Power of the arbitral tribunal to rule on its own jurisdiction

Article 16 of the Model Law provides an arbitral tribunal with the power to rule on its own jurisdiction. The article is essentially a recognition of two principles:

1. the separability of the arbitration agreement, even when that agreement appears as a clause within the substantive contract, and
2. the principle of what is referred to as “competence-competence”.

Competence-competence means that an arbitral tribunal has, literally, the competence to rule on its own competence, without having to engage a decision of the national court. The principle of separability, furthermore, means that a tribunal is able to find that the arbitration agreement is valid and operative, even if the substantive contract is found to be void.

If an arbitral tribunal is faced with an argument that it lacks jurisdiction, but finds that it has ownership of the matter, then the arbitration will continue. However, if it rules that it is without jurisdiction, then the matter can go no further. It is, therefore, usually the case that a tribunal will hear a jurisdictional argument at the outset and give a ruling in the form of a preliminary award immediately thereafter. That having been said, if an argument as to jurisdiction is closely tied to the facts of the substantive case that are in dispute, or if the tribunal take the view that a jurisdictional argument is being put forward in a frivolous or vexatious way in order simply to frustrate the proceedings, then it may choose to make its jurisdictional ruling within the final award.

It must always be remembered by the parties and by the arbitrator that art 16(2) of the Model Law makes it clear that any argument as to the tribunal’s jurisdiction is to be made as early as possible. An objection raised late on should only be considered if there has been a justifiable delay in raising the point.

Article 16(3) of the Model Law provides that, following a preliminary ruling by the tribunal as to its jurisdiction, a party may (within 30 days of having received notice of the ruling) appeal to the national court. The court decision, though, will be final. However, a tribunal is permitted under the Model Law to continue the proceedings while such an appeal is pending or taking place. The intention, of course, is to ensure that a party does not have recourse to the court simply in order to delay or frustrate the process.

But the 16(3) route of appeal applies only to a case where the tribunal has ruled as a preliminary question that it has jurisdiction. It does not apply to a negative decision as to jurisdiction. Thus, given that art 5 of the Model Law provides that a court is only able to intervene in a matter to the extent provided by the Model Law itself, the effect of art 5, coupled with art 16(3), is that the Model Law does not give the right of appeal where a tribunal has found that it is without jurisdiction.

However, it should be noted that a number of states have chosen not to follow this approach. That divergence reflects the view of many that, because the effect of a negative jurisdictional ruling is to render the arbitration a nullity, there should be an opportunity for review. Thus, the United Kingdom Arbitration Act 1996 (at s 30) specifically provides for challenges to both positive and negative jurisdictional findings, and the Singapore International Arbitration Act (following an amendment in 2012) has adopted a similar course and allows both positive and negative rulings to be appealed. However, the Hong Kong Arbitration Ordinance (CAP 609) specifically excludes an appeal against a negative ruling, although there is also the provision (in s 34) for the court, in those circumstances, to decide on the substantive dispute if it has jurisdiction.

Meanwhile, the position in Malaysia is that the Arbitration Act 2005 (as amended in 2018) provides for an appeal against a finding of positive jurisdiction by the tribunal, but not in respect of a negative decision (see s 18(8)).