An arbitration clause in a contract is generally regarded as an autonomous agreement that may survive the termination of the contract that contains it. This presumption is often referred as “separability” or the “doctrine of separability”, according to which an arbitration clause is a “separate contract” whose validity and existence are independent from the substantive contract.
As a conceptual premise of international arbitration, the doctrine of separability has been endorsed by many courts over the years.
In one important English decision, Bremer Vulkan Schiffbau Und Maschinenfabrik v. South India Shipping,  A.C. 980, Lord Diplock discussed the nature of the arbitration clause, stating that “the arbitration clause constitutes a self-contained contract collateral or ancillary to the [underlying] contract itself”. Lord Diplock’s statement was approved by two other members of the House of Lords.
In France, the French Court of Cassation held in the classic Gosset decision (Cass. 1ere civ., 7 May 1963) that the arbitration agreement has, in international arbitration, full autonomy vis-à-vis the substantive contract.
[…] in matters of international arbitration, the arbitration agreement (“accord compromissoire”), whether concluded separately or included in the underlying contract within which it is contained, shall have, except for of exceptional circumstances, full legal autonomy and shall not be affected by the invalidity of the aforementioned contract.
Subsequently, the doctrine has evolved in France as French courts abandoned the exception of “exceptional circumstances”. In this respect, French courts will generally consider the arbitration agreement to be an independent agreement irrespective of any foreign law applicable to the underlying contract or to the arbitration agreement itself.
Today, the doctrine of separability is so acceptable worldwide that it is considered a cornerstone of international arbitration regardless of the law applicable to the proceedings or to the merits.
The Termination of a Contract and the Separability Doctrine in National Arbitration Laws
Many national laws have recognized that the invalidity, non-existence, illegality or termination of the substantive contract does not affect the validity, legality or existence of the arbitration agreement. As a result, arbitrators have a prerogative to consider any challenges related to the existence, validity, legality or termination of the main contract as these challenges do not affect the arbitration agreement itself.
National laws recognize the separability of arbitration clauses to ensure the enforcement of arbitration agreements even in case of, most commonly, termination of the main contract. For instance, Article 19 of the Chinese Arbitration Act expressly provides that any alteration, dissolution, termination or invalidity of a contract shall not affect the arbitration agreement.
The effect of an agreement for arbitration shall stand independently and shall not be affected by the alteration, dissolution, termination or invalidity of a contract.
Section 7 of the 1996 English Arbitration Act provides that, unless otherwise agreed, the arbitration clause shall not be regarded as invalid because the underlying contract has become ineffective.
Unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement (whether or not in writing) shall not be regarded as invalid, non-existent or ineffective because that other agreement is invalid, or did not come into existence or has become ineffective, and it shall for that purpose be treated as a distinct agreement.
Likewise, in France, the separability doctrine is recognized in Article 1447 of the French Arbitration Act, which provides that “[a]n arbitration agreement is independent of the contract to which it relates. It shall not be affected if such contract is void”. Article 1053 of the Dutch Arbitration Act similarly provides that “an arbitration agreement shall be considered and decided upon as a separate agreement”.
Most modern arbitration laws contain, both in common law and civil law, an express provision on separability including, among others, Hong Kong (§34); Sweden (Section 3); Brazil (Article 8); Spain (Article 22); Portugal (Article 18.2).
The U.S. Federal Arbitral Act does not expressly address the question of separability of arbitration agreements. However, U.S. courts have applied the doctrine of separability in different cases and built consistent case law on the autonomous nature of the arbitration clause (see, e.g., Prima Paint Corp v Flood & Conklin Mfg Co, 388 U.S. 395, 87 S. Ct. 1801 (1967)).
The Termination of a Contract and the Separability Doctrine in Arbitration Case Law
Arbitral tribunals typically accept the doctrine of separability without any reference to a national law, but rather as a general principle of international arbitration.
In the ad hoc arbitration BP Exploration Company (Libya) Ltd. v. Libya, the sole arbitrator implicitly referred to the separability doctrine, holding that “[The Libyan legislation] was effective to terminate the BP Concession except in the sense that the BP Concession forms the basis of the jurisdiction of the Tribunal and of the right of the Claimant to claim damages from the Respondent before the Tribunal”.
In Elf v. National Iranian Oil Company (NIOC), NIOC objected the validity of the arbitration clause on the ground that the underlying contract had been declared null and void by an Iranian Special Committee to review oil agreements. The sole arbitrator disagreed and stated “the arbitration clause binds the parties and is operative unimpaired by the allegation by NIOC that the Agreement, as a whole, is null and void ab initio.”
In ICC arbitrations, arbitral tribunals have also held that questions of validity, illegality or other impairment of the main contract do not necessarily cause the invalidity of the arbitration agreement (see, e.g., Interim Award ICC Case No. 4145 and Final Award ICC Case No. 10329).
Applicability of an Arbitration Clause After the Termination of a Contract
As a consequence of the doctrine of separability, the existence, validity or legality of an arbitration agreement does not depend on the underlying contract.
Accordingly, the fact that a dispute has arisen while the contract was in force, and the parties do not raise a claim until after the main contract has been terminated, does not prevent the dispute from being decided by an arbitral tribunal.
Likewise, the novation of any obligation included in the underlying contract will not affect the arbitration agreement and a settlement concerning issues arising out of the main contract will not terminate or extinguish the arbitration clause.
The enforcement of an arbitration clause after the termination or expiration of a contract is a question that ultimately depends on the parties’ intention. Put differently, parties may, at least in theory, agree that upon the termination of the underlying contract, the arbitration agreement:
- will be terminated for the purpose of all disputes;
- will be terminated for the purpose of all future disputes, but not for the purpose of disputes that arose while the contract was in force; or
- will not be affected.
In practice, it is widely accepted that the termination of the underlying contract does not affect the arbitration clause with respect to disputes that arose while the contract was in force, in the absence of clear evidence to the contrary. It is worth recalling that Section 7 of the English Arbitration Act authorizes parties to exclude the doctrine of separability, although it is rare that parties will address this issue.
For instance, the U.S. Supreme Court in Nolde Bros., Inc v. Bakery Workers decided that the arbitration agreement will apply to cases that involve facts before expiration, and after expiration, as long as the dispute in question is related to a right that was vested under the terminated contract.
Not rarely, parties invoke the arbitration agreement to resolve disputes that arose before the contract was entered into. In this respect, some courts have accepted to enforce the arbitration agreement retroactively (see, e.g. Clark v. Kidder, Peabody & Co., 636 F.Supp. 195 (S.D.N.Y. 1986)).
On the other hand, in the absence of any agreement of the parties, future disputes that are unrelated to the terminated contract itself will not be covered by the arbitration agreement.
 BP Exploration Company (Libya) Limited v. Government of the Libyan Arab Republic, Ad hoc Arbitration, Award on Merits dated 11 December 1971, at 206.
 Elf Aquitaine Iran v National Iranian Oil Company, Ad hoc Arbitration, Preliminary Award dated 14 January 1982, YCA 1986, at 103.
 Nolde Bros., Inc. v. Bakery & Confectionary Workers Union, 430 U.S. 243, 250 (1977).