The Arbitrability Dicta in First Options v. Kaplan: What Sort of Kompetenz-Kompetenz Has Crossed the Atlantic?

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Kluwer Law International




IN MAY of 1995 the United States Supreme Court handed down a significant decision about the allocation of functions between judges and arbitrators. First Options of Chicago v. Kaplan1 arose from an arbitral award rendered against both an investment company and its owners with respect to debts owed to a securities clearing house. The owners argued that they had never signed the arbitration agreement from which the arbitral tribunal drew its power, and consequently were not bound by its award. The Supreme Court held that the scope of the arbitration agreement was a matter for courts to decide independently (i.e., without deference to the arbitral finding on the matter), and affirmed the Court of Appeals' decision that the owners had not agreed to arbitrate.2 So far so good.

The problematic part of the Supreme Court's opinion lies in dicta suggesting that in some situations (although not under the facts of Kaplan) what the Court called ‘the arbitrability question itself’ may be submitted to arbitration,3 in which case the courts must defer (‘give considerable leeway’4) to arbitrators' decisions on the limits of their own jurisdiction.

What exactly this dicta means is unclear. Human nature being what it is, however, the securities industry and other groups relying on arbitration clauses in standard form contracts can be expected to give the dicta an expansive interpretation, tending to further a degree of arbitral autonomy that may be at odds with sound arbitration policy.


Reprinted in 11 International Arbitration Report 1 (Oct. 1996).

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