By: WBG, LLP Published: January 2009

Arbitrator's Authority to Decide Jurisdictional Questions

A court’s jurisdiction is established by statute. It sets forth the limitiations and powers of 
the court to decide cases that come before it. For example, small claims courts and district courts 
have a dollar amount limits on judgments they can award. Similarly, the state Court of Claims 
can only decide cases brought against the state. Determining whether a case fits within a court’s 
particular jurisdiction, is decided by that court. 
 
Arbitration is different. In arbitration, the arbitrator’s jurisdiction is established by the 
parties’ arbitration agreement, not by statute. Determination of whether a particular dispute is 
arbitrable – that is, within the arbitrator’s jurisdiction – was a question for the courts to decide. 
 
 Recently, New York’s highest court, the Court of Appeals, ruled that where empowered 
by the parties, an arbitrator can decide questions of his or her own jurisdiction. The case is Life 
Receivable Trust v. Goshawk Syndicate 102 at Lloyd’s.1
 
 Life Trust owned a portfolio of life insurance policies. It purchased contingency cost 
insurance from Goshawk as a hedge on payments that would have to be made on those policies. 
Life Trust paid premiums for the contingency cost insurance to Goshawk, however, Goshawk did 
not pay any claims. The contingency cost insurance agreements contained an arbitration 
agreement. Goshawk commenced arbitration before the American Arbitration Association’s 
International Center for Dispute Resolution. Life Trust, not wanting to arbitrate the dispute, 
made a motion in court to stay the arbitration based upon arbitrability grounds.2
 
 
The lower court denied Life Trust’s motion, noting that the contingency cost insurance 
agreements contained an arbitration provision indicating that “All disputes and differences arising 
under or in connection with this Insurance shall be referred to arbitration under the American 
Arbitration Association Rules.” The lower court further found that the arbitration provision was 
plain and expansive and indicated that the parties agreed to arbitrate their disputes under the AAA 
rules. Those rules, said the court, gave the arbitrator, not the court, the authority to decide the 
“existence, scope, or validity” of the arbitration agreement. 
 
 Life Trust appealed the denial of its motion to stay the arbitration to the Appellate 
Division (First Department). The appellate court upheld the lower court, by a 4 – 1 majority, 
indicating that although questions of arbitrability are generally ruled upon by the court, 
when the parties arbitration agreement specifically incorporates the AAA rules, which 
give the arbitrator the power to rule on his or her own jurisdiction, including challenges 

 

 1
 2008 WL 4461446 (N.Y. Sup.), affirmed, 66 A.D.3d 495, 888 N.Y.S.2d 458 (1st Dept. 2009), 
affirmed, 14 N.Y.3d 850, 901 N.Y.S.2d 133 (2010). 
 
2
 Life Trust argued that the U.S. Supreme Court’s decision in Hall Street Assoc. LLC v. Mattel, 
Inc., 128 US 1396 (2008), nullified the arbitration agreement with Goshawk because the arbitration 
agreement expanded the scope of the court’s review beyond the grounds of review set forth in the Federal 
Arbitration Act. Life Trust also argued that Goshawk’s obligation to pay claims was absolute and the 
agreement precluded Goshawk from asserting any defense. Goshawk argued that the parties unequivocally 
agreed that the arbitrators, and not the Court, would decide issues of arbitrability. 
 
  
to the existence, scope or validity of the arbitration agreement itself3
 and the agreement 
uses expansive “all disputes” language, the courts will leave the question of arbitrability 
to the arbitrator. 
 
Life Trust appealed to the Court of Appeals, however that court agreed with the 
lower courts. 
 
 What is the ramification of this on the construction community? 
 
 If you are using AIA forms of contracts, or contracts containing broad arbitration 
clauses incorporating the AAA Construction Industry Arbitration Rules, what is or is not 
arbitrable under the contract will be decided by the arbitrator, not by a court. Contractors 
should therefore be mindful of any arbitration agreement in their contracts. They must be 
alert, when it comes time to select an arbitrator. If the dispute involves questions 
pertaining to whether or not a particular issue is subject to arbitration, additional 
consideration should be given to select an arbitrator who has experience with arbitrability 
questions. Merely selecting an arbitrator based upon his or her construction or design 
background may put significant questions of whether an issue is arbitrabile in the hands 
of someone without experience or knowledge of such jurisdictional matters. In such 
situations the parties may want to have an attorney with construction law background as 
their arbitrator. 
 
This alert provides general information only. It is not intended to provide legal advice. 
We encourage you to contact an attorney should you desire to discuss specific situations 
for which you may need legal advice. 

 

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