Drafting an arbitration provision that complies with the standards articulated by the New Jersey Supreme Court in Atalese v. U.S. Legal Services Group, 219 N.J. 430 (2014), is a necessary first step to ensuring a New Jersey dispute is resolved through arbitration. But what happens when the other side in a dispute challenges the applicability of the underlying contract that contains such an arbitration provision? Is it for the arbitrator or the court to decide the provision’s applicability? The answer: it depends, absent a well-drafted arbitration provision that can eliminate this uncertainty and cost.

In a series of decisions between 1986 and 2019, the U.S. Supreme Court considered the question of who decides the arbitrability of a dispute. In First Options of Chicago v. Kaplan, 514 U.S. 938 (1995), the court took up this issue and stated that the question “‘who has the primary power to decide arbitrability’ turns upon what the parties agreed about that matter.” Justice Breyer identified two scenarios. First, “[d]id the parties agree to submit the arbitrability question itself to arbitration?” If the answer was yes, then the arbitrator decided arbitrability. However:

If, on the other hand, the parties did not agree to submit the arbitrability question itself to arbitration, then the court should decide that question just as it would decide any other question that the parties did not submit to arbitration, namely, independently.

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