Kompetenz Kompetenz: What's in the principle?

Introduction

The doctrine of kompetenz-kompetenz saw its inception in the Federal Constitutional Courts in Germany. According to the doctrine, a tribunal has the right to rule on its own jurisdiction. This concept has been majorly applied to arbitral tribunals wherein they have been given the powers to decide jurisdictional issues that may arise during the course of the arbitral proceedings. One of the most acclaimed international arbitrators, Mr. Gary Born remarked, "The 'Kompetenz-Kompetenz' doctrine forms the bedrock of arbitration proceedings; it is a key factor that maintains the arbitration process as a unique and independent system for dispute resolution."[1]

The UNCITRAL Model Law:

The UNCITRAL Model Law on International Commercial Arbitration (hereinafter “Model Law”), which can be considered as a mother-text for the Arbitration Acts in many countries, including India, provides for the competence of an arbitral tribunal to rule on its own jurisdiction. Section 16 of the Model Law talk about quite a few things, such as; the tribunal being able to rule on its own jurisdiction including ruling on objections as to the existence and validity of an arbitration agreement, the doctrine of severability[2], raising an objection against the jurisdiction, or that that the tribunal is exceeding its scope, challenging the decision of an arbitral tribunal holding that it has jurisdiction, etc. The Model Law can be considered to be the first document that formally recognises and stipulates the doctrine of kompetenz-kompetenz in the international arbitration arena. This Section 16 has been reproduced almost exactly, barring a few clauses, in its counterpart (Section 16) in the Arbitration and Conciliation Act, 1996 (hereinafter the “1996 Act”) of the Indian Parliament.

The Arbitration and Conciliation Act, 1996

Under the Arbitration Act, 1940 (hereinafter “Old Act”), the arbitral tribunal did not have any such power to rule on its jurisdiction, however, section 16 of the 1996 Act provided it with the same. The Supreme Court of India (hereinafter “Supreme Court”) in the case of Olympis Superstructures Pvt. Ltd. v. Meena Vijay Khetan[3] had held that the tribunal is empowered  u/s 16 of the 1996 Act to rule on its own jurisdiction. As stated earlier, the verbatim has been almost reproduced from paragraphs 1 & 2 of its counterpart in the Model Law. Section 16(1) provides that the arbitral tribunal may rule on its own jurisdiction including any objections with regard to the existence and validity of an arbitration agreement, section 16(1)(a) and 16(1)(b) lay down the doctrine of severability[4], section 16(2) provides that the plea objecting that the arbitral tribunal does not have jurisdiction shall be raised before the submission of statement of defence, section 16(3) stipulates that a plea objecting that the tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged as beyond scope of authority is raised, section 16(4) provides that the tribunal may admit the pleas mentioned in sub-sections (2) or (3) later if it deems the delay justified, section 16(5) stipulates that if the tribunal rejects the pleas mentioned in sub-section (2) or (3), it may proceed and pass an arbitral award and lastly, section 16(6) provides for making an application for challenging such award as under section 34.

Section 16 can be criticised on 2 grounds:

1)     There is no provision for an appeal against the decision of an arbitral tribunal rejecting the pleas under sections 16(2) or 16(3) although, the Model Law does provide for such an appeal. Hence, the aggrieved party has to wait until the final award is passed and then challenge it as per section 34 of the 1996 Act.

2)     The tribunal is not mandated to hear the issue of jurisdiction at the preliminary stages, it is left entirely up to its discretion. However, the issue of jurisdiction is a preliminary issue and hence should be decided during the initial stages of the proceedings, preferably right after the passing of the 1^st Procedural Order. The courts have taken different views regarding this issue. The Supreme Court in McDermott International v. Burn Standard[5] had held that the objection that the arbitrator is exceeding the scope of his jurisdiction should be tried as a preliminary issue by the arbitration u/s 16. Later, in Maharshi Dayanand University v. Anand Coop[6], it was held that the arbitrator need not mandatorily decide any issue concerning jurisdiction at the preliminary stage and can decide it anytime before pronouncing the final award. In a subsequent case the Supreme Court again reverted to the reasoning in Mcdermott.

Conclusion

The doctrine of kompetenz kompetenz is a unique doctrine which gives considerable autonomy to the arbitral tribunals while ensuring minimal interference by courts. As it stands, the section 16 of the 1996 Act can be said to empower the tribunal to decide on three crucial issues, namely, the existence and validity of the arbitral agreement, the jurisdiction of the tribunal, and the scope of authority of the tribunal. Despite the ongoing debate around the topic, it can still be concluded that these issues have to be decided by the tribunal itself as preliminary issues although it is not obligated to do so.

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[1] Born, Gary. International Commercial Arbitration  / Gary B. Born. Second edition. Alphen aan den Rijn, The Netherlands: Kluwer Law International, 2014. Print.

[2] The ‘Doctrine of Severability’ stipulates that an arbitration clause exists as an independent agreement in the main instrument/document that it is contained in and hence, even if the main instrument is held to be invalid, it does not ipso jure render the arbitration clause as invalid.

[3] Olympis Superstructures Pvt. Ltd. v. Meena Vijay Khetan (1999) 5 SCC 651

[4] Id at 2.

[5] McDermott International v. Burn Standard (2006) 11 SCC 181

[6] Maharshi Dayanand University v. Anand Coop. L/C Society Ltd. (2007) 5 SCC 295