A short note on the separability (severability) of the agreement from the main contract.
The doctrine of separability (also known as severability) is a fundamental principle in international arbitration which establishes that an arbitration agreement is autonomous and legally distinct from the main contract in which it is contained.
Core Principles of Separability
- Autonomy of the Clause: Even if the underlying contract is alleged to be void, inoperative, or terminated, the arbitration agreement within it remains valid to allow a tribunal to decide the effects of that invalidity.
- UNCITRAL Model Law (Article 16): This doctrine is enshrined in Article 16(1) of the Model Law, which stipulates that an arbitration clause shall be treated as an independent agreement. A decision by a tribunal that a contract is null and void does not ipso jure (by the law itself) the invalidity of the arbitration clause.
- Source of Jurisdiction: Because the arbitration agreement is separate, the tribunal retains the to hear arguments and receive evidence regarding the validity of the main contract.
Separability in Cases of Illegality and Fraud
Modern arbitration practice applies separability even when a contract is challenged on the grounds of fraud or illegality.
- The Fiona Trust v Privalov (Premium Nafta) Case: The House of Lords held that even if a main contract was procured by bribery, the arbitration clause remains valid unless the invalidity is directed specifically at the arbitration clause itself.
- Tribunal's Duty: It is the arbitral tribunal’s obligation to determine questions of illegality rather than automatically losing jurisdiction at the mere allegation of such acts.
Key Consequences of the Doctrine
According to the sources, the conclusion that an arbitration agreement is "separable" leads to several practical outcomes:
1. Independent Validity: The invalidity of the underlying contract does not necessarily invalidate the arbitration agreement, and vice-versa.
2. Survival: The arbitration clause can survive the termination or expiry of the underlying agreement.
3. Jurisdictional Power: It implies the arbitrator’s power to consider their own jurisdiction, a concept closely related to kompetenz-kompetenz.
4. Differing Laws: The law governing the arbitration clause may be different from the law governing the substantive contract.
5. Juridical Connection: Courts have noted that because of separability, the arbitration agreement is most closely connected with the law of the seat (procedural law) rather than the substantive law of the contract.