Author

Ms Mook Jianpinitnan

Associate Litigation & Arbitration - Houthoff

Author

Mr Matthew Brown

Foreign Associate International Arbitration - Houthoff

Editors
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Subject Matter of the Dispute not Arbitrable

I. General

1.

Subject matter non-Arbitrability is the negative consequence of the subject matter of a dispute falling outside the scope of that which is capable of resolution by arbitration under the applicable law.1 See further Arbitrability. Non-Arbitrability precludes a tribunal from exercising jurisdiction over the particular subject matter. Where a tribunal has nonetheless exercised jurisdiction, any resulting award may be set aside2 or denied recognition and Enforcement. See further Enforcement. The following discussion is limited to the topic of subject matter non-Arbitrability as a ground for annulment or setting aside of investment arbitration awards.

II. Applicable law

2.

In the context of setting aside proceedings, there are two relevant applicable law or rules of law which outline what subjects are or are not arbitrable: the law governing the substance of the dispute (see further Applicable Law to the Merits) and the law governing the procedure of the dispute (i.e., the applicable lex arbitri; see further Applicable Law to the Proceeding).

3.

In investment arbitration, the law governing the dispute will depend on the basis for the tribunal's jurisdiction. For example, Article 43(1) of the ICSID Convention provides: 


"The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on conflict of laws) and such rules of international law as may be applicable."

4.

Such agreement by the parties may take the form of inter alia investment contracts, domestic (foreign) investment laws or international investment agreements ("IIAs", i.e., treaties). See further Applicable Law. In the case of an arbitration under an IIA, the merits of the dispute would be subject to international law and the particular terms of the relevant IIA, i.e., a lex specialis.

5.

The basis of the tribunal's jurisdiction will also determine whether there is a domestic seat of arbitration (and therefore a lex arbitri), depending on whether consent is given to proceed to ICSID, non-ICSID institutional or ad hoc arbitration. Such will govern the procedure of the annulment proceedings.

6.

In non-ICSID proceedings, the precise formulation by which subject matter non-arbitrability must be articulated as a ground for annulment or setting aside will depend on the applicable lex arbitri. For example, if annulment is sought in a country that has adopted the UNCITRAL Model law, Article 34(2)(b)(i) provides that the measure of arbitrability will also be subject to domestic law: "the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State".3

7.

Under the ICSID Convention, where there is no domestic seat of the arbitration, Annulment of an award must take place in accordance with Article 52 of the ICSID Convention.4 In such case, arbitrability, as a matter concerning the jurisdiction of a tribunal, will depend on the instrument by which the tribunal is constituted "in concert with the ICSID Convention, as interpreted in the light of the general principles of international law."5 See further Annulment and Grounds for Annulment.

III. Determining subject matter non-arbitrability

8.

As a general matter, the scope in the abstract of disputes capable of resolution via investment arbitration is broad.6 For example, under the ICSID Convention, a tribunal may resolve "any legal dispute arising directly out of an investment".7

9.

Although the ICSID Convention does not define the term “investment”, tribunals have generally agreed that there are objective limits to the concept of investment under the ICSID Convention. See further Definition of Investment. The most famous of such an objective limitation comes from the award in Salini v. Morocco8. So long as the dispute arises directly out of that investment, then the subject matter is arbitrable under the ICSID Convention. See further Salini Test.

10.

Within the scope of disputes broadly capable of settlement by arbitration, States can delimit arbitrability within a particular IIA, investment contract or domestic (foreign) investment law. An example of such a limitation is Article 21 of the Energy Charter Treaty ("ECT"), which "excludes from the scope of the ECT’s protections taxation measures of a Contracting State".9 Other IIAs similarly limit the arbitrability of taxation measures.10 Other IIAs strictly limit consent to a narrow range of arbitrable disputes, for example related only to the "the amount or payment of compensation [for expropriation]."11 

11.

Where there is a domestic legal seat, the manner in which arbitrability is defined by the seat may also influence the interpretation of what is or is not arbitrable.12 Prior to the ECJ decision in Achmea, for example, several tribunals rejected arguments by respondent States that issues concerning EU law were non-arbitrable under intra-EU bilateral investment treaties as a result of the domestic legal regimes.13 Rather than determine that disputes concerning EU law were non-arbitrable, the ECJ invalidated altogether Article 8 of the relevant Netherlands-Slovak Republic BIT, i.e., the arbitration mechanism of the IIA. Rather than enhance the non-arbitrability argument, the decision – and the EU Member States' later decision to terminate their intra-EU BITs – rendered the argument moot. 

IV. Subject matter non-arbitrability as an annulment ground

12.

As noted, the precise formulation of an annulment bid based on subject matter non-arbitrability will depend on the particular grounds available under the applicable legal regime.

13.

Whereas the UNCITRAL Model Law provides a direct ground for annulment for a lack of arbitrability,14 the ICSID Convention does not provide such an express ground.15  

14.

Where lack of arbitrability is not an express ground in and of itself, it may be possible nonetheless to argue non-arbitrability either as a lack of a valid arbitration agreement (since no arbitration agreement was capable of being validly formed to settle the subject matter of the dispute),16 or as an excess of a tribunal's powers or mandate (since the tribunal was incapable of having the authority to exercise jurisdiction over the subject matter).17 

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