Faced with a disagreement on the arbitration clause, the International Court of Arbitration limits itself to an observation. Either it notes the prima facie absence of an arbitration clause or the existence of an arbitration clause which does not specify the ICC. In the first case, by virtue of Article 7 of the Rules,1 if the defendant does not file an answer within thirty days from receipt of the request or arbitration under the ICC Rules, arbitration cannot proceed. By contrast, in the second case, the Court will decide that the arbitration shall proceed by virtue of Article 8.3.2

Disagreement on the scope of the arbitration clause implies that the wish of one of the parties to submit the dispute to arbitration runs into opposition by the other party. In other words, the parties disagree about the way to settle the dispute.

Such disagreement does not concern the existence of either the dispute or an ICC arbitration clause but the question as to whether or not the arbitration clause covers the said dispute.

The party that disputes the scope of the arbitration clause challenges the jurisdiction of the arbitral tribunal. However, this is a limited challenge. The tribunal's jurisdiction is not rejected in toto but only in the dispute concerned. In other words, the challenging party agrees that an arbitration clause exists but holds, however, that the dispute is not within the tribunal's jurisdiction because it is not covered by such arbitration clause.

On first analysis, the prima facie existence of the arbitration clause is not disputed in case of a disagreement on its scope. On the contrary, the parties acknowledge the existence of the clause and only dispute its scope. Requested to rule on a dispute of this type, the Court would apparently have to decide that arbitration must proceed and that the arbitral tribunal has jurisdiction to settle the dispute.

However, a closer look reveals that there are two types of disagreements on the scope of an arbitration clause: first, on the internal scope of the arbitration clause, i.e. its scope within the framework of the contract is called into question (I); second, on the external scope of the arbitration clause. In this case, the problem at issue is its application to contracts connected with the original contract containing the arbitration clause (II). The Court's decisions vary according to the nature of the disagreement.

I. Disagreement on the internal scope of an arbitration clause

The internal scope of an arbitration clause is normally at stake when the clause mentions disputes connected with contractual performance but fails to mention disputes on contractual interpretation, and vice versa. The defendant may use this oversight to reject the arbitration request. Faced with this type of argument, the Court always rules in favour of arbitration. It does not delve into considerations on the scope of an arbitration clause if it notes that there is such a clause between the parties.

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This is a fair solution: the clause would be entirely devoid of purpose if disagreement on its exact scope could prevent its application when a request is filed. Moreover, Article 8(3) provides that the existence of an arbitration clause vests the arbitrator with the power to decide on the scope of the arbitration agreement.

Thus, the arbitration agreement implies that the arbitrator is empowered to settle disputes between the parties in connection with the arbitration clause. This is a sine qua non for effective arbitration.3 The arbitrators sometimes base their jurisdiction on this principle:

In the event that recourse to arbitration is not disputed but rather the scope of the issues submitted to arbitration, it is generally accepted that the arbitrator is empowered to decide himself whether he has jurisdiction, unless otherwise stipulated by the parties.4

In short, international arbitration is governed by a general legal principle according to which an arbitration agreement entitles an arbitrator to decide on the scope of the arbitration clause. This principle is reasserted in Article 8(3) of the ICC Rules of Arbitration. The arbitrators' power to rule on a challenge of jurisdiction based on disagreement with the arbitration clause is confirmed by several international5 and national6 texts on arbitration. This solution is also incorporated in all the major arbitration rules.7

Accordingly, disagreement on the internal scope of an arbitration clause should not lead the Court to deprive an arbitral tribunal its power to rule on its own jurisdiction. Therefore, when the Court notes the existence an arbitration clause, it decides that the proceedings should follow their course. This is why the existence of an arbitration clause ipso jure makes it possible for arbitration to be set in motion.

In other words, when there is indisputable evidence for the prima facie existence of an arbitration clause, it reverts to the Court to implement arbitration proceedings during the course of which the arbitral tribunal will determine its own jurisdiction.

In practice, where the issue that is raised over the arbitration clause concerns its scope, the Court will agree to set the arbitration in motion, thus empowering the arbitral tribunal to determine its jurisdiction by virtue of Art. 8 (3). This has been constant practice. The Court has sometimes hesitated on whether the term "existence" in Article 8(3) of the Rules should or not be construed as meaning "existence of a clause which covers the dispute". Viewed from this angle, a clause which would not cover the dispute would have to be considered non-existent. However, the Court has rejected this interpretation of Article 8(3). Consequently, disagreements based on ambiguity of an arbitration clause do not hold anarbitration from being set in motion.

In its reading of an arbitration clause, the Court will follow the letter of the text and will make only a "surface" examination of the will of the parties.8 This is a purely factual examination and consists in noting the existence or non-existence of the clause. Given that it is disconnected from any applicable law, the Court's examination will be the same regardless of the law applicable to [Page26:] the disputed agreement. The existence of an arbitration agreement does not raise before the Court a truly legal question because such examination is not made by reference to specific standards.

This aspect clearly distinguishes the Court's work from that of an arbitral tribunal. Once an arbitral tribunal has decided that it has jurisdiction to settle a dispute on the scope of the arbitration clause, it must determine which standards it will apply to settle the said dispute. In this respect, specialists argue that:

The determination of the scope of the agreement involves interpretation of the Agreement and is accordingly governed by the proper law of the agreement.9

The Court's examination is not grounded on a particular legal system and is limited to considerations of fact only. It deals with disagreement on the internal scope by determining whether or not an arbitration clause exists. However, its role becomes more complicated when the disagreement concerns the external scope of the clause.

II. Disagreement on the external scope of an arbitration clause

Where there is disagreement on the external scope of an arbitration clause the question at issue concerns the impact of the clause, incorporated in a given contract, on another contract. On first analysis, such extension seems not to be allowed in view of the privity of contract principle. However, the answer must be qualified when the parties or the purposes of the different contracts are identical.

In cases where several contracts are established for one same purpose, can an arbitration clause be extended to different agreements which are part of the same global transaction, even if there are several different parties involved in these contracts?

Within the framework of the ICC Rules, the Court has decided that arbitrations could not proceed vis-à-vis a seller's supplier, where the arbitration clause was signed between the seller and the buyer, or vis-à-vis a subcontractor, where the arbitration agreement was contained in the contract signed by an owner and a main contractor. The first case involved two back-to-back sales contracts where the Claimant as buyer requested arbitration with its supplier (defendant 1) as well as with the latter's supplier (defendant 2); both contracts contained an arbitration clause. The Court decided that the arbitration could not proceed against defendant 2 as there was no evidence that the latter ever intended to arbitrate with the claimant. In the second case, the Court refused to set in motion an arbitration between the subcontractor and the owner as no direct contract and no arbitration clause existed between the two. The only contracts containing an arbitration clause were those signed between the subcontractor and a manufacturer, and between the main contractor and the owner. Thus, it appears that an arbitration agreement included in one contract does not "circulate" around from the former to other contracts involving different parties by the mere fact that other operations are related to one same project. Moreover, if it is remembered that "arbitration clauses are interpreted restrictively",10 the effect of an arbitration clause can be extended only to those contracts that refer expressly to the original.

On the other hand, if several contracts are successively made between the same parties concerning a given project, one may think that it was the parties' intent that their business relationship be subject to arbitration even if they did not mention arbitration in each and every contract.

In arbitration practice, arbitral tribunals will determine the strength of the ties between related contracts. One from another. Close ties between contracts may favour extension of the arbitration agreement. Arbitrators have sometimes qualified contracts which remained silent on this issue as amendments to the principal contract, in such a [Page27:] way that the arbitration clause was deemed to cover both contracts. Obviously, such extension is possible only if the parties have not included express provisions to the contrary. For instance, an arbitration agreement could not be extended to a second contract containing an express reference to the courts of a given country.

Clearly, this type of disagreement raises considerable difficulties for the Court. It requires a thorough examination of the intention of the parties, which is precisely what the Court wishes to avoid.

In such cases, determining the existence or non-existence of an arbitration clause goes beyond a prima facie examination.

To sum up, different subject matters or parties in contracts seem to exclude extension of an arbitration clause from one to another of these contracts. This is why, contrary to disagreement on the internal scope, disagreement on the external scope of an arbitration clause, if well-founded, is likely to preclude the setting in motion of an arbitration.

1
Article 7: "Where there is no prima facie agreement between the parties to arbitrate or where there is an agreement but it does not specify the International Chamber of Commerce, and if the Defendant does not file an answer within the period of 30 days provided by paragraph 1 of Article 4 or refuses arbitration by the International Chamber of Commerce, the Claimant shall be informed that the arbitration cannot proceed."

2
Article 8(3): "Should one of the parties raise one or more pleas concerning the existence or validity of the agreement to arbitrate, and should the International Court of Arbitration be satisfied of the prima facie existence of such an agreement, the Court may, without prejudice to the admissibility or merits of the plea or pleas, decide that the arbitration shall proceed. In such a case any decision as to the arbitrator's jurisdiction shall be taken by the arbitrator himself."

3
Y. Derains, comments on case no. 1526 (1968), Collection of ICC Arbitral Awards, Vol. 1, p. 217.

4
Case no. 5065 (1986), Collection of ICC Arbitral Awards, vol. 1, p. 330.

5
Article V.3 of the Convention on International Commercial Arbitration signed in Geneva on 21 April 1961 states the following: "Subject to one subsequent judicial control provided for under the lex fori, the arbitrator whose jurisdiction is called in question shall be entitled to proceed with the arbitration, to rule on his own jurisdiction and to decide upon the existence or the validity of the arbitration agreement or of the contract of which the agreement forms part." Article 41 of the Convention on the Settlement of investment Disputes between States and nationals of Other States, Washington, 18 March 1965, lays down the principle that "the Tribunal shall be the judge of its own competence".

6
In France, Article 1466 of the Code of Civil Procedure provides: "If one of the parties contests, before the arbitrator, the latter's jurisdiction, whether in principal or scope, it is for the arbitrator to decide on the validity or scope of his appointment." In Switzerland, Article 186 of the Swiss Federal Statute on Private International Law of 18th December 1987 states that: "The arbitral tribunal shall rule on its own jurisdiction."

7
For instance, the UNCITRAL Arbitration Rules provide the following (Art. 21.1): "The arbitral tribunal shall have the power to rule on objections that it has no jurisdiction, including any objections with respect to the existence or validity of the arbitration clause or of the separate arbitration agreement." See also Article 15 of the International Arbitration Rules of the American Arbitration Association.

8
Thus, based on the existence of an arbitration clause, the Court should decide that an arbitration will proceed, even though the arbitration agreement clearly shows that the parties intended that the dispute submitted by one of them would not to be covered by the tribunal's jurisdiction.

9
Redfern & M. Hunter, Law and Practice of Commercial Arbitration (1991), p. 150.

10
Case No. 2138 (1974), Collection of ICC Arbitral Awards, vol. 1, p. 242.