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Current Developments in the Commercial Divisions of the
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Posted: November 3, 2017

Arbitrability of Claim Determined by the Arbitrator Where Agreement Incorporates Rules of the London Court of International Arbitration

On October 12, 2017, the Court of Appeals issued a decision in Garthon Bus. Inc. v. Stein, 2017 NY Slip Op. 07160, holding that the arbitrability of a dispute should be determined by the arbitrator where β€œthe terms of the parties’ final agreements . . . incorporated the rules of the London Court of International Arbitration,” which provide that β€œ[t]he Arbitral Tribunal shall have the power to rule upon its own jurisdiction and authority, including any objection to the initial or continuing existence, validity, effectiveness or scope of the Arbitration Agreement.” The First Department, in a decision we blogged about here, held (with two justices dissenting) that the parties’ incorporation of the LCIA Rules was not sufficient under the facts of the case to demonstrate a “clear and unmistakable” intent to have the arbitrator determine arbitrability. The Court of Appeals reversed in a brief, two-sentence decision.

The holding in Garthon follows a decision earlier this year, Town of Amherst v. Granite State Insurance Company, 2017 NY Slip Op 04321, in which the Court of Appeals held, in a similarly terse decision, that the parties’ incorporation of the AAA Rules meant that questions of arbitrability should be resolved by the arbitrator. (See our post about Town of Amherst here).

These decisions show that the incorporation in an arbitration agreement of arbitral rules that empower the arbitrator to determine his or her jurisdiction or authority will generally mean that threshold issues of arbitrability will be determined by the arbitrator rather than the Courts.

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