MATTERS WHICH MAY BE ARBITRABLE

HIDAYATULLAH NATIONAL LAW UNIVERSITY

ALTERNATE DISPUTE RESOLUTION PROJECT
ON

MATTERS WHICH MAY BE ARBITRABLE

SUBMITTED TO
MR. MANOJ KUMAR

VIKASH GOEL
SEMESTER VI
ROLL NO. 172
SUBMITTED ON
18TH FEBRUARY, 2015

MATTERS WHICH MAY BE ARBITRABLE

ACKNOWLEDGEMENT
I feel highly elated to work on this dynamic topic on MATTERS WHICH MAY BE ARBITRABLE. Its
ratio is significant in todays era when there is a grat importance given to arbitration as dispute resolution
method and people fail to know which disputes are arbitrable.
The practical realization of this project has obligated the guidance of many persons. I express my deepest
regard for our faculty MR. Manoj Kumar. His consistent supervision, constant inspiration and invaluable
guidance and suggestions have been of immense help in carrying out the project work with success.
I extend my heartfelt thanks to my family and friends for their moral support and encouragement.

Vikash Goel
Semester VI TH
Roll no. 172

MATTERS WHICH MAY BE ARBITRABLE

TABLE OF CONTENTS

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

Acknowledgement2
Introduction.........4
Objective6
Research methodology6
Law applicable to question of arbitrability7
Substantive rules on objective arbitrability8
Duty t deal with lack of arbitrability ex-officio9
The Non- Arbitrability doctrine.10
Case law relating to Arbitrability.13
Conclusion ...15
Bibliography.....15

MATTERS WHICH MAY BE ARBITRABLE

INTRODUCTION
Arbitrability is one of the issues where the contractual and jurisdictional natures of international
commercial arbitration meet head on. According to Carbonneau and Janson,

arbitrability

determines the point at which the exercise of contractual freedom ends and the public mission of
adjudication begins. It involves the simple question of what types of issues can and cannot be
submitted to arbitration. Party autonomy espouses the right of parties to submit any dispute to
arbitration. It is the parties right to opt out of the normal national court jurisdiction. National
laws often impose restrictions or limitations on what matters can be referred to and resolved by
arbitration. For example, states or state entities may not be allowed to enter into arbitration
agreements at all or may require a special authorization to do so. This is called SUBJECTIVE
ARBITRABILITY. More important than the restrictions relating to the parties are limitations
based on the subject matter in issue. This is OBJECTIVE ARBITRABILITY. Certain disputes
may involve such sensitive public policy issues that it is felt that they should only be dealt with
by the judicial authority of state courts. An obvious example is criminal law which is generally
the domain of the national courts. These disputes are not capable of settlement by arbitration.
This restriction on party autonomy is justified to the extent that arbitrability is a manifestation of
national or international, public policy. Consequently, arbitration agreements covering those
matters will, in general, not be considered valid, will not establish the jurisdiction of the
arbitrators and subsequent award may not be enforced. In the U.S. the term arbitrability is
often used in a wider sense covering the whole issue of the tribunals jurisdiction.

To understand the prevailing international situation with regard to arbitrability, three important
aspects are to be studied. They are-

i)Law applicable to questions of arbitrability,

ii) The limitations imposed in different countries, or Substantive Rules on Objective arbitrability;
and

MATTERS WHICH MAY BE ARBITRABLE

iii) Whether arbitration tribunals have the right and duty to deal with the issue of arbitrability on
their own initiative.(Lack of arbitrability)

ARBITRABILITY DEFINED

Wiktionary defined arbitrability as the characteristics of being arbitrable. It is the ability of a

matter to be arbitrated. The term arbitrability is used to determine whether the dispute under
the arbitration agreement could be settled by arbitration. The international understanding of
arbitrability stems from the 1958 New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, which in Article II(1) provides that each contracting state shall
recognize an arbitration agreement concerning a subject matter capable of settlement by
arbitration, and Article V(2)(a) provides that an arbitral award may be refused recognition and
enforcement if the subject matter of the difference is not capable of settlement by arbitration
under the law of that country.

Outside the United States, the term arbitrability has a reasonably precise and limited meaning:
i.e., whether specific classes of disputes are barred from arbitration because of national
legislation or judicial authority. Courts often refer to public policy as the basis of the bar.

Thus, the subject matter of the claim is the key to arbitrability in international arbitration, and
the question to be asked is, under the law of the place of arbitration or the state where award
enforcement is being sought, are the specific claims capable of settlement by arbitration or must
they be resolved in a national court?

MATTERS WHICH MAY BE ARBITRABLE

Objectives of the research

1.
2.
3.
4.

To know the basic concepts refund under income Tax Act, 1961,
To study the persons entitled to claim refund
To study the procedure for claiming refund,
To study the concept of interest on refund.

Research methodology
This work being a Doctrinal work is descriptive in nature. Secondary and Electronic resources have been
largely used to gather information and data on the topic.
Books and other reference materials as suggested by Faculty of Taxation have been primarily helpful in
giving this project a firm structure. Websites, dictionaries and articles have also been referred to.

LAW APPLICABLE TO QUESTIONS OF ARBITRABILITY

MATTERS WHICH MAY BE ARBITRABLE

Determination of the law governing arbitrability is of considerable importance. Despite the
generally prevailing tendency to increase the scope of arbitrable disputes national laws
frequently differ from each other. A number of disputes which are not arbitrable under the law of
one country are arbitrable in another country where the interests involved are considered to be
less important. The approach to bribery is an example of existing differences. In many countries,
whilst bribery is a vitiating factor in all contracts, it can be considered by arbitrators. In other
countries not only is bribery illegal but also to preclude it from being legitimized, by a
commercial or consultancy arrangement, if allegations of bribery are raised they cannot be
considered by arbitrators. Consequently, in some countries, consultancy contracts relating to
public procurement are not arbitrable because of the prevalence of excessive commissions
considered to be bribes. The law governing arbitrability of a dispute may depend on where and at
what stage of proceedings the question arises. Tribunals may apply different criteria than courts
in determining this law and the criteria applied by courts at the post-award stage may differ from
those at the pre-award stage.
International Conventions vs. National Laws:
Under the various conventions the obligations of national courts to enforce arbitration
agreements and awards only exist where the dispute is arbitrable. Therefore these conventions
generally regulate which law governs arbitrability. If a dispute is arbitrable according to this law,
courts may not rely on non-arbitrability of the dispute under a different law to refuse
enforcement of the arbitration agreement or award.
The New York Convention provides for the law of arbitrability only from the perspective of
enforcement. It requires the enforcing court to look to its own law to determine whether the
dispute is arbitrable. Art-V (2) (a) provides 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: The subject matter of the difference is not capable of settlement by
arbitration under the law of that country

SUBSTANTIVE RULES ON OBJECTIVE ARBITRABILITY

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MATTERS WHICH MAY BE ARBITRABLE

Every national law determines which types of disputes are the exclusive domains of national
courts and which can be referred to arbitration. This differs from state to state reflecting the
political, social and economic prerogatives of the state, as well as its general attitude towards
arbitration. It involves a balancing of the mainly domestic importance of reserving certain
matters for exclusive decision of courts with the more general public interest of promoting trade
and commerce through an effective means of dispute settlement.
Therefore, the decision may be different in cases arising in a purely national context from that in
relation to international transaction. In Mitsubishi Vs. Soler,1 the U.S. Supreme Court held that
in an international context the ambit of arbitration may be wider than in a national context.
Though the case only dealt with US Law, the decision describes what the prevailing view is now.
The case also evidences a second general trend: the increase in the types of disputes which can
be referred to international arbitration. While originally arbitration was often limited to claims
arising directly out of a contract, gradually more and more claims based on statutes, for example
regulating important parts of national economy in the public interest, have become arbitrable. In
Mitsubishi vs. Soler, the Court declared anti-trust disputes to be arbitrable which inAmerican
Safety Equipment Corp Vs. J.P. Maguire & Co.2 were still held not to be arbitrable in a
domestic context. Although in general limits on arbitrability of disputes arise from public policy
only few laws make express reference to the notion of public policy.335 Not only is the notion
often too vague to give clear guidance but in the contemporary arbitration friendly environment
not every rule of public policy justifies reserving the disputes involved for determination by state
courts.3 Therefore, despite the underlying public policy consideration, different criteria are
adopted in determining arbitrability. Some national laws refer to very broad notions such as
disputes involving economic interest (Germany ZPO Sec.1030 (1), or dispute involving
property (Switzerland PIL Art-177). Other national laws rely on the narrower concept of
capability of the parties to reach an agreement. The Model Law does not contain any definition
1 473 US 614
2 6, 3335 et seq
3 Kirry, Arbitrability:Current Trends in Europe, 12 Arb. Int. 373 (1996) 374-379.
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MATTERS WHICH MAY BE ARBITRABLE

of which disputes are arbitrable. Quite to the contrary Art-1(5) Model Law provides that it is not
intended to affect other laws of the state which preclude certain disputes being submitted to
arbitration.

DUTY TO DEAL WITH THE LACK OF ARBITRABILITY EX OFFICIO

In the majority of cases the non-arbitrality of a dispute is raised by one party seeking to preclude
arbitration. It may prefer to have the dispute decided by the courts. There are, however, cases
where none of the parties invokes the lack of arbitrability.They may either not have realized it or
may have an interest in having their dispute settled in private. For example, parties to contracts
involving bribery or certain illegal conduct may accept the need for their dispute to be resolved
but may not want the relevant authorities to be informed about their contract which will
invariably be the case if the dispute is dealt with in the courts. In such cases the question arises
whether the arbitration tribunal has the right itself to raise the issue of arbitrability even though
the parties do not challenge the jurisdiction of the tribunal. This was done by Judge Lager green
in ICC case 1110.375 After studying the pleadings filed by the parties and oral and written
witness statement, the sole arbitrator raised the question of his jurisdiction ex officio, to entertain
the subject matter of the case and stated
In this respect both parties affirmed the binding effect of their contractual undertakings and my
competence to consider and decide their case in accordance with theterms of reference. However,
in the presence of a contract in dispute of the nature set out hereafter, condemned by public
policy decency and morality, I cannot in the interest of due administration of justice avoid
examining the question of jurisdiction on my own motion. It is worth noting under the New
York Convention recognition and enforcement of an award may be refused ex officio 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.

MATTERS WHICH MAY BE ARBITRABLE

One could argue that arbitration tribunals are not part of any national judicial system and
therefore do not owe any allegiance to a particular state. As long as the parties want to have their
dispute decided by arbitration the tribunal should do so irrespective of the fact that its award may
later be set aside for lack of arbitrability. The duty towards the parties to render an enforceable
award only exists as long as the parties have not renounced it. However, the preferred view is
that an arbitration tribunal should on its own initiative deny jurisdiction if the dispute is not
arbitrable on the basis of the facts submitted by the parties. This is not contrary to the principle of
NE ULTRA PETITA i.e. not raising an issuing outside the arbitrators authority (ArtV(1)(c) of
New York Convention) but is the result of an application of the law to the facts. It is provided
under Section 8 of Indian Arbitration and Conciliation Act, 1996.

THE NON-ARBITRABILITY DOCTRINE

The New York Convention contains various exceptions to the general obligation, set forth in ArtII to enforce written arbitration agreements. In particular, Art.II (1) does not require arbitration of
disputes that are not capable of settlement by arbitration. Similarly, Art-V (2) (a) provides that
an arbitration award need not be recognized if the subject matter of the difference is not capable
of settlement by arbitration under the law of the country where recognition is sought. Together,
these provisions permit the assertion of non-arbitrability defences to the enforcement of
arbitration agreements and awards under the Convention. Other international arbitration
conventions and treaties contain similar exceptions. Art-II (3) requires the enforcement of
arbitration agreements, provided that they are not null and void without any reference to a nonarbitrability or public policy defence. It has been suggested that, as a consequence, arbitration
agreements must be enforced, even if they pertain to non-arbitrable claims and if the resulting
award would be therefore unenforceable under Art-V(2)(a) or (b).378 Neither courts nor most
commentators have accepted this view, generally reasoning that non-arbitrability defences
permitted by Art-II(1) and Art-V(2) are incorporated by Art-II(3)s NULL AND VOID
exception.
As noted above, Art-II (1) of the New York Convention does not require recognition of
arbitration agreements unless they concern a subject-matter capable of settlement by
arbitration. Like other exceptions under Art-II and V, the nonarbitrability doctrine raises a
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MATTERS WHICH MAY BE ARBITRABLE

threshold choice of law question: what law(s) apply to determine whether a claim or dispute is
non-arbitrable for purposes of Art-II (3)? Among commentators, there is no agreement on what
governing law should apply.
Several choices are possible:
First, the Convention might be regarded as establishing (albeit almost entirely by implication) a
uniform international definition of non-arbitrability, from which no nation could deviate.
Second, the law governing the parties arbitration agreement might define nonarbitrability, as
Art-II (1) and V(1)(a) imply.
Third, non-arbitrability might be defined by the law of the place where the arbitration is
conducted and the award made, as also implied by Art-V (1)(a).
Fourth, the law of the nation in which enforcement of an award will eventually be sought might
define non-arbitrability, as Art-V (2)(a) and (b) specifically contemplate.
Fifth, the law of the judicial forum where an arbitration agreement is sought to be enforced could
govern non-arbitrability; and
Finally, non-arbitrability might be defined by the law that provides the basis for the relevant
substantive claim.
Indian Scenario
In India, Certain disputes like criminal offences of public nature, disputes arising out of illegal
agreements4, and disputes relating to status, such as divorce, cannot be referred to arbitration.
The broad categories of disputes which are considered to be non-arbitrable are:
- antitrust and competition
- insolvency
- intellectual property rights
4 T.M.L. Financial Services Ltd. V. Vinod Kumar
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MATTERS WHICH MAY BE ARBITRABLE

- illegality and fraud
- bribery and corruption
The well recognized example of non-arbitrable disputes are:

Disputes relating to rights and liabilities which give rise to or arise out of criminal
offences;

Matrimonial disputes relating to divorce, judicial separation, restitution of conjugal

rights, child custody;

Guardianship matters;

Insolvency and winding up matters;

Testamentary matters;

Eviction or tenancy matters governed by special statutes where the tenant enjoys statutory
protection against eviction and only the specified courts are conferred jurisdiction to
grant eviction or decide on the disputes. 5

ARBITRABLE ISSUES
Where a judicial proceeding is commenced in a matter which is subject matter of an arbitration
agreement, the judicial forum is bound to refer the matter for arbitration by the arbitral tribunal.
This provision implies that if the matter is an arbitrable matter, and is covered by the arbitration
agreement, the matter must be decided by arbitration rather than by adjudication. The underlying
crucial issue for this provision is what exactly is an arbitrable matter, or what are the limits to
arbitrability?
Courts in several jurisdictions have rendered rulings on arbitrability. Matters that can be settled
by arbitration include:

5 Union of India v Rent Tribunal, Jodhpur

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MATTERS WHICH MAY BE ARBITRABLE

Basically all disputes of Civil or Quasi Civil nature involving Civil Rights fall within the
jurisdiction of Arbitration.
Almost all disputes commercial, civil, labour and family disputes in respect of which the
parties are entitled to conclude a settlement can be settled by Arbitration.
Disputes involving joint ventures, construction projects, partnership differences, intellectual
property rights, personal injury, product liabilities, professional liability, real estate securities,
contract interpretation and performance, insurance claim and Banking & non-Banking
transaction disputes fall within the jurisdiction of Arbitration.
It is expanding to the areas or construction health care, telecommunication, entertainment and
technology based industries.

CASE LAWS RELATING TO ARBITRABILITY

The distinction between disputes which are capable of being decided by arbitration and those
which are not is brought out in the following decisions of the court:

In Haryana Telecom Limited V. Sterlite Industries India Limited 6the Supreme Court
held that Section 8(1) of Arbitration and Conciliation Act, 1996 provides that the judicial
authority before whom an action is brought in a matter, will refer the parties to arbitration
the same matter in accordance with the arbitration agreement. This, however, postulates,
in the opinion of the court, that what can be referred to the arbitrator is only that dispute
or matter which the arbitrator is competent or empowered to decide; The claim in a
petition for winding up is not for money. The petition for winding up is to be filed under
the Companies Act. The company has become commercially insolvent and therefore,
should be wound up. The power to order winding up of a company is contained under
the Companies Act and is conferred on the court. An arbitrator, notwithstanding any
agreement between the parties, would have no jurisdiction to order winding up of a
company. The matter which is pending before the High Court in which the application

6 (1999) (5) SCC 688

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was filed by the petition herein was relating to winding up of the company. That could
obviously not be referred to arbitration.

In Olympus Superstructures (P) Limited V. Meena Vijay Khetan 7the Supreme Court
considered whether an arbitrator has the power and jurisdiction to grant specific
performance of contracts relating to immoveable property. In this regard the Supreme
Court held that there is no prohibition in the Specific Relief Act, 1963 that issues relating
to specific performance of contract relating to immoveable property cannot be referred to
arbitration. Nor is there such a prohibition contained in the Arbitration and Conciliation
Act, 1996 as contrasted with Section 15 of the English Arbitration Act, 1950 or Section
48(5)(b) of the English Arbitration Act, 1996 which contained a prohibition relating to
specific performance of contracts concerning immoveable property.

In Keventer Agro Limited V. Seegram Co. Limited Apo 498 of 1997 the Supreme Court
held that disputes arising out of illegal agreements and disputes relating to status, such as
divorce, which cannot be referred to arbitration. However if in respect of the facts
relating to a criminal matter, say, physical injury, if there is a right of damages for
personal injury, then such a dispute can be referred to arbitration. Similarly a husband
and wife may, refer to arbitration the terms on which they shall separate, because they
can make a valid agreement between themselves on that matter.

In Chiranjilal Shrilal Goenka V. Jasjit Singh 8the Supreme Court held that grant of
probate is a judgment in rem and is conclusive and binding not only the parties but also
the entire world; and therefore, courts alone will have exclusive jurisdiction to grant
probate and an arbitral tribunal will not have jurisdiction even if consented concluded to
by the parties to adjudicate up on the proof or validity of the will.

7 (1999) 5 SCC 651

8 (1993) 2 SCC 507
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CONCLUSION
Thus we can conclude that arbitrability is an evolving topic with each country adopting different
stand on different matters but a constant behavior can be seen due to compliance with New York
Convention on arbitration. The Indian Law itself does not specify the exhaustive list on matters
arbitrable but leave the issue to the arbitrator to decide under Section 8 of Arbitration and
Conciliation Act, 1996. Generally matters of public police or criminal nature are non- arbitrable
whereas all other matters are considered arbitrable for enabling speedy disposal of cases in the
country. There is need to further the scope of arbitrable subject- matter to include commercial
transaction including securities matter where both parties agree to it to enable speedy disposal.
An amendment to the act to specify clearly matters which may be arbitrable can be a step in the
right direction and clear all the doubts in the mind of parties. Generally it is observed that the
parties are unaware of the fact whether their disputes are arbitrableor not and go ahead with
arbitration after which the decision is annulled later on which lead to a wasteof time and money.
Therefore there is need for a proper source from where it can be determined whether matters are
arbitrable or not.

BIBLIOGRAPHY

MARKANDA, PC -ARBITRATION AND CONCILIATION, LEXISNEXIS, NAGPUR

MALHOTRA, OP - ARBITRATION AND CONCILIATION, THOMSON REUTERS.

Redfern and Hunter, Law and Practice of International Commercial Arbitration (4th
Edition Sweet

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