Is the principle of competence-competence recognised in your country? What is the approach of local courts towards a party commencing arbitration in apparent breach of an arbitration agreement?

International Arbitration

Austria Small Flag Austria

Yes. According to section 584 ACCP, the arbitral tribunal decides on its jurisdiction over a certain dispute and the validity of an arbitration agreement. In case a dispute, subject to an arbitration agreement, is brought before the national courts, the latter are obliged to reject the claim without further review, unless the respondent enters into the dispute without raising objections.

France Small Flag France

In France, the principle of competence-competence is widely recognized and applied (Article 1448, CCP). Application of the principle means that:

• In the first instance, the arbitral tribunal has jurisdiction to rule on its own jurisdiction.
• A French court must decline jurisdiction in the presence of an arbitration agreement and let the arbitral tribunal decide.

However, this principle does not mean that national courts can never have a say on the jurisdiction of an arbitral tribunal. Before the constitution of the tribunal, a court can accept jurisdiction if the arbitration agreement is manifestly void or manifestly not applicable. The threshold for this test is very high, and French judges decide the issue on a prima facie basis (see Court of Cassation, First Civil Chamber, 7 June 2006, No. 03-12.034). Any ambiguity is resolved in favour of the tribunal’s power to decide the issue.

The French courts can also review the issue of the tribunal’s jurisdiction at the setting-aside stage. In such a case, the court will review the issue de novo and in its review will not be bound by the factual and legal findings of the tribunal.

Portugal Small Flag Portugal

The arbitral tribunal is competent to rule as to its jurisdiction – the well-known principle of Kompetenz-Kompetenz. The law provides for the ‘negative’ effect of this rule, according to which national courts may not decide on the arbitral tribunal’s competence before the tribunal issues its ruling. This disposition is applicable only in cases where the lack of jurisdiction is not obvious.

Several local courts judgements addressed the kompetenz-kompetenz principle and in every one of them the ruling goes according to the Portuguese Law that follows international standards: when one of the parties argues an arbitration agreement, the national court immediately dismisses the case. The only exception is a clear invalidity of the arbitration agreement.

Romania Small Flag Romania

The principle of competence-competence is fully recognised under Romanian arbitration law. Once a dispute has been referred to arbitration, the arbitral tribunal is competent to decide on its own jurisdiction – and will do so even if identical disputes are pending before the courts or other arbitral tribunals, except if the arbitral tribunal finds it appropriate to suspend the proceedings. Further, the arbitral tribunal’s ruling that it has jurisdiction may not be challenged before the courts during the arbitral proceedings. Such decision may be subject to judicial review by state courts only during an action to set aside the final arbitral award. Therefore, the arbitration law provides no procedural grounds allowing a party to ask the local courts, during the arbitral proceedings, to determine whether an arbitral tribunal has jurisdiction.

Nevertheless, a state court court vested with a dispute in respect of which an arbitral agreement has been concluded will check its own competence and decline its jurisdiction if at least one of the parties invokes the existence of the arbitration clause. The court will retain its jurisdiction in settling the dispute only in three exceptional situations, namely, if the respondent has submitted its defence without invoking the existence of the arbitration agreement, if the arbitration clause is null or inoperable, and if the arbitral tribunal cannot be constituted from causes clearly attributable to the defendant in the arbitration.

Sweden Small Flag Sweden

Under the Arbitration Act, the tribunal has the power to rule on its own jurisdiction.

If the tribunal finds that it lacks jurisdiction, it shall dismiss the dispute in an arbitral award. Such award becomes final unless challenged by a party.

In contrast, if the tribunal finds that it has jurisdiction, the ruling shall be in the form of a decision. Such decision may not be appealed.

However, in parallel proceedings, the district courts may also rule on the tribunal’s jurisdiction, which will overrule any decision of the tribunal.

UAE Small Flag UAE

The principle of competence-competence is not expressly addressed in the CPC. Therefore, parties who wish to vest in the tribunal the power to decide on its jurisdiction should either stipulate this power expressly in their arbitration agreement or adopt arbitration rules that recognise the principle. Both the DIAC and ADCCAC Rules recognise such principle.

However, the UAE courts are willing to (and usually do) stay court proceedings commenced in apparent breach of an arbitration agreement, provided that the existence of such agreement is clearly raised by the respondent at the first hearing before such court, failing which, it will be deemed to have waived its right to enforce the arbitration agreement. The ‘first hearing’ has been interpreted as the first time a party appears before the court, even if that party requests nothing more than an adjournment. Therefore, the arbitration agreement should be invoked prior to making any requests or defences before the court at the first hearing.

Both the DIFC Arbitration Law and the ADGM Regulations provide for the tribunal’s power to rule on its own jurisdiction, including on any challenges to the validity or existence of the arbitration agreement. The DIFC Courts should stay proceedings brought in apparent breach of an arbitration agreement. While as yet untested, the same approach can be expected of the ADGM courts.

Switzerland Small Flag Switzerland

The principle of competence-competence applies to arbitral tribunals based on art. 178 para 1 PILA.

Swiss court practice has established principles favouring arbitration over state court litigation, at least where the parties have agreed on arbitration seated in Switzerland. When a state court's jurisdiction is contested based on the existence of an arbitration agreement, Swiss court practice directs any state court seized to refer the matter for review to the arbitral tribunal stipulated in the arbitration agreement in question, if the arbitration agreement on its face appears to be valid and capable of being performed by the parties. This is referred to as the negative effect of competence-competence, which applies in Switzerland with regard to arbitral tribunals seated in Switzerland. Thus, if an arbitration agreement provides for arbitration seated in Switzerland, a state court (wrongly) seized by a party must even in case of doubt refrain from reviewing the arbitration agreement (i.e. its validity and scope) and refer the matter to arbitration.

New Zealand Small Flag New Zealand

Yes. See article 16 of Schedule 1 of the Act, which reflects the equivalent provision in the UNCITRAL Model Law.

New Zealand courts support arbitration agreements in accordance with the purposes of the Act which include encouraging the use of arbitration as an agreed method of resolving commercial and other disputes (section 5(a)). A mandatory stay is available under article 8 of Schedule 1 if the party seeking to uphold the arbitration agreement applies to the Court before proceedings have been commenced. The Court is required to stay the proceedings unless it finds that the arbitration agreement is null, void, inoperative or incapable of being performed, or that there is not in fact any dispute between the parties with regard to the matters agreed to be referred. The Supreme Court has confirmed that Parliament did not intend to import a summary judgment standard (a contention that there is no reasonably arguable defence does not mean there is not a dispute between the parties) as a threshold for a mandatory article 8(1) stay (Zurich v Cognition Insurance [2015] 1 NZLR 383). For a recent example of a mandatory article 8(1) stay, see Flock Hill v University of Canterbury [2015] NZHC 3169.

The application for stay need not delay the arbitration proceedings. The arbitral proceedings may be commenced and an award made while the issue is pending before the Court (article 8(2) of Schedule 1). Article 8 applies even where the place of arbitration is outside New Zealand (section 7). Note that in Danone Asia Pacific Holdings PTE Limited & Ors v Fonterra Co-operative Group Limited [2014] NZCA 536, a discretionary case management stay was granted in favour of an international arbitration seated in Singapore. The respondent was the parent company to the contractual counterparty, and not the counterparty itself. Accordingly, the article 8 mandatory stay was unavailable. The existence of the arbitration was, however, a highly relevant consideration to the exercise of the High Court’s discretion, as confirmed on appeal.

The Act does not specifically provide for anti-suit injunctions to be issued by a court in support of an arbitration agreement, but, notwithstanding the terms of article 5 of Schedule 1 (“In matters governed by this Schedule, no court shall intervene except where so provided by this Schedule”), New Zealand courts would be likely to follow English jurisprudence in this respect and find that they do have authority to issue anti-suit injunctions to support arbitration agreements. It is notable that the court’s jurisdiction to issue an anti-arbitration injunction has already been confirmed by the High Court (Carter Holt Harvey Ltd v Genesis Power Ltd [2006] 3 NZLR 794).

Malaysia Small Flag Malaysia

Competence-competence comprises two aspects: positive competence-competence and the negative effect of competence-competence. Positive competence-competence refers to a tribunal’s competence to preliminarily decide virtually all jurisdictional disputes subject to subsequent judicial review. The negative effect of competence-competence is a rule of chronological priority which prohibits national courts from considering jurisdictional objections on an interlocutory basis prior to the arbitrator’s initial determination on the same jurisdictional question.

Positive competence-competence is statutorily recognised in section 18(1), AA. Malaysia has embraced the negative effect of competence-competence through its case law. Malaysian courts are deferential to arbitrators on matters of jurisdiction and are generally willing to grant stays of court proceedings to allow jurisdictional questions to be first determined by arbitrators.

United States Small Flag United States

As noted in Question 4, the U.S. Supreme Court has held that an arbitral tribunal may rule on a challenge to its jurisdiction as long as there is “clear and unmistakable evidence” that the parties intended to submit this question to the tribunal. Absent such evidence, a tribunal may make a provisional ruling on jurisdiction, but this ruling is reviewable by a court without deference to the tribunal.

Absent explicit language in the arbitration agreement referring jurisdictional matters to the tribunal, courts must determine whether the agreement contains any other “clear and unmistakable” evidence of an intent to submit the arbitrability issue to the arbitrators. Some courts have held that the explicit incorporation in an arbitration agreement of institutional arbitration rules giving the arbitrator the power to determine his or her own competence is sufficient. Several courts have held that broadly worded arbitration clauses committing resolution of all disputes to arbitration also satisfy the “clear and unmistakable” standard, as long as there is nothing else in the parties’ agreement suggesting a contrary intent.

If it is clear that the parties intended to submit the arbitral jurisdiction question to the arbitral tribunal, then the court should refer the issue to arbitration, and upon an application to enforce the resulting award, review the arbitrators’ decision deferentially in the same manner as any other issue submitted to arbitration. Most arbitration rules provide that an objection to a tribunal’s jurisdiction must be made promptly.

The reviewing court may stay the arbitration pending the resolution of the jurisdictional question. Without such an order, the arbitral tribunal need not suspend its proceedings.

Singapore Small Flag Singapore

The principle of competence-competence is reflected in the IAA in the following terms: ‘The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement.’ IAA, First Schedule, Article 16(1).

This principle has been embraced by the Singapore judiciary without reservation. Aloe Vera of America, Inc v Asiatic Food (S) Pte Ltd and anor [2006] 3 SLR(R) 174 (Singapore High Court) (‘It is an accepted principle of arbitration law that an arbitral tribunal has jurisdiction to determine whether a particular person is a party to an arbitration agreement. This is referred to as the doctrine of Kompetenz-Kompetenz … [which] state[s] that an arbitral tribunal has power to rule on its own competence and to continue with the arbitration if it considers itself competent to do so.’).

The principle of competence-competence has its limits, however. While Singapore law recognises that an arbitral tribunal is competent to determine whether it has jurisdiction and the scope of that jurisdiction, rulings on jurisdiction are subject to review by the Singapore High Court. IAA, Section 10(3).

Brazil Small Flag Brazil

Yes, because the sole paragraph of Article 8 of Law nº 9.307/96 provides that the arbitrator must decide ex officio or at the instigation of the parties, the issues concerning the existence, validity and effectiveness of the arbitration convention and the contract containing the arbitration clause, so this legal provision, in fact, provides the principle of competence-competence, given that according to this principle, the arbitrator has the jurisdiction power to decide on its own jurisdiction, solving the challenges that arise about their ability to judge , the extent of his powers, the arbitrability of the dispute, that is, evaluating the effectiveness and the extent of the powers that the parties have given him through the arbitration clause and the compromissum. Thus, it is possible to realize that what gives power to arbitrators is not the arbitration convention, but it is the law, by Article 8, sole paragraph, of Law nº 9.307/96, which recognizes the principle of competence-competence, because it is this legal provision that gives to a particular person the power to be arbitrator for the specific purpose of determining its own jurisdiction.

According to Law nº 9.307/96, the local arbitral courts understand that if a party initiates the arbitration in apparent violation of the arbitration agreement, the arbitration procedure cannot be continued in the form in which it was started.

In addition, according to caput and §3º of Article 485 of the Brazilian Code of Civil Procedure, it is up to the defendant to raise a motion to dismiss the lawsuit on grounds of the existence of an arbitration agreement, and request the judicial court to dismiss the case and remand the parties to arbitration. However, if the defendant fails to do so, it will be deemed to have waived the arbitration agreement, and the court proceedings will continue.

Canada Small Flag Canada

The principle of competence-competence is well-recognized in Canadian law. The principle permits arbitrators to rule on their jurisdiction before a party can challenge jurisdiction in a court. The Supreme Court of Canada affirmed its applicability in Dell Computer Corp v Union des Consommateurs unless the challenge to the arbitrator’s jurisdiction is based solely on a question of law. The Model Law imports the principle under Article 16.

A party can apply to the court for an order staying a court proceeding where an agreement to arbitrate is in place. Courts must stay the proceeding if the arbitration agreement is not void, inoperative, or incapable of being performed.

Panama Small Flag Panama

The principle of competence-competence is recognised in Panama. Indeed, since 2004, it is also included in the Panamanian Constitution.

The approach of local courts towards a party commencing arbitration in apparent breach of an arbitration agreement is to refer the matter to arbitration.

Spain Small Flag Spain

It is expressly recognized in art. 22.1 of the Arbitration Law and respected by the Tribunals. Courts are evolving and now tend to leave the issue to be decided by the arbitration tribunals, without prejudice of a posterior annulment of the award.

Turkey Small Flag Turkey

The principle of competence-competence is recognised in Turkish law. The arbitral tribunal may decide on its own authority including the objections regarding the existence or validity of the arbitration agreement. During this decision, arbitration clause is assessed separately from the other provisions of the agreement. The arbitration agreement does not become invalid automatically, in case the sole arbitrator or the arbitral tribunal decides on the invalidity of the main agreement.

Germany Small Flag Germany

The principle of competence-competence of article 16 of the UNCITRAL Model Law is recognized in Germany (section 1040 ZPO). The arbitral tribunal may decide on its own competence in a dispute.

Italy Small Flag Italy

The principle of competence-competence is recognised under Italian law in Articles 817 and 819 ter of the Italian Civil Procedural Code.

Pursuant to Article 817 of the Italian Civil Procedural Code, if an objection regarding the jurisdiction of the arbitral tribunal is raised, the same arbitral tribunal decides on it. The objection must be raised in the first response brief, otherwise the objection is considered waived and the party may not seek the setting aside of the award on that ground. An award can be always set a side when under Italian law the dispute is not arbitrable, notwithstanding the fact whether such an objection was raised or not.

United Kingdom Small Flag United Kingdom

Yes (section 30). The tribunal may determine its own substantive jurisdiction in relation to (a) validity of the arbitral agreement (b) proper constitution of the tribunal and (c) issues it must decide.

On an application by a party (section 9), the court shall stay proceedings unless (a) that party has taken a step in the court proceedings (having deemed to have waived their right to arbitrate) or (b) the court finds the arbitral agreement is null, void, inoperative or incapable or being performed.

Ireland Small Flag Ireland

The principle of competence-competence is recognised in Ireland under the UNCITRAL Model Law as adopted by the Arbitration Act. An arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement.

Where an action is brought under a matter that is subject to an arbitration agreement, the courts in Ireland are under an obligation to refer the parties to arbitration regardless of whether the commencing party is in apparent breach of the arbitration agreement or not, provided that the application is brought no later than when submitting the first statement on the substance of the dispute and the written arbitration agreement is not null and void or incapable of being performed.

Poland Small Flag Poland

The principle of competence-competence is incorporated in art. 1180 §1 CPC, according to which an arbitral tribunal may rule on its own jurisdiction, including the existence, validity or effectiveness of the arbitration agreement.

If the tribunal issues a separate decision upholding its jurisdiction, then either party may seek a ruling from the court within two weeks from service of the decision. Initiation of a proceeding before the court does not stay hearing of the case by the arbitral tribunal. The decision of the court is subject to interlocutory appeal.

If the tribunal rules that it lacks jurisdiction, there is no recourse to the courts available. Such decision is binding on the court, which in such case is not allowed to dismiss the claim based on assertion of the arbitration agreement.

Local courts cannot intervene in arbitration proceedings commenced in apparent breach of an arbitration agreement by issuing an anti-arbitration injunction. Furthermore, there is no case reported in which local courts awarded damages for breach of an arbitration agreement.

Updated: February 6, 2017