Article 8.

Arbitration agreement and substantive claim before court

(1) A court before which an action is brought in a matter which is the subject of an
arbitration agreement shall, if a party so requests not later than when submitting his first
statement on the substance of the dispute, refer the parties to arbitration unless it finds that the
agreement is null and void, inoperative or incapable of being performed.
(2) Where an action referred to in paragraph (1) of this article has been brought, arbitral
proceedings may nevertheless be commenced or continued, and an award may be made, while
the issue is pending in court.

Article 8 deals with the relationship between the arbitration agreement and resort to
courts.
It is patterned after Article II (3) of the 1958 New York Convention which provides that:
The court of a Contracting State, when seized of an action in a matter in
respect of which the parties have made an agreement within the meaning of
this article, shall, at the request of one of the parties, refer the parties to
arbitration, unless it finds that the said agreement is null and void,
inoperative or incapable of being performed

As worded, the referral is dependent on a request, which a party may make not later
than when submitting his first statement on the substance of the dispute.

Binds the courts of an adopting state, it is not restricted to agreements providing for
arbitration in that State and, thus, helps to give universal recognition and effect to
international commercial arbitration agreements.

Article 8 (1) relates to the so-called negative effect of the arbitration agreement,
which prevents the parties from commencing court actions in relation to matters
falling within the scope of the agreement.

Said article compels the courts to refer an action to arbitration under certain
conditions, namely:
First, subject-matter of the dispute falls within an arbitration agreement which is
neither null and void, inoperative nor incapable of being performed (substantive).
Second, referral to arbitration be sought no later than when the party requesting it
submits its frist statement on the substance of the dispute (procedural).
Some cases hold that as an additional condition, article 8 requires that there exist a
dispute between the parties.

Par. 2 allows arbitration proceedings to be commenced or continued even where an

application to refer a case to arbitration is pending.
The effect of which is to delegate to the arbitral tribunal, the decision as to whether
the arbitration should proceed while a referral application is pending.

Scope of application

The fact that the place of arbitration is located in a foreign jurisdiction has no
bearing on the applicability of article 8.
Similarly, the law chosen by the parties to govern the contract in which the
arbitration clause is inserted has no impact on the conditions under which a referral
application will be granted.
Conditions are always governed by the law of the jurisdiction in which the court
operates.
It applies where a court is seized of an action. Hence, if it has not seized such, said
article is not applicable and no referral order may be obtained.
Inapplicable incases other than ordinary contractual or extra-contractual actions
and when the court is seized of applications seeking interim measures of protection
as provided in article 9.
Case law provides that it applies to instances where; pre-action application seeking
to obtain documents from a prospective defendant; liquidation of a company;
application to set aside a default judgment on the merits of an action; summary
documents-only proceedings.
The purpose of article 8(1) is to grant parties limited access to the courts to resolve
jurisdictional disputes of a legal nature due to the courts expertise compared with
that of an arbitrator, the desire to avoid multiple legal disputes over the jurisdiction
of the arbitral tribunal, and the interest of finality.

The public policy favoring the enforcement of arbitration agreements

Party autonomy is one of the laws cornerstones.

As held by the Supreme Court of Canada the intention of the parties who have
agreed to resort to arbitration ought to be fully given effect to.
Similarly, lines of cases affirmed that predictability in the enforcement of
dispute resolution provisions is an indispensable precondition to any
international business transaction and facilitates and encourages the pursuit of
freer trade on an international scale.
It is the courts duty to actively encourage resort to arbitration and other means
of extrajudicial dispute resolution.

Courts may not refer an action to arbitration on their own motion

Article 8 only mentions cases where referral to arbitration is requested by a party to

the action. It does not explicitly state whether a court can refer an action to
arbitration on its own motion.
Said article prevents a court from doing so, and courts have confirmed that they
may only refer an action to arbitration if a request to that effect has been made by
a party.

Mandatory nature of referral to arbitration where the conditions set out in

article 8 are met

Where the conditions set out therein are met, courts have no other option than to
refer the action to arbitration.

The substantive condition: an action falling within an arbitration agreement that

is neither null and void, inoperative nor incapable of being performed
The court must be satisfied that the arbitration agreement is:
1. Neither null and void, inoperative, nor incapable of being performed, and;
2. Applicable to the dispute to which the action relates.
Cases where a referral order may be found to be non-existent, null and void,
inoperative nor incapable of being performed
1. No consent or no valid consent to the alleged arbitration agreement

Respondent to the referral application never undertook, or never validly undertook

(did not consent), to resort to arbitration as alleged by the party seeking a referral
order.
Respondent contends that it did so with parties other the party seeking a referral
order, who is thus alleged not to be a party to the arbitration agreement it invoked.
Consent was vitiated by deceit or fraud.
Instances when whether the terms in a contract express an intention to resort to
final and binding arbitration.

2. Arbitration agreement not validly transferred to the party making the referral
application or to the party responding thereto

Obligation to arbitrate arising out of the original agreement has not transferred to
the respondent to the referral application, or that the party seeking a referral order
has not acquired the right to compel the respondent to resort to arbitration.

3. Formal requirements not met

Even though there may have been a meeting of the minds between the parties,
applicable formal requirements were not met.
Whether the writing requirement set out in article 7 (2) had been met.

4. Condition precedent to the arbitration agreement taking effect not fulfilled

The arbitration would only become binding after the setting up of an arbitral
tribunal, which had not yet occurred.

5. Arbitration agreement no longer in effect

Once existing arbitration agreement has ceased to be binding on grounds of

termination, recission, abandonment, repudiation, waiver, is superseded by a new
one and the like.

6. Arbitration agreement invalid because the dispute is not arbitrable

Inarbitrable pursuant to mandatory, public policy based rules which prohibit

enforcement of arbitration agreements in certain areas, such as issues pertaining to
marriage, labor disputes and the like.

7. Arbitration agreement invalid because it is abusive or unconscionable

Unfair or one-sided as to be non-binding under the rules of contract applicable to

the case.
An arbitration agreement is substantively unconscionable if it denies the persons
benefits conferred by statute

8. Arbitration agreement invalid because of the invalidity of non-severable

provisions thereof

Provisions of the arbitration agreement relating to the constitution of the arbitral

tribunal were contrary to public policy and therefore null.
In Debois v. Industries A.C. Davie Inc. the court refused to uphold the agreement
that provided that the tribunal would be constituted by one of the parties to the
contract or dispute.

9. Arbitration agreement designating an arbitral institution or appointing

authority that is either non-existing or uncooperative

In a Canadian case, the arbitral institution chosen by the parties had ceased to
exist, and the parties disagreed as to whether another institution created
subsequently was the legal successor of the first.
Arbitral institution designated therein- which had become practically inactive- was
unwilling to administer the arbitration.
However, there are cases which ruled otherwise (that it did not entail that the
arbitration agreement was inoperative or incapable of being performed).

10. Failure to commence arbitration within the deadline provided for in the
arbitration agreement.

Agreements sometimes provide that arbitration must be commenced within a given

period following certain pre-determined occurrences.
Conversely, despite the fact that the arbitration clause was time barred several
courts held that it does not justify the dismissal of a referral application.

11. Other circumstances

An arbitration agreement was held incapable of being performed where the party
against whom it was invoked did not have the financial resources needed to
proceed to arbitration.
Arbitration agreement became inoperative because of the defendants refusal to
participate in the arbitration.