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A Delaware trial court ruled that the arbitrability of a dispute was a question for the arbitrator based on a Delaware rule whereby a broad arbitration agreement that incorporates rules which empower the arbitrator to decide questions of arbitrability is sufficient to overcome the presumption that courts decide questions of arbitrability.
In BAYPO Ltd. Partnership v. Technology JV, LP, No. CIV.A. 2693-VCL, 2007 WL 2896369 (Del. Ch. Oct. 2, 2007), the Bayer Corporation and its affiliates (collectively, Bayer) entered into a joint venture agreement with the Lyondell Chemical Company and its affiliate (collectively, Lyondell). The underlying agreement contained a broad arbitration clause that provided for arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the Rules).
In accordance with the agreement, the parties arbitrated a dispute over fees and other issues. The arbitrator issued an award in Lyondell’s favor.
Following arbitration, Bayer filed a lawsuit seeking reformation of the license agreement. In response, Lyondell moved for dismissal, arguing that the dispute was subject to arbitration. Bayer contested the arbitrability of the dispute.
The Court held that the arbitrability of the dispute was a question for the arbitrator because there was sufficient evidence of the parties’ intent to arbitrate questions of arbitrability. As the Court noted, questions of arbitrability are generally decided by the court, but this presumption can be overcome by “clear and unmistakable evidence” of the parties’ intent to arbitrate questions of arbitrability.
In reaching its holding, the Court relied on precedent from the Delaware Supreme Court holding that “clear and unmistakable evidence” of such intent is present if “the arbitration clause generally provides for arbitration of all disputes and also incorporates a set of arbitration rules that empower arbitrators to decide arbitrability.” See James & Jackson, LLC v. Willie Gary, 906 A.2d 76 (Del. 2006).
The Court applied that precedent in this case because the arbitration agreement covered all disputes, with a narrow exception for equitable and injunctive relief, and incorporated rules that empower arbitrators to decide questions of arbitrability. Accordingly, the arbitrability of the dispute was a question for the arbitrator.
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