What disputes can your company resolve by arbitration?

IN arbitration, parties to an arbitration agreement are masters of their ship. They can sail anywhere. Except for a restricted number of non-arbitrable issues, such as criminal matters, virtually every kind of dispute imaginable may be the subject of an arbitration agreement. Parties can execute a wide arbitration clause, which covers any and all disputes arising or relating to the contract, or a narrow clause, limiting the kind of disputes the parties agree to submit to arbitration. Despite the parties’ agreement to resolve their disputes by arbitration, certain disputes may arise that, by operation of law, cannot be settled by arbitration.

According to Sundin and Wernberg, in their work, The Scope of Arbitrabili

ty under Swedish Law (2013), there is no universally agreed concept of arbitrability. The concept has no clear or settled definition in international legal in

struments. In its 32nd session, the United Nations Convention on Internation

al Trade Law (UNCITRAL), acknowledged the difficulty of prescribing universal guidelines on defining arbitrability. The Report of the UNCITRAL on the Work of its 32nd Session (1999) readily admits that there is no certainty on whether or not particular disputes are capable of resolution by arbitration.

Be that as it may, one can fashion a definition of the concept by gleaning international legal instruments. Arbitrability concerns itself with whether specific classes of disputes can or cannot be resolved by arbitration. In practice, arbitrability resolves the question of whether a particular type of dispute, by operation of statute or judicial authority, is barred from arbitration and reserved to the sphere of the public courts. Once, it is established that a dispute is not arbitrable; the claim must be referred to public courts for resolution.

The above definition of arbitrability emanates from the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York

Convention), in particular Article II (1) and V (2).

Article II (1) of the New York Convention states that:

“Each Contracting State shall recognise an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.”

Parties have the freedom to refer virtually all disputes to arbitration except where the subject matter is not capable of resolution by arbitration. Article V (2) of the Convention defines the situations where the subject matter is not capable of resolution by arbitration. It provides that:

“2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:

(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or

(b) The recognition or enforcement of the award would be contrary to the public policy of that country.” (My own emphasis).

It is clear, therefore, that the arbitrability of any given dispute is determined by the applicable laws of individual countries. By virtue of the concept of party autonomy, parties have broad latitude to submit all manner of disputes to arbitration; however, that autonomy is limited by national laws which regulate the nature of matters capable of resolution by arbitration.

The restrictions imposed by national laws are varied. These limitations may concern themselves with the capacity of a party to conclude an arbitration agreement. Certain institutions, for example states or state entities, on account of policy considerations, may be barred from concluding arbitration agreements. Other limitations may be based on the subject matter. For example, a statute may prescribe that disputes over the custody of minor children are not capable of resolution by arbitration.

The capacity of a subject matter to be resolved by arbitration is known as “objective arbitrabil

ity”, and the capacity of a person to be party to an arbitration agreement is generally defined as “subjective arbitrability”.

In Zimbabwe, arbitrability is governed by section 4 of the Arbitration Act [Chapter 7:15]

(“the Act”). Section 4 (1) restates the concept of party autonomy in the following terms:

“(1) Subject to this section, any dispute which the parties have agreed to submit to arbitration may be determined by arbitration.”

Section 4 (2) of the Act enumerates the matters that are not capable of resolution by arbitration and those matters which can only be referred to arbitration if the courts expressly allow parties leave to do so. Section 4 (2) provides as follows:

“(2) The following matters shall not be capable of determination by arbitration—

(a) an agreement that is contrary to public policy; or

(b) a dispute which, in terms of any law, may not be determined by arbitration; or

(c) a criminal case; or

(d) a matrimonial cause or a matter relating to status, unless the High Court gives leave for it to be determined by arbitration; or

(e) a matter affecting the interests of a minor or an individual under a legal disability, unless the High Court gives leave for it to be determined by arbitration; or

(f) a matter concerning a consumer contract as defined in the Consumer Contracts Act [Chapter 8:03], unless the consumer has by separate agreement agreed thereto.

Section 4 (3) clarifies an important point. Where a statute prescribes that the courts or a particular tribunal has jurisdiction to determine a dispute, such a provision does not necessarily ouster resolution by arbitration. Section 4 (3) says:

(3) The fact that an enactment confers jurisdiction on a court or other tribunal to determine any matter shall not, on that ground alone, be construed as preventing the matter from being determined by arbitration.”

To conclude, if a dispute is non-arbitrable, the arbitration agreement is a nullity. Consequently, the tribunal would lack jurisdiction and the award might not be recognised and enforced. To ensure enforceability of their arbitral awards, arbitrators should invariably determine arbitrability with specific reference to the law of the place of arbitration

Jacob Mutevedzi is a commercial lawyer and arbitration practitioner. He can be contacted on jmutevedzi@gmail.com, on Twitter @jmutevedzi_ADR and on +263775987784. He writes in his personal capacity.