Republic of Serbia v Imagesat International NV

A party may confer substantive jurisdiction on an arbitral tribunal through signed Terms of Reference, even where the underlying contract and arbitration agreement are disputed. The court construes the Terms of Reference as a whole, giving substantial weight to an unqualified jurisdiction clause and avoiding interpretations which deprive it of content.

Estoppel by convention requires a clearly identified common assumption on the material issue, communicated by mutually manifest conduct. A reservation of rights and references to succession do not necessarily establish such an assumption.

Where parties have submitted a dispute concerning state continuity or succession to arbitration in a commercial context, the issue is arbitrable and justiciable for the purposes of the arbitration and a challenge under section 67 of the Arbitration Act 1996.

The Republic of Serbia challenged under section 67 of the Arbitration Act 1996 a partial ICC arbitration award concerning the proper parties to an agreement originally made with the State Union of Serbia and Montenegro.

The arbitrator had held that Serbia was the continuation of the State Union and was therefore bound by the agreement and arbitration clause. Serbia argued that the Terms of Reference did not confer substantive jurisdiction to determine whether it was a successor or continuator state, that it was estopped or otherwise precluded from challenging jurisdiction, and that the issue was non-arbitrable or non-justiciable.

1. Application dismissed. Serbia had submitted to the arbitrator’s substantive jurisdiction through the signed Terms of Reference. Paragraph 14 stated in unqualified terms that the tribunal had jurisdiction to deal with the disputes, and paragraphs 15 and 33 supported a comprehensive submission. The references to Serbia as successor to certain rights, obligations and liabilities did not qualify that agreement.
2. The Terms of Reference had to be construed in their contractual and procedural context. Paragraphs 32 and 33 preserved substantive rights and defences, such as an argument that the agreement had not been properly authorised, but did not reserve an objection that the tribunal lacked jurisdiction under paragraphs 13 to 15. Construing them otherwise would deprive paragraph 14 of content.
3. No estoppel by convention was established. The necessary common assumption would have been that Serbia was not party to the arbitration agreement and participated only as a successor state. The letter of 12 July 2006 merely reserved rights and did not communicate that precise assumption. The subsequent conduct was insufficiently clear.
4. Serbia’s challenge was also precluded by section 73 of the Arbitration Act 1996 in consequence of its submission. The court nevertheless indicated that, had the point arisen, the jurisdiction objection was not barred under section 31 merely because it was omitted from Serbia’s Answer, since ImageSat had not taken that point before the arbitrator.
5. The contractual submission made the continuator/successor issue arbitrable and justiciable in this commercial arbitration. The reasoning in Republic of Ecuador v Occidental Exploration and Production Co supported the court’s ability to determine issues of public international law where necessary to determine private-law rights under an arbitration agreement.
6. By way of indication, the court considered that Serbia was probably the continuator of the State Union. Article 60 of the Constitutional Charter, Serbia’s communications to international organisations, and the prevailing institutional treatment supported continuity of legal personality. The court also indicated that, outside the arbitration context, the material before it might not establish sufficiently clear customary international law standards for determining continuity or succession.