Browsing by Subject "jurisdiction"

Contract adaptation is to a considerable extent different kind of decision-making than settling a traditional dispute. When a party requests adaptation of the contract, the tribunal is asked to reshape the parties’ future contractual relationship, which may include creating new obligations for the parties upon the tribunal’s discretion. Thus, the decision-making includes a creative or innovative element thereby denoting wider discretion and requiring high competence from the arbitrators. For these reasons, it is not self-evident that parties want arbitrators to possess the powers to adapt their contract even if they wished them to solve their disputes through traditional dispute settlement. In that light, this study evaluates the possible grounds on which a party could contest a claim requesting adaptation of the parties’ contract in arbitration. In particular, the study aims at determining how a preliminary objection to the arbitral tribunal’s procedural powers to adapt the contract ought to be classified in the obscure division between jurisdiction and admissibility. In legal literature and case law the issue has so far been by default understood as an issue pertaining to the arbitrators’ jurisdiction. This study critically considers whether such view is actually the most accurate and well-grounded perception. The first research question examines the separation between challenges to jurisdiction and challenges to admissibility. There is unfortunate inconsistency in the use of the concepts among courts and tribunals as well as legal commentators, and issues of admissibility have often been wrongly treated as jurisdictional. However, there is a substantial difference between classifying an issue as of jurisdiction or admissibility. Firstly, whereas challenging the arbitral tribunal’s jurisdiction intends to send the particular dispute to a court instead of arbitration, an admissibility challenge seeks to cease the legal processing of the case altogether. Thus, while a jurisdictional challenge attacks the tribunal, an admissibility challenge is aimed at the particular claim. The second main difference between jurisdiction and admissibility concerns the finality of the decision. While arbitrators’ decisions on jurisdiction are necessarily reviewable by courts, issues concerning admissibility fall within the scope of arbitrators’ exclusive adjudicatory powers and are thus non-reviewable. Thereby, the classification has direct effect on the length of the proceedings. In addition, arbitrators may not regard the claim’s admissibility by their own initiative, but such arguments need to be raised by the parties. Therefore, the parties should be particularly mindful of how to formulate and classify their preliminary objections. The second research question considers the appropriate nature of a preliminary objection against a claim on contract adaptation. If the question of the arbitrators’ powers to adapt the parties’ contract was regarded as jurisdictional, the tribunal’s decision could be reviewed by a court on the ground that the claim requesting adaptation was outside the scope of the arbitration agreement. Yet, what is problematic in characterizing the issue as jurisdictional is the uncertainty in the existence of the state courts’ jurisdiction to adapt the contract in case the arbitrators would be found to lack such jurisdiction. While jurisdictional issues constitute an either-or situation between litigation and arbitration, such substituting jurisdiction of the courts is indeed a necessity in order to avoid a situation where nobody would have the jurisdiction in the case. Furthermore, characterizing the issue as jurisdictional would in case of a negative decision on the tribunal’s jurisdiction cause decentralization of different claims to different forums. However, when the parties have agreed on arbitration through a general arbitration clause, they can be presumed to have intended that different disputes would not be fragmented between arbitration and litigation. Thus, such characterization would presumably contradict the parties’ intentions. The ultimate conclusion of the study is that the question of the arbitrators’ procedural powers to adapt the parties’ contract would be better characterized (as a default rule) as an issue of admissibility. Such default rule is considered to best reflect the intentions of the parties. Hence, a new plausible ground for inadmissibility of claims, i.e. inadequacy of the decision-maker’s powers, is proposed to be recognized. Indeed, it is suggested that the pro-arbitration principle and the need for promoting minimal judicial interference in arbitration to avoid multiple proceedings do not require only that the available court review is limited to jurisdictional issues but also that the users of international arbitration rethink what actually constitutes a jurisdictional issue. First and foremost, the characterization of the particular issue should be evaluated individually in each case and not labelled automatically as concerning the tribunal’s jurisdiction when the ultimate consequence is that the issue is always in the end finally decided by a court.