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If a contract is invalid or breached, the survival of an international arbitration clause becomes a question. Tribunals use Separability Doctrine to resolve contract termination in international arbitration. If you do not know what to do when you face an international breach of contract, please visit An International Breach: What to do? – Transnational Matters
What is the Separability Doctrine
Separability Doctrine recognizes arbitration clause separate from contract in international arbitration. The arbitrational clause must be decided separately from the contract as a distinct component. The Separability Doctrine holds that arbitration is a separate agreement that should be respected regardless of any issues with the underlying contract. For more information and example on the application of the Separability Doctrine visit The “Separability Doctrine:” The Continuing Impact of Prima Paint in Georgia, Alabama, and the Eleventh Circuit – FindLaw
Société Cargill France SAS v. Louis Dreyfus Commodities Suisse SA
One international arbitration case that demonstrates the Separability Doctrine is the case of Société Cargill France SAS v. Louis Dreyfus Commodities Suisse SA, ICC Case No. 18639. In this case, the parties entered into a contract for the sale and purchase of sugar. The arbitration clause in the contract required resolving any disputes arising from the contract through arbitration. Later, Société Cargill France SAS sought to terminate the contract, claiming that Louis Dreyfus Commodities Suisse SA breached the contract by failing to deliver the sugar as agreed.
Louis Dreyfus Commodities Suisse SA contended that the dispute must be settled through arbitration, in accordance with the arbitration clause in the contract. Société Cargill France SAS argued that the arbitration clause was invalid because of the breach of the contract. The arbitrator ruled that the arbitration clause was valid and enforceable, and that Société Cargill France SAS’s claim of breach went to the validity of the contract as a whole, rather than the validity of the arbitration clause. Therefore, the dispute had to be resolved through arbitration, as required by the arbitration clause.
BSG Resources Limited v. Vale S.A., ICC Case No. 16963/TBO
Another international arbitration case that demonstrates the Separability Doctrine is the case of BSG Resources Limited v. Vale S.A., ICC Case No. 16963/TBO. In this case, BSG Resources Limited and Vale S.A. entered into a contract for the mining of iron ore in Guinea. The arbitration clause in the contract required resolving any disputes arising from the contract through arbitration. Later, Vale S.A. sought to terminate the contract, alleging that BSG Resources Limited obtained the mining rights through corrupt practices.
BSG Resources claimed arbitration compliance with the contract’s arbitration clause. Vale S.A. argued that the arbitration clause was invalid because of the corrupt practices used to obtain the mining rights. The Tribunal ruled that the arbitration clause was valid and enforceable. In addition, the tribunal found that Vale S.A.’s claim of corruption went to the validity of the contract as a whole, rather than the validity of the arbitration clause. As a result, the dispute had to be settled through arbitration, as mandated by the arbitration clause.
Conclusion
These international arbitration cases demonstrate the importance of the Separability Doctrine in international arbitration. Even if there are issues with the underlying contract, the arbitration clause must be respected as a separate agreement between the parties. Therefore, the determination of the validity of an arbitrational clause must be seperately decided from the contract.
