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Author: James Gawuga Nkrumah
Arbitration is increasingly becoming the norm for resolving disputes, rather than just an alternative to litigation. Parties to commercial agreements often designate arbitration under dispute resolution clauses as their preferred method for resolving disputes. They do this for reasons such as privacy, autonomy, efficiency, neutrality, expertise, and party participation. However, there may be times when a party objects to arbitrating a dispute on grounds of fraud, with the goal of having a court of law determine the matter.
When parties include a clause in a commercial agreement directing them to resort to arbitration to settle any disputes or differences, that clause is known as an arbitration clause or agreement. It is important to note that the arbitration clause is separate from the main agreement and is considered a stand-alone agreement. This means that if one provision of the agreement is deemed invalid, the other provisions remain in effect, thanks to severability clauses that are often included in well-drafted commercial agreements.
In the absence of a severability clause, the principle of severability in respect of arbitration clauses becomes relevant. This principle treats the arbitration clause as entirely separate from the agreement in which it is incorporated. This concept is known as the doctrine of separability. The leading judicial decision on the separability doctrine is the case of Habour Assurance v. Kansa General International Insurance. In this case, the court held that the arbitration clause in the insurance contract was separate from the contract itself and therefore the invalidity of the main contract did not deprive the arbitrator of jurisdiction.
Despite the presence of an arbitration clause, a party may allege fraud in order to challenge the arbitration. However, the separability principle means that the arbitration clause can survive allegations of fraud. The Alternative Dispute Resolution Act, 2010 (Act 798) in Ghana provides statutory endorsement for the doctrine of separability of arbitration agreement or clause. This means that an arbitration agreement contained in the wider agreement is unlikely to be affected by allegations of fraud. In the case of Savannah Pride v. Hanergy Global, the Ghanaian courts held that issues that cannot be settled by alternative dispute resolution methods may preclude a reference to arbitration, but this is typically limited to issues such as those relating to the environment, national or public interest, enforcement or interpretation of the constitution, and matters that cannot be settled by any alternative dispute resolution methods.