2 · Court review of arbitral tribunals’ jurisdiction

November 2010: “If a national court is called upon, in the context of an application to refer parties to arbitration, to determine whether a valid arbitration agreement exists, how probing should the court’s examination of the existence or validity of the putative agreement be? Judicial authorities in countries that have adopted the UNCITRAL Model Law on International Commercial Arbitration have split on the question of what standard of judicial review to apply in such cases. Applying Article 8 of the Model Law, some courts have adopted a standard of full judicial review: in deciding whether or not to refer parties to arbitration or to stay national court proceedings, these courts have considered de novo whether or not a valid arbitration agreement exists, rendering a final determination on this issue. In contrast, applying the same provision, other courts have adopted a prima facie review standard; under this standard, a national court only preliminarily determines whether there is a prima facie basis for arbitral jurisdiction and, if so, leaves determination of the jurisdictional issue to the arbitral tribunal, subject to later judicial review of the arbitrators’ award and jurisdictional decision.” The arti cle was available on 16 August 2016 at http://kluwerarbitrationblog.com/ blog/2010/12/13/irish-high-court-on-full-versus-prima-facie-judicial-consideration -of-whether-an-arbitration-agreement-exists/. 15 See SOU 1994:81 s. 106 and NJA 2016 s. 264. 16 See SOU 1994:81 s. 258 and prop. 1998/99:35 s. 214. 1 7 See references made in NJA 2008 s. 406 by the reporting clerk in the Supreme Court and the references made in the decision itself to NJA 1955 s. 500, NJA 1982 s. 738 and NJA 2005 s. 586 and NJA 1973 s. 1 and NJA 1984 s. 705 respectively. The case from 2008 involved an arbitration based on statutory law but the Supreme Court explained explicitly that the doctrine of assertion was to be applied in the same manner when an arbitration was based on statutory law as when it was based on an arbitration agreement. 18 In NJA 2007 s. 475, the Supreme Court held that even if the claimant had alleged that the claim was not based on a lease agreement which included an arbitration agreement but rather a tort claim, the facts invoked were directly related to the lease agreement. Subsequently, in addition to the fact that the claimant’s other grounds were to be adjudicated by arbitrators, the non-contractual ground was also to be considered as within the purview of the arbitration agreement. Similarly, in NJA 2008 s. 120, the claimant, a ferry operator, had pleaded his case without invoking an agreement between him and the respondent, in which an arbitration agreement had been included. The claimant alleged that the respondent’s (a municipal port company) total collection of fees exceeded what the port was entitled to receive pursuant to the cost/price principle in Swedish law. The port company held that certain fees paid by the claimant related to investments in the port in order to stimulate traffic and that this was governed by an investment agreement containing an arbitration clause. The courts of general jurisdiction thus lacked jurisdiction to hear the claimant’s action in the matter to the extent the payments were made under this agreement. The Supreme Court found that the claimant’s request had such strong connection to the agreement that the action in that specific part should be considered as covered by the arbitration agreement. The same principle of connection appears to have been applied by the Supreme Court in NJA 1973 s. 620. The case concerned a request for vacation allowance due to an alleged employment relationship whereas the respondent defended the claim on the basis that the claimant was an independent agent and subsequently invoked the arbitration agreement contained within the agency agreement as a bar to judicial proceedings. The Supreme Court noted that the issue of whether the claimant was entitled to vacation allowance was regarded as so closely connected to the agency agreement that the arbitration clause applied. 1 9 See, e.g. Heuman, JT 2009–10 s. 335, and JT 2011–12 s. 650 and Lindskog, Skiljeförfarande: en kommentar (Eng: Arbitration. A Commentary), 2012, p. 186 et seq., especially the footnotes 438–441. See also Mohammar & Isaksson, Vänbok till Bertil Södermark (Eng: Commemorative book to Bertil Södermark), 2009, p. 145 et seq., Schöldström, JT 2007–08 s. 467 et seq. and 2008–09 s. 138 et seq. and Forsell & Wallin, JT 2007–08 s. 943. Cf. also Waerme, SvJT 2010 s. 714, Madsen SvJT 2013 s. 730 et seq. and Falkman, SvJT 2016 s. 257. 20 Heuman states in JT 2009–10 s. 335 that the doctrine of assertion and the doctrine of connection focus on two different jurisdictional issues in that the doc trine of assertion is targeted at certain substantive and evidentiary issues, whereas the doctrine of connection is targeted at certain legal issues. In JT 2010– 11 s. 650, Heuman develops his theory further and writes that there are reasons to apply the doctrine of assertion in all, or some, cases when facts of double relevance are at hand. 21 In fact, the Supreme Court even went a step further, basing the decision on the fact that the tribunal should have accepted the claimant’s assertion that he had made an investment within the meaning of the Foreign Investment Law (of the Republic of Kirgizistan). The court did not assess whether the facts invoked by the claimant did in fact qualify him as an “investor” under the statute but concluded that the requirement under the statute was fulfilled by the assertion alone. Likewise, in NJA 2012 s. 183, the Supreme Court based the outcome on the fact that the claimant had contended that his action was founded on the repayment of a loan which had already been granted prior to the entry into of the agreements which included an arbitration clause. Hence, the claim was perceived to constitute a separate legal relationship to the relationship contained in the agreements. This appears to be contrary to Swedish procedural principles as a court is not bound by the legal qualifications made by the parties, but rather only by the facts submitted by them. 2 2 In the Swedish version of the rules, only the term “tvist” (Eng: “dispute”) is used. The New York Convention uses the expressions “dispute” and “difference” as synonyms. In NJA 2007 s. 475 the arbitration clause simply stated that any dispute was to be settled by arbitration. The Supreme Court found that the clause could be rea d as to imply that all disputes connected to the agreement were to be settled by arbitration and found that the non-contractual claim was also to be arbitrated. In NJA 2012 s. 183 it was stated that disputes in respect of the agreement or connected thereto be arbitrated. It is difficult to draw any conclusions as to the scope of the two arbitration clauses on the basis of the wording of the clauses. If anything, one would have thought that the clause in the latter case would be deemed to be more widely drafted as it explicitly stated that disputes connected to the agreement were to be included. However, in the latter case the Supreme Court held that the relevant arbitration clauses (two were involved) did not specify any legal relationship except the agreement regulated by the respective contractual document. Thus, the arbitration clauses would govern only the rights and obligations arising under these agreements. 23 Lindskog, op. cit., p. 115 et seq. 24 See, e.g. NJA 1995 s. 586. 25 It was previously unclear which impact the form of the agreement had, see, e.g. NJA 1964 s. 2, NJA 1972 s. 458 and Heuman, op. cit. p. 75, footnote 147. 26 See footnote 22 supra. 2 7 Cf. Born, op. cit., p. 1321, “It is almost uniformly held or assumed that general applicable rules of contract construction apply to the interpretation of international arbitration agreements”. 28 Redfern & Hunter, Redfern and Hunter on International Arbitration, Student Version, 2009 (5th ed.), p. 107 assumes that “it is necessary to determine whether a particular claim or a defence has a sufficiently close connection with the contract to be governed by the arbitration agreement”. See also Lew, Julian D.M, Mistelis, Loukas A. & Kroll, Stefan, Comparative International Commercial Arbitration, Kluwer, 2003, p. 150 et seq., who states that: “Most arbitration agreements are broadly worded. The ICC model clause for example covers ‘All disputes arising out of or in connection with the present contract.’ It is generally recognised that this wording covers all differences and claims arising from a given contractual relationship and even to non-contractual and tortious claims. In Kaverit Ltd v Kone Corp the Alberta Court of Appeal of Canada defined the ambit of such clauses […] A dispute meets the test set by the submission if either claimant or defendant relies on the existence of a contractual obligation as a necessary element to create the claim, or to defeat it” [Kaverit Steel and Crane Ltd et al v Kone Corporation et al, (1994) XIX YBCA 643 (Alberta Court of Appeal, 16 January 1992)]. 29 ICCA Yearbook Commercial Arbitration (“ICCA YC”) 2003–2012. 30 ICCA YC 2011 US 745(sub 11-19), 2009 Austria 19 (sub 2–3), Netherlands 33 (sub 15–18), US 662 (sub 20–27), 2008 US 631 (sub 1–2), 2006 US 629 (sub 32– 35), 2005 US 505 (sub 9–27) and 2004 US 454 (sub 22–24). 3 1 Born. op. cit., p. 839-840. See also Wolff (ed.), New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards-Commentary, p. 187 and further references in footnote 637. 32 See, e.g. Schöldström in JT 2007–08 s. 467 et seq. and 2008-09, s. 689 et seq. See also Forsell and Wallin in JT 2007–08 s. 943 et seq. Lindskog also opines that noncontractual grounds, e.g. caused by an offence, cannot be covered by the arbitration agreement if the offence occurred after the arbitration agreement had been concluded, bearing in mind the fact that such agreements cannot be concluded with regard to a legal relationship that has not yet been established, see Lindskog, op. cit., p. 254 et seq. Lindskog also claims that NJA 2007 s. 475, as mentioned above, cannot under any circumstances be understood as if one and the same legal consequence may be based on both the main agreement as on a non-contractual rule, a non-contractual claim is always within the scope of an arbitration agreement; that should only be the case in exceptional circumstances and would further require good procedural reasons. Lindskog points out that the Supreme Court in NJA 2010 s. 734 has made it clear that this is the case. See also Heuman, Arbitration Law 1999, p. 48 et seq. and 92 et seq. Heuman indicates in JT 2011–12 p. 665 that “in case law, courts seem to have overlooked the requirement that arbitration agreements shall regard a specified legal relationship”. Heuman also emphasizes that “the previous case law must be reevaluated and critically examined” and further refers to that the Supreme Court in NJA 2010 s. 734 held that it is not possible to disregard the legal relationship requirement. 3 3 See SOU 1994:81 s. 256 et seq. and prop. 1998/99:35 s. 212. Lindskog points out that the particular legal relationship requirement was included already in section 1 of the Arbitration Act from 1929 and was then transferred into section 1 of the Arbitration Act 1999 without it being further discussed in the preparatory works (Lindskog, op. cit., p. 247, footnote 144). 34 See Article II (1) of the New York Convention and Article 7 (1) of the Model Law respectively. 35 The Geneva Protocol was behind the Swedish law from 1929 on foreign arbitration agreements and arbitral awards. 36 In the Swedish version, the text reads as follows: “let disputes arisen out of the contract, in whole or in part, be referred to arbitration” (NJA II 1929 s. 72). 37 See van den Berg, Albert Jan (ed.), The New York Arbitration Convention of 1958: towards a uniform judicial interpretation, 1981, p. 148. Among other things, van den Berg points out: “The final text has as a main consequence that also actions framed in tort can be submitted to arbitration. This provision supersedes a municipal law which regards arbitration possible only in respect of contractual claims. Of course the claims framed in tort must come within the purview of the arbitration agreement.” Van den Berg also emphasizes on pp. 149–150 that: “The dispute must also ‘arise in respect of’ a defined legal relationship. In other words, the wording of the arbitration agreement must be sufficiently broad to cover the dispute. Whether a dispute falls under the agreement would appear to be essentially a matter of construction.” 38 See UNCITRAL 2012 Digest of Case Law on the Model Law on International Commercial arbitration (available at www.uncitral.org, commentary to Article 7 (1) , para. 12, with further references. See also Holtzmann & Neuhaus, A Guide to UNCITRAL Model Law, 1989, p. 259 at footnote 2. It states: ”The Secretariat gave the following examples: ’third part interfering with contractual relations, infringement of trade mark or other unfair competition’.” It is further stated that ”a number of delegations suggested removing the words ’defined legal’, but they were retained because they were found in the New York Convention on which Article 7 was consciously based.” A review of court cases in this regard from different jurisdictions can also be found in Poudret & Besson, op. cit., p. 266 et seq. 39 See, e.g. Poudret & Besson, op. cit., pp. 265–268. 40 This follows for foreign arbitral agreements to which the New York Convention is applicable. 41 In connection with the accession of Sweden to the Convention, the provision in the New York Convention has been interpreted so that no contracting state may impose more strict formal requirements than those set out in the Convention. Furthermore, the Supreme Court, in NJA 2003 s. 379 and NJA 2010 s. 219, referred to the underlying purpose of the New York Convention in connection with enforcement of foreign arbitral awards. Regarding the interpretation of an arbitration agreement it may be interesting to mention what is stated in Born, cit. op. p. 1318: “The New York Convention acknowledges the necessity of interpreting the scope of arbitration agreements and provides for the non-recognition of awards that exceed the scope of the agreement to arbitrate.” It is further stated that: “The convention does not, however, prescribe any rules governing the interpreting process.” Finally, Born, op. cit., p. 1321 writes that “it is almost uniformly held or assumed that generally applicable rules of contract construction apply to the interpretation of international arbitration agreements” and on p. (p. 1326) “that a valid arbitration clause should generall be interpreted expansively and, in case of doubt, extended to encompass disputed claims.” 42 It would be conceivable, at least in theory, that only contractual claims which existed at the time of the establishment of the arbitration agreement were intended, but this seems less likely given the fact that this restriction has not been mentioned in the preparatory works and that no such difference has been recognized in comments thereto. I have not seen it used in any court cases regarding the Model Law or the New York Convention. 4 3 As has been noted above, the Convention applies to foreign arbitration agreements. The Supreme Court did not, however, perform any special assessment in NJA 2008 s. 406 although the case concerned foreign parties. Nor have I noticed that the Supreme Court in other decisions has taken particular account of international connections (see, e.g. NJA 2009 s. 128). 44 Wolff et al, op. cit., The New York Convention states that the requirement “defined legal relationship” is characterized as autonomous substantive law that is to be interpreted independently from national law regardless of whether the domestic law foresees higher or lower requirements in this regard, p. 111. Moreover, it is emphasised on p. 113: “the defined legal relationship is not limited to a defined contract, it suffices that all disputes between the parties within a given sphere are covered, e.g. all disputes related to a membership in an association, all disputes arising out of the consignment of a certain commodity or all disputes related to joint stock exchange activities.” 45 The question may be raised as to whether the doctrine of assertion is in harmony with Article 6(1) of the European Convention on Human Rights – Right to a fair trial. Pursuant to the provision everyone is entitled to a fair and public hearing. A party may waive their right to a court adjudication in favour of arbitration, provided that such waiver is permissible and is established freely and unequivocally (Suda v. the Czech Republic, §§ 48 and 49). The Convention is not directly applicable to arbitrations but national courts must comply with the Convention’s fundamental procedural guarantees (see Fouchard, Gaillard, Goldman on International Commercial Arbitration, 1999, p. 118). Article 6 (1) requires the courts to carry out an effective judicial review (Obermeier v. Austria, § 70). The principle that a court should exercise full jurisdiction requires it not to abandon any of the elements of its judicial function (Chevrol v. France, § 63 (see Guide on Article 6 on the Convention of Human Rights available at http://www.echr.coe.int/Documents/ Guide_Art_6_ENG.pdf, pp. 17,18 and 21). At the very least, it seems to be worth looking more closely at the matter in order to assess whether a party has freely and unequivocally consented to arbitration in the meaning of the Convention by a tribunal or court without reviewing all factual matters pertinent to the waiver. 46 See Born I, op. cit., p. 1246 et seq. and with respect to Switzerland and England, Poudret & Besson, , op. cit., p. 419 et seq. See Lindskog, op. cit., in I:0-6.1.2. and particularly in footnote 438. Lindskog, who was the Reporting Justice in NJA 2008 s. 406 and participated in the decisions in NJA 2010 s. 734 and NJA 2012 s. 183 argues against Hobér’s statement in International Arbitration in Sweden, 201 1, 3.36 with footnote 59 that it is not unusual in international arbitration when doubly relevant facts exist to merge the jurisdictional objections to the merits phase of the arbitration. However, according to Hobér, this does not mean that the arbitrators are prevented from dismissing the case for lack of jurisdiction should they come to this conclusion when trying the facts and the legal arguments. According to Lindskog, this is not in conformity with the doctrine of assertion. According to the doctrine the point of departure is that jurisdiction shall be deemed to exist, which means that the claim shall be dismissed after meritorious review, not without prejudice if the fact or facts of relevance are deemed not proven. This, as a dismissal without prejudice would entail than an action could be instituted in another forum. 47 The same applies to the ICC Arbitration Rules, the Secretariat’s Guide to ICC Arbitration, 2012, p. 87, 3–264. 48 Wolff, op. cit., p. 318 and e.g. the Supreme Court, UK, in Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46 UK where it was held by Lord Mance writing for the majority that “the tribunal’s own view of its jurisdiction has no legal or evidential value, when the issue is whether the tribunal had any legitimate authority” and that the scheme of the New York Convention “may give limited prima facie credit to apparently valid arbitral awards based on apparently valid and applicable arbitration agreements, by throwing on the person resisting enforcement the onus of proving one of the matters set out in Article V(1) and s. 103 [of the Arbitration Act]. But that is as far as it goes. [Claimant] starts with the advantage of service, it does not also start fifteen or thirty love up”. Born, op. cit. p. 3477 et seq. recognizes that a court will ordinarily consider the existence and validity of an arbitration agreement de novo but states that the Supreme Court in the Dallah matter supra should have shown more deference to the findings of the tribunal. 4 9 See Born op. cit., p. 1326 et seq and decision of the House of Lords, 17 October 2007 [Fiona Trust & Holding & Holding Corporation & Ors 20 v. Yuri Privalov & Ors 17 sub nom Premium Nafta Products Ltd. (20th defendant) & Ors v. Fili Shipping Co. Ltd. (14th claimant) & Ors [2007] UKHL 40]. The House of Lords stated the following: “Ordinary businessmen would be surprised at the nice distinctions drawn in the cases and the time taken up by argument in debating whether a particular case falls within one set of words or another very similar set of words. If businessmen go to the trouble of agreeing that their disputes be heard in the courts of a particular country or by a tribunal of their choice they do not expect (at any rate when they are making the contract in the first place) that time and expense will be taken in lengthy argument about the nature of particular causes of action and whether any particular cause of action comes within the meaning of the particular phrase they have chosen in their arbitration clause. […] As it seems to us any jurisdiction or arbitration clause in an international commercial contract should be liberally construed. The words ‘arising out of’ should cover ‘every dispute except a dispute as to whether there was ever a contract at all’ […] It is not to be expected that any commercial man would knowingly create a system which required that the court should first decide whether the contract should be rectified or avoided or rescinded (as the case might be) and then, if the contract is held to be valid, required the arbitrator to resolve the issues that have arisen. This is indeed a powerful reason for a liberal construction.” Furthermore, see SIAR 2007:3 p. 115 et seq. There are also numerous cases from various jurisdictions that emphasize the desirability of a conformed dispute resolution.

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