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Separability Of The Arbitration Agreement

By Zach Arnold | October 6, 2021

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Such an argument, if accepted, could lead to a fatal end to the arbitration. Accordingly, the parties have no choice but to proceed, which is contrary to the express intention of the parties to settle their dispute through arbitration. Doctrine was necessary to act as a shield against this argument. 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 circumstances in which public policy factors that invalidate the underlying contract may also charge an arbitration clause. In the application for annulment of the arbitral award, nioc consults ยง2 (5) and 4 (5) of the English Arbitration Act to argue: (1) Application of section 2 (5), where an arbitration has its seat outside England and Wales, but the law of the arbitration agreement is English, that law governs severability, Severability is therefore implicitly a matter of substantive law of the arbitration agreement, Non lex fori2) Section 2 (5) of the Act provides that, in areas where English law governs the arbitration agreement and where the arbitration has its seat outside England and Wales, the presumption of severability provided for in section 7 of the Act applies. Although the arbitration has its seat in England in this case, NIOC argued that this provision meant that, in accordance with English law, the law of the arbitration agreement regulated the issue of severability; 2. Where Article 4(5) of the Act was applied, the substantive law of the arbitration agreement was the same as that of the treaty, namely Iranian law; the law of the seat was not applicable, as the seat was chosen only after the conclusion of the arbitration agreement (and the law applicable to the arbitration agreement should not change); (3) Iranian law does not recognise the principle of separation and, therefore, both the treaty and the arbitration agreement were null and void. The defendants argued that this went too far and that Foster/Driscoll did not have a general rule to that effect. Instead, they argued that the court should apply the principle of separation set out in Harbour Insurance and consider whether the policy of the rule that invalidates the main contract also invalidates the arbitration agreement.

An arbitration agreement must be treated separately from the main agreement in which it is contained and, as such, the termination or invalidity of the main agreement – this is called the “doctrine of severability”. The doctrine of severability is enshrined in English law, in accordance with section 7 of the Arbitration Act 1996 (AA 1996): in some jurisdictions it can play no role: arbitrators may apply the “principle of validation” to make the severability of an arbitration agreement effective. This principle encourages arbitrators to apply a law related to the dispute that takes effect on the separability and agreement of the parties to the arbitration.3)Born, Gary. . . .

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