(c) 2024 Sherby & Co., Advs.<\/p>\n
As reported in our posts of January 11<\/a> and 31<\/a>, Israel\u2019s Knesset is considering adopting, for international arbitrations taking place in Israel, the Model Law of the United Nations International Trade Commission (commonly known as the \u201cUNCITRAL Model La<\/strong>w\u201d). On January 11, we began a series of posts regarding such possible change in Israeli arbitration law.<\/p>\n In the first two posts of this series, we examined the issues of (a) the grounds for vacating (canceling) an arbitral award, and (b) the types of relief available in arbitration. We concluded that, as to both of those issues, (ii) the differences between Israeli law and the Model Law are minuscule, and (ii) they do not<\/em> support amending Israeli law to adopt the Model Law.<\/p>\n In this post, we will begin addressing one of the most controversial aspects –from the perspective of existing Israeli law — of the UNCITRAL Model Law, namely, that the Model Law confers upon an arbitrator the jurisdiction to rule on his\/her own jurisdiction. The rule under which an arbitrator may determine his own jurisdiction is often referred to as the \u201ccompetence-competence\u201d rule. (The term \u201ccompetence-competence\u201d derives from the German, Kompetenz-Kompetenz<\/em>.)<\/p>\n Because the proposal for Israel to adopt the competence-competence rule would be far-reaching, we will be publishing a number of blog posts regarding the \u201ccompetence-competence rule.\u201d<\/p>\n This post focuses on the specific question of the comparison(s) that have been made between Israeli law and American law by Israeli proponents of adopting the UNCITRAL Model Law (those proponents are sometimes referred to as the “Pro-UNCITRAL Camp\u201d). The United States has not<\/em> adopted the Model Law as federal law (seven states have adopted it), and the competence-competence rule has not<\/em> become the rule under the Federal Arbitration Act law or under the law of the 43 states that have not adopted the Model Law.<\/p>\n Most<\/em> of the Israeli proponents of the Model Law have actually sidestepped<\/em> the issue of whether, in this debate, Israelis should give significant weight to the fact that the United States has refrained from adopting (a) the Model Law, and (b) the competence-competence rule.<\/p>\n One proponent who has not<\/em> sidestepped the issue is Professor Arie Reich (Bar Ilan University), who is Israel\u2019s leading authority in the field of investor-state arbitration.<\/p>\n In 2016, Professor Reich published an article (entitled in Hebrew \u05de\u05d3\u05d5\u05e2 \u05e2\u05dc \u05d9\u05e9\u05e8\u05d0\u05dc \u05dc\u05d0\u05de\u05e5 \u05d0\u05ea \u05d4\u05d7\u05d5\u05e7 \u05dc\u05d3\u05d5\u05d2\u05de\u05d4 \u05dc\u05d1\u05d5\u05e8\u05e8\u05d5\u05ea \u05de\u05e1\u05d7\u05e8\u05d9\u05ea \u05d1\u05d9\u05df-\u05dc\u05d0\u05d5\u05de\u05d9\u05ea \u05e9\u05dc \u05d4\u05d0\u05d5”\u05dd) advocating for Israel to adopt the Model Law. Professor Reich\u2019s article is referred to herein as the \u201c2016 Article<\/strong>.\u201d<\/p>\n On the competence-competence issue, the points made in the 2016 Article are not<\/em> persuasive.<\/p>\n The 2016 Article is 57 pages, and about four pages are devoted to discussing the \u201ccompetence-competence\u201d issue \u2013 which is the most controversial issue<\/em> regarding Israel\u2019s possible adoption of the Model Law In the limited discussion of the issue, the 2016 Article states that (a) the \u201cmodern\u201d approach to the question of the determination of an arbitrator\u2019s jurisdiction is the competence-competence rule, and (b) federal law in the United States is the exception<\/em> to the modern approach. The 2016 Article proceeds to state that, even in the United States, in recent years, there has been a \u201ctrend\u201d of courts \u201cto send to the arbitrator\u201d the decision concerning several aspects of his jurisdiction.<\/p>\n As explained below, the supposed \u201ctrend\u201d does not<\/em> exist.<\/p>\n The 2016 Article cites to two American cases for the proposition that there has been a \u201ctrend\u201d in recent years to send \u201cseveral aspects of jurisdiction to the arbitrator.\u201d The two cases cited are (a) Painewebber Inc. v. Bybyk<\/em>, 81 F.3d 1193 (2d Cir. 1996) and (b) Shearson Inc. v. Sacharow<\/em>, 91 N.Y.2d 39 (N.Y.1997). (There was apparently a typographical error in the 2016 Article \u2013 the citation regarding the second case \u201391 N.Y.2d 39 \u2013 is correct, but the name of the appellant in the published decision is \u201cSmith Barney<\/em>.\u201d)<\/p>\n A review of the two cases cited in the 2016 Article (supposedly in support of a trend toward the competence-competence rule) shows that they actually reflect a rule contrary<\/em> to the competence-competence rule for which the article advocates:<\/p>\n In Painewebber<\/em>, the federal appellate court held:<\/p>\n [u]nless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator<\/strong><\/em>.<\/p>\n * * * *<\/p>\n [T]he arbitrability of a given issue is a question for the court<\/strong><\/em> unless there is \u201cclear and unmistakable\u201d evidence from the arbitration agreement, as construed by the relevant state law, that the parties intended that the question of arbitrability shall be decided by the arbitrator.<\/p>\n Painewebber, 81 F.3d at 1198, 1198-99 (emphasis added).<\/p>\n In so holding, the appellate court in Painewebber<\/em> relied upon three decisions from the United States Supreme Court \u2013 (a) John Wiley Sons, Inc. v. Livingston<\/em>, 376 U.S. 543 (1964), (b) ATT Technologies, Inc. v. Communications Workers of America<\/em>, 475 U.S. 643 (1986), and (c) First Options, Inc. v. Kaplan<\/em>, 115 S.Ct. 1920 (1995). Those Supreme Court cases are not referred to in the 2016 Article.<\/p>\n Under the specific facts of the Painewebber<\/em> case, the appellate court found that there was \u201cclear and unmistakable evidence\u201d from the arbitration agreement that the parties intended that the question of arbitrability be decided by the arbitrator. But nothing in the PaineWebber<\/em> decision in any way undermines the general rule of federal law under which the arbitrability of a given issue is a question for the court<\/em>. In other words, had there been a \u201cplain vanilla\u201d arbitration clause (one that is silent as to the scope of jurisdiction of the arbitrator) before the court in Painewebber, the court would have ruled that the issue regarding jurisdiction is not for the arbitrator but for the court.<\/p>\n Similarly, in Smith Barney v. Sacharow<\/em>, the highest court in the State of New York observed:<\/p>\n [W]e note the wellsettled proposition that the question of arbitrability is an issue generally for judicial determination<\/em><\/strong> in the first instance.<\/p>\n 91 N.Y.2d at 45 (emphasis added).<\/p>\n The New York court proceeded to state that there is a well settled \u201cexception<\/em>\u201d to the rule of arbitrability being for the court \u2013 when there is clear and unmistakable evidence from the arbitration agreement<\/em> that the parties intended for the question to be decided by the arbitrator. Id. at 45-46.<\/p>\n Again, both the PaineWebber<\/em> (federal court of appeals) and Smith Barney<\/em> (highest appellate court in the State of New York) cases make clear that the rule is that arbitrability is to be decided by the court<\/em>, with an exception<\/em> being made only when the language of the arbitration agreement indicates a clear intention to the contrary.<\/p>\n Current Israeli law is in accord \u2013 if<\/em> the arbitration agreement confers upon the arbitrator the power to determine the extent of his jurisdiction, an Israeli court will generally respect that provision and consider the arbitrability issue to be before the arbitrator.<\/p>\n The discussion in the 2016 Article of PaineWebber<\/em> and Smith Barney<\/em> does not<\/em> contain any<\/em> indication that those two cases support a general<\/em> rule in the United States that is contrary<\/em> to the legislative proposal advocated in the article. The proposition in the 2016 Article of a \u201ctrend\u201d in the US towards the competence-competence rule is not supported by the only two cases that are cited “in support” of that trend.<\/p>\n The assertion of such a “trend” in the United States is simply not supportable.<\/p>\n In the post-2016 era, the general rule of arbitrability being for the court was reiterated in Bromberg & Liebowitz v. O\u2019Brien<\/em>, 150 N.Y.S.3d 897 (N.Y. Co. 2021): \u201c[T]he question of arbitrability is generally an issue for judicial determination.\u201d<\/p>\n In summary, there appears to be only one advocate in the Israeli pro-UNCITRAL Camp who does not shy away from the fact that the United States has not adopted the Model Law. Yet that lone advocate cites to American cases that actually support a general rule contrary<\/em> to the supposed “trend” of a rule consistent with the competence-competence rule under the UNCITRAL Model Law.<\/p>\n In subsequent posts in this series, we will look at other problems (from an Israeli perspective) with the competence-competence rule, and we will look at other, related deficiencies in the arguments made by the Israeli UNCITRAL Camp concerning the relevance of the fact that the United States has not adopted the Model Law.<\/p>\n","protected":false},"excerpt":{"rendered":" (c) 2024 Sherby & Co., Advs. As reported in our posts of January 11 and 31, Israel\u2019s Knesset is considering adopting, for international arbitrations taking place in Israel, the Model Law of the United Nations International Trade Commission (commonly known as the \u201cUNCITRAL Model Law\u201d). On January 11, we began a series of posts regarding<\/p>\n