The doctrine of Kompetenz-Kompetenz (German for ‘competence-competence’) is a widely accepted feature of modern arbitration law. This doctrine lays down the ability of the arbitral tribunal to decide whether it can hear a case on its own jurisdictionwithout the interference of courts. In other words, this doctrine states that the Arbitral Tribunal has the ‘competence’ to decide its own ‘competence’. The rationale is to ensure the speedy settlement of disputes as the doctrine allows the arbitral tribunal to settle pleas relating to jurisdiction,at the beginning itself.
This principle has been widely recognized and accepted in several international arbitration institutions. The UNCITRAL Model Law upholds this principle in Article 23(1) of the UNCITRAL Arbitration Rules, 2013. The article perspicuously states that “The arbitral tribunal shall have the power to rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement”. The same approach has been taken by many other arbitral institutions as well. These are mostly those institutions that are based on the UNCITRAL Model Law.
The Singapore International Arbitration Centre (SIAC) has also incorporated the Kompetenz-Kompetenz principle in the SIAC Rules. Article 28.2 envisages the same wordings as that of Article 23.1 of the Model Law. In 2015, the Singapore High Court reiterated the importance of theKompetenz-Kompetenz principle in the case of Malini Ventura v. Knight Capital Pvt Ltd &Ors. In this case the court considered whether it is a matter for the arbitral tribunal to decide if the very existence of an arbitration agreement is in question for which the court held in the affirmative. This case re-emphasised the Singapore courts adherence to the principle of Kompetenz-Kompetenz, such that the tribunal will be given the first say over questions regarding its jurisdiction.
The Kompetenz-Kompetenz principle has also been adhered to by the Swiss Chambers Arbitration Institution (SCAI) in Article 21.1 of the Swiss Rules of International Arbitration. Recently, in its decision published on 2ndNovember 2020, the Swiss Federal Supreme Court upheld an arbitral award referring to the widely recognized principle in international arbitration of Kompetenz-Kompetenz. The Supreme Court also reminded that challenging the validity or existence of an agreement on arbitration does not prevent the arbitral tribunal from arbitration proceedings and issuing an award. Rather, the principle of Kompetenz-Kompetenzallows the arbitral tribunal to come to a decision on their own jurisdiction before any state court has rendered its decision in that regard.
In addition to these Rules, the Hong Kong International Arbitration Centre (HKIAC) and the London Court of International Arbitration (LCIA) have also recognized the principle under Article 19.1 and Article 23.1 in their respective rules.
STATUTORY FRAMEWORK IN INDIA
In Indian law, this principle is enshrined in Section 16 of the Arbitration and Conciliation Act, 1996. This section states that the arbitral tribunal is allowed to rule on its own jurisdiction. In 2015, an amendment was made in the 1996 Act. The result of this Amendment was that it effectively broadened the horizons of Section 16. Issues such as limitation, accord and satisfaction have now been included under the purview of Section 16. Therefore, if a party wishes to challenge the jurisdiction of the arbitral tribunal, it has to prefer an application under Section 16 of The Arbitration & Conciliation Act, 1996.
Section 16 places a limit on the time after which a party to the arbitration proceedings may make a plea before the tribunal alleging that the tribunal has no jurisdiction. Section 16(2) states that such a plea shall not be raised after the submission of the statement of defence. A plea alleging that the tribunal has exceeded the scope of its authority must be raised as soon as the matter alleged to be beyond the tribunal’s scope of jurisdiction is raised during the proceedings. The Supreme Court clarified in Olympus Superstructure Pvt. Ltd. v. Meena Vijay Khetan that the use of the words “as soon as” and “no later than” in the provision show that such a plea must be taken without undue delay. However, the tribunal is competent to admit a plea as mentioned above if it considers that the reason for the delay in submitting a plea is justified.
JUDICIAL PRECEDENCE IN INDIA
Section 16 has, on many occasions, been interpreted with a reference to Section 11 of the Act which talks about the appointment of arbitrators. The first time Section 16 was interpreted along with Section 11 was in the year 2005 in the case of SBP & Co. v. Patel Engineering. In this case, the Supreme Court had,in fact,undermined the doctrine of Kompetenz-Kompetenz. The Court held, “Where the jurisdictional issues are decided under Section 11, before a reference is made, Section 16 cannot be held to empower the arbitral tribunal to ignore the decision given by the judicial authority or the Chief Justice before the reference to it was made”. This judgment was followed by heavy criticism since it diluted the power of the arbitral tribunal mentioned under Section 16.
In the case of Indian Farmers Fertilizers Cooperative Limited v. Bhadra Products, the Supreme Court had interpreted the contours of Section 16 in detail. The issue, in this case, was whether limitation is a jurisdictional issue within the ambit of the arbitral tribunal or it is an issue that is to be separately adjudicated by the tribunal at later stages. The Supreme Court held that the issue of limitation is not a jurisdictional issue to be decided under Section 16 of the Act. The Court further held that an order passed on the issue of limitation by the arbitral tribunal is to be construed as an interim award subject to appeal under Section 34 of the Act.
Since then, the Supreme Court has been accepting the Kompetenz-Kompetenz principle. In Surender Kumar Singhal v. Arun Kumar Bhalotia, the court interpreted the law governing applications under Section 16 of the Act and referred to the principle of Kompetenz-Kompetenz. The court held that under Section 16 of the Arbitration Act the issues of jurisdiction ought to be raised before the Arbitrator at the earliest and such objection has to be decided as a preliminary ground. If the tribunal then thinks fit that the objections under Section 16 cannot be decided at the inception and further enquiry is required, the tribunal could consider framing a preliminary issue and deciding the same as soon as possible.
On November 27, 2019, the Supreme Court in Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd. analysed Section 16 along with the doctrine of Kompetenz¬-Kompetenz. In this regard the court stated that the doctrine of Kompetenz¬-Kompetenz issubject to the exception i.e., when an arbitration agreement itself is faulty as being procured by fraud or deception. The Apex Court while discussing the judgment of Indian Farmers Fertilizers Cooperative Ltd. v. Bhadra Products held that the issue of limitation being a jurisdictional issue and the same has to be decided by the tribunal under Section 16 of the Act.
This decision of the Supreme Court was relied upon by the Bombay High Court in the case of C. Shamsuddin v. Now Realty Ventures LLP and Ors., wherein it was held that the question of limitation will be kept open for decision by only the arbitral tribunal under Section 16 of the Act.
Thus, the doctrine of Kompetenz-Kompetenz has the underlying object to minimize judicial interventions in the arbitration process. The importance of Section 16 is paramount as it demonstrates the faith that is reposed in the authority of the arbitral tribunals. When arbitral tribunals are allowed to rule on their own jurisdiction, it not only brings ease in the arbitration process but also enhances the confidence of the parties towards this mechanism for resolving disputes. The doctrine has been recognized in all international institutions and it has been strengthened by the Supreme Court of India over the years which reaffirms its position in India.