by Harshal Morwale*
“Arbitration is the grease that helps economies flow and brings us benefits around the world.”
—David W. Rivkin
Arbitration is a dynamic dispute resolution technique. An arbitrator’s powers normally derive from the arbitration agreement. With increasing number of cross border transactions and international trade contracts, the arbitrability of arbitration agreements holds a prominent place in the resolution of international and domestic arbitrations.
- Effect given to an arbitration agreement by court
Traditionally, the parties move to court when the dispute relating to an arbitration agreement arises. So the question that needs to be dealt with is how does a court give effect to an arbitration agreement? It can be dealt in parts.
- Where one party wants to institute arbitration and another one is uncooperative, court may pass order compelling arbitration.
- Where litigation is initiated over a claim falling within the scope of arbitration agreement, court may dismiss the suit on grounds of lack of jurisdiction.
- Depending on the law of the seat, the Court may even have powers to support the arbitral tribunal – witnesses, documents, opinions.
However, question is when can parties approach court even in presence of an arbitration agreement? In other words, what makes a dispute non-arbitrable?
- The Golden Rule
The Golden Rule is that if the dispute is covered by an Arbitration agreement, the said dispute should be resolved by Arbitration. Ordinarily every civil or commercial dispute whether based on contract or otherwise which is capable of being decided by a civil court is in principle capable of being adjudicated upon and resolved by arbitration subject to the dispute being governed by the arbitration agreement. However, there are exceptions to this Rule. There are several scenarios and circumstances, which might render the dispute non-arbitrable.
Arbitrability can be found in UNCITRAL Model Law, which permits the courts of the seat to set aside an arbitral awards on the grounds that the subject matter of the dispute is not capable of resolution by arbitration under the law of the State. The term arbitrability has different meanings in different contexts. The three facets of arbitrability, relating to the jurisdiction of the arbitral tribunal, are as under: 
- Whether the disputes are capable of adjudication and settlement by arbitration?
That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties (the arbitral tribunal) or whether they would exclusively fall within the domain of public fora (courts).
- Whether the disputes are covered by the arbitration agreement?
That is, whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the excepted matters excluded from the purview of the arbitration agreement.
- Whether the parties have referred the disputes to arbitration?
That is, whether the disputes fall under the scope of the submission to the arbitral tribunal, or whether they do not arise out of the statement of claim and the counter claim filed before the arbitral tribunal.
- Drawing a line
While deciding the issue of arbitrability courts are required to draw a line between arbitrable and non-arbitrable disputes on the basis of two different policy objectives:
- Ensuring that sensitive matters of public interest are debated and resolved before national courts, and
- Promoting arbitration as a vibrant system of dispute resolution for parties who freely chose to arbitrate rather than litigate their differences.
While the first two procedural requirements must be satisfied at the beginning of an arbitral proceeding, the issue of the subject-matter arbitrability can arise when it comes to the recognition and enforcement of a foreign arbitral award.
Number of pronouncements have been rendered laying down the scope of judicial intervention, in cases where there is an arbitration clause, with clear and unambiguous message that in such an event judicial intervention would be very limited and minimal. However, the Arbitration Act, 1996 contains provisions for challenging the arbitral awards. These provisions are Section 34 and Section 48 of the Act. Section 34(2)(b) and Section 48(2) of the Act, inter alia, provide that an arbitral award may be set aside if the Court finds that the subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force. Even when such a provision is interpreted, what is to be shown is that there is a law which makes subject matter of a dispute incapable of settlement by arbitration.
- Which law makes a dispute non-arbitrable?
The Courts have held that certain kinds of disputes may not be capable of adjudication through the means of arbitration. Disputes like criminal offences of a public nature, disputes arising out of illegal agreements and disputes relating to status, such as divorce, cannot be referred to arbitration.
- The well recognized examples 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 (grant of probate, letters of administration and succession certificate)
- Eviction or tenancy matters governed by special statutes
- Cases arising out of Trust Deed and the Trust Act
- Patent, trademarks and copyright
- Anti-trust/competition laws
- Would mere allegation of fraud make Commercial Dispute Non-Arbitrable?
More recently, commentators and courts have taken the position that a mere allegation of illegality should not relieve a tribunal of jurisdiction to determine the dispute, including the question of illegality.
Courts are of the opinion that mere allegation of fraud simplicitor may not be a ground to nullify the effect of arbitration agreement between the parties. It is only in those cases where the Court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by civil court on the appreciation of the voluminous evidence that needs to be produced, the Court can sidetrack the agreement by dismissing application under Section 8 and proceed with the suit on merits. It can be so done also in those cases where there are serious allegations of forgery/fabrication of documents in support of the plea of fraud or where fraud is alleged against the arbitration provision itself or is of such a nature that permeates the entire contract, including the agreement to arbitrate, meaning thereby in those cases where fraud goes to the validity of the contract itself of the entire contract which contains the arbitration clause or the validity of the arbitration clause itself.
The reverse position thereof would be that where there are simple allegations of fraud touching upon the internal affairs of the party inter se and it has no implication in the public domain, the arbitration clause need not be avoided and the parties can be relegated to arbitration. While dealing with such an issue in an application under Section 8 of the Act, the focus of the Court has to be on the question as to whether jurisdiction of the Court has been ousted instead of focusing on the issue as to whether the Court has jurisdiction or not. It has to be kept in mind that insofar as the statutory scheme of the Act is concerned, it does not specifically exclude any category of cases as non-arbitrable. Such categories of non-arbitrable subjects are carved out by the Courts, keeping in mind the principle of common law that certain disputes which are of public nature, etc. are not capable of adjudication and settlement by arbitration and for resolution of such disputes, Courts, i.e. public for a, are better suited than a private forum of arbitration.
Therefore, the inquiry of the Court, while dealing with an application under Section 8 of the Act, should be on the aforesaid aspect, viz. whether the nature of dispute is such that it cannot be referred to arbitration, even if there is an arbitration agreement between the parties. When the case of fraud is set up by one of the parties and on that basis that party wants to wriggle out of that arbitration agreement, a strict and meticulous inquiry into the allegations of fraud is needed and only when the Court is satisfied that the allegations are of serious and complicated nature that it would be more appropriate for the Court to deal with the subject matter rather than relegating the parties to arbitration, then alone such an application under Section 8 should be rejected.
- Whether Arbitrator can decide not arbitrable dispute?
If a non-arbitrable dispute is referred to an Arbitrator and even if an issue is framed by the Arbitrator in relation to such a dispute, there cannot be a presumption or a conclusion to the effect that the parties had agreed to refer the issue to the Arbitrator. There was a case where the respondent authorities had raised an objection relating to the arbitrability of the aforestated issue before the Arbitrator and yet the Arbitrator had rendered his decision on the said excepted dispute. In the opinion of courts, the Arbitrator could not have decided the said excepted dispute. Court, therefore, held that it was not open to the Arbitrator to decide the issues, which were not arbitrable, and the award was quashed.
- Changing Scenario
Scenario on global level is changing. Increasingly, disputes involving antitrust laws, which were formerly considered inappropriate for arbitration, are being arbitrated. Securities issues are also arbitrable, at least in the United States.
There has been seen the growing acceptance of arbitration, at least in the international sphere, public policy limits to arbitrability are gradually disappearing. Arbitrators now adjudicate disputes involving such public matters as intellectual property rights, antitrust and competition, securities laws, bankruptcy, corporate law, taxation, and allegations of fraud, corruption or bribery. 
- Arbitration of competition law
Being regulatory law, it is foremost related to the governmental apparatus of supervision over market practices purporting to prevent and/or sanction abusive actions in the forms of antitrust agreements and abuse of dominant position, in broad terms. Hence, competition law is primarily enforceable by designated regulatory bodies. 
- In spite of that, both doctrine and case law confirm that competition law may be subject to private enforcement. US Supreme Court opined that where the Court confirmed that obligations arising out of statutory rules would be arbitrable to the same extent as contractual duties. This constitutes private enforcement of competition law since private claims are allowed to seek sanctions for breaches of statutory competition rules (though private enforcement may lead only to a single remedy – compensation)
- Spanish Court of Appeals also recently ruled on the arbitrability of competititon law. The Court concluded that the EU law or Spanish law does not preclude the arbitrability of the competition disputes as long as the relevant award applied the mandatory competition rules. Therefore, competition law claims are considered to be at free disposition of the parties.
- Arbitration of Copyright disputes
The Canadian Supreme Court opined that – In order to determine whether questions relating to ownership of copyright fall outside arbitral jurisdiction, we must more clearly define the concept of public order in the context of arbitration, where it may arise in a number of forms, as it does here, for instance, in respect of circumscribing the jurisdiction ratione materiae of the arbitration. Thus a matter may be excluded from the field covered by arbitration because it is by nature a matter of public order. The concept also applies in order to define and, on occasion, restrict the scope of legal action that may be undertaken by individuals, or of contractual liberty. The variable, shifting or developing nature of the concept of public order sometimes makes it extremely difficult to arrive at a precise or exhaustive definition of what it covers.
The development and application of the concept of public order allows for a considerable amount of judicial discretion in defining the fundamental values and principles of a legal system. In interpreting and applying this concept in the realm of consensual arbitration, we must therefore have regard to the legislative policy that accepts this form of dispute resolution and even seeks to promote its expansion. For that reason, in order to preserve decision‑making autonomy within the arbitration system, it is important that we avoid extensive application of the concept by the courts. Such wide reliance on public order in the realm of arbitration would jeopardize that autonomy, contrary to the clear legislative approach and the judicial policy based on it.
In these recent matters, even Bombay High Court opined that it is possible to lose sight of the fact that in trademark and copyright disputes, we very often are confronted with written agreements. In copyright matters, agreements are in fact a statutory requirement for an assignment. There must be a written document. The law does not say that the written document of assignment should have an arbitration clause. 
To quote Hon’ble G.S. Justice Patel –
“What Mr. Dhond (counsel for plaintiff) suggests, in effect, is that in every one of these cases, all these arbitration clauses must be treated as entirely null, void and otiose. No law that I am aware of even remotely suggests anything of the kind. I think it would do a very great violence not only to the language but to the purpose and ambit of the Arbitration Act as also the Copyright Act, if I would have to read it in the manner Mr. Dhond suggests. I find Mr. Dhond’s protests, to the effect that the view I am inclined to take would turn the entire edifice of intellectual property law on its head, needlessly alarmist. It will do nothing of the kind. On the contrary, I believe an acceptance of Mr. Dhond’s view must result in widespread confusion and mayhem in commercial transactions. We often have complex commercial documents and transactions that routinely deal with intellectual property rights of various descriptions as part of the overall transaction. This can be said of mergers, acquisitions, joint ventures, the setting up of special purpose vehicles, technology transfer and sharing agreements, technical tie-ups, licensing and so on. The range of fields of human activity that could possibly be covered by any one or more of these is limited by nothing but our own imagination: steel manufacturing, setting up of power plants, software, motor car manufacture, computer hardware, music, films, books and literature, performances and even services. If Mr. Dhond is correct, then in any of these cases, where intellectual property rights are transferred or, for that matter, in any way dealt with, no dispute arising from any such agreement or transactional document could ever be referred to arbitration, and every single arbitration clause in any such document would actually, in his formulation of it, be void and non-est ab initio. It would have to be so — Sukanya Holdings will not allow a dispute relating to intellectual property rights to be segregated from other disputes. I do not think the world of domestic and international commerce is prepared for the apocalyptic legal thermonuclear devastation that will follow an acceptance of Mr. Dhond’s submission.
Therefore, it is safe to say that intellectual property dispute or at least copyrights disputes are arbitrable.
Arbitration offers significant advantages for the resolution of many disputes. An arbitrator’s powers normally derive from the arbitration agreement. In general, arbitration is not part of the state’s judicial system, although the state sometimes assigns powers or functions directly to arbitrators. Nonetheless, arbitration is still, in a broader sense, a part of the dispute resolution system the legitimacy of which is fully recognized by the legislative authorities.
The law establishes a mechanism for overseeing arbitral activity that is intended to preserve certain values that are considered fundamental in a legal system, despite the freedom that the parties are given in determining the methods of resolution of their disputes
Today, on global level most of the disputes are considered arbitrable. Therefore, initially while negotiating national or international arbitration agreements it is necessary to look at national laws and present issues with their arbitrability. It cannot be emphasized enough that effective planning is very important in arbitration.
In cutting edge environment of international commercial arbitration, if India has to emerge as a global hub for arbitration, national law and international law has a wide role to play.
* Harshal Morwale, Final Year, B.A. LL.B. (5 Years), SNG Law College, Akola.
 David W. Rivkin (Former President at the International Bar Association) (Quiet Triumph : How Arbitration Changed The World)
 ‘How does a Court give effect to arbitration agreements? ‘ (Law Web) <http://www.lawweb.in/2017/09/how-does-court-give-effect-to.html> accessed 20 September 2017
 Hindustan Petroleum Corporation Ltd v Kamalkant Automobiles , 2017 (123) ALR 369 [High Court of Allahabad]
 Section 34.2. – UNCITRAL Model Law, 1985
 Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd, (2011) 5 SCC 532 [Supreme Court of India]
 L. Yves Fortier, ‘Arbitrability of Disputes’  International Law, Commerce and Dispute Resolution, 269-284
 Luljeta Plakolli-Kasumi, ‘The Notion of “Ordre Public”: Arbitrability of Patent Law Disputes’  1(1) Journal of Alternative Dispute Resolution in Kosovo, 12-24
 A Ayyasamy Vs A Paramasivam & Ors, AIR 2016 SC 4675 [Supreme Court of India]
 6.1.1 – 6.1.5 Supra note 5
 Supra note 5 – Where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.
 Supra note 5 – Under the Arbitration and Conciliation Act, 1996 only parties to the arbitration agreement can refer their disputes to arbitration (being a right in personam). Since the rights of a third party may be affected in a mortgage suit (being a right in rem), such an action cannot be referred to arbitration under the Act.
 Shri Vimal Kishor Shah Vs Jayesh Dinesh Shah & Ors, (2016) 8 SCC 788, [Supreme Court of India]
6.1.9 – 6.1.12 – O.P. Malhotra on ‘The Law & Practice of Arbitration and Conciliation’, (3rd edn)
 Margaret L. Moses, The Principles and Practice of International Commercial Arbitration (3rd edn, Cambridge University Press 2017) pg. 35
 Section 8 – Power to refer parties to arbitration where there is an arbitration agreement – THE ARBITRATION AND CONCILIATION ACT, 1996
 Supra note 11
 M/S Harsha Constructions v Union of India (2014) 9 SCC 246 [Supreme Court of India]
 Supra Note 18
 Deyan Draguiev, ‘Arbitrability of Competition Law Issues Reinforced‘, Kluwer Arbitration Blog, January 10 2014,
 Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) [Supreme Court of United States]
 Camimalaga S.A.U. v. DAF Vehículos Industriales S.A.U., Audiencia Provincial  Appeal no. 66/2013
 Desputeaux v. Éditions Chouett,  1 S.C.R. 178, [Supreme Court of Canada]
 Eros International Media Limited v. Telemax Links India, 2016 SCC OnLine Bom 2179, [High Court of Bombay]
 Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya (2003) 5 SCC 531) [Supreme Court of India]
 Supra note 30