996 empowers the arbitral tribunal-like court to decide its own jurisdiction. It is based on the KOMPETENZ-KOMPETENZ or COMPETENCE OF THE COMPETITION principle. The arbitrator is allowed autonomy to determine jurisdiction. According to the Act, the Arbitral Tribunal is empowered to be self-sufficient in its operations and will not be hampered by the Court's interference in day-to-day operations so that the arbitral proceedings can continue and provide prompt relief. That is why, when the arbitrator is appointed by the Chief Justice, no objections to the nomination are entertained[2], because the Arbitral Tribunal is the proper forum under the terms of the Act.

Section 16 of the Act is a key section. It is to overcome the difficulties being faced by the various arbitral tribunals in view of the occasional frivolous objections against their jurisdiction being raised by the parties during the course of arbitration proceedings with intention to delay and defeat the arbitration proceedings. Now, such objections like, the non-existence of arbitration agreement, or, that the contract containing the arbitration clause is invalid/ void under the law, or, that the reference being beyond the scope of arbitration agreement, etc. could be decided by the arbitral tribunal itself[3].

• Section 16(1) of the Act[4] states that if the arbitration clause is independent of the agreement and the tribunal decides against the validity of the agreement, it will not ipso facto make the arbitration clause invalid.
• Under Section 16(2) of the Act[5], limitation is imposed on the parties that the plea of tribunal acting outside jurisdiction cannot be raised at a further stage that is after the submission of the written statement. And it further states that the party who had appointed or participated in the appointment procedure can also raise the objection of non- jurisdiction.
• Under section 16 (3) of the Act[6], if the plea is that the tribunal has exceeded the scope then it must be raised during the conduct of the proceedings and as soon as the authority is exceeded.
• Section 16(4) of the Act[7] empowers the Tribunal for the condonation of delay and to entertain the plea on valid grounds. The validity would be dependent on the facts and circumstances of the case.
• Section 16(5) of the Act[8] states that if the plea is rejected then the arbitral tribunal will continue with the proceedings and the issuance of the Arbitral of the Arbitral award.
• Section 16(6)[9] of the Act deals with the setting aside of the arbitral award in accordance with Section 34 of the Act[10].

In Shree Shubh Laxmi Fabrics Ltd. v Chandimal Barodia[11], where arbitral proceedings were stayed by the High Court on the grounds that there was no arbitral agreement, the Supreme Court ruled that the correct forum for resolution of such a problem was the Arbitral Tribunal itself. The court stated that the 'caution' theory developed by certain high courts is erroneous since it contradicts the policy of courts interfering with Arbitral Tribunal proceedings as little as possible[12]. The court confirmed the integrity of established law under section 16 of the Act, which authorizes the Arbitral Tribunal to decide the issue of its jurisdiction, as well as the existence and validity of the arbitral agreement itself, putting aside the writ jurisdiction of the High Courts. As a result, the High Court should exercise its arbitration power under Article 226 of the Constitution only in exceptional and cautious cases.

In Dhanrajamal Gobindram v. Shamji Kalidas & Co[13]., Section 16 of the Arbitration Act, based on Article 16 of the Model Law, acknowledges the idea of competence-competence in Indian arbitration law. Section 16 authorizes the arbitral tribunal to rule on its own jurisdiction, including any challenges to the existence or legality of the arbitration agreement. Importantly, Sections 16(2) and 16(3) allow the parties to contest the arbitral tribunal's jurisdiction on grounds such as the non-existence or illegality of the arbitration agreement. The arbitral panel is required to rule on the challenge to its jurisdiction, and if it rejects the objection, it may proceed with the arbitration procedures and issue an arbitral decision. The concept of procedural competence recognizes an arbitral tribunal's ability to hear and decide objections to its jurisdiction. After the arbitral tribunal issues an award, Section 16(6) authorizes the aggrieved party to file an action to set aside the verdict under Section 34. Sections 16(5) and 16(6) demonstrate that Parliament has totally eliminated the ability of courts to intervene during arbitral proceedings; courts can only intervene after the panel has issued an award. Thus, Section 16 is intended to fully implement both the procedural and substantive parts of the competence-competence theory.

2. To Issue Interim measures[14]

The arbitral tribunal empowered to order interim measures of protection reflects modern trend in new arbitration law. Under the old Act of 1940, Courts alone had the power to grant interim measures of protection. The new act, has however also conferred these powers upon arbitral tribunals. An arbitral tribunal cannot order interim measures as such on its own motion. Further, an interim measure must determine some part of the dispute referred to arbitration. It cannot deal with any other matter and also cannot affect right of a party which is not a party to such an arbitration agreement[15].

A party to the reference may be ordered by the Arbitral Tribunal to take interim protective measures with regard to the dispute's subject matter under Section 17. The Court's authority is unrestricted, whereas the Arbitral Tribunal's authority is conditional and can only be used in situations in which the parties have not otherwise agreed. Furthermore, the Arbitral Tribunal may only use its authority during the arbitration process and within the parameters set forth in section 17. This means that it may require a party to provide suitable security

• for the execution of the interim measures it orders, as well as
• order a party to take interim measures upon the other party's request.

Further, these interim measures are different from the interim award which is intended to be effective during the pendency of the arbitration, till the final award is given[16].

Conclusion

The jurisdiction of an arbitral tribunal is fully considered their jurisdiction, taking into account both the arbitration agreement and the relevant legal and procedural requirements. At the same time, courts have a limited but crucial role in examining jurisdictional problems, notably in cases of obvious invalidity or overreach by the tribunal. In essence, an arbitral tribunal's jurisdiction ensures that arbitration continues to be an effective and efficient means of conflict settlement, with a clear structure for addressing jurisdictional issues and protecting the arbitration process integrity.

[1] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.16.

[2] Nimet Resources v Essar Steel Ltd., AIR 2000 SC 3107.

[3] Dr. Ashok K. Jain, Law of Arbitration Conciliation Mediation and Negotiation (ADR) 134 (Ascent Publication, Delhi, 4^TH edn., 2023).

[4] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.16(1).

[5] Id. at s. 16(2).

[6] Id. at s. 16(3).

[7] Id. at s. 16(4).

[8] Id. at s. 16(5).

[9] Id. at s. 16(6).

[10] Id. at s. 34.

[11] AIR 2005 SC 2261.

[12] As an exception, when the Chief Justice is appointing authority of arbitrators under section 11(6), they may, as a matter of caution, inquire or adjudicate, if necessary, the question of existence of arbitral agreement or its validity before appointing the arbitrators. This is because, according to the caution theory, if the Chief Justice appoints an arbitrator and the Arbitral Tribunal later finds that there was no arbitral agreement or clause in existence on which arbitrators should have been appointed, it could lead to accusations against the judiciary.

[13] 1961 SCC OnLine SC 28.

[14] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.17.

[15] Dr. Ashok K. Jain, Law of Arbitration Conciliation Mediation and Negotiation (ADR) 137 (Ascent Publication, Delhi, 4^TH edn., 2023).

[16] Dr. Ashok K. Jain, Law of Arbitration Conciliation Mediation and Negotiation (ADR) 138 (Ascent Publication, Delhi, 4^TH edn., 2023).

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