Sovereign immunity and arbitration

Abstract

The plea of sovereign immunity in the sense of a procedural bar to jurisdiction based on the personal capacity of the litigant, has little immediate relevance in arbitration proceedings. Based on the assumption that states are equal, the essence of the plea is to correct the lop-sided situation where one state by reason of its control of the legislation and courts of the legal system operating in its territory has an unfair advantage over a foreign state which appears as litigant in these courts. Arbitration proceedings depend totally on the consent of the parties; without an arbitration agreement or a clause in an agreement agreeing to submit future disputes to arbitration, the arbitrator has no jurisdiction, no powers and the arbitral award has no binding effect. A party can never be brought before an arbitration tribunal without its consent. A plea that the tribunal has no competence is based not on the special status of the party but on a construction of the terms of the arbitration agreement in respect of issues such as the identity of the person signing the agreement, his authority to do so, whether the dispute falls within the matters agreed to be referred to arbitration and the extent of the jurisdiction conferred by the parties on the arbitrator.