Refers to the question of whether a dispute can be settled by arbitration and usually whether it is:
- Subject to a valid arbitration agreement;
- Within the scope of issues an arbitration tribunal is, under applicable laws, permitted to address.
The first issue normally turns on whether the dispute is between parties subject to an arbitration agreement and is its subject matter included within the terms of the arbitration agreement – for example, does it “arise out of the contract?” if that is the language of the clause. However, validity can also be subject to question, if the consent to arbitrate is uncertain – for example, if one party was a minor when the agreement was signed, or if a signatory clearly lacked authority to agree to arbitration, or if there is another reason under relevant law that the arbitration agreement was improperly entered into.
The second, more complex issue is that there are subjects that arbitration tribunal may not, under applicable law, adjudicate. These are typically public policy aspects of law, or require validating or invalidating government granted rights and assets such as patents, trademarks (this does not mean a tribunal cannot necessarily reach conclusions as to likely validity, but its decisions do not bind government entities.)
Although arbitrability is ultimately an issue for the courts, usually those of the seat of the arbitration an arbitration tribunal is usually expected to rule on its own capacity to hear the dispute, a practice known as competence-competence or komptenz-kompetenz as an early matter.