Porto Court of Appeal | Kompetenz-Kompetenz | Enforceability of Arbitration Agreements by Non-Signatories | Abuse of Rights | 08-03-2016 | Case #009

Porto Court of Appeal 
Date: 08-03-2016
Case Nr. 2164/14.7TBSTS.P1

LINK DGSI

Headline:

State courts must confine themselves to questions of non-existence, nullity or inoperability of the arbitration clause. Non-signatories may be joint to arbitration, and can even claim to be joint in certain instances that were delineated by the Court.

Summary:

  1. Art. 5(1) and 18(1) of the Arbitration Act recognize the principle of kompetenz-kompetenz, and this entitles the tribunal to make the first decision on jurisdiction. Consequently, the state court before which the action was brought must confine itself to solely decide upon the issue of the objection of the existence of an arbitration agreement. Thus, a court may only decide that the arbitral tribunal is in want of jurisdiction in cases of non-existence, nullity or inoperability of the arbitration clause.
  2. A Tribunal is bound by the decision of the state court which recognizes that the tribunal has jurisdiction, because not doing so would lead to a situation where both the courts and tribunal have found that they have no jurisdiction.
  3. Pursuant to Art. 36(1) of the Arbitration Act, third parties are allowed to join the arbitral proceedings (independently of any express wording in the arbitration agreement). This joinder is obligatory to third parties if those parties have argued the existence of an arbitration agreement in a separate and previous lawsuit. It would run against good faith if those parties that had argued the existence of that arbitration agreement and subsequently, once the arbitral tribunal is constituted, they plead that they are not bound by that arbitration agreement.
  4. The contract must be interpreted as a whole, so that if the analysis of the relevant negotiation documents reveals that several parties have been bound by the contract as a result of their contractual statements, thus expressing their consent (even implicitly), those contractual effects extend to the arbitration agreement.
  5. A non-signatory of arbitration may even force a signatory to accept arbitration. All that is required is that there is (or has been pleaded) an action between the non-signatory and one of the parties to the contract, related to the abuse of rights in question in the arbitration; which then acts as estoppel to any objection against the competence of the arbitral tribunal.

 

This case summary was kindly prepared by Rishabh Raheja, (rishabharaheja@gmail.com, NALSAR University of Law), Sameer Thakur (sameerthakur@live.in, NALSAR University of Law), and Abhishek Babbar (abhishekbabbar1996@gmail.com).

 

 

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