Challenges to the jurisdiction of a tribunal go to the heart of the process. A successful challenge at the outset can stop arbitral proceedings in their tracks. For this reason challenges are usually dealt with early, either through the tribunal itself determining its jurisdiction or through application to the court. 

But that is not the end of it, the issue can come back to the fore on enforcement under the New York Convention. Of the limited grounds available to resist recognition and enforcement under Article V of the New York Convention, an attack on the validity of the arbitration agreement is first on the list.

The Supreme Court’s judgment in Kabab-JI SAL (Lebanon) –v- Kout Food Group (Kuwait) [2021] UKSC 48  illustrates the problems that can arise.

I have commented on one notable outcome of that judgment (see The Supreme Court underlines the power of “No Oral Modification clauses” in upholding an agreement to arbitrate) but the outcome of the jurisdiction dispute is interesting too.

The issue was whether there was a binding arbitration agreement. The ICC appointed tribunal decided (by majority) that it should apply the law of the seat, French law to the question of whether or not there was an arbitration agreement in place which bound the Respondent (which had not signed an arbitration agreement but which was said to have become a party by “novation by addition”).

It issued an award for $6.7m that the successful Claimant sought to enforce in England. In the meantime the unsuccessful Respondent applied to the French courts to seek to annul the award. The Paris Court of Appeal refused and upheld the award. The English courts, ultimately the Supreme Court, refused to enforce the award. It decided that English law, the governing law of the agreement which contained the arbitration clause, applied to the question of whether the Respondent was a party to the arbitration agreement, not the law of the Seat (French law).  

As things stand therefore the Claimant has an award that it can enforce in France but not in England. If the only available assets of the Respondent were in England, this would be a disastrous outcome for the Claimant. The Respondent is seeking to appeal the French court decision. If the Respondent had assets in jurisdictions other than France or England enforcement proceedings, the Claimant might yet take action there to seek recognition and enforcement of its award.

This outcome is not unique and is the reason why issues of jurisdiction and enforceability of an award is an issue that parties to arbitrations keep closely in mind prior to commencement and throughout the process. Understanding where assets of the opponent are and how an award might be enforced is something that needs to be considered at the outset and kept under review.