Jurisdiction and admissibility in dispute resolution clauses

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Jurisdiction and admissibility

In an arbitration context, jurisdiction refers to the authority of an arbitral tribunal to make a decision affecting the merits of the case. If an arbitrator decides it has no jurisdiction it cannot make an award on the merits. The word ‘admissibility’ is used in international commercial arbitration to refer to the power of a tribunal to decide a case at a particular point in time, having regard to a possible temporary or permanent defect within the claim. If a tribunal concludes it has jurisdiction then it must proceed to rule on the merits of the claim, which may include considering questions of admissibility.

Some commentators have argued that the approach to determining whether there is a question of jurisdiction or admissibility is to examine whether the challenge is to the arbitral tribunal or the claim. Challenges to the arbitral tribunal give rise to questions of jurisdiction whereas challenges to the claim give rise to issues of admissibility. ‘Jurisdiction is commonly defined to refer to “the power of the tribunal to hear a case”, whereas admissibility refers to “whether it is appropriate for the tribunal to hear it.”’¹

Jan Paulsson, a leading international arbitrator, acknowledged the difficulty of establishing a dividing line between admissibility and jurisdiction in his article on the subject:²

‘[I]t is perhaps not easy to define the exact dividing line, just as it is not easy in twilight to see the divide between night and day. Nonetheless, whilst the exact line may remain undrawn, it should still be possible to determine which side of the divide a particular claim must lie.’³

The complexity with this distinction arises from the perspective of the person looking at the issue. A civil lawyer in France might draw the line differently to a lawyer from the United States, or England. Depending on where the arbitration is seated or the law governing the arbitration agreement, the line between admissibility and jurisdiction will often be different.

Jurisdiction and admissibility – why is it important?

Where an arbitral tribunal rules that it has jurisdiction then that decision will invariably be reviewable by the courts. Where, however, the parties have consented to the jurisdiction of the arbitral tribunal to deal with the dispute, for example in the arbitration’s terms of reference, a decision as to the admissibility of a claim should be final and binding. It has also been argued that where an arbitral tribunal decides that is has no jurisdiction, a claimant will be prevented from re-referring the same dispute to the same arbitral tribunal at a later date. However, dismissing a claim because it is inadmissible will not in principle prevent the claimant from resubmitting its claim, providing that it has cured the flaw in the claim which caused it to be inadmissible.⁴

Case law on admissibility and jurisdiction

The FIDIC 1999 forms of contract (as well as the 2017 forms of contract) contain conditions precedent to the commencement of arbitration. There are compulsory time-bar clauses and a multi-tiered dispute resolution clause. There are similar clauses found in the NEC and IChemE suite of contracts and within many other forms. The view of some civil law arbitrators is that since these types of contracts contain a valid and binding arbitration clause that gives them jurisdiction, arguments about notices or whether one party has taken all the steps required by the dispute resolution provisions are questions of admissibility. However, not every arbitral tribunal will adopt this approach. The following cases, which mostly relate to the FIDIC forms of contract, illustrate the differences in approach.

In Interim Award in Case 16083,⁵ the arbitral tribunal found that a failure to comply with the dispute resolution provisions⁶ in the contract gave rise to an issue of admissibility and not jurisdiction, although it accepted that there was some debate on this issue. The arbitral tribunal reasoned that it was bound to follow French law, as the arbitration had its seat in Paris, and that under French law the French Cour de cassation⁷ had termed this type of challenge one of admissibility (recevabilité). The arbitral tribunal also held that there was no evidence that the parties’ consent to arbitration was conditional on the pre-arbitral procedures being undertaken. It therefore did not affect the jurisdiction or authority of the arbitral tribunal.⁸

An arbitral tribunal reached a similar conclusion in Interim Award in Case 16155⁹ where, again, the seat of the arbitration was in Paris. In this arbitration both parties accepted that the requirement to refer a dispute to the Dispute Adjudication Board was a condition precedent to arbitration, except where there was no Dispute Adjudication Board in place.¹⁰ Both parties proceeded on a presumption that a failure by one party to refer a dispute to the engineer and then to the Dispute Adjudication Board was an issue of admissibility. Similarly, in Interim Award in Case 14431,¹¹ in Zurich, the arbitral tribunal found that the requirement to refer a dispute to a FIDIC Dispute Adjudication Board was a mandatory requirement and that the arbitral tribunal had therefore the option to dismiss the claims or stay the arbitration so that the adjudication could take place. The arbitral tribunal decided to stay the arbitration. The case proceeded on the basis that this was a question of admissibility.

In contrast, the Swiss Federal Supreme Court in X Ltd v Y SpA, 4A_628/2015¹² inferred that the issue was one of jurisdiction but used its case management powers to suspend the proceedings so that the defect could be resolved. The case involved the failure by one party to operate the conciliation process under the ICC ADR Rules, prior to commencing arbitration. The Supreme Court used the words ‘admissible’ and ‘jurisdictional’ synonymously¹³ but was clear that an award as to whether the arbitral tribunal could proceed with the dispute in the absence of a failure to comply with the multi-tier dispute resolution clause was an award on jurisdiction. The court stated: ‘When an arbitral tribunal rejects a jurisdictional defence in a separate award, it issues a preliminary award (Art 186(3) PILA). This is the case here.’

A comparison between jurisdiction and admissibility was undertaken in Final Award in Case 19581.¹⁴ The arbitral tribunal referred to the ICSID case of Abaclat and others v Argentine Republic¹⁵ and stated that it had jurisdiction because there was a dispute and a valid arbitration agreement. The arbitral tribunal then considered the admissibility of the claims and concluded, based on the facts, that these were admissible. The seat of the arbitration in this case was an Eastern European country.¹⁶

Arbitral tribunals sitting in London have traditionally taken very different approaches. In a case dealing with FIDIC’s 2nd edition,¹⁷ the arbitral tribunal found that it was a condition precedent to its jurisdiction that the claimant first submits a dispute to the engineer. In that case the arbitral tribunal concluded that it lacked jurisdiction because that process had not taken place. In Partial Award in Case 16262,¹⁸ which involved FIDIC’s Yellow Book, the arbitral tribunal found:

‘that a reference to the DAB was a condition precedent to arbitration and that, since that condition precedent has not been satisfied, the Arbitral Tribunal has no jurisdiction. It follows from the Arbitral Tribunal’s opinion that a reference of a dispute to a DAB is mandatory and a condition precedent to arbitration […] that, absent such reference, there is no jurisdiction save only where Sub-Clause 20.8 applies. In the present case, Sub-Clause 20.8 does not apply.’

The English courts had historically proceeded on the basis that a failure to comply with a condition precedent would give rise to challenge as to the substantive jurisdiction of the arbitral tribunal. It was only in 2018 that the English courts recognised the distinction between admissibility and jurisdiction.¹⁹ In February 2021 the commercial court addressed the issue of whether a failure to comply with clause requiring good faith amicable settlement for a 3 month period gave rise to a question of admissibility or jurisdiction.²⁰ Sir Michael Burton stated that “Jurisdiction ... is commonly defined to refer to ‘the power of the tribunal to hear a case’, whereas admissibility refers to ‘whether it is appropriate for the tribunal to hear it’.”  The English commercial court found that the failure to attempt good faith amicable settlement gave rise to an issue of admissibility and therefore brought English law into line with Singapore law,²¹ the law of the United States²² and the views of Jan Paulsson.

The following cases illustrate that some arbitral tribunals have found that a final and binding decision of an engineer or dispute adjudication board gives rise to questions of jurisdiction and not admissibility. In Final Award in Case No 7910,²³ the arbitral tribunal considered whether an engineer’s decision had become final and binding where no notice of dissatisfaction had been given. On the facts, the arbitral tribunal concluded it was both final and binding and stated: ‘the said decision has become final and binding justifies inadmissibility of such claims for lack of jurisdiction of the Arbitral Tribunal’. While the arbitral tribunal used the words inadmissibility and jurisdiction synonymously it was clear that their decision involved a finding of no jurisdiction. A similar decision was reached in Final Award in Case No 16435,²⁴ where the arbitral tribunal had to consider a contract that contained the following clause: ‘Either party may refer a decision of the Adjudicator to an Arbitrator within 28 days of the Adjudicator’s written decision. If neither party refers the dispute to arbitration within the above 28 days, the Adjudicator’s decision shall be final and binding.’ The seat of the arbitration was Mauritius and the case was influenced by English common law. The arbitral tribunal held that the claimant was not entitled to refer the dispute to arbitration as it had not made the referral within the specified 28-day period. Its conclusion was ‘that, therefore, it does not have the power or jurisdiction to decide the claims’.²⁵

Which law applies?

Questions of jurisdiction and admissibility have often been considered by reference to the law of the seat of the arbitration.²⁶ However, the recent UK Supreme Court decision of Enka Insaat Ve Sanayi A S v OOO Insurance Company Chubb²⁷ has cast doubt over the correctness of that approach. Lord Hamblin and Lord Leggatt stated:

‘It has become increasingly common for commercial parties to include in their contracts provisions which require other forms of dispute resolution, such as good faith negotiation or mediation, to be undertaken without success before a dispute is referred to arbitration […] it is reasonable to expect that, where a multi-tiered procedure is chosen, the law which determines the validity and scope of the arbitration agreement will determine the validity and scope of the whole dispute resolution agreement.’²⁸

The case of Enka v Chubb did not, however, consider the difference between admissibility, jurisdiction and arbitrability.²⁹ The power to rule on substantive jurisdiction is a power usually given to the arbitrator by the relevant arbitration laws of the seat of the arbitration. Whether issues of admissibility will be covered by the law applicable to the arbitration agreement or the law of the seat remains unclear.

Conclusion

There are differences in the way that arbitral tribunals deal with the issues of jurisdiction and admissibility in multi-tiered dispute resolution clauses. Matters such as time-bar clauses; mandatory ADR clauses; claims for extinctive prescription; waiver of claims; or final and binding third-party decisions may be treated by some arbitrators as questions of admissibility. Other tribunals may differentiate between clauses that make a third-party decision final and binding and clauses that mandate an ADR process, such as clause 20.4 of the FIDIC 1999 forms. Once a third-party decision has become final and binding under such a clause, some arbitral tribunals may find the effect to be a bar on a remedy, which will affect its jurisdiction.³⁰

Whether a particular issue is a matter of jurisdiction or admissibility is unclear. It will depend where the arbitration has its seat or the law applicable to the arbitration agreement and the background of the arbitral tribunal making the decision. However, recent jurisprudence shows that common law countries are now recognising the difference between admissibility and jurisdiction and the following the lead taken in many civil law countries. In the case of Republic of Sierra Leone v SL Mining Ltd,³¹ the court recognised international arbitration practice and adopted it. This approach is to be welcomed.

Notes

1 Waste Management Inc v United Mexican States ICSID Case No ARB(AF)/98/2; approved in Swissborough Diamond Mines (Pty) Ltd v Kingdom of Lesotho [2019] 1 SLR 263 and BBA and others v BAZ and another appeal [2020] SGCA 53.

2 Jan Paulsson, ‘Jurisdiction and Admissibility’, in Global Reflections, Global Reflections on International Law, Commerce and Dispute Resolution, Liber Amicorum in honour of Robert Briner (ICC Publishing 2005)
p 601 at 603.

3 Methanex Corporation v United States of America, Partial Award on Jurisdiction and Admissibility, 7 August 2002, 7 ICSID Reports 239 at 271 [139].

4 Abaclat and others v Argentine Republic, Decision on Jurisdiction and Admissibility, ICSID Case No ARN/07/5, 4 August 2011 [287].

5 Interim Award in Case 16083, ICC Dispute Resolution Bulletin 2015, No 1, p 57.

6 In Medissimo v Logica, 29 April 2014, No 12-27.004 the Cour de cassation held that the dispute resolution clause had to be mandatory, a condition precedent and sufficiently detailed if a claim was to be considered inadmissible.

7 Poiré v Tripier Rev arb, (2003), p 403; C Jarrosson, ‘Observation on Poiré v Tripier’ (2003) 19:3 Arbitration International p 363; see also Medissimo v Logica, 29 April 2014, No 12-27.004.

8 The arbitral tribunal referred to Jan Paulsson, ‘Jurisdiction and Admissibility’, in Global Reflections, Libor Amicorum in honour of Robert Biner, ICC Publishing, p 601.

9 Interim Award in Case 16155, ICC Dispute Resolution Bulletin 2015, No 1, p 71.

10 Ibid, No 1, at [61] and [63]; see also Final Award in Case 18505, ICC Dispute Resolution Bulletin 2015, No 1, at p 137.

11 Interim Award in Case 14431, ICC Dispute Resolution Bulletin 2015, No 1, p 35; see also Final Award in Case 16765, ICC Dispute Resolution Bulletin 2015, No 1, p 101 at [127]

12 ‘Mandatory pre-arbitration procedure not complied with results in annulment of the award’, Swiss International Arbitration Decisions, see www.swissarbitrationdecisions.com/mandatory-pre-arbitration-procedure-not-complied-results-annulment-award, accessed
1 December 2020.

13 See also Swiss Federal Supreme Court, 4A_124/2014, 7 July 2014, where the Court was again unclear as to whether the failure to comply with FIDIC’s mandatory requirements for referring disputes to a DAB gave rise to a jurisdictional challenge or a challenge to the admissibility of the claim.

14 Final Award in Case 19581, ICC Dispute Resolution Bulletin 2015, No 1, p 147.

15 Abaclat and others v Argentine Republic, Decision on Jurisdiction and Admissibility, ICSID Case No ARN/07/5, 4 August 2011, [287]. See also the decision of the Philippines court in Hutama-RSEA joint Operations, Inc v Citra Metro Manila Tollways Corporation – G R No 180640 [2009] PHSC 435.

16 The country is unspecified in the report due to confidentiality reasons.

17 Final Award in Case 6535, ICC International Court of Arbitration Bulletin, Vol 9, No 2 at p 60.

18 ICC Dispute Resolution Bulletin 2015 No 1, p 75.

19 PAO Tatneft v Ukraine [2018] 1 WLR 5947; and Obrascon Huarte Lain S.A. v Qatar Foundation for Education [2020] EWHC 1643 (Comm).

20 Republic of Sierra Leone v SL Mining Ltd [2021] EWHC 286 (Comm) at [18].

21 BBA v BAZ [2020] 2 SLR 453 and BTN v BTP [2020] SGCA 105.

22 BG Group v Republic of Argentina 134 S.Ct.1198 (2002) (US Supreme Court).

23 Final Award in Case 7910, ICC International Court of Arbitration Bulletin, Vol 9, No 2, p 46.

24 Final Award in Case 19581, ICC Dispute Resolution Bulletin 2015, No 1, p 147.

25 Ibid at [161].

26 Interim Award in Case 16083, ICC Dispute Resolution Bulletin 2015, No 1, p 57.

27 [2020] UKSC 38.

28 Ibid at [168].

29 See, for example, s.30(1)(c) of the Arbitration Act 1996.

30 Ewelina Kajkowska, Enforceability of Multi-Tiered Dispute Resolution Clauses (Bloomsbury Publishing 2017) at 4.76.

31 [2021] EWHC 286 (Comm) at [18].Jan Paulsson, ‘Jurisdiction and Admissibility’, in Global Reflections, Global Reflections on International Law, Commerce and Dispute Resolution, Liber Amicorum in honour of Robert Briner (ICC Publishing 2005)
p 601 at 603.

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