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arbitration agreement as well. For instance, where either or both parties
are found to lack the capacity to have entered into the agreements, both
agreements will be deemed invalid. Similarly, the arbitration agreement
will be assigned to a third party if the underlying agreement is assigned
(provided that the assignee consents to arbitrate).
The effect of the separability of arbitration agreements upon the
choice of applicable law should also be analyzed; i.e. whether the law
applicable to the underlying agreement will be, automatically, different
from the law applicable to the arbitration agreement by reason of its
separability. In other words, is the choice of law applicable to the main
contract also applicable to the arbitration agreement?
This issue is especially important for arbitration clauses. Choice of law
and arbitration clauses are often stipulated in international agreements;
either as part of the same phrase, or as two paragraphs of the same article,
or as consecutive articles. In such cases, it should be analyzed on a case
by case basis whether or not the applicable law stated in the choice of law
clause shall apply to the arbitration agreement or not.
Conclusion
The arbitration agreement is accepted as a distinct agreement, separate
from the underlying agreement – a concept defined as the separability
principle. This principle prevents the validity of one agreement from being
affected by the other one; it effectively establishes the full autonomy
of an arbitration agreement and the integrity of the arbitral process.
Nonetheless, the two may be assessed together. However, it is important
to consider, because of the separability of the arbitration agreement,
whether the choice of law stipulated by the parties in the main contract
is applicable to the arbitration agreement. Thus, dispute resolution and
choice of law clauses should be drafted with the utmost caution and care.