The Doctrine of Separability in Arbitration Agreement
If the underlying contract has expired or is nullified, the arbitration clause remains valid.
Arbitration clause is an additional agreement (accesoir) of the underlying contract. In accordance with the legal principle of additional agreement, the arbitration clause shall not exceed or is in contrary with the underlying contract.
The existence of arbitration clause is only an addition for its underlying contract, and will not affect its fulfillment. Without an arbitration clause, the fulfillment of the underlying contract will not be obstructed.
Although arbitration clause is only an additional agreement, there are some unique characteristics that cause the legal principle of additional agreement will not be fully implemented. Exceptions for this implementation are stated in Article 10 of Law Number 30 of 1999 on Arbitration and Alternative Dispute Resolution which states:
“An arbitration agreement will not become void because of the circumstances mentioned below:
- the death of one of the parties;
- the bankruptcy of one of the parties;
- the insolvency of one of the parties;
- the conditions to terminate the main contract become effective;
- the implementation of the agreement is assigned to a third party, with the consent of the parties who made the arbitration agreement; or
- the main contract expires or is nullified.”
Referring to the Article 10 letter f and h above, the arbitration clause is separated from the underlying contract. The doctrine of separability is the principle of the autonomy of the arbitration clause. Hence, the conclusion is that if the underlying contract has expired or is nullified, the arbitration clause still exists.
The doctrine of separability have been recognized internationally, and set in Article 16 paragraph (1) of UNCITRAL Model Law of 1985. The article states, “An arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.”
BP Lawyers can assist you
We can assist you in providing the best solution to the problems or disputes related to contracts, settlement through the arbitration process and the general judiciary. You can contact us by:
H: +62821 1000 4741