Whereas multi-tiered arbitration clauses were relatively rare two decades ago, they are increasingly common today and can be found in a large number of contracts. These clauses aim to address the growing need to reduce time and costs by providing for arbitration only as a last resort in the event that prior proceedings—such as mediation, expert determination, or a dispute resolution panel—fail.
Nevertheless, a significant number of cases involving multi-tiered arbitration clauses still end up in arbitration. Furthermore, the existence of multi-tiered arbitration clauses often gives rise to additional disputes regarding compliance with such clauses.
Most arbitral tribunals would likely consider this issue to pertain to the admissibility of the claim and would therefore retain jurisdiction by means of an interim or partial award.
However, because there is no uniform case law, many parties may be tempted to challenge the arbitral tribunal’s interim or partial award, arguing that the issue of (non)compliance with the multi-tiered arbitration clause is a matter of jurisdiction and not a matter of the admissibility of the claims.
In two recent decisions, the German Bundesgerichtshof¹ clarified that the issue of (non)compliance with multi-tiered arbitration clauses is a matter of admissibility and not a matter of jurisdiction. Consequently, arbitral tribunals have jurisdiction to decide on this matter. Furthermore, since the issue of (non)compliance with the multi-tiered arbitration clause pertains to the admissibility of the claims, the arbitral tribunal’s decision in that regard does not constitute grounds for setting aside awards and cannot be challenged once the final award has been rendered.
This is a very welcome clarification, which will no doubt help reduce the temptation to challenge awards on the grounds of jurisdiction or final awards on that basis. It is nevertheless regrettable that the Bundesgerichtshof, in addition to dismissing the claim as currently inadmissible or currently unfounded, did not provide for a third option that would allow the arbitration to be stayed pending the conduct of the first-step proceedings. This would normally be the most cost-effective way to proceed, given that the likelihood of reaching a settlement in the first-step proceedings is relatively low once the matter has gone to arbitration.
Almost at the same time, the Paris Court of Appeal2, relying on previous case law, ruled in similar circumstances and in line with the Bundesgerichtshof that the issue of (non)compliance with a multi-tiered arbitration clause is not a matter of jurisdiction, but a matter of the admissibility of the claims.
German and French case law are therefore fully aligned on this important issue, and it is to be hoped that other jurisdictions will follow suit in order to achieve a uniform approach worldwide.
1Orderof January 14, 2016, I ZB 50/15; Order of August 9, 2016, I ZB 1/15.
2Paris Courtof Appeal, June 28, 2016, No. 15/03504.