Site Loader

Under the principle of dissociability, the invalidity of the underlying agreement will not affect the compromise clause; similarly, the invalidity of the compromise clause will not invalidate the underlying agreement. In other words, the requirements for the validity of the arbitration agreement may differ from those sought for the validity of the underlying agreement. Under Turkish law, for example, a representative may enter into a share purchase agreement on behalf of the client, which does not require the agent to do so. However, the same agent needs a special authority to enter into an arbitration agreement on behalf of the same client. In this case, the provisions of the share purchase contract concluded by the agent are valid, with the exception of the compromise clause, in the absence of a specific power1. Now, applying the (broad) presumption of dissociability, New York law cannot be considered an implicit choice of the arbitration agreement, as it is separate from the main agreement. Such a view could be contrary to the intention of the parties if they feel that the parties do not have legal training and are not aware of the existence of a doctrine of parability, much less a broad or narrow application. Therefore, the application of the doctrine of dissiability could disregard the parties` intention to regulate the entire agreement (including the arbitration agreement) by the New York law. However, the true scope of the doctrine has sometimes been misunderstood and interpreted in a broader sense. This article critically examines the scope of the doctrine that treats an arbitration agreement as a separate agreement only if the validity of the arbitration agreement is called into question on the basis of the invalidity of the main agreement. The doctrine of separation is one of the conceptual and practical cornerstones of international arbitration. This means that the compromise clause of a contract is separate from the main contract to which it belongs and, as such, survives the termination, violation and invalidity of that contract. Separability thus ensures that, if one party asserts that the other is in total violation, the contract is not destroyed for all purposes.

Instead, it survives to measure the rights arising from the infringement, and the compromise clause survives to determine the nature of their tally. Under English law, an arbitration agreement can be directly charged for public policy reasons. The question arises as to whether the arbitration agreement may be independent of the nullity contract4 or whether it supports the application of the arbitration agreement with a view to promoting or concealing an illegal system or circumventing a foreign right that led to its break.5 Indeed, the compromise clause and the underlying agreement are two different agreements, although they both exist in the same text. While the underlying agreement creates a relationship of engagement between the parties, the arbitration agreement focuses exclusively on the settlement of disputes between the parties. The Beijing High Court Jianlong Heavy Industry Group v. Golden Ocean Group Limited – Ors1 recently addressed the issue of the separation of arbitration agreements and the circumstances in which political factors that invalidate the underlying contract may also challenge a compromise clause.

Dan