published by the llinois Institute for Continuing Legal Education

© 2001 by Stephen E. Smith

III. Drafting the International Arbitration Agreement

J. [23.12] Judicial Forum - Asymmetrical or Sole Option

Sections 23.13 – 23.16 all deal with selection of the appropriate judicial forum for an ancillary proceeding or for the enforcement of the arbitral award. The terms very closely mirror their titles. Accordingly, the asymmetrical or sole option allows one party, usually the one with more bargaining power, to establish the courts of one jurisdiction alone to hear any dispute arising from the contract at hand. Alternatively, the party with the greater bargaining power might prefer to have the other accept jurisdiction over it in the first party’s jurisdiction and so construct the clause in that way.

1. [23.13] Exclusive Judicial Forum

The parties may establish that there is one exclusive court to which to apply for enforcement of the arbitration clause itself, while retaining nonexclusive resort to courts to enforce the arbitral award. One of the parties may insist that there be only one court for resort for all matters concerning the arbitration proceeding itself. Further, that party may require the other to waive any objections to that forum for such purposes.

2. [23.14] Nonexclusive Judicial Forum

The "non-exclusive" judicial forum language raises some very interesting issues for the drafter. If it is the intention of the parties that all matters shall be referred to arbitration, then there is no need for terms allowing to resort to court for determination of any dispute arising out of or related to the contract; however, if certain subjects are not meant for arbitral resolution, then those issues should be excluded and plainly made the subject of judicial action.

3. [23.15] Excluded Judicial Review

The determination of which subjects should be excluded from agreements to arbitrate leads to a very short discussion of a very complicated matter: Who should decide the jurisdiction of the arbitration panel to hear a matter, if a challenge is brought? This question is settled law in the U. S. See e.g., Mostrobuono v. Shearson Lehman Hutton, Inc., et. al., 514 U.S. 52, 131 L.Ed.2d 76, 115 S.Ct. 1212, (1995) and Mitsubishi Motor Corp. v. Solar Chrysler-Plymouth, Inc., 473 U.S. 614, 87 L.Ed.2d 444, 105 S.Ct. 3346, (1985). Further, in the United States, it has long been settled law that arbitration provisions within contracts are separable from the rest of the contract and only challenges that the arbitration clause itself, not the entire contract, was induced by fraud. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 18 L.Ed.2d 1270, 87 S.Ct. 1801 (1967). This "American" doctrine seems vaguely familiar to the continental notion of "kompetenz-kompetenz" or double competence: the power of the arbitrators to decide their own power. The concept of excluding all judicial review—also known as the "exclusionary clause"—makes the arbitral award self-executing and immune from any form of judicial challenge or necessity for enforcement, as the parties have committed themselves to abide by the arbitral award as final and binding.

4. [23.16] Expanded Judicial Review

The "expanded judicial review clause" is the opposite of the exclusionary clause and allows more far-ranging and broader court review, amounting to review, modification or correction due to improper reasoning or mistakes on the part of the arbitrators. An expanded judicial review clause amounts to a "clearly erroneous" review standard.