Arbitration News – Supreme Court rules on scope of arbitration agreements
(Article by Dr. A. Tsavdaridis, published in the Arbitration & ADR Newsletter of the ILO on November 10, 2016)
An arbitration agreement which covers future disputes or differences arising out of the initial
agreement also covers future disputes or differences arising out of subsequent agreements that are
supplementary to the initial agreement.
Facts
A landowner contracted with a construction company for the construction of a rehabilitation centre
for individuals with longstanding health conditions. The parties entered into three consecutive
agreements to cover each phase of construction. All of the agreements contained identical clauses
which incorporated by reference the arbitration clause contained in the tender specification.
Subsequently, the parties entered into non-written agreements to cover either additional works not
provided for in the initial agreements or works that had been provided for, but where the parties
changed their modalities.
A dispute arose between the parties regarding the amount owed to the contractor with respect to the
additional works. The parties had agreed to determine the amount on completion of the additional
works.
The contractor initiated arbitration against the landowner and an award was partially rendered in its
favour. The landowner sought to set aside the award on the grounds that the arbitrators had
exceeded their power by deciding on a matter involving subsequent agreements for additional works
which fell outside the scope of the arbitration agreement. The competent court dismissed the
motion, holding that the initial agreements and the subsequent agreements were complementary and
indivisible as referring to the same project.(1) The landowner appealed before the Supreme Court.
Decision
Dismissing the appeal, the Supreme Court held(2) that an arbitration agreement may validly refer to
future disputes; in such cases, it must determine the definite legal relationship out of which such
disputes will arise, but it is not necessary to refer to specific disputes. The Supreme Court added that
an arbitration agreement does not extend its scope to disputes arising out of a subsequent agreement
between the same parties, even if the subject matter concerns the initial agreement. Nevertheless,
the Supreme Court held that such an extension shall occur where the subsequent agreement is
supplementary and indivisibly related to the initial agreement (which contains the arbitration
clause), as these are not separate agreements with related subject matter.
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