As a private dispute resolution mechanism, arbitration depends on the availability of funds from the parties. However, not infrequently one side will be unable, or unwilling, to advance its share of the costs. Courts faced with such cases can either uphold the validity of the agreement or set aside the agreement and retain jurisdiction over the dispute. This article examines several legal theories courts have relied on when doing so. Initially, it will present the various positions by way of case examples, including that the agreement is rendered invalid due to public policy principles, denial of justice, contractual breaches or waiver. Afterwards, it will analyse various issues that arise from court practice, including conflicts regarding the applicable law, jurisdiction and the burden of proof. The article concludes with the author’s suggestions on how decisions over the potential invalidity of the agreement could be guided.
Journal of International Arbitration