Citation(1995) 7 SAcLJ 269
Published date01 December 1995
Date01 December 1995

This paper examines the enforcement of international arbitration agreements under the International Arbitration Act 1994. The issues, which relate to enforceability at the pre-award and post-award stages, are important as many of them relate to the drafting of the arbitration agreement or clause. As the Act is new, reference is made to case law from other jurisdictions for suggestions on interpretation.


This paper will examine some of the issues surrounding the enforcement of arbitration agreements under the International Arbitration Act,1 under the following headings:

  1. 1. Applications for stay of judicial proceedings:

    1. (a) under section 6 of the Act,

    2. (b) under Article 8 of the Model Law,

    3. (c) under the courts inherent jurisdiction, with examples,

    4. (d) implications of stay being allowed or refused;

  2. 2. Public Policy and Arbitrability;

  3. 3. Separability; and

  4. 4. Enforcement of award where the arbitration agreement is challenged.

The Act defines an arbitration agreement in two ways. Under section 2(1), it means:

“an agreement in writing referred to in Article 7 of the Model Law and includes an arbitration clause contained or incorporated by reference in a bill of lading”.

Article 7 of the Model Law2 provides:

  1. “(1) “Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which

  1. may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause or in the form of a separate agreement.

  2. (2) The arbitration agreement shall be in writing…”

Thus, an arbitration agreement may take the form of a clause embedded in a commercial agreement, or of an agreement separate from the main contract. Whichever form it takes, an arbitration agreement must be capable of enforcement at general law and under the Act.3

From the definitions above, it is clear that such an agreement must relate to a dispute in respect of a “defined legal relationship”, and be “in writing” to be enforceable under the Act. However, what constitutes such writing,4 and beyond that, when an arbitration agreement may be unenforceable for other reasons, are issues which may arise from time to time.

It should be noted at the outset that a challenge to the enforceability of an arbitration agreement can occur at more than one stage of the arbitral process, and on various grounds. The challenge may occur at the initial stage of the dispute, where one party seeks arbitration but the other resists it, challenging the validity of the arbitration agreement. In another example, one party may, despite the existence of an arbitration agreement, have commenced judicial proceedings, but the other party seeks a stay of these proceedings in favour of arbitration. The party in favour of judicial proceedings would invite the court to refuse a stay on the ground that the arbitration agreement is unenforceable.

The challenge to the arbitration agreement can also occur at the stage at which the arbitral award is sought to be enforced, where one party resists such enforcement by attacking the validity or enforceability of the arbitration agreement.5 The grounds on which the challenges can be made would generally depend on the relevant curial law of the arbitration and, where the challenge occurs at the enforcement stage, the law of the place of enforcement.6 Under the Act, for instance, arbitration agreements are open

to challenge both at the initial and enforcement stages. If an arbitration agreement is successfully challenged, the dispute would have to be decided by means other than arbitration, probably, by court proceedings. In an appropriate case under the Act, the court may well refuse stay and prefer to hear the matter itself.

One might query why, with the current fervour to promote commercial arbitration as an alternative to litigation, such judicial intervention in arbitral proceedings is allowed under the Act. One argument would be that since arbitration removes disputes from the judicial system into a private forum, the law seeks to ensure that this removal is done only in appropriate cases. Cases which may be inappropriate would be those in which the matter to be decided requires public, not private, resolution, because, perhaps, it concerns public policy, or concerns matters more appropriately decided by a court of law, such as where criminal activity is involved. Another reason would be that the particular arbitration agreement may simply be defective or non-existent, so that it is unenforceable under normal contractual principles.

The Act stipulates the cases in which it would not be appropriate to arbitrate. In these cases, arbitration agreements will not be enforced as the courts are deemed to be the appropriate venue for dispute settlement. What, then, are these cases under the Act? They appear to be clearly defined categories, but several difficult issues can arise in their application. The following discussion will examine some of these issues.

1. Applications for stay of judicial proceedings
(a) Under section 6 of the Act

Under section 6(1) of the Act, where any party to an arbitration agreement institutes legal proceedings against any other party to the agreement, in respect of any matter which is the subject of the agreement, any party to the agreement may apply for a stay of those proceedings. This is provided that the party applying for the stay has done so “at any time after appearance and before delivering any pleadings or taking any other steps in the proceedings”. Where such an application is made, section 6(2) requires that the court “shall make an order … staying the proceedings unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed.” Such a stay should also be ordered by virtue of Article 11(3) of the New York Convention, which appears in the Second Schedule of the Act.7

The mandatory language in section 6(2) requiring the court to order the stay indicates that it has no discretion. Read literally, the only exceptions in which the court may choose to refuse stay are those mentioned in the last part of the sub-section. The corresponding provision in the UNCITRAL Model Law is Article 8. Neither the Act, the Model Law nor the New York Convention defines “null and void, inoperative or incapable of being performed”. Although section 4(1) of the Act allows reference to the travaux préparatories of the Model Law in its interpretation, there does not appear to be any assistance therein, except that “null and void” agreements would normally include those which refer non-arbitrable matters to arbitration.8 The terms “null and void”, “inoperative” and “incapable of being performed” have deliberately not been defined in the Model Law and in the Act, to allow the adopting jurisdiction to give them such meaning as it thinks fit.

Mustill & Boyd have sought to explain the application of these terms as follows, in the context of their appearance in section 1 of the English Arbitration Act 1975 (which is not an adoption of the Model Law):

  1. • the words “null and void” includes cases where the purported arbitration agreement never came into existence and where it came into existence but has become void ab initio;

  2. • the term “inoperative”, having no accepted meaning in English law, refers to an agreement which has for some reason ceased to have effect for the future — such reason including a court order to the effect that the agreement shall cease to have effect, the existence of circumstances such as frustration, discharge by breach etc, and cessation of the agreement by some further agreement of the parties;

  3. • finally, “incapable of being performed” is taken to mean some obstacle to the performance of the arbitration agreement by the parties, such as the breakdown of the mechanism for constituting the tribunal in a way that is beyond repair by the Court.9

It can be expected that where the arbitral process is strongly supported by the courts in a jurisdiction, they will read these terms narrowly so as to give maximum effect to the arbitration agreement. This is illustrated by the cases discussed below.10

In Kaverit Steel & Crane Ltd v Kone Corpn11, the Alberta Court of Appeal was of the view that the ground is “an echo of the law about void contracts (‘null and void’), unenforceable contracts (‘inoperative’), and frustrated contracts (‘incapable of being performed’).”

In Halsbury’s Laws of Australia, these terms are taken to refer to the following situations:

  1. • want of offer and acceptance;

  2. • want of consideration;

  3. • the arbitration agreement is illegal or otherwise void ab initio; and

  4. • the arbitration agreement has become void ab initio by operation of law or court order.12

How have courts elsewhere dealt with this phrase?

In Overseas Union Insurance Ltd v AA Mutual International Insurance Co Ltd13, the English court held that it was for the party opposing a stay to prove that the words “null and void …” etc in section 1 of the English Arbitration Act 1975 applied, once the applicant for stay had proved the existence of what appears to be a relevant arbitration agreement. On the facts, the court held that there was no evidence that the agreements in question “were not valid, or that they were a sham or device or were inoperable in accordance with their terms…”14

In Home & Overseas Insurance Co Ltd v Mentor Insurance Co (UK) Ltd15, the English Court of Appeal held that whilst a clause which purported to let arbitrators decide without regard to the law and according, for example, to their own notions of fairness would be invalid, the clause in question did no more than to allow the arbitrators latitude to decide in a reasonable or equitable manner, rather than in a strict legal one. The clause was therefore...

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