Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?
International Arbitration (2nd Edition)
Generally under Chilean law, matters that affect public policy and third parties rights are deemed as non-arbitrable.
As for more specific regulation, Articles 229 and 230 of the Code of Judicial Organization (CJO) refer to the main disputes that are considered non-arbitrable in domestic arbitration. Under such provisions, (i) alimony, (ii) partition of goods between husband and wife, (iii) criminal causes, (iv) matters of local police, (v) disputes between principal and agent and (vi) disputes in which the Fiscal Judicial must be heard, may not be referred to arbitration. Also, Article 5 of the Chilean Labour Code provides for labor matters as non-arbitrable.
Accordingly, Article 1(5) of the International Commercial Arbitration Law No 19.971 (ICAL) specifically states that the law does not change the domestic regulations on non-arbitrable matters. Furthermore, the legislative history of ICAL shows that matters of public policy shall not be resolved under international arbitration procedures.
Neither the CJO nor the ICAL provisions regarding the non-arbitrable matters have been subject to modification in the recent years.
Under Portuguese law, arbitrable disputes are the ones involving economic interests and others which, although not involving economic interests, may be settled by the parties.
According to the previous voluntary arbitration act, dated 1986, only disputes relating to disposable rights could be subject to arbitration. The new voluntary arbitration act (LAV), currently in force, has thus broadened the concept of arbitrability by adopting the economic criteria of interests at stake along with the disposition of rights.
Anyone can compromise on rights freely disposable (Article 1224 NCPC). However, some matters are excluded from arbitration, for instance disputes in relation with (i) the status and legal capacity of natural persons, (ii) the conjugal relationship, (iii) the application for divorce or legal separation, (iv) the representation of incapacitated persons or missing persons (Article 1225 NCPC). Furthermore, disputes that are subject to a mandatory attribution of jurisdiction cannot be submitted to arbitration.
Any arbitration clause inserted in a pre-established contract concluded between professional traders and consumers is considered as an abusive clause, if it is not proven that such clause was specifically accepted.
In international arbitration, art. 177 para 1 PILA and the case law of the Swiss Federal Tribunal provide for a broad definition of disputes deemed arbitrable as any dispute of financial interest, i.e. any claim that ultimately pursues an economic purpose, may be subject of an arbitration procedure. Thus, also monetary claims in family and inheritance law, monetary claims relating to intellectual property and competition as well as antitrust law are deemed arbitrable in Switzerland. Thus, solely matters concerning the legal status (e.g. marriage, separation, divorce, matrimony, paternity, adoption etc.) and some matters relating to insolvency law (opening of bankruptcy proceeding, arrest etc.) are deemed non-arbitrable in international arbitration.
In contrast thereto, the definition of arbitrability in Swiss domestic arbitration is more restrictive than its understanding in Swiss international arbitration. Pursuant to art. 354 CPC, a dispute may only be submitted to an arbitral tribunal if the parties are free to dispose over the rights and duties in question. In particular and contrary to the situation in international arbitration, labor law disputes in a domestic context are solely arbitrable if the respective arbitration agreement was concluded a minimum of one month after the end of the employment relationship (art. 341 para 1 Swiss Code of Obligations). In addition, labor law rights confirmed by the Swiss Code of Obligations as non-waivable will also not be deemed arbitrable in a domestic context.
The notion of arbitrability in Switzerland did not undergo any major changes throughout the last few years. The interpretation of arbitrability continues to be broad, particularly in international arbitration. Also the partial revision of the PILA will not change this situation.
Under German law, any claim under property law is arbitrable. In addition, non-pecuniary claims are also arbitrable if the concerned parties can settle the matter (section 1030 (1) ZPO). However, certain matters are non-arbitrable under German law. These exceptions include tenancy relationships for residential space, and matters relating to family law, labor law and criminal law.
There has been a recent development with regard to so called intra-company-disputes, which are now clearly arbitrable in Germany. This used to be controversial for the application of set-aside corporate resolutions adopted by a majority of shareholders in a German limited liability company. The Bundesgerichtshof decided in 2009 that an arbitration agreement for such disputes must fulfil the following four requirements:
- The arbitration clause must be included in the articles of association. Alternatively, in a separate agreement which all shareholders agreed to.
- All shareholders must be aware of the arbitration and must be given an opportunity to join.
- All shareholders must be able to participate in the appointment of an arbitrator (unless a neutral entity does the appointment).
- All applications for the setting aside of a corporate resolution relating to the same matter in dispute must be put before on tribunal.
In the same vein, the Bundesgerichtshof held in April 2017 that the same requirements apply, in principle, to a limited partnership.
The Arbitration Act does not provide for the list of non-arbitrable disputes. Meanwhile, the CoCP and the PILA contain the provisions which Ukrainian courts in a number of cases interpret as the provisions establishing non-arbitrability of certain disputes. In particular, according to the CoCP the following categories of disputes may not be referred to the domestic arbitration ("treteiskyi") court:
- disputes on invalidation of public acts,
- disputes arising out of the public procurement contracts,
- disputes arising out of corporate relations and between the company and its participants (founder, shareholder, member), including a former participant, as well as between the participants and related to the establishment, activities, management and liquidation of the company, the rights and obligations of the participants of such company, and excluding the labour disputes;
- other disputes as provided by law.
Notwithstanding the reasonable grounds to apply the above-mentioned provisions on non-arbitrability merely to the domestic arbitration, which is subject to separate regulation, Ukrainian courts tend to apply them to international arbitration as well. This topic has been the hot debate in Ukraine particularly in respect to the arbitrability of corporate disputes.
Pursuant to the PILA Ukrainian courts exercise exclusive jurisdiction over certain types of disputes, including the following:
- disputes concerning the real estate located in Ukraine;
- intellectual property disputes involving registration of intellectual property rights or issuance of certificate (patent) in Ukraine;
- disputes arising out of bankruptcy proceedings of the company registered in Ukraine;
- disputes concerning the issuance or cancellation of securities issued in Ukraine.
According to the amendment to the Law of Ukraine "On privatization of state property" adopted in early 2016 the disputes between seller and purchaser arising out of or in connection with the contract for sale of the object of privatization may be referred to international commercial arbitration.
Based on the amendments established in the Draft Law, certain changes in arbitrability of disputes are expected. The Draft Law both broadens the scope of non-arbitrability of certain types of disputes and limits the scope of non-arbitrability of other ones. In particular, according to the Draft Law the following types of disputes are recognised as non-arbitrable:
- disputes on invalidation of public acts;
- disputes on state registration and recording of real estate, intellectual property rights, rights on securities;
- disputes arising out of the public procurement contracts, except for the civil law aspects of such disputes;
- disputes on the privatisation of state property (not including the state residential fund), except for the civil law aspects of such disputes;
- disputes arising out of the corporate relations, including between the company and its participants, including a former participant, as well as between the participants of the company and related to the establishment, activities, management and liquidation of the company, except for the labour disputes. However, such disputes arising out of the agreement may be referred to arbitration based on the arbitration agreement between a company and all its participants;
- certain disputes concerning unfair competition, except for the civil law aspects of such disputes;
- disputes arising out of bankruptcy proceedings, including the related disputes such as invalidation of the agreements with the debtor subject to the bankruptcy proceedings;
- disputes between the legal entity and its chief officer, including the former officer;
- other disputes as provided by law.
In Panama, matters governed by Criminal Law, Labor Law, Consumer Law or Family Law are considered non-arbitrable. As a general rule, the matters that cannot be subject to negotiation and disposition of rights and obligations, and that cannot be waived by the parties, cannot be referred to arbitration.
There has not been any evolution in this regard in the recent years.
Commercial disputes which relate to the registration of real estate, insurance policies and commercial agencies are generally not arbitrable.
The arbitrability of each dispute will however be considered on its own merits.
A dispute is considered non-arbitrable if the subject matter is not capable of being settled by agreement between the parties. This is the case e.g. if the relief requested would be illegal, criminal, or constitute pactum turpe. A dispute is also likely non-arbitrable in cases where third party’s consent is required and in some aspects as far as it concerns rights in rem. Furthermore, a claim for relief, which can exclusively be granted by a court or a state authority, is non-arbitrable. Such cases include declaration of bankruptcy, taxation, existence and validity of patents, certain competition law disputes such imposition of fines, ordering a company to cease and desist activities harmful to competition, and granting clearance for acquisitions of businesses.
In recent years there has been a discussion concerning the arbitrability in relation to some competition matters, where a fairly high threshold have been established in respect to what is deemed admissible.
Section 2 of the SAA determines that disputes on matters which are considered by law as disposable may be settled throughout arbitration. In Spain, the SAA provides that only disputes relating to matters within the free disposition of the parties may be subject to arbitration, specifically excluding arbitrations related to labor matters from its scope of application. Criminal matters and certain specific civil matters (such as parental issues) would also be beyond the scope of application of the Spanish Arbitration Act.
Serbian Arbitration Law provides that a dispute is arbitrable under following conditions: (i) it concerns a property right with which the parties may freely dispose, and (ii) it does not concern a matter which is within exclusive competence of courts. In practice, the second precondition (exclusive competence of courts) has caused certain dilemmas.
First of all, Serbian Law on Private International Law provides that a number of disputes are within the exclusive competence of courts and as such, they are non-arbitrable (e.g. disputes which govern ownership rights over real estate in Serbia, family law disputes, probate disputes). No major controversies exist in this regard. However, in addition to the Serbian Law on Private International Law, a number of other laws contain provisions which govern the competence of courts for certain types of disputes. What creates problems in practice is that at times the laws are unclear as to whether these provisions provide for an exclusive court competence, or they merely regulate which particular court should have competence in certain matter. For example, there is controversy in practice concerning the arbitrability of disputes which relate to insolvency proceedings, and in general, the impact of insolvency of a party to an arbitration to the arbitration proceedings. Furthermore, the law remains unclear with regard to exclusive competence of courts in corporate disputes – the dominant court practice is that these disputes are not arbitrable.
The following matters cannot be the subject of arbitration:
- Labor disputes covered by the Labor Code (Pursuant to the Labor Code of the Philippines, there are separate rules for labor disputes under which parties undergo either compulsory or voluntary arbitration);
- Civil Status of persons;
- Validity of marriage;
- Any grounds for legal separation;
- Jurisdiction of courts;
- Future legitime or the future right of an heir to the portion of the deceased’s property which he or she is entitled under the law regardless of the provisions in the predecessor’s will;
- Criminal liability;
- Future support or the right to support of spouses, descendants, ascendants and siblings at some future time.
In Booz-Allen and Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532, the Hon’ble Supreme Court set down certain examples of non-arbitrable disputes such as:
(i) Disputes relating to rights and liabilities which give rise to or arise out of criminal offences;
(ii) Matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody;
(iii) Guardianship matters;
(iv) Insolvency and winding-up matters;
(v) Matters related to grant of probate, letters of administration and succession certificate;
(vi) Matters related to eviction of tenants where tenant enjoys statutory protection against eviction by special statutes;
(vii) The enforcement of a mortgage has been held to be a right in rem for which proceedings in arbitration would not be maintainable In the matter A. Ayyaswamy vs. A. Paramasivam and Ors., Civil Appeal Nos. 8245-8246 of 2016, the Hon’ble Supreme Court held that following are the disputes which are considered non-arbitrable:
(viii) Patent, trade-marks and copyright;
(ix) Anti-trust/competition laws;
(x) Bribery/corruption laws;
(xii) Criminal Matters.
The LAM provides that only the controversies in which settlement is permitted can be subjected to arbitration. Consequently, disputes arising from labor relationships, tax matters, conflict of matters concerning minors, among others, cannot be subjected to arbitration.
Arbitration is not allowed in matters that are not, by law, potentially capable of amicable settlement between the parties. For example, matters that would give rise to criminal charges that cannot be waived cannot be subject to arbitration. Also family law matters are not arbitrable. Transfer of title to real property is not arbitrable.
A dispute is considered non-arbitrable if the subject matter is not capable of being settled by agreement between the parties. A dispute is also likely non-arbitrable in cases where a third party’s consent is required, and in some aspects as far as it concerns rights in rem. Furthermore, a claim is non-arbitrable if the relief sought may only be granted by a state authority or the courts. Such cases include declaration of bankruptcy, taxation, the existence and validity of patents, certain competition law disputes such as imposition of fines, ordering a company to cease and desist activities harmful to competition, and granting clearance for acquisitions of businesses.
After entry into force of the Arbitration Act in 2001, Croatia placed itself amongst the states which allow arbitration on the widest variety of disputes. Thus, the parties may agree on arbitration for the settlement of disputes with respect to the rights of which they may freely dispose.
Croatian law limits the possibility of choosing the seat of arbitration outside of Croatia. The parties may agree on the arbitration outside Croatia only in the disputes with an international element and provided that Croatian courts do not have exclusive jurisdiction to hear such disputes.
Criminal matters, matrimonial and family matters, disputes concerning minors and disputes with public policy implications are non-arbitrable in Cyprus. In addition, recent Cypriot caselaw has adopted the existing common law approach that a Tribunal will have limited powers to make orders which affect the status of a Cyprus Company such as a winding up order or rectification of a company’s register of members, though the substantive dispute may be arbitrable regarding its disputed facts.
As a matter of principle, parties may have recourse to arbitration with respect to any right that they enjoy freely (Article 2059, Civil Code). Parties are free to arbitrate anti-trust and intellectual property disputes, for example. Thus, there are only a limited number of types of disputes that may not be resolved by arbitration. The types of disputes that cannot be resolved by arbitration include those relating to:
- Civil status and capacity of natural persons.
- Divorce and judicial separation of spouses.
In addition, disputes involving certain categories of public authorities and entities cannot be arbitrated.
In principle, certain types of consumer and employment disputes also cannot be resolved through arbitration.
However, the Court of Cassation has held that this prohibition does not apply in the same way to international arbitration (Court of Cassation, First Civil Chamber, 5 January 1999, No. 96-21.430, Zanzi). For example, in the case of an international employment contract containing an arbitration clause, the French courts considered that the arbitration clause was not null and void but that the employee was nevertheless not prevented from initiating a claim before the French Employment Courts (as would normally be the case with a valid arbitration clause) (Court of Cassation, Social Chamber, 16 February 1999, No. 96-40.643).
Pursuant to Article 806 CCP all disputes are arbitrable under Italian law, except those concerning non-arbitrable rights such as criminal and certain family law matters. Employment disputes can be referred to arbitration only if so provided by the law or by national collective employment agreements. Also, disputes between private parties and public administrations acting as a public entity are non-arbitrable.
The ACA does not set out the disputes that are considered non-arbitrable. However, section 57 of the ACA defines arbitration to mean commercial arbitration, and “commercial” entails all relationships of a commercial nature. Further, the full title of the ACA states that it is an Act to provide a unified legal framework for the fair settlement of commercial disputes by arbitration and conciliation. Disputes arising from non-commercial transactions may not be referred to arbitration under the ACA. Criminal prosecutions, proceedings for the judicial review of administrative action and proceedings to dissolve marriages, for example, are unabitrable. See United World Ltd Inc v MTS (1998) 10 NWLR (Pt. 568) 106. One can find broader suggestions that issues as to whether a conduct amounts to a crime or a payment or transaction is taxable, or whether given parties are or were truly married are all non-arbitrable, but these all appear, strictly speaking, to be overbroad.
Most disputes are arbitrable under Austrian law and, in particular, those that can be legally settled (such as typically commercial claims but also several non-proprietary claims).
Family law matters are a typical example of non-arbitrable disputes; the same goes for social security claims. This holds true even if the claims involve an economic interest. Also claims based on contracts subject (even if only in part) to the Austrian Tenant Act (Mietrechtsgesetz), the Austrian Non-Profit Housing Act (Wohnungsgemeinnützigkeitsgesetz) or the Austrian Condominium Act (Wohnungseigentumsgesetz) are also non-arbitrable.
While consumer and employment matters are, in principle, arbitrable, Austrian law requires the arbitration agreement to be concluded only once the dispute has arisen to be valid.
Very few categories of disputes are considered non-arbitrable in the United States (e.g., criminal law disputes). Virtually any dispute of a civil or commercial nature can be arbitrated. For example, intellectual property, antitrust, labor and employment, franchise, and civil rights claims all are arbitrable in the United States.
The arbitrability question is controlled by article 867 GrCCP as regards domestic and international commercial arbitration alike. It provides that any private law dispute may be referred to arbitration as long as the parties are vested under law with the power to freely dispose of its subject matter. Certain classes of disputes which meet said prerequisite are nevertheless expressly excluded on the basis of other considerations. This holds true for example as regards labor disputes, the exclusion of which is premised upon the perceived necessity to protect the interests of employees.
Said doctrine is well-established in legal literature and case law. No recent developments exist. There is an ever-growing body of case law ruling on the arbitrability of certain types of disputes along lines which are indeed predictable given the said standard derived from substantive law.
In accordance with the Israeli laws, an arbitration agreement in a matter that cannot be a subject for an agreement between the parties is not valid. The matters that cannot be a subject for an agreement between the parties include an illegal matter (meaning an illegal arbitration agreement as opposed to a partly illegal agreement), matters relating to the rights conferred by the law (e.g., social rights and employees' rights under labor laws, personal status issues concerning the determination of one's legal status), company liquidation issues, matters concerning administrative discretion, issues with constitutional nature, lawsuits against office holders in corporations, matters relating to in rem rights.
Both contractual and non-contractual disputes can be submitted to arbitration (s.6(1) of the 1996 Act, see also the recent case of Fiona Trust & Holding Corporation v. Privalov (2007) UKHL 40). Examples of non-arbitrable matters as a matter of English law include criminal and family matters and insolvency proceedings.
As a matter of principle, all disputes are arbitrable, unless there is a legal provision which states otherwise.
As far as national arbitration is concerned, the following matters are exempt from arbitration, according to the Civil Procedure Code: civil status litigation, litigation with respect to legal capacity of persons, inheritance litigation, matters arising out of or in connection with family relations, as well as litigation regarding rights that the parties cannot dispose of (eg in labour and employment law matters where the law expressly provides that a party cannot waive the legal rights established in their favour, criminal matters - except for civil aspects arising in connection thereto).
Regarding international arbitration, a dispute can be referred to arbitration provided that:
- it is of a patrimonial nature;
- it deals with rights the parties may freely dispose of (this excludes, among others, disputes over personal civil status and legal capacity, inheritance and family matters and labour law disputes); and
- it falls outside the exclusive jurisdiction of the courts pursuant to the law of the seat of arbitration.
While the procedural rules regulating domestic proceedings may still occasionally raise questions regarding the capacity of public and state-owned bodies to conclude arbitration agreements, no such limitations are imposed in respect of international arbitration. Thus, international arbitration parties may not seek to evade arbitration to which they have previously agreed by invoking internal law provisions that purport to prohibit entering into arbitration agreements. As a matter of fact, in the recent years the jurisprudence has become quite unanimous in rejecting the objections raised by state-owned bodies that had previously agreed to refer a dispute to arbitration.