Do You Know Who Will Decide Whether Your Next Dispute Is Subject to Arbitration?

This article was published in the March 2018 issue of AGC Law in Brief (Volume 4, Issue 2), Practical Construction Law & Risk Issues. It is reprinted here with permission.

Courts determine whether a dispute is subject to arbitration, also known as questions of “arbitrability,” unless the parties agree to submit arbitrability disputes to the arbitrator. However, you should be mindful that incorporating an arbitration provider’s rules or a broad arbitration provision in your agreement may delegate the arbitrability determination to the arbitrator.

This article will survey the effects of incorporating an arbitration provider’s rules or common arbitration provisions on who determines questions of arbitrability.

Unless the Parties Agree Otherwise, Courts Ordinarily Decide Questions of Arbitrability

The Supreme Court long ago recognized that arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute that he or she has not agreed to submit.¹ Accordingly, when a dispute arises, it must first be determined whether the parties are bound by an arbitration agreement and whether they agreed to submit their particular dispute to arbitration. These questions of “arbitrability” are ordinarily decided by a court.² A court will review the parties’ arbitration agreement, as with any other contract, with an eye to what the parties intended. When doubt exists as to the parties’ intentions to arbitrate, the Federal Arbitration Act (FAA) — and similar state arbitration statutes — express a strong presumption in favor of arbitration, requiring that doubt to be resolved in favor of arbitration.

While questions of arbitrability are ordinarily decided by a court, contracting parties can agree to delegate questions of arbitrability to an arbitrator instead.³ Because an arbitrator deciding questions of arbitrability is contrary to the ordinary course of events, contracting parties must express their intent to delegate questions of arbitrability to an arbitrator “clearly and unmistakably.”⁴ When doubt exists as to the parties’ intent to “arbitrate arbitrability,” the FAA’s presumption in favor of arbitrability is reversed.⁵

Courts generally apply state law principles governing the formation of contracts to determine whether parties “clearly and unmistakably” agreed to arbitrate arbitrability.⁶ Courts interpreting the FAA have also developed a similar federal common law of arbitrability, which is applicable to any contract involving interstate commerce. Many courts have held that parties “clearly and unmistakably” agreed to arbitrate arbitrability simply by incorporating an arbitration provider’s rules or a broad arbitration provision into their agreement.

Incorporating a Particular Arbitration Provider’s Rules Into Your Agreement Can Be a “Clear and Unmistakable” Delegation of Authority to Decide Questions of Arbitrability

Arbitration provisions frequently state that the contracting parties agree to arbitrate with a particular provider, and many go on to specifically incorporate the rules of the arbitration provider into the agreement. Many courts have held that specifically incorporating an arbitration provider’s rules, which recognize the arbitrator’s discretion to determine their own authority’s scope, into an agreement is a clear and unmistakable delegation of authority to decide questions of arbitrability to arbitrators.⁷

Arbitration providers’ rules almost universally recognize arbitrators’ discretion to determine the scope of their own authority. For example:

• American Arbitration Association (AAA) Commercial Arbitration Rule 7(a) provides that “The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.”
• The AAA International Arbitration Rules provide in Article 19 that “The arbitral tribunal shall have the power to rule on its own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement(s), or with respect to whether all of the claims, counterclaims, and setoffs made in the arbitration may be determined in a single arbitration.”
• The International Chamber of Commerce (ICC) Arbitration Rules provide in Article 6(5) that “any decision as to the jurisdiction of the arbitral tribunal . . . shall [] be taken by the arbitral tribunal itself.”
• Article 23 of the 2010 UNCITRAL Arbitration Rules states that “[t]he arbitral tribunal shall have the power to rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement,” and that “[t]he...