The principle requires the lines to be drawn between the authority of the arbitral tribunal and that of the courts. This is particularly true in France, which has long been considered as a pro-arbitration jurisdiction, Ms Francois-Poncet told delegates at a seminar on the principle held by the London Shipping Law Centre.
French courts and legislators have tried to find the right balance between the powers of arbitrators and judges so as to ensure that arbitral proceedings can proceed efficiently without parties challenging jurisdiction she said.
Kompetenz-Kompetenz (or competence-competence) is a well recognised principle of international arbitration, although one which is subject to much debate.
The principle recognises that arbitrators have the power to determine their own jurisdiction. However, some argue that the original German principle from which the name derives implies that arbitrators are entitled to make final ruling on their jurisdiction, “a position that has in fact been rejected in most jurisdictions, including Germany and France”, Ms Francois-Poncet said. It was therefore suggested that the term competence-competence be used instead to avoid confusion.
She said that the principle was often described as having a dual function containing both positive and negative elements.
The positive effect is that arbitrators have the jurisdiction to determine their own jurisdiction. The negative effects is that national court judges do not have jurisdiction to determine the arbitrators jurisdiction until after the arbitrators have done so themselves.
“In France, both the positive and negative effects of the principle are recognised and considered as fundamental components of French law on international arbitration,” according to Ms Francois-Poncet.
While the compentence-competence principle gives priority to arbitrators to decide their own jurisdiction, it does not remove this issue from review by the national courts, she explained. In general terms the principle draws its power not from the arbitration agreement itself but from the laws of the country where the arbitration is held.
The primary rationale for the principle is to prevent obstruction or delay of the arbitration by parties acting in bad faith, and, specifically in France, to preserve the exclusive jurisdiction of the French Court of Appeals to review arbitral awards.
The principle is embodied in the New Code of Civil Procedure with Article 1466 embodying the positive effect of the principle and Article 1458 the negative.
Under Article 1458:
• When a dispute submitted to an arbitral tribunal by virtue of an arbitration agreement is brought before a national court, such court shall decline jurisdiction;
• If an arbitral tribunal has not yet been sized of the matter, the national court shall also decline jurisdiction unless the arbitration agreement is manifestly void;
• In both cases, the national courts cannot decline jurisdiction ex officio.
Ms Francois-Poncet explained that under the article, the court performs a prima facie examination of the existence and validity of the arbitration agreement only if an arbitral tribunal has not yet been seized of the matter, and must refer the matter back to arbitration if it finds evidence of the existence and validity of the arbitration agreement. “However, in order for the court even to undertake this review, a petition must have been made to them to this effect. In cases where the arbitral tribunal has already been seized of the matter, the court has no option but to decline jurisdiction in favour of the arbitral tribunal.”
Article 1466 of the code states that: “If, before the arbitrator, one of the parties challenges the principle or scope of the arbitrator’s jurisdiction, the arbitrator shall rule on the validity or scope of his jurisdiction.”
Numerous cases before the French courts have confirmed the positive effect of the compentence-competence principle enshrined in article 1466.
However, the negative effect of the principle in Article 1458 has also been upheld in a number of groundbreaking cases including one involving American Bureau of Shipping.
Ms Francois-Poncet explained that in that case “the court held that finding an arbitration agreement manifestly void is the only possible obstacle to the principle ‘that recognises the priority of the arbitral jurisdiction in determining the existence, validity and scope of the arbitration agreement’, this case has been acknowledged to be one of the leading French decisions in the field of international arbitration, mainly because of its clear recognition of the negative effect of compentence-competence”.
There are exceptions to the principle that have been considered by the French courts, notably where the agreements to arbitrate are manifestly void or manifestly inapplicable.
“In only a limited number of circumstances will French courts consider arbitration clauses to be manifestly void and, nofollowing the Quarto decision, the French courts have similarly restricted the possibility of applying the manifestly inapplicable exception. This is in keeping with French’s upholding of the competence-competence principle and its commitment generally to international arbitration as a preferred form of dispute resolution.”