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 Les articles qui suivent representent les contributions qui furent
presentees i la Conference sur la validite des conventions d'arbitrage
qui s'est tenue i Athenes les 17/18 mars 1988. Cette Conference etait
organiseeconjointement par /'Association Hellenique de l'Arbitrage,
la Cour Internationaled'Arbitrage de la CCI et l'Institut du droit et
des pratiques des affaires internationalesde la CCI en association
avec le Comite nationalGrec de la CCI.
Les articlessont publis dans l'ordrede leurpresentation.

CONDITIONS REQUIRED FOR THE VALIDITY

OF AN ARBITRATION AGREEMENT

Anghelos C. FOUSTOUCOS*
Attorney-at-law, docteur d'Etat en droit
Secretary General of the Greek Arbitration Association
INTRODUCTION

Before any other considerations are put forward, the cultural dimen-
sion of arbitration should be emphasized. Each party necessarily gets to
know the other, and the arbitrators, better. The fact that each party avoids
submitting itself to the national forum of the other brings them closer to-
gether. Thus, they begin to have a greater understanding not only of what
divides them, but also of what they have in common. Arbitration of any
kind is founded on the agreement of the parties. Compulsory or forced
arbitration' was, and is, improperly called arbitration. Voluntary resort to
arbitration, i.e. to private judges nominated by the parties 2 is its essential
feature. The agreement which opens the way to international commercial
arbitration will be dealt with later.
The wording "arbitration about private law disputes" is used in
Greece. Internationally, the term "commercial arbitration" prevails; its

* This article is adapted from a paper presented at the Conference in March 1988,
and originally published in the December 1988 issue of the Journal of Internatio-
nal Arbitration. (Reproduced here by permission of its publisher).
I. Abolished in Greece by Art. 7 of the Act of Introduction to the Code of Civil
Procedure (Act No.44 of 1967).
2. This definition was given by Harmenopoulos, the 14th Century Byzantine
scholar (Harm. 1,4,51).
 Revue Hellnique de Droit International

meaning is understood as broadly as possible. The recent codification by

the UNCITRAL Model Law illustrates the actual conception of the term 3.
Thus:
"The term 'commercial' should be given a wide interpretation so as to
cover matters arising from all relationships of a commercial nature,
whether contractual or not. Relationships of a commercial nature include,
but are not limited to, the following transactions: any trade transaction for
the supply or exchange of goods or services; distribution agreement; com-
mercial representation or agency; factoring; leasing; construction of works;
consulting; engineering; licensing; investment; financing; banking; insur-
ance; exploitation agreement or concession; joint venture and other forms
of industrial or business co-operation; carriage of goods or passengers by
air, sea, rail or road".
An arbitration is international when it refers to disputes resulting from
4
international business transactions.
The legislation of several countries, or most international conventions,
such as the 1927 Geneva Convention 5 on the enforcement of foreign arb-
itral awards, and the 1958 New York Convention 6 on the recognition and
enforcement of foreign arbitral awards and the UNCITRAL Arbitration
Rules 7 do not contain the term "international arbitration". This term does
not appear in Greek law 7a which establishes a distinction between domes-
tic and foreign arbitration only. However, Greek jurisprudence admitted

4. Fouchard, L'arbitragecommercial international,Paris 1965, pp. 4 and 5.

5. Ratified by Greece by Law 5013 of 1931.
6. Ratified by Greece by Legislative Decree 4220 of 1961.
7. Sanders in Commentary on UNCITRAL Arbitration Rules, Yearbook Com-
mercial Arbitration (hereinafter called: Yearbook), Vol. 11 1977, p. 175, No.
2.5 writes: "The UNCITRAL Arbitration rules were designed to facilitate the
arbitration of disputes arising out of international trade transactions. Neverthe-
less, the inclusion of a provision in the title or text of the Rules, expressly li-
miting their scope of application to international trade transactions, would
have presented the difficult problem of defining the term international trade
transaction and might have opened up additional grounds for challenges to
arbitration".
7a. The recent Greek Law No. 1816 of 1988, that has modified some provisions of
the Greek Code of Civil Procedure regarding the possibility for judges to act as
arbitrators, is the first Greek legislation text which mentions the term "interna-
tional arbitration". Without defining it, it provides in Art. I and 2 (Art. 873
para. 3 and 882 para. 7 Greek CCP) that the limitations regarding the appoint-
ment of judges to act as arbitrators and the limitations regarding the fees of arb-
itrators are not applicable in international arbitration.
 Validity of an arbitration agreement

the particularity of international arbitration long ago8 and scholars pro-

ceeded to define it. 9
International arbitration is, explicitly, the subject of the European
Convention on International Commercial Arbitration signed in Geneva in
1961, which has not yet been ratified by Greece, of the 1965 Washington
Convention on the Settlement of Investment Disputes between States and
Nationals of other States,1 ° of the Rules of the ICC Court of Arbitration"
and of the UNCITRAL Model Law on International Commercial Arbitra-
tion.' 2 Among national legislations, French law provided, in 1981, a defin-
ition of international arbitration. Art.1492 of the New Code of Civil
Procedure1 3 states: "An arbitration is international when it involves the in-
terests of international trade". Articles 1493 to 1495 refer to matters relat-
ed to the international arbitration agreement.
Today the term "arbitration agreement" means either a submission
(compromis), i.e. the agreement to submit existing disputes to arbitrators,
or an arbitration clause (clause compromissoire) i.e. the agreement to sub-
mit future disputes 14 to arbitration. Submission was- the first form of arb-
itration agreement.Later, practice gave birth to the arbitration clause. 5 In
modern times, the first multilateral international convention on arbitra-
tion was the 1923 Geneva "Protocol on Arbitration Clauses". According
to Art. I of this, each of the Contracting States recognizes the validity of
the arbitration clause on commercial matters, or any other matter which
can be settled by arbitration.

8. Supreme Court Decision No. 565 of 1965, Epitheorissis Emporikou Dikeou,

1966, p. 333.
9. Fragistas, R. Crit. d.i.p. 1960 p. 1, - G.A. Papakonstantinou, International
Commercial Arbitration, Epitheorissis E.D. 1972 p. 169. - Foustoucos, L'ar-
bitrage- interne et international- en droitprivOhellnique, p. 188 et seq.
10. Ratified by Greece by Law 608 of 1968.
11. ICC Rules of Arbitration, in force as of Jan. 1,1988, Publ. No. 477.
12. The Model law has already been adopted by Canada (Bill C/1986) and by Cy-
prus (Act 101/1987). In these two countries it is a part of the national legisla-
tion. On the other hand, it has been the object of a rich bibliography. See G.
Herrman and C. Calavros, Reports to the InternationalConference on Proce-
dural Law, Nafplion, Greece 1987.
13. Decree of 12th May, 1981.
14. Art. 867 and 868 Greek CCP.
15. As far as we know, the first evidence about agreements to arbitrate on future
disputes comes from the 10th or 1 th century A.D. Byzantine collection of le-
gal practice called PEIRA ("Good faith tribunals established by contracts, like
sales, purchases, pacts, rentings, and similar"). See Foustoucos, L' arbitrage,
op. cit. p. 8 and 9.
 Revue Hellenique de Droit International

In fact, the arbitration clause is the most usual form of arbitration

agreement. Usually it is one of the last clauses in a contract. The position
of the arbitration clause in the so-called main contract, may lead to the er-
roneous idea that it is a part of the main contract and cannot be separated
from it. However, it became obvious early enough, to arbitrators as well as
to State courts, that it was a separate agreement. The separability (autono-
mie) of the arbitration clause has been the subject of doctrine. 16
Two possible systems will now be discussed:
- The Conflict of Laws method;
- The study and direct application of a system of rules of law suitable
for international trade relations.
It will be discovered - without surprise- that these converge. The con-
ditions required for the validity of the arbitration agreement will then be
examined.

I. THE APPROACH

A. Conflict of Laws

The classic method of the conflict of laws system is to be found in the

provisions of the relevant international (inter-state) conventions and na-
tional legislations. Para. (a) of Art. I of the 1927 Geneva Convention pro-
vides that, for a foreign award to be recognized or enforced, it is necessary
for the award to be made in pursuance of an arbitration agreement which
is valid under the law applicable thereto. However, para. (b) requires the
subject-matter of the award to be capable of settlement by arbitration und-
er the law of the country in which the award is sought to be relied upon.
Both these provisions have been adopted by Greek law in Art. 903 para. I
and 2 CCP. 17 In practical terms, this means that the subject - matter of the
arbitration agreement must be arbitrable under the substantive law of two
countries. '

16. Regarding Greece, Economopoulos, The separabilityof the arbitrationagree-

ment, Dike 5 p. 699. Athens Court of Appeal 6752 of 1962, Harmenopoulos,
31, p. 292, Athens Court of Appeal 517 of 1980, Ephemeris Ellinon Nomikon
48, p. 388. Regarding France, see Arret Gosset ( Cass. 7-5.63, JCP 1963, 11
13405 note Goldman ). Regarding the USA, see Supreme Court, Prima Paint
v. Flood and Conklin (1967) 388 US 395. Cited by Holzman, Yearbook I1, 123.
17. Report by G. Economopoulos in CCP draft Vol. V, p.307.
18. B6ckstiegel, Public Policy and Arbitrability, Comparative ArbitrationPractice
and Public Policy in Arbitration,General Editor Pieter Sanders, Kluwer 1987,
p. 185 (All references under "Bdckstiegel" are to this article).
 Validity of an arbitration agreement

The New York Convention on the Recognition and Enforcement of

Foreign Arbitral Awards of 1958 is widely known internationally as a
common legal tool in international commercial arbitration. 9 It has been
ratified by more than 80 countries. In Art. V, I, a, the Convention requires
the arbitration agreement to be valid under the law to which the parties
have subjected it or, failing any indication of this, under the law of the
country where the award was made. Art. V, 2, a of the Convention pro-
vides that recognition and enforcement of an arbitral award may be re-
fused if the competent authority in the country where they are sought finds
that the subject - matter of the dispute cannot be settled by arbitration
under the law of that country. This means that under the New York Con-
vention as well, the substantive law of two countries must be taken into
consideration in order to examine the arbitrability of the issue.
The European Convention on International Commercial Arbitration,
signed in Geneva in 1961, also provides in Art. VI, 2 for the double exa-
mination of the arbitrability. However, while this Convention contains the
same regulation on the law of the country of recognition or enforcement, it
contains a series of alternatives about the other substantive law. Thus, the
validity of the arbitration agreement must be examined: (a) under the law
to which the parties have subjected their arbitration agreement; (b) failing
any indication thereon, under the law of the country in which the award is
to be made. If there is no indication of (a), and when at the time the ques-
tion is raised in court, the country of (b) cannot be determined, under the
competent law by virtue of the rules of conflict of the court seized of the
dispute.
As far as the capacity of the parties is concerned, the 1958 New York
Convention in Art. V, I, a and the 1961 European Convention in Art. VI, 2
provide that the capacity of the parties be taken into consideration under the
law applicable to them. This wording is comprehensive enough to cover (a)
the national laws which consider the capacity of physical persons according to
their nationality and of moral persons according to the law of their principal
place of business; this is the case of Greek law ( with an exception in maritime
law ) and (b) the national laws, mainly of the common law group, where the
capacity of physical persons is considered on the basis of their domicile, and
of moral persons on the basis of their incorporation. 20

19. See A. J. van Berg, The New York Arbitration Convention of 1958, towards a
Uniform JudicialInterpretation, Kluwer, The Netherlands 1981. By the same
author, New York Convention of 1958, Yearbook VI, pp. 393 et seq.
20. Evrigenis, Private InternationalLaw (in Greek), 1973, p. 214. - Batiffol, Droit
internationalprive, 5th ed., vol. I., pp.98 s. 235 s. - Cheshire, Private Interna-
tionalLaw, 9th ed., p. 197. Ehrenzweig, Conflict of Laws, 1962, p. 413.
 Revue Hell~nique de Droit International

Regarding the form, the New York Convention, in Art. II, requires an
agreement in writing. This provision constitutes a uniform rule (regle d'
application immediate) directly applicable. Similarly, the written form is
required by the 1965 Washington Convention (BIRD) in Art. 25 and Art.
36. The 1961 European Convention imposes the written form in Art. I, 2,
a, but admits the possibility of the unwritten form, when the applicable
law allows it. A study of the international Conventions is of particular im-
portance, because most countries give an increasing legal value to Conven-
tions they have ratified. In Greece this is imposed by Art. 28 para. I of the
Constitution. Specifically about arbitration, Art. 903 CCP specifies the
conditions of recognition and enforcement of foreign awards, under the ex-
plicit reservation "of what is provided for in international Conventions".

B. Lex Mercatoria

Is there a system of legal rules proper to international trade relations,

as distinct from national legislations and international conventions? In
1964 Professor Goldman replied in the affirmative to this in his article
Fronti~resde droit et lex mercatoria.2" Since then there has been abundant
literature, against22 or in favour ofP the law merchant.
Apart from doctrinal discussions, it is generally admitted that there are
legal rules or even systems of legal rules, which are not created by Go-
vernements, for example standard charter-parties,2 4 sales contracts 25 and,
among the successful activities of the ICC, the INCOTERMS,2 6 or the Do-
cumentary Credit Rules.
On the other hand, some general principles, e.g. pacta sunt servanda,
the refusal by one of the parties to perform its commitments under a con-
tract if the other party does not perform the commitment it was obliged to
perform first (exception non adimpleti contractus), or the obligation for a
party to pay an idemnity if in default, etc. are common. It is true that all

21. B. Goldman, "Fronti~res de droit et lex mercatoria",Archives de philosophie de

droit, 1964, pp. 177 et seq.
22. From F. A. Mann, Lexfacit arbitrum, in Liber Amicorum M. Domke, 1967 to
J. Bredin, La loi du Juge, and P. Lagarde, Approche critique de la lex mereatoria
in Etudes offertes t B. Goldman, Paris 1983, pp. 15 and 125 respectively.
23. & Goldman, Lex mercatoria in Forum International,No. 3, 1983, Kluwer.
This study comes 20 years after the first one. In the meantime, the author has
repeatedly returned to this subject.
24. Widely used by Greek maritime circles.
25. Like GAFTA sales contracts.
26. Defining the obligations of seller and buyer under CIF, FOB, FAS etc., clauses.
 Validity of an arbitration agreement

these principles are, more or less satisfactorily, a part of most municipal

legislations. However, business people consider them not just as part of
national legislation, but as instruments of international trade practice.2"
The above rules and principles constitute the8 consensus of busines-
smen and lawyers active on an international scale.1
Our concern here is not how arbitrators apply the lex mercatoria,but
how it operates at the arbitration agreement level.
Our thoughts turn first to the Arbitration Rules of various arbitration
institutions and, above all, the Rules of the ICC International Court of
Arbitration. This institution celebrated its 60th anniversary in 1983 with a
well-deserved satisfaction. The parties, by their arbitration agreement, sti-
pulate that their eventual disputes will be settled under its Rules, which
thus become legally binding upon the parties. Similarly, the binding effect
is the result of the choice of other international arbitration Rules, such as
those of the UNCITRAL, 9 the American Arbitration Association (AAA),

27. The lex mercatoriawas officially recognized by the March 4, 1981 Decision of
the Paris Tribunal de Grande Instance as well as by the November 18, 1982
Decision of the Austrian Supreme Court. See Goldman, Lex mercatoria, op.
cit. pp. 16, 17.
28. 0. Lando, in Lex mercatoria,ICLQ, 1985, p. 752, judiciously remarks: "An
arbitrator applying the lex mercatoria will act as an inventor more often than
one who applies national law. Faced with the restricted legal material which
the law merchant ofeers, he must often seek guidance elsewhere. His main
source is in the various legal systems. When they conflict he must make a
choice or find a new solution. The lex mercatoria often becomes a creative
process by this means".
29. The United Nations Commission for International Trade Law (UNCITRAL)
has prepared (a) the Arbitration Rules intended for parties to arbitration and
(b) the Model Law on International Arbitration with the recommendation to
Governments to adopt it as a part of their national legislations. The Greek
Arbitration Association applies to an arbitration the Rules provided by the
parties. In most cases, Greek companies, in their international contracts, de-
clare that the ICC arbitration rules are applicable. In other cases they choose
the UNCITRAL rules. In the cooperation agreements concluded by the Greek
Arbitration Association with the American Arbitration Association (AAA),
with the USSR Chamber of Commerce and Industry, with the Arbitration
Courts of the Bulgarian and Hungarian Chambers of Commerce and Industry
and with other arbitration institutions, the UNCITRAL arbitration rules are,
in principle, applicable. If the parties do not agree about the appointment of a
sole arbitrator or of a chairman for the arbitral tribunal, but also when the par-
ties have explicitly provided about that, the Greek Arbitration Association
may act as appointing authority. This possibility based on Art. 876 of the
Greek CCP, has been opened up by the Greek Arbitration Association since
1987.
 Revue Hellknique de Droit International

the London Court of International Arbitration, the Euro-Arab System of

Arbitration, etc.3 °
The Rules of the ICC Court of Arbitration provide about the arbitra-
tion agreement in Articles 3, 2, c and 7 and for the separability of the arb-
itration clause in Art. 8, 4. They also give a model arbitration clause. It re-
sults from the above mentioned regulations that, according to the ICC
Rules, the arbitration agreement must be in writing. The UNCITRAL
Arbitration Rules explicitly require, in Art. I, an arbitration agreement in
writing, and provide about its separability in Art. 21, 2.
However, when published, arbitral awards form a jurisprudence which
constitutes a valuable aid on all matters and, of course, on the conditions
of validity of the arbitration agreement. Thus the pragmatic authors of
ICC Arbitration" write:
"An arbitrator who dces not refer to a particular national law to deter-
mine the validity, scope and effects of the arbitration clause gives himself a
particular wide berth to apply the growing body of published international
awards, if not as precedents reflecting general principles of an internation-
al law merchant, then, at least, as evidence of usages".

II. CONDITIONS OF VALIDITY

To examine the conditions required for an international commercial
arbitration agreement to be valid, we shall rely on both categories of
sources; our main guide will be the 1958 New York Convention.
First of all, how should the arbitration agreement be qualified? Is it go-
verned by substantive law, or is it a procedural agreement? 32 Under Greek
law,33 an arbitration agreement is explicitly governed by the rules of sub-
stantive law applied to contracts. More generally, it is understood under
all national legislations that by this agreement the parties intend and agree
to entrust their disputes to arbitrators appointed by them, or by an arbitra-
tion institution chosen by them3 4.

30. The 1972 Moscow Convention, and the 1974 Uniform Rules of Arbitration re-
gulate international commercial arbitration among the CMEA East European
Countries. They play a role similar to that of the a.m. Rules but they do not
constitute lex mercatoria,because they are products in Inter - Government
Conventions.
31. Craig, Park, Paulsson, InternationalChamber of Commerce Arbitration, Part
II, para. 5.05, p. 18.
32. For a discussion of the conflicting views, see Foustoucos, Validity of the Arb-
itration Agreement (in Greek), Nomikon Vima, 35, pp. 1366 et seq.
33. Art. 869 Greek CCP.
34. About the particular role played by conciliation in the Far East, see Yearbook
Vol. III, p. 153 (China), Vol. IV, p. 115 (Japan).
 Validity of an arbitration agreement

The conditions for an arbitration agreement to be valid are:

- The dispute must arise out of a legal relationship.
- The subject - matter of the dispute must be arbitrable. (The relation-
ship between arbitrability and public policy will be discussed later.)
- The parties must have the capacity to conclude arbitration agree-
ments.
- Minimum form requirements must be observed.
Art. II. I of the New York Convention provides that an arbitration agree-
ment must refer to disputes that have arisen or will arise, out of a certain legal
relationship. Greek law contains a similar provision 35 and so does the UNCI-
TRAL Model law. 36 In contrast, French law, 37 the UNCITRAL Rules, 38 and
the ICC39 Arbitration Rules, and the legislation of most countries require dis-
putes to arise from a contract. The difference is obvious: a legal relationshp40
has a wider scope than a contract. For example, in multiparty arbitration
there is often not just one contract, but a whole series of them.
As we have seen, 4' most international Conventions and national legis-
lations require the dispute to be arbitrable both under the law governing
the arbitration agreement and under the law of possible enforcement of the
award. The particularities of every legal system cannot be discussed here,
but an attempt will be made to outline the main features of arbitrability,
positively, and then negatively. Our concern is private law42 or commer-
cial 43 disputes. It is generally admitted that these include disputes between
States (or State-owned organizations) and individuals or private law com-
panies, arising out of investments.44
The fundamental (positive) condition of arbitrability is that the parties
must be able to dispose of the matter in dispute; such alienable matters are
those connected with contractual and commercial relations, but also with
property rights. The barrier, i.e. the negative condition to arbitrability is
public policy (ordre public) whenever it is involved.

35. Art. 868 Greek CCP.

36. Art. 7.
37. Art. 1442 new CCP.
38. Art. 1.
39. Art. 3, 2, c and 8, 4.
40. Bernini, Multiparty Arbitration, Yearbook Vol. V, p. 291. In Greek: Foustou-
cos, Multiparty Arbitration,Dike 12, p. 189.
41. Above No. 8.
42. Greek CCP Art. 867.
43. Definition given in the UNCITRAL Model Law. See note 2 supra.
44. The 1961 Washington Convention (ICSID), but also national laws, such as the
Greek legislative decree No. 2687 of 1951 provide for such arbitrations.
 Revue Helldnique de Droit International

The opposition and mutual influence of positive and negative conditions

is a guide allowing us to find out if any particular case is arbitrable or not.
In France the principle of respecting public order is a general legal
rule. 45 The Anglo-Saxon 46 and other 41 countries adopt a case-by-case de-
termination, either by law or by jurisprudence.
We shall now try to group the non-arbitrable disputes. At first, as we
have seen in the previous paragraph, disputes the subject matter of which
cannot be disposed of by the parties 48 are not arbitrable. This definition
covers disputes which national legislations explicitly take out of the do-
main of arbitration, e.g. labour disputes in France, 49 Italy,50 Greece, 5 l and
elsewhere are not arbitrable, but in the U.S.A. and in some other countries
they are. This is a matter of domestic law. Some disputes closely connect-
ed with the protection of human personality, such as those about civil sta-
tus, relations between parents and children, or about divorce, are not arb-
2
itrable.1
Matters which for reasons of public and social interest are directly re-
gulated by the legislation of various countries are not arbitrable. These are:
- Disputes about industrial and intellectual property, such as patent
and trademark registration, or compulsory license agreements. Industrial
property and arbitration was on the agenda of the ICCA interim meeting,
in Vienna in 1976." 3 In Greece this question has not been regulated by law.
The new Act 1733 of 1987 (Technology Transfer, Inventions, etc.) does not
contain any specific provisions. Disputes which arise from rights which
one is free to dispose of, such as those arising out of (voluntary) licence
agreements for patents or know-how are arbitrable par excellence.14 In
some countries, such as France,55 these matters have been dealt with by le-
gislation and the solutions are similar to those generally accepted, though
6
more detailed. The same can be said about Germany.

45. French Civil Code Art. 2060, Robert, ibid. p. 27.

46. B6ckstiegel, p. 194.
47. About Greece, see Foustoucos, The Validity ... (in' Greek), Nomikon Vima 35,
pp. 1367 et seq.
48. Greek CCP Art. 867. French Civil Code Art. 2059.
49. Law 82-372 of 6th May, 1982 - see Robert p. 41.
50. Bernini, Yearbook, Vol. VI, p. 33.
51. Art. 867 CCP.
52. See for example Sanders, Yearbook, Vol. VI, p. 64 about the Netherlands.
Foustoucos, The Validity ... p. 1366 about Greece. French Civil Code Art. 2060
about France.
53. W. Melis, The ICCA Interim Meeting, Yearbook Vol.11, pp. 267 et seq.
54. About Greece, see Foustoucos, The Validity ... p. 1368.
55. Law of 13th July, 1978. See Robert, op. cit. pp. 35 et seq.
56. B6ckstiegel, op. cit. p. 197, note 67.
 Validity of an arbitration agreement

- Disputes on anti-trust (competition) issues. This is a very wide field.

It covers the US anti-trust legislation and that of various other countries,
as well as the EEC competition law (Articles 85 and 86 of the Treaty of
Rome). Until recenlty, the rule was that anti-trust issues could not be arb-
itrable. This principle was again emphasized by the US Court of Appeals,
under the heading of "American Safety" in 1983 in the well-known Mitsu-
bishi case. 7 However, the US Supreme Court, to the hearing of which the
American Arbitration Association and the ICC were admitted as amici
curiae, quashed the decision of the Court of Appeals and admitted that
claims arising out of the US anti-trust legislation and connected with an
international trade relationship are arbitrable. On the other hand, Art. 91
of the German anti-trust law (GWB) provides that arbitration agreements
concerning future disputes arising out of contracts connected with the
GWB are not valid unless they provide that each party can submit a dis-
pute to the State Courts, in any case, instead of submitting it to arbitration.
With regard to the situation prevailing internationally, I refer to Prof.
B6ckstiegel's remarks:
"... all seem to indicate a trend to the effect that, on the one hand, in-
ternational arbitration on anti-trust matters is more widely accepted, but,
at the other side of the coin, awards will face intensive scrutiny by courts
in view of the public policy of major anti-trust regulations".

- Disputes related to enforcement : for example Greek jurisprudence

had to deal with the following case. An arbitration clause was included in
a notary's deed for the sale of an apartment; the deed in question had at
the same time been declared by the parties to constitute an enforceable in-
strument. 58 During the enforcement procedure, the defendant contested
the validity of the enforcement by recource to the State Courts, in accor-
dance with Art. 933 of the Greek Code of Civil Procedure. The claimant
objected that the State Courts should abstain because the matter should be
submitted to arbitration in conformity with a clause inserted in the deed.
His objection was accepted by the judge of the Court of First Instance. The
defendant appealed and the Athens Court of Appeal 9 decided that the
matter was not arbitrable because:
"Contesting enforcement, whether about the validity of the enforceable
instrument, or about the proceedings, or about the claims, aims at annull-

57. Mitsubishi Motors Corporationvs. Soler Chlysler - Plymouth Inc.

58. According to Articles 904 para. 2d, and 918, para. 2c, of Greek CCP.
59. Athens Court of Appeal, No. 1621 of 1980, Nomikon Vima 29 (1981), para.
113.
 Revue Hellenique de Droit International

ing enforcement itself. It therefore attacks the activity of the organs of the
State, who, by virtue of our procedural system, are competent to do what
is required for the satisfaction of the claim. Said organs are not the clai-
mants' representatives, but act to safeguard the common interests of all
creditors concerned. It is obvious that the validity of the actions of the en-
forcement is not among the rights that the parties may dispose of, inas-
much as such action directly concerns third parties".

- Disputes which are directly contrary to public policy (ordre public)

and to morality (bonos mores).
Previously, we referred to partial expressions of public policy in var-
ious countries, the result of which was non-arbitrability of the relevant
matters. We may call them positive public policy cases, because they are
defined by mandatory legal rules.
In France, in particular, we saw that, by an explicit legal provision, all
public policy matters are not arbitrable.6 °
International arbitration concerns public policy within the framework
of private international law (conflict of laws). 6' Art. 33 of the Greek Civil
Code dces not allow a foreign legal rule to be applied to Greece if its
implementation is contrary to public policy and to morality, i.e. if it is
contrary to the fundamental principles which govern the social and politi-
cal organization of the country. Similar provisions are found in the legisla-
tion of most countries. However, Art. 903 para 6 of the Greek CCP does
not allow a foreign award to be recognized or enforced in Greece if it is
contrary to public policy and to morality. A similar rule applies with Art.
V, 2, b of the 1958 New York Convention. This short survey is concerned
with public policy and morality, not at the enforcement stage of an arbitral
award, but at the arbitration agreement stage. The question springs to mind:
Is there a truly international public policy? Professor Pierre Lalive dealt
with this matter 62 at the 8th International Arbitration Congress, organized
jointly by the ICCA and the AAA, in New York in 1986..,.
Practicioners and theorists, who have had to deal with the matter, agree
that disputes arising out of agreements concerning bribery and corruption

60. Art. 2060 French Civil Code.

61. See Francescakis Ordre Public, in Repertoire Dalloz de droit international
priW. - Kerameus, Arbitrageinternationalet ordreiuridiquehellenique, R. Arb.
1987, pp. 43 etseq.
62. P. Lalive, Transnational(or Truly International)Public Policy and Interna-
tional Arbitration, in comparative Arbitration Practice and Public Policy in
Arbitration, Gen. Ed. P. Sanders, Kluwer 1987.
 Validity of an arbitration agreement

are not arbitrable because they are contrary to international public policy
in its broadest conception. The way this matter was faced by international
arbitrators is a fascinating story.
In 1963 the Swedish judge Gunnar Lagergen was the sole arbitrator in
the following ICC case. In 1950, a British company agreed to pay 10%
commission to an Argentinian agent in order to be awarded a contract by
the Government of Argentina for expanding the capacity of the Buenos
Aires power plant. It was an open secret that the major part of the com-
mission would be used for bribing Government officials; this practice was
not uncommon under the Peron regime. 63 The contract was finally award-
ed to another bidder. The Peron regime fell in 1955. The agent left Argen-
tina. In 1957, the same British company succeeded in securing a contract
for the erection of another small power plant in Buenos Aires. The agent
asked for his 10% commission, contending that his previous effort had pro-
duced results. The parties submitted their dispute to the ICC Court of
Arbitration. The arbitrator did not limit his reasoning to the agreement
concerning bribery being contrary to public policy, both in France where
the arbitration proceedings took place, and in Argentina, but stated:
"It cannot be contested that there exists a general principle of law re-
cognized by civilised nations that contracts which seriously violate bonos
mores or international public policy are invalid or at least unenforcable
and that they cannot be sanctioned by courts or arbitrators... Thus juris-
diction must be declined in this case... In concluding that I have no juris-
diction, guidance has been sought from general principles denying arbitra-
tors to entertain disputes of this nature rather than from any national rules
on arbitrability".
In another ICC arbitration 64 in 1975, the arbitral tribunal judged that,
even if it had the power of amiable compositeur, it was not "...according to
general principles.., authorized to take a decision contrary to an absolutely
constraining law, particularly the rules governing public policy or morals".
Finally, in 1982, in another ICC arbitration 65
the sole arbitrator, on the
basis of the principle of separability of the arbitration agreement, judged
that he had competence to hear the dispute, but rejected the request on the

63. For more details and comments see J. D. M. Lew, Applicable Law in Interna-
tional CommercialArbitration. Oceana - Sijthoff 1978 pp. 553-555.
64. ICC No. 1677, mentioned by Craig, Park, Paulsson, II, para. 5.07, p. 25, note
46.
65. ICC No. 3916, mentioned by B6ckstiegel, o.p. cit. p. 272. See also the arbitra-
tions mentioned by P. Lalive, ibid..pp. 290-295.
 Revue Hellnique de Droit International

merits, because, the case being again about a bribery agreement, he stated
"that the object of the agreement was contra bonos mores.
Various authors have dealt with the validity of arbitration agreements
connected with bribery66 and also with other categories of agreements that
67
could be considered to be contrary to international public policy.

We now come to the capacity to conclude arbitration agreements, in

other words, subjective arbitrability. 68 The provision of Art. V, I, a of the
New York Convention requires the parties to the arbitration agreement to
have the capacity under the law applicable to them. As we have seen, 69 a
group of countries applies the law of nationality to individuals and the law
of the seat to moral persons. Other countries apply the law of the domicile
to individuals and the law of incorporation to moral persons. Taking into
account this defferentation, we realize that the rule of Art. V, I, a of the
New York Convention
70 is also a rule of conflict of laws in the legislation of
most countries.
International arbitrators also apply this rule to determine whether the
parties had the capacity to conclude the arbitration agreement.
There is not much to say about the capacity of individuals: this is a
matter of applicable law. 7'
Regarding the capacity of moral persons, the answer is, in principle,
the same: it is to be found in the applicable law. However, matters are not
so simple here. In private law, a legal person (a company, etc.) is bound by
the action of the organs which represent it. Commitments of this kind are
valid under the conditions of the applicable law and of the articles of asso-
ciation of the legal person in question.
An arbitrator has to ask for proof that, under the applicable law and
the articles of association, the individual who signed the arbitration agree-
ment on behalf of the legal person had the power to sign it and to bind that
person.

66. Goldman, The Complementary Roles of Judges and Arbitrators in Ensuring

that International Commercial Arbitration is Effective, in ICC Court of Arb-
itration 60th anniversary, p. 272. Also S. El Kosheri / Ph. Leboulanger
L'arbitrageface6 la corruption et aux trafics d'influence, R. Arb. 1984, p. 18.
67. Lew, op. cit. p. 534, No. 407. Lalive op. cit. p. 294 Nos. 129, 130. This matter
is still being discussed.
68. B6ckstiegel, ibid. p. 181, Lalive, ibid.p. 2 2 6 .
69. Note No. 9 supra.
70. In Greece, Civil Code Art. 7 (law of nationality) and Art. 10 (law of the seat of
jurisdiction).
71. About Greek law see Foustoucos, L'arbitrage,pp. 57, 60 and 228.
 Validity of an arbitration agreement

Greek law has a particularity which calls for special care. Based on an
extended interpretation of the provision of Art. 65 para. 2 of the Greek
CCP, some Greek Courts7 2 have stated that the power given to the manag-
er of a legal person to enter into a set of agreements on its behalf dces not
include arbitration agreements, if the manager was not given specific and
explicit powers in this connection.
Most recently Areios Pagos, the Greek Supreme Court, by its decision
No.586 of 198313 judged that, when the Board of Directors of a socit an-
onyme appoints one or more directors (to act as its substitutes and) to
enter into a series of some categories of contracts, it is not required - and
the Board is not compelled by any legal provision - to express solemnly
and explicitly the power of the substitute(s) to sign arbitration agreements.
This matter has been examined exhaustively elsewhere.7 4 It should be
emphasized here that non-Greek parties must always request proof that
the person who represents a Greek company has been duly authorized to
sign the relevant arbitration clause. However, it must be admitted that the
above - mentioned decision of the Greek Supreme Court is a very impor-
tant step in the right direction and that it constitutes a guarantee of respect
and the bona fide implementation of the contractual obligations of Greek
legal persons, including their obligations resulting from an arbitration
agreement.
With regard to the capacity of the State and of State Agencies to con-
clude arbitration agreements, the various national laws can be divided into
two categories:
(a) those where the State and State Agencies have full capacity, and
(b) those where such capacity is subject to the fulfillment of certain for-
malities or conditions.
In Greece, the State and State Agencies have the capacity to conclude
arbitration agreements. In domestic arbitration, the State must fulfill cer-
tain formalities and conditions which are specified in Art. 49 of the Intro-
ductory law to the CCP, but it is not subject to them in the case of an in-
ternational arbitration agreement. This was established in 1963 at first by

72. Athens Court of First Instance No. 2437 of 1980, Dike II, p. 117. Athens Court of
Appeal Nos. 5276 and 7987 of 1980, Harmenopoulos 1980, pp. 978 and 979.
73. Published in Epitheorissis Emporikou Dikeou, 1984, p. 264, and Nomikon
Vima, Vol. 32, p. 70.
74. Foustoucos, The validity of the arbitrationagreement and its control (by the ar-
bitrator and by the judge) (in Greek), Nomikon Vima, Vol. 35 (1987) pp.
1366 et seq. particulary pp. 1372-1376.
 Revue Hellnique de Droit International

jurisprudence,7 5 and later, in 1970, by law. 76 On the other hand, the condi-
tions required for each Government Agency to sign valid arbitration agree-
ments are to be found in the Legislative Act establishing it and in its Arti-
cles of Association. The same guidelines are applicable to municipalities.
If there are no special provisions, the general provisions concerning legal
entities, as previously described, are applicable.

In France the State and State Agencies do not have the capacity to re-
sort to domestic commercial arbitration, 77 but they have it with no restric-
tions in the international field. 7
In Great Britain, the State and State Agencies may conclude commer-
cial arbitration agreements, without any formalities.79
In the Federal Republic of Germany there is the distinction between
domestic arbitration to which the State can resort after the fulfillment of
certain formalities80 and international commercial arbitration to which the
State and State Agencies can resort, at least within the framework of the
1960 European Convention," with no restrictions or formalities.
In the United States,82 Italy,83 and the Netherlands,8 4 the State and
State Agencies can conclude arbitration agreements after certain formali-
ties have been completed. In Switzerland, the State and State Agencies
have this capacity on all matters, with the exception of those for which,
under mandatory law provisions, they cannot conclude arbitration agree-
85
ments.

75. Areios Pagos decision No. 565 of 1965, Epitheorissis Emporikou Dikeou,
1966, p. 289. This decision is contemporaneous with the French Cour de Cas-
sation decisions Capitaine du San Carlo (1964) and Galakis (1966). See Fous-
toucos, L'arbitrage,p. 263.
76. Art. 8, legislative decree No. 736 of 1970. Greek investment laws (2687 of
1953, 1471 of 1961, 3948 of 1959, 522 of 1968, 1262 of 1982) also contain pro-
visions concerning arbitration. See Foustoucos, ibid. p. 1285.
77. Robert, Arbitrage, op. cit. p. 28.
78. Robert, ibid. p. 251.
79. Under the State Immunity Act 1978, See Steyn, Yearbook VIII, p. 10. Also
Fox, States and the undertaking to arbitrage, ICQL, Vol. 37 (1988) p. 1 et seq.,
particularly p. 29 No. 4.
80. Glossner, Commercial Arbitatration in the F.R. of Germany, p. 4.
81. Art. II of the 1961 (Geneva) European Convention, which was ratified by the
FRG on Feb. 20, 1975, with no reservation.
82. Holzmann, Yearbook II, p. 121.
83. Bernini, Yearbook VI, p. 32.
84. Sanders, Yearbook VI, p. 64.
85. Briner, Yearbook VI, p. 185.
 Validity of an arbitration agreement

In the USSR and the East European Socialist countries the Govern-
ment is never a party to international commercial contracts, but State -
controlled enterprises are, and they validly conclude arbitration agree-
86
ments.
Syria offers an interesting variation. The State and State Agencies re-
quire the approval of the Council of State (Conseil d'Etat)in order to con-
clude commercial contracts, settlements or arbitration agreements, invo-
living more than a specified amount87 . However, public organizations, pub-
lic companies, and public e'nterprises, i.e. legal entities belonging to the
State, but with commercial, industrial, argicultural, or financial activities,
are considered to be merchants and do not require the prior approval of
the Council of State for their commercial activities, contracts, and arbitra-
tion agreements (Art. 35 of legislative decree No. 18 of 1974).

As we have seen, in international commercial arbitration an arbitration

agreement in writing is the basis of every arbitration. As stated in Art. II,
2, of the New York Convention, the term "agreement in writing" shall in-
clude an arbitral clause in a contract, or an arbitration agreement, signed
by the parties or contained in an exchange of letters or telegrams. The
1961 European Convention includes, in addition to the above, in Art. I, 2,
a, "a communication by teleprinter", that is today's well - known com-
munication by telefax. The omission of the telefax in the New York Con-
vention was not an error; it constitutes a proof of the speedy development
of the modern techniques. 8 8 This means of communication was not widely
used before 1980.
In Greek, 89 Italian9" and other national laws, there is a provision ac-
cording to which, when there is no valid arbitration agreement in writing,
the lack of written form is remedied if the parties appear before the arb-
itrators and participate, without reservation in the arbitral proceedings. In

86. Strohbach, in Yearbook I, p. 4 et seq. See also in the same volume the contri-
butions about the USSR, Bulgaria, East Germany, Czechoslovakia, Poland,
Hungary, Rumania, Yugoslavia. See also Kaj Hober, Arbitration in Moscow,
Arbitration International, 1987, pp. 119 et seq.
87. Foustoucos, Aptitude des personnes morales du secteur public a compromettre,
la loi Syrienne. Euro - Arab Arbitration, LLP, London 1987, pp. 241 et seq.
88. It has been pointed out by W. Melis, in La reforme autrichienne de I" arbitrage
R. Arb. 1987, p. 453. - Austrian legislation (Act of 2.2.1983) is, I think, the
first national law which includes communication by telefax among the valid
forms of arbitration agreements.
89. Art. 868, 869 CCP.
90. Bernini, Yearbook VI, p. 32.
 Revue Hellknique de Droit International

international commercial arbitration, it is nevertheless advisable for arb-

itrators to ask before the beginning of the arbitral proceedings that the par-
ties confirm their arbitration agreement in writing. The Terms of Refer-
ence provided for by the Rules of the ICC Court of Arbitration 9' should
also be borne in mind.
The written form required by the 1958 New York Convention, with the
clarifications of Art. II, para. 2, is the rule in all countries that have rati-
fied it. However, a case of loose interpretation of the Convention by a Bri-
tish Court of Appeal 92 has been signalled. The reason, put forward by one
of the judges for accepting as valid under the New York Convention an
arbitration agreement signed by one party only, was that it could be
proved that the arbitration agreement was concluded by evidence drawn
93
not from the written text. This decision was strongly criticized.
In international commercial practice, the conclusion of contracts,
mainly sales contracts, through a commercial agent or a broker is usual. It
is generally accepted that a sale may be concluded verbally, by the agent,
without previous instruments in writing from the principal. The question
is whether the agent can conclude an arbitration agreement, without an
order in writing by the principal. Some national legislations, Dutch for in-
stance, accept this possibility, but under Greek law this is not possible.
According to Art. 217 of the Greek Civil Code the power of attorney is in
the same form as the legal act or contract for which it is intended.
The Supreme Court, by its decision No. 88 of 197794 judged that, in an
international commercial transaction, the agent must have been given
power in writing in order to conclude a valid arbitration
95
agreement for the
principal. Italian law is similar in this respect.

To sum up: For an arbitration agreement to be valid in international

commercial arbitration, the following conditions are required:
1. The agreement must be in writing.
2. The parties must have the capacity to arbitrate (subjective arbitrabi-
lity).
3. The issue must be arbitrable (objective arbitrability).

91. Article 13.

92. Zambia Steel Building Supplies Ltd. v. James Clark Eaton Ltd. (1986) 2 Lloyd's
Rep. 225.
93. By F. A. Mann, An "Agreement in Writing" to Arbitrate, Arbitration Interna-
tional, 1987, p. 171.
94. Areios Pagos No. 88 of 1977, Nomikon Vima, 25, p. 1126, and Yearbook IV, p.
270.
95. Bernini, Yearbook VI, p. 32.
 Validity of an arbitration agreement 199

The written form is a general and direct requirement under the New
York Convention and under all other texts dealing with international arb-
itration. Capacity must satisfy the conditions set by the law applicable to
each party. Arbitrability of the issue must be established under two differ-
ent national laws.