Mann Lex Facit Arbitrum

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Kluwer
The UNCITRAL Model Law - Lex Facit

Arbitrum
Source
In 1967, Dr Mann's article Lex Facit Arbitrum was published
in â€˜International Arbitration Liber Amicorum for Martin
• The
Domkeâ€™. This article raised fundamental points of
UNCITRAL
principle which had not then been much discussed. It coined
Model Law -
the phrase lex arbitri; and its influence has been widely felt,
Lex Facit
particularly in England and the common law countries of the
Arbitrum,
British Commonwealth. Dr Mann has recently restated his
Arbitration
points of principle in strong opposition to the UNCITRAL
International,
Model Law in â€˜Private Arbitration and Public Policyâ€™
(Kluwer Law
(1985) CJQ 257; and he there invoked views expressed by
International
Sir Michael Kerr in his 1984 Alexander Lecture on the
1986 Volume 2
UNCITRAL Model Law. Much has happened since 1967;
Issue 3 ) pp.
but the conclusions stated by Dr Mann almost 20 years ago
241 - 260
remain relevant and important at a time when many
countries are studying the Model Law with a view to its
implementation in domestic legislation. The article has
become difficult to find with the passage of time; and it has
never been reprinted in full. We reprint it here for the benefit
of all students of the Model Law and those committees of
experts in many countries now considering the Model Law
for enactment into their system of law. Many may not agree
with Dr Mann's conclusions applied to the Model Law; but
his points require an answer as much today as in 1967. The
Note Editors.
Few aspects of legal history have had so memorable and

exciting a development as the doctrine of the supremacy of
the law. The subjection of the King or, as we would put it in
modern terms, of the Executive to the law was not accepted
before the 13th century, when Bracton rejected the Roman
doctrine according to which rex legibus solutus est, and
proclaimed that lex facit principem. (1) It took many more
centuries for the principle to be established in practice. That
the legislature itself is subject to law, namely the
fundamental law and, more particularly, the constitutional
law is an achievement of the final decades of the 18th
century. The trail blazed by the American and French
revolutions has today produced a situation in which the
https://mail-attachment.googleusercontent.com/attachment/u/0/?ui=2&ik=7729a1661f... 11/26/2012
United Kingdom is almost the only State in the Western

world where Parliament is said to be omnipotent and in fact
page "241"legislates in a manner which occasionally might
offend the written Constitutions of enlightened countries.
The Judiciary's duty to apply the law has always and
everywhere been plain; if recently certain doubts have arisen
(2)
in regard to the binding quality of statute law they
contemplate wholly exceptional circumstances which for
present purposes may be ignored.
It is against this background that one notices with a little

astonishment the uncertainties which, after a historical
development extending over some two thousand years,
continue to surround the problem of the supremacy of the
law in the field of arbitration. (3) From time to time and in
one country after another there appear those who advocate
the freedom of arbitrators from the shackles of the law. In so
far as the municipal law of commercial arbitration is
concerned, the subject is in many countries covered by an
enormous literature, (4) although in modern times not all of it
is being remembered. (5)
In the course of the last decade or so, however, a further

refinement of the arbitrator's alleged freedom from the law
has come to the fore. This is to the effect that at any rate
within the realm of international commercial arbitration the
arbitrator is not or should not be, subject to law, but is, or
should be, free to derive his decision, not from any
municipal system of law, but from what the arbitrator
believes to be custom or usage, good sense, fairness, justice,
aequitas or, as it is sometimes wrongly put, â€˜equityâ€™.
(6)
The autonomy of the parties, so it is said, may produce a
contract without law, (7) a contract subject to un droit
anational, (8) so that arbitrators are not called upon to apply
any fixed rules of a specific system of law, but may have
resort to a law of their own creation. Professor Goldman has
lent his authority to a statement of special clarity: â€˜toute
recherche d'un systÃ¨me de rattachement correspondant Ã
la nature de l'arbitrage international dÃ©bouche sur
l'inÃ©luctable nÃ©cessitÃ© d'un systÃ¨me autonome, et
non nationalâ€™. (9) In effect this is also the view of a Greek
scholar, Professor Fragistas, who seems to have been the
first to suggest that the parties may â€˜dÃ©tacher l'arbitrage
de tout ordre juridique et lui donner un caractÃ¨re
supranationalâ€™. (10) He presses his doctrine page
"242"even so far as to make the somewhat extreme proposal
of submitting an international arbitration to public
international law: (11)
l'arbitrage supranational doit done Ãªtre un

arbitrage international, c'est-Ã -dire un arbitrage
qui Ã©chappe Ã l'emprise de tout droit national
pour Ãªtre soumis directement au droit

international.
This, according to the learned author, in practice means the

right and duty to decide ex bono et aequo (sic). (12) Such a
method of approach is said to characterise, in particular,
arbitrations under the rules of the International Chamber of
Commerce: (13)
dans ces cas les parties n'entendent pas se

soumettre Ã un arbitrage rÃ©gi par le droit
d'un Ã‰tat dÃ©terminÃ©; au contraire les
parties ont l'impression de soumettre leur litige
Ã un arbitrage qui se trouve au-dessus de tout
ordre Ã©tatique.
It is proposed to enquire into the soundness of such theories

in the sphere of private arbitrations. Where disputes between
States or international persons are submitted to arbitration
under public international law, wholly distinct considerations
arise; such arbitrations which would include those of the
type represented by the Mixed Arbitral Tribunals set up after
the first world war (14) are, therefore, outside the scope of the
present study. Arbitrations between States and private
persons, on the other hand, are necessarily founded on
private, as opposed to public international law, though a
given system of private law may perhaps permit the parties
to select public international law as the proper law of their
contract. (15) For this reason, among others, (16) such
arbitrations page "243"may in certain cases involve special
and unusual features. This makes it preferable likewise to
eliminate them from the following discussion.
The latter is intended as an inquiry into principles. It does

not aim at presenting a collection or a complete review of
statutory provisions, judicial practice or academic doctrine
on a comparative basis. The purpose is to make a broad
survey of the field and show that arbitration, like any other
institution of municipal law, requires a firm legal basis
which can only be found in the recognition and
implementation of the idea of lex facit arbitrum.
II
Although, where international aspects of some kind arise, it

is not uncommon and, on the whole, harmless to speak,
somewhat colloquially, of international arbitration, the
phrase is a misnomer. In the legal sense no international
commercial arbitration exists. Just as, notwithstanding its
notoriously misleading name, every system of private
international law is a system of national law, every
arbitration is a national arbitration, that is to say, subject to a
specific system of national law. (17) It may well be that in
some countries arbitrations displaying an international

character of some sort are governed by special rules, though
they may be common to those in other States. Thus, the
Geneva Convention on International Commercial Arbitration
of 1961 applies to â€˜litiges nÃ©s ou Ã naÃ®tre
d'opÃ©rations de commerce international entre personnes
physiques ou morales, ayant au moment de la conclusion de
la convention, leur rÃ©sidence habituelle ou leur siÃ¨ge
dans des Etats contractants diffÃ©rentsâ€™. (18) Yet even
such an arbitration is a national arbitration. The Geneva
Convention of 1961 applies only by reason of the fact that
the State controlling the arbitration has become a Party to it.
In other words, the fact that the Convention applies and that
in the limited sense of its Art. I(I) (a) the arbitration is an
international one, does not by any means deprive the
arbitration as a whole of its strictly and necessarily national
character, or prejudice the supremacy of the municipal law
applicable to it.
Numerous attempts have been made in recent years to define

an â€˜international commercial arbitrationâ€™. They have
failed to produce any clear formula, nor is it certain whether
an effective formula, if it were to be found, would constitute
a useful contribution rather than a sterile exercise. Monsieur
Fouchard, for example, starts by giving the impression that
he intends to make the extravagant suggestion that an
international commercial arbitration would be â€˜un
arbitration dÃ©tachÃ© de tous les cadres Ã©tatiques,
soumis Ã tous Ã©gards Ã des normes et Ã des autoritÃ©s
vÃ©ritablement internationalesâ€™, (19) but he then seems to
resile from it. (20) Similarly, Professor Goldman leaves it
obscure whether he really wishes to maintain his no less
fanciful initial intimation that an international commercial
arbitration â€˜serait ainsi celui don't la procÃ©dure
Ã©chappe â€“ ou peut Ã©chapper, si la convention des
parties est suffisamment explicite â€“ Ã l'application d'une
loi Ã©tatiqueâ€™. (21) However this may be, all these page
"244"attempts, let it be repeated, are profitless. No one has
ever or anywhere been able to point to any provision or legal
principle which would permit individuals to act outside the
confines of a system of municipal law; even the idea of the
autonomy of the parties exists only by virtue of a given
system of municipal law and in different systems may have
different characteristics and effects. Similarly, every
arbitration is necessarily subject to the law of a given State.
No private person has the right or the power to act on any
level other than that of municipal law. Every right or power a
private person enjoys is inexorably conferred by or derived
from a system of municipal law which may conveniently and
in accordance with tradition be called the lex fori, though it
would be more exact (but also less familiar) to speak of the
lex arbitri or, in French, la loi de l'arbitrage.
III
Which is the lex fori that necessarily governs every

arbitration, even if it involves international aspects such as a
dispute between parties residing in different countries?
The question is not always put in this way. Very frequently,

though a little illogically, the consequences of the
determination of the lex fori or, in other words, the matters
governed by it are discussed in preference to the more basic
question of the identity of the lex fori itself. Yet, broadly,
two views have emerged. In most countries it seems to be
accepted, or at least assumed, that the loi de l'arbitrage is the
law of the country in which the tribunal has its seat. (22) This
is in accordance with the weighty Resolution proposed by
Professor Sauser-Hall and accepted by a distinguished
Commission of the Institut de Droit International in 1952. (23)
The other view, advocated by many writers, is to the effect
that the lex fori is identical with the law chosen by the parties
and thus determined by their autonomous act.
It would clearly be open to any given country to adopt either

of these solutions or any other solution. Indeed, the question
can only be answered from the point of view of a given
country. It is, therefore, impossible to say that a particular
practice is wrong. It may not prevail in a specific country,
but may have been adopted elsewhere. Since express
provisions are very unusual, all one can do is to suggest what
the law should be and what, in those countries where express
provisions are missing, it is likely to be.
The lex arbitri cannot be the law of any country other than
that of the arbitration tribunal's seat. (24) No act of the parties
can have any legal effect except as the result of page
"245"the sanction given to it by a legal system. (25) Hence, it
is unavoidable to ascertain such system before the act of the
parties can be upheld. When we say in the conflict of laws:
â€˜contracts are governed by the law chosen by the
partiesâ€™, we do so, and can do so, only by reason of the
fact that the rule is part of the law of a specific legal system.
Similarly, the statement: â€ãrbitrations are subject to the
law chosen by the parties as the lex foriâ€™ cannot have any
validity in the absence of a legal rule to this effect. On the
other hand, arbitrators are inevitably subject to the legislative
jurisdiction of the country in which the tribunal functions.
Whatever the intentions of the parties may be, the legislative
and judicial authorities of the seat control the tribunal's
existence, composition and activities. It is primarily the law
of the seat that decides whether and on what conditions
arbitration is permitted at all. No country other than that of
the seat has such complete and effective control over the
arbitration tribunal. Certainly the State where the arbitrator
resides or of which he is a national has no comparable

degree of control. If there is a single arbitrator, it is true, the
jurisdiction of his home State may to some extent assert
itself, but where there are several arbitrators belonging to
different countries, or where after the commencement of the
arbitration questions arise for decision, it becomes obvious
that there is only one single State qualified to create the lex
arbitri. Finally, it would be intolerable if the country of the
seat could not override whatever arrangements the parties
may have made. The local sovereign does not yield to them
except as a result of freedoms granted by himself.
Perhaps the lex fori so determined allows the law chosen by

the parties to operate. This would be a choice-of-law
produced, not by the parties alone, but by the lex fori. There
is a pronounced similarity between the national judge and
the arbitrator in that both of them are subject to the local
sovereign. If, in contrast to the national judge, the arbitrator
is in many respects, but by no means with uniformity,
allowed and even ordered by municipal legislators to accept
the commands of the parties, this is because, and to the
extent that, the local sovereign so provides.
This is also the answer to certain scholars who argue that

arbitration has a character entirely different from judicial
proceedings, that arbitration â€ñe met en aucune maniÃ¨re
en jeu le service public de la justice ... et ne manifeste ni
n'exerce la souveraineÃ©â€™ and that for these reasons it
cannot be â€ãssimilÃ© au fonctionnement du service public
de la justice dans l'Etat oÃ¹ il est gÃ©ographiquement
localisÃ©â€™. (26) Is not every activity occurring on the
territory of a State necessarily subject to its jurisdiction? Is it
not for such State to say whether and in what manner
arbitrators are assimilated to judges and, like them, subject to
the law? Various States may give various answers to the
questions, but that each of them has the right to, and does,
answer it according to its own discretion cannot be doubted.
The same answer must also be given to those who suggest

that the lex arbitri is constituted, not by the law of the seat of
the arbitration, but by the law to which, expressly or
impliedly, the parties have submitted their contract, ie, the
proper law of page "246"the contract. (27) Notwithstanding its
frequently unsatisfactory reasoning and style the most recent
contribution to the problem seems to defend such a thesis:
(28)
the arbitration tribunal is said to be â€ñaturalisedâ€™
where it has its seat in Savigny's sense and this is said to be
the law to which the parties â€ãs creators are subjectâ€™.
Accordingly, lex foriâ€˜within the framework of the loi
d'arbitrage to which the parties as creators are subject is the
law of the community in the name of which the arbitrator
makes his award, the lex contractusâ€™. If it is intended to
refer to the proper law as the lex arbitri, the reasoning is
faulty, as Professor Ehrenzweig had no difficulty in showing.
(29)
Which is the law that enforces the partiesâ€™ choice of
the proper law of the contract? Surely, not the proper law of
the contract itself. One cannot in this field argue on the basis
of apodictic generalisations. The argument must contemplate
a specific legal system. Suppose a contract, subject to
English law, leads to an arbitration in Zurich. Is it really
suggested that the arbitrator is in every respect free from
control by Swiss legislation, but is subject to the Parliament
in Westminster?
IV
Which is the seat whose law constitutes the lex fori binding
upon arbitrators, the lex arbitri?
Frequently the seat is expressly determined by the parties:

â€Ãrbitration in Londonâ€™; such a choice is usually far
from fortuitous, but made for good and well-understood
reasons and purposes. (30) The definition is no less clear if the
parties merely refer to arbitration by a particular trade
association. The point is a little more difficult if the parties
refrain from mentioning any localising element and adopt,
for example, the arbitration clause recommended by the
International Chamber of Commerce: â€Ãll disputes arising
in connection with the present contract shall be finally
settled under the Rules of Conciliation and Arbitration of the
ICC by one or more arbitrators appointed in accordance with
the rules.â€™ In such a case the seat is determined only if
and when the arbitrator or the umpire is appointed: The
parties choose such seat as may be the residence of the
arbitrator or umpire to be appointed, (31) for the implied
intention is to this effect. The arbitrator's nationality is
unlikely to be material.
It may happen that, for instance, a Stockholm arbitrator,

when called upon to arbitrate between parties in Paris and
Hamburg respectively, decides to hold the arbitration in
Zurich. Since the choice or appointment of an arbitrator in
Stockholm page "247"makes Sweden the seat of the tribunal,
either party may object to a change to Switzerland, but in the
absence of objection the original seat would become varied
to a Swiss seat.
The existence of a seat does not mean that all hearings will
necessarily have to be held in the country of such seat. For
the convenience of arbitrators or parties or for other reasons
hearings may be held in different places. Such a practice will
not ordinarily involve a change of the seat and, therefore, of
the lex fori.
Where there is any doubt, an arbitrator or umpire should, in

accordance with sound practice, formally fix the seat once
and for all.
It is thus clear that by their direct or indirect, express or

implied choice of the seat the parties at the same time choose
the lex arbitri. In this sense the choice of the lex fori is, in
the last resort, determined by the autonomy of the parties
rather than by law. There is nothing unusual in this. If the
parties agree upon the jurisdiction of the courts in a
particular country or if the plaintiff has the choice between
two jurisdictions and brings his action in one country rather
than another the position is similar; ultimately the lex fori is
derived from the intention of the parties or one of them. Just
as the submission to the sovereign of the forum results in the
application of his lex, so the determination of the arbitrator's
seat establishes the identity of the lex arbitri.
The law of the arbitration tribunal's seat initially governs the

whole of the tribunal's life and work. In particular, it governs
the validity of the submission, the creation and composition
of the tribunal, the rules of the conflict of laws to be
followed by it, its procedure, the making and publication of
its award. This does not mean that the lex arbitri will
invariably be applied to all these matters as well as to others
that may fall to be considered. On the contrary, most legal
systems, when called upon to function as lex fori of
arbitrations, allow much room for the application of the rules
of other legal systems. The scope of such reference,
however, is in principle determined by the lex arbitri from
which any enquiry must start and to which it will revert at
many points. Once more it should be emphasised that it is
impossible to proceed from or aim at generalisations: each
legal system has its special features, and, therefore,
variations in the control of the lex arbitri are inevitable. At
no point it is possible or, as will be suggested in a later
section, desirable, to leave the firm ground of a specific legal
system and to have resort to some â€˜droit anationalâ€™ or
some â€˜loi d'autonomieâ€™.
The reasons which require the adoption of these views, and

the implications of opposing theories, can most usefully be
tested by glancing at some of their respective consequences
in two spheres of application. (32) page "248"
1.Â As regards the procedure to be observed by arbitrators,

the statutory-provisions and the judicial practice of the
principal countries display a noteworthy tendency to allow
the parties or the arbitrators to define the rules of procedure
governing the arbitration. A problem of formulation which
arises in this connection should not be overrated: There are
those who render the procedure subject to the lex arbitri
except in so far as this allows the parties or arbitrators to
control it. According to others, parties and arbitrators enjoy
freedom of regulation except in so far as the lex arbitri
intervenes. The former method is followed by Art. 1009 of

the French Code de ProcÃ©dure Civile, according to which
â€˜les parties et les arbitres suivront, dans la procÃ©dure,
les dÃ©lais et les formes Ã©tablis pour les tribunaux, si les
parties n'en sont autrement convenuesâ€™. The Geneva
Protocol of 1923 prefers the latter method: (33) â€˜The arbitral
procedure ... shall be governed by the will of the parties and
by the law of the country in whose territory the arbitration
takes place.â€™ The Geneva Convention of 1961 which in
this respect as in so many others is wholly inappropriately
formulated cannot mean anything different when it provides
(34)
that the parties have â€˜la facultÃ© ... de fixer les rÃ¨gles
de procÃ©dure Ã suivre par les arbitresâ€™; is it
conceivable that in the face of the prohibition contained in s.
1035 of the German Code of Civil Procedure the parties
should be at liberty to confer upon arbitrators sitting in
Germany the right to examine parties and witnesses on oath?
(35)
However this may be, the existence and the measure of the
freedom of regulating the arbitral procedure is determined by
the lex arbitri. It is, therefore, both more accurate and more
convenient to take it as the starting point. If the arbitration
takes place, for instance, in Germany, one turns to German
law as the lex arbitri and, more particularly, to the Code of
Civil Procedure and finds that, subject to certain exceptions,
the parties, alternatively the arbitrators, regulate the
procedure at their discretion. (36) Or, to take another example,
(37)
if a German and a Swiss agree upon arbitration at Geneva
subject to German law of procedure, the primary question (38)
is whether and to what extent Swiss law permits a reference
to German procedural rules; if, in principle, the answer is in
the affirmative, then, and then only, the further question (39)
may arise whether German law allows a German arbitration
to be held outside Germany.
Where the lex arbitri allows the parties to regulate the

procedure, they can employ several methods. They can
establish their own rules. Or they adopt the rules sponsored
by a trade association or an institution. Or they may refer to
the procedure prevailing page "249"in a particular country;
an example of this last-mentioned case is supplied by a
recent French decision relating to an arbitration â€˜Ã Paris
suivant la juridiction anglaise seule admiseâ€™. (40) In all
such cases the procedural rules adopted by the parties
become part of the lex arbitri, so that this will be called upon
to answer any residual question of construction that may
arise. For this reason the effect of adopting a foreign
country's procedure may well be very limited: an arbitration
in Paris in accordance with English law may very well
exclude a right of appeal existing under French, but denied
by English law, yet it clearly cannot be intended to follow in
every respect the Arbitration Act 1950; in so far, for
instance, as this makes arbitrators subject to the supervision

by English courts, it could not operate in France, nor would
it be intended by the parties to do so.
It should, however, be made clear that the fact of the

contract being subject to a defined legal system as its proper
law does not mean that the procedure applicable in the event
of an arbitration is necessarily subject to the same law. (41) A
question of construction, to be decided in each case by the
lex arbitri, arises. Perhaps it is permitted to venture the
general suggestion that in the absence of very special
circumstances the usual choice of law clause (such as the
clause â€˜this contract, its validity, effect and interpretation
shall be subject to English lawâ€™) should be held to extend
only to the proper law of the contract, but not to comprise
procedure. Certainly, the choice of an arbitration forum
implies a choice of law, (42) but it does not follow that the
choice of law implies a choice of procedure. Two different
things are involved and the thesis (43) â€˜que l'arbitrage ne
saurait se dÃ©ployer de faÃ§on cohÃ©rente dans les
relations internationales sans Ãªtre soumis Ã la mÃªme loi
dans ses diffÃ©rents actes et stades successifsâ€™ is
entirely unproven and proclaims a policy of reform and
unification which only a legislator can adopt, the wisdom of
which is open to argument and which at present is illusory.
Finally, in procedural matters the control of the lex arbitri is

compulsory (though it may itself allow a certain freedom of
choice to the parties) and does not merely arise from a
rebuttable presumption. The contrary was asserted in a
thoughtful article by Mezger: (44)
We therefore think that the parties should be

free to choose the law governing the arbitration
procedure in the same way as, in international
contract law, they are at liberty to choose the
proper law of the contract. We admit, however,
and even emphasise, that there is a strong
presumption that the choice of the place of
arbitration by the parties or by a third party
named in the arbitration agreement ... or even by
the arbitrator, implies subjection to the local
procedural law of the place selected.
Why only a â€˜strong presumptionâ€™? Where is its legal

basis? What is meant by the suggestion that the parties
â€˜shouldâ€™ be free to choose the procedure? The truth of
the page "250"matter is that in law the lex arbitri governs the
procedure and that if largely, though by no means
universally or uniformly, the parties may choose other rules
of procedure, the existence and the measure of the choice is
determined by the lex arbitri only.
What, with far too little reference to a specific country, has

been suggested here as the appropriate method of solving the
procedural problem is probably in accordance with the law
and practice of most countries and almost certainly express
the English approach. English law on the matter is not
illuminated by judicial authority. It can however, be
submitted with confidence that, on the one hand, an
arbitration having its seat in England is always and
necessarily governed by English rules of procedure,
including the Arbitration Act 1950; that, on the other hand,
the procedure of an arbitration in another country will be
held by an English court to be subject to the lex arbitri as
defined above; and that the Arbitration Act 1950 will not
govern an arbitration outside England even if it should have
been expressly adopted in the contract of the parties, for not
only is the statute territorial in scope and therefore lacking
the intent to apply extraterritorially, but its provisions with
their frequent references to the English High Court are also
likely to be repugnant to the foreign law.
2.Â Just as the judge has to apply the private international

law of the forum, so the arbitrator has to apply the private
international law of the arbitration tribunal's seat, the lex
arbitri. (45) , (46) Any other solution would involve the
conclusion that it is open to the arbitrator to disregard the
law. Once it is accepted that he must follow a system of the
conflict of laws, it becomes obvious that he has no
alternative but to adopt that of the lex arbitri and that, if he
did not do so, his award would suffer from an error of law
which may endanger its validity and enforceability. Suppose
a contract between an English and an Italian firm does not
contain a choice of law clause, but provides for arbitration
under the auspices of the International Chamber of
Commerce which appoints a German arbitrator. He has to
find the proper law of the contract, because the buyer's right
of rescission, so it is assumed, exists by English law, but is
lost under Italian law. To ascertain the proper law the
arbitrator plainly cannot proceed otherwise than by
application of German conflict rules. No other system can
help. And it is not difficult to think of peculiar effects of
German private international law which have no counterpart
in other legal systems. (47) Or suppose that in the course of an
arbitration the question arises whether a contract is valid in
point of form, whether a tort has been page "251"committed,
whether a corporation is dissolved, whether title to certain
property the subject matter of a contract of sale has passed.
In such a case it may have to be decided whether the rule
locus regil actum applies in its compulsory or its optional
version; whether a tort is subject to the lex loci delicti or the
law of the partiesâ€™ common social environment or some
similar test; whether a corporation and its status is subject to
the law of the â€˜siÃ¨geâ€™ or to the law of incorporation;
whether the passing of movable property is governed by the
lex situs or the proper law of the contract of sale. There is no
other system than the lex arbitri that could provide an

answer to such and similar questions, many of which could
be formulated. If, as is almost generally admitted, the
arbitrator is bound to observe the ordre public of the lex
arbitri, it would be both illogical and unrealistic to suggest
that he is entitled to disregard other rules of that legal
system's private international law.
Perhaps the strongest support for the inevitability of the

above view is provided by the alternative theories which
have been put forward.
Thus, the suggestion has been made that the conflict of rules
of the legal system which is the proper law of the contract
should be applicable to all questions that arise in the course
of an arbitration. (48) This would seem to mean that if
arbitrators sitting at Zurich to decide a dispute between a
French and an Italian firm which arises from a contract
governed by English law would have to apply English
conflict rules: the status of a corporation, for instance, would
be governed by the law of incorporation, while, so we
assume, Swiss, French and Italian law would apply the law
of the siÃ¨ge. Why this should be so or should be preferable
to the application of Swiss conflict rules is difficult to
understand. The analogy drawn from the effect of a
contractual submission to the jurisdiction of a particular
court (49) is false: although in such a case the choice of the
forum involves the choice of the conflict rules of the forum,
the counterpart of the forum is the seat of the arbitration
tribunal, not the proper law of the contract.
The alleged necessity for submitting arbitration to a single

legal system, (50) is a myth, because the suggested method
fails to produce such a result. Moreover, the partiesâ€™
reference to the proper law is, and is intended to be, a
reference to substantive law; it does not comprise the
conflict rules of the proper law, with the well-known result,
for instance, that renvoi rules do not apply. (51) So the
autonomy of the parties cannot be invoked to justify the
application of the proper law's conflict rules. The discussion,
it appears, is bedevilled by the illusion that the questions of
private international law arising in the course of an
arbitration necessarily and exclusively relate to the contract
and that, therefore, all is achieved by pointing to the
autonomy of the parties and their page "252"power to
determine the proper law. It is, however, a mistake to assume
that no question outside the field of contracts is likely to be
considered by arbitrators. Once this is appreciated, there will
be no reason why the conflict rules of the proper law should
be preferred to those of the lex arbitri. Even within the
limited field of the conflict of laws relating to contracts, the
first task of identifying the proper law cannot be discharged
except by the conflict rules of the lex arbitri. The conflict
rules of the proper law cannot afford guidance so long as this
has not been ascertained, if arbitrators sitting in Zurich have

to ascertain the proper law of the contract between a French
and Italian firm, they can only do this by applying Swiss
conflict rules.
Another view which has recently been suggested (though to

a large extent it seems to have been anticipated by Professor
Martin Wolff (52) ), is equally unacceptable. If one takes
Monsieur Fouchard as a guide, (53) he starts by explaining
that there are two categories of questions which he submits
to â€˜la loi nationale compÃ©tenteâ€™ â€“ curiously
enough without clarifying its identity; these are matters
affecting â€˜la politique Ã©conomiqueâ€™ as well as
questions of capacity, prescription, rate of interest and other
undefined matters belonging to â€˜un systÃ¨me juridique
national complÃ¨tement Ã©laborÃ©.â€™ (54) In regard to
the rest, equally undefined though it may be, the arbitrator
has â€˜entiÃ¨re libertÃ© de choisir la rÃ¨gle de conflit qu'il
estime la plus appropriÃ©e Ã l'espÃ¨ce ou aux
nÃ©cessitÃ©s du commerce internationalâ€™. Professor
Goldman goes even further. (55) He advocates (56) â€˜un droit
international privÃ© de l'arbitrage international,
spÃ©cifique Ã cette institution et indÃ©pendant des droits
nationauxâ€™. The learned author discusses some of the
problems which fall to be considered, such as classification,
fraude Ã la loi and so forth, but the length to which he is
prepared to go is most impressively demonstrated by what he
says about ordre public: (57)
DÃ¨s lors, en effet, que l'arbitre international

n'est pas juridiquement liÃ© Ã un Etat
dÃ©terminÃ© â€“ qui'il n'existe pas pour lui,
nous l'avons dit, de â€˜forâ€™, autre que
gÃ©ographique â€“ il semble qu'il n'ait Ã tenir
compte ni de l'ordre public de l'Etat oÃ¹ il
siÃ¨ge, ni de tel autre Etat. Seul se poserait pour
lui le problÃ¨me d'un â€õrdre public
rÃ©ellement internationalâ€™; transposÃ©e
dans l'arbitrage international, l'exception d'ordre
public n'aurait jamais pour effet d'exclure une
loi Ã©trangÃ¨re parce que contraire aux
principes fondamentaux d'une inexistante loi du
for, mais pourrait en revanche faire obstacle Ã
l'application de toute loi Ã©tatique â€“ y
compris la loi du pays oÃ¹ l'arbitre siÃ¨ge â€“
parce qu'elle serait contraire Ã des principes
fondamentaux universellement admis par la
communautÃ© des nations.
Such theories have no basis in the existing law. A given legal

system may allow arbitrators freedom from law and thus
relieve them also of the duty to apply conflict rules: a French
amiable compositeur sitting in France and called upon to
decide a dispute between an English and Italian firm arising
under a French contract may, under page "253"French law,

be entitled to disregard private international law. It is the law
that confers such a right. Where the law fails to grant it, no
arbitrator can lawfully arrogate it to himself. (58)
Once again, these submissions are likely to conform to

English law, though no judicial decision directly supports
them. (59) In England, as will appear below, arbitrators are to
a large extent subject to the control of the courts in so far as
the application of the law is concerned. English rules of the
conflict of laws are part of English law and therefore their
application is subject to judicial control to the same extent as
English municipal law.
VI
This, then leads to the question whether there are any

circumstances in which an arbitrator is permitted to decide
according to his own standards of fairness rather than
according to law. Is this a question of procedure governed by
the lex arbitri or a question relating to the interpretation and
effect of the arbitration clause and therefore governed by the
proper law of the contract? A contract subject to English law
may direct arbitration in France â€ãccording to principles of
equity and fairnessâ€™. Such a clause may be void under
English law. Would it nevertheless be effective in France on
the ground that a procedural question is involved?
Once again, the answer can only be given from the point of
view of a specific legal system. Not all legal systems may
arrive at the same conclusion. In principle, however, it would
seem that the point is procedural in character. The reason is
not the purely superficial one that in many countries the
matter is dealt with in the Code of Civil Procedure and that
even in England it arises under the Arbitration Act, 1950,
which may be said to be a piece of procedural legislation. It
is more persuasive that what the clause aims at regulating is
the manner in which arbitrators are to approach the case and
its decision, or the kind of attitude they should adopt towards
the conduct of the case. This is procedure rather than
substance. A further argument is to be derived from the fact
that, if the problem were one of substance, the French
arbitrator, in the above example, would have to hold the
clause invalid, although in England it would be treated as
procedural and therefore subject to the law of France where,
ex hypothesi, it is valid. Conversely, if the arbitrator was
sitting in England and the contract was subject to French
law, an English court would almost certainly apply the lex
fori, It follows that a procedural classification is likely to
produce greater similarity of results.
VII
A broad survey of the principal legal systems seems to

indicate that the arbitrator's page "254"subjection to or
freedom from the law has mainly been solved in two (60)
different ways. Some countries allow the arbitrator freedom
from the law if the parties expressly so provide. Others
subject the arbitrator to law even in the face of an express
clause purporting to exempt him.
The first group is represented by France where Art. 1019 of

the Code de ProcÃ©dure Civile provides (*) This provision
which has found its way into the law of many other countries
(61)
means in the first place that in the normal case arbitrators
are strictly bound to apply the law, both jus cogens and jus
dispositivum. (62) Where, on the other hand, there is an
express clause d'amiable composition and where, therefore,
arbitrators are entitled (though not bound) to have resort to
â€˜lâ€™Ã©quitÃ©â€™, their power is not unlimited, for
â€˜les arbitres ne pourront pas passer outre aux rÃ¨gles
impÃ©ratives du droit et qui s'imposent en toutes
circonstancesâ€™. (63) To put it differently, they can only
â€˜passer outre aux rÃ¨gles de droit supplÃ©tives. (64) The
distinction is not altogether clear; in particular, there does
not seem to be any judicial practice establishing whether
rules of private international law are â€˜rÃ¨gles
impÃ©rativesâ€™ or â€˜rÃ¨gles de droit supplÃ©tivesâ€™.
Germany probably belongs to the same group. In the first

place, it is clear that an agreement or a submission
authorising arbitrators to disregard jus cogens would be void
and an award would be liable to be set aside. (65) Secondly, if
arbitrators decide according to their own standards of
fairness without being authorised to do so, the award is liable
to be set aside. (66) On the other hand, it seems to be generally
accepted that, within the realm of jus dispositivum,
arbitrators may be expressly authorised to decide according
to their own standards of fairness rather than according to
law. (67) Only the question whether and in what
circumstances such freedom may be implied, is open to
much doubt. There are conflicting decisions rendered by
Courts of Appeal (68) and the only decision of the Supreme
Court (69) uses very cautious language: the plaintiff and the
page "255"defendant had been parties to an arbitration in
Berlin. The award was in the defendant's favour. The
plaintiff then brought an action for damages in the courts on
the ground that allegedly the defendant had obtained the
award by fraud. In order to succeed the plaintiff had to prove
that, had there been no fraud, the award would have been in
his favour. He attempted to establish this by submitting that
the arbitrators had been entitled and bound to decide
according to German law, that this meant â€˜equityâ€™ and
that on this basis, irrespective of the legal position, he would
necessarily have succeeded. The Supreme Court dealt with
this argument in so guarded a fashion as to leave it entirely

open whether arbitrators may decide otherwise than
according to law:
... it may be true that arbitrators may to a certain

extent be dispensed from the application of the
law objectively existing according to statute and
that in this connection room may more or less be
allowed to free decisions. However, that the
parties reached agreement on this point and that
the decision of their dispute by the arbitrators
was to be reached according to German law and
with special regard to commercial conceptions
and equitable principles, does not follow from
the arbitration agreement.
The Supreme Court did not refer to the fact that the point
touched upon by it had given rise to a celebrated clash of
opinion among German scholars, which continues to this
day. In 1918 a paper by Professor Oertmann proclaimed the
subjection of arbitrators to the law. (70) He had much
academic support, though he was opposed by many
practitioners. In particular, he had the support of Professor
Arthur Nussbaum whose views are entitled to great weight,
because, on the one hand, he was one of the outstanding
advocates of arbitration as an institution and, on the other
hand, on the very point in issue he had in a previous
publication taken the opposite attitude; he justified his final
condemnation of arbitral discretion as follows: (71)
The arbitration clause is to be treated primarily

as a waiver of the guarantees inherent in judicial
proceedings, and to put a liberal interpretation
upon the waiver so that the parties also dispense
with the protection of substantive law would,
particularly in periods of grave changes in moral
standards, fail to conform either to the
presumptive intention of the parties or to the
general interests of the administration of justice.
Today most authors seem to think that an implied exemption

from the duty to decide according to law should be possible.
(72)
Some of them even incline to the view that the mere
appointment of laymen as arbitrators implies such
exemption, but this would surely amount to a distortion of
the partiesâ€™ intentions. The absence of judicial material
renders a pragmatic approach difficult. As a matter of legal
technique, the utmost caution is indicated before in a given
case the parties are actually held to have agreed upon such
freedom: freedom from law presupposes express exemption.
That page "256"freedom is excluded in those numerous
cases in which parties submit their contract to a specific
proper law deserves emphasis, for it is a circumstance to
which, surprisingly, learned commentators hardly ever
allude, but which clearly precludes arbitrators from deciding

otherwise than in accordance with the chosen legal system.
In England, on the other hand, the law may be said to be well

established. While the clause â€˜This arrangement is not
entered into ... as a legal agreementâ€™ precludes the
document from being a binding contract, (73) the clause
â€˜The Arbitrators ... are relieved from all judicial
formalities and may abstain from following the strict rules of
law. They shall settle any dispute ... according to an
equitable rather than a strictly legal interpretation of its
termsâ€™ (74) is invalid. Accordingly, it does not affect the
duty of arbitrators to decide in conformity with the law, (75)
or the right of the courts to supervise (76) the correct
application of the law in all cases in which it is not a specific
legal question that is referred to arbitration (77) and in which
the point of law is a substantial one. (78) The reason for the
invalidity lies in the fact that in England the courts have a
supervisory jurisdiction over questions of law arising in the
course of an arbitration, that this jurisdiction cannot under
any circumstances be ousted or waived and that,
consequently, arbitrators have to apply the laws of England.
As Megaw J said in the leading case: (79)
The essence of the matter, as I see it, is that so

long as the courts of this country have a
statutory supervisory jurisdiction over
arbitrators in England, it must remain a firm
principle of the law governing arbitrations that
that which is in English law a question of law,
shall remain in all respects and for all purposes a
question of law; and it cannot be turned into
something other than a question of law by any
agreement of the parties in their agreement to
arbitrate or otherwise.
It is not without interest to observe that in Scotland where

Continental influence is in many respects so clearly
discernible the law seems to be very similar to England. An
important, though little-known, decision employs such clear
and forceful language that it merits the attention of students
everywhere: (80)
When it is said that an arbiter in Scotland is the

final judge both of fact and law, it is not implied
that he is entitled either to make the facts as he
would like them to be, or to make the page
"257"law what he thinks it ought to be. Like any
other judge, he must take the facts as they are
presented to him, and the law as it is. Otherwise
he would act, not as the partiesâ€™ judge, but
as their oracle; his function would be not
judicial but arbitrary; and his award would be
given, not according to the principles of justice,
but according to the caprice of personal

preferences. Like other judges of more highly
specialised qualifications and experience, he
may err both in interpreting the evidence before
him and in applying the law to the facts which
he thinks are proved; and, he being the final
judge on the subject-matter of the submission,
any such errors and misunderstandings into
which he may innocently fall cannot be
corrected. But that is all that is meant by saying
that he is the final judge of fact and law. If it
could be proved that, in arriving at his award, an
arbiter had invented the facts to suit some view
of his own, or had fashioned the law to suit his
own ideas, then, however, innocent in itself
might be the eccentricity which had seduced
him into such a travesty of judicial conduct, his
behaviour would naturally imply that justice had
not been done; he would be guilty of that which
Lord Watson in Adams v. Great North of
Scotland Railway Co described as misconduct;
and his award would be reduced.
The distinctions between the two systems which have been

discussed give rise to the final question whether, as a matter
of legal policy, the expressly or impliedly permitted (81)
freedom of the arbitrator to disregard the law should be
upheld. It is an old problem to the solution of which a novel
contribution probably cannot be made. Nevertheless, it is
suggested that the answer should be an emphatic No.
Those scholars who take the opposite view tend to found it

upon considerations such as these: (82)
par l'arbitrage, les parties Ã un litige

commercial international cherchent Ã Ã©viter
les embÃ»ches de juridictions et de lois, mais
aussi Ã obtenir un rÃ¨glement conforme Ã
leurs aspirations communes et adaptÃ© aux
besoins du commerce international
Even if these could be proved to be the objects of the parties

â€“ and there is no evidence of any kind except that after
almost thirty-five years of experience as a practising lawyer
the present writer is bound to reject such assertions as wholly
unfounded â€“ and even if they were to merit protection,
why is it that they cannot be achieved by application of the
law? â€˜What is wrong with our system of law, with our
legal education and our entire life-work that [arbitrators] can
carry out their work not only without law, but can indeed
regard themselves as better off without the assistance which
the law might afford them; and how is it possible that
eminent lawyers can support them in this belief?â€™ (83)
The only argument that can be made in favour of the

arbitrator's freedom from legal rules is a somewhat
paradoxical one, for in essence it rests on the inability of
arbitrators to apply the law, and it thus leads to the
condemnation of arbitration as an instrument of international
commerce. It can best be explained by reference to a recent
arbitration of a type which is by no means unusual. Under a
contract governed by Dutch law and providing for arbitration
in Geneva, the Swedish buyer, represented by Swedish
lawyers, appointed a member of the Dutch Bar as arbitrator,
while the Dutch seller page "258"instructed New Orleans
lawyers and appointed as arbitrator a member of the Boston
Bar trained in the common law of the Anglo-American
world. An international organisation appointed a Scottish
lawyer as umpire. No member of the tribunal, no
representative of the parties had any knowledge of Geneva
procedure. Two members of the tribunal and the
representatives of one of the parties were without knowledge
of Dutch law. One member of the tribunal and the seller's
lawyers were without knowledge of the French language. Is
there in such circumstances any point in advocating
observance of Dutch law and Generva procedure and in
denying to the tribunal the right to decide ex aequo et bono?
An answer in the negative would override the terms of the
contract providing for the application of Dutch law and must,
therefore, be rejected. An answer in the affirmative would
expose the tribunal to the danger of misapplying the law. To
support the arbitrator's freedom by reference to the
threatened disregard of the terms of the contract or the law is
an unhelpful argument. Yet it does confirm the impression
that arbitration is in many cases an unsatisfactory process.
This is a point, however, which is outside the scope of the
present observations. It must suffice to remind the reader of
Arthur Nussbaum who, for good reason, spoke of the
â€˜congenital infirmitiesâ€™ which characterise commercial
arbitration and are â€˜particularly perceptible in the
international areaâ€™. (84)
It is submitted that the law is always to be preferred to the

arbitrator's discretion. There may be very exceptional cases
where the law produces results that are unfair; if so, there is
no reason why those who have chosen arbitration should
enjoy a privilege which others who are subject to the
jurisdiction of the courts are not allowed. But how do
arbitrators know that the law renders the result unfair? There
may be very good and important reasons which become
apparent only to the trained mind after exhaustive
investigation and which in fact justify the alleged unfairness
of the result. Moreover, a result, supported by the law, albeit
an unfair law, is much more satisfactory than a result
supported merely by the discretion of the person who
happens to be an arbitrator but may have no insight into the
problem at all. How do we, how do arbitrators, know that
their decision, based on their standards of fairness, is not
much unfairer than the law? Absolute perfection not being

attainable, it is infinitely more dangerous to allow discretion
to arbitrators than to compel parties to accept the law, its
relative certainty, its authority and, above all, its non-
discriminatory character. The law is rarely an instrument of
oppression. Arbitration, forced upon the weak by the strong
and conducted according to home-made standards of
fairness, is liable to lead to grave abuse. The point was most
persuasively put by Bankes LJ sitting in â€˜that historic
Court of Appealâ€™ (85) which included Scrutton and Atkin
LJJ: (86)
Among commercial men, what are commonly

called commercial arbitrations are undoubtedly
and deservedly popular. That they will continue
their present popularity I entertain no doubt, so
long as the law retains sufficient hold over them
to prevent and redress any injustice on the part
of the arbitrator, and to secure that the law that
is administered by an arbitrator is in substance
the law of the land and not some homemade law
of the particular arbitrator or the particular
association. To release real and effective control
over commercial page "259"arbitrations is to
allow the arbitrator or Arbitration Tribunal to be
a law unto himself, or themselves, to give him
or them a free hand to decide according to law
or not according to law as he or they think fit; in
other words to be outside the law.
It is, perhaps, not without use to raise some specific

questions. Suppose a legal system allows the buyer six years,
as the English law does, to pursue his claim against the seller
for breach of warranty. Suppose another system, such as the
German, (87) allows the buyer only six months. Which is
fairer? Should arbitrators be allowed to pronounce upon such
a question? Suppose in the first case the arbitrator regards it
as fairer to disallow claims after, say, three years. Is there
any objective standard to support such a conclusion? Will
the buyer consider it fairer? Suppose the arbitrator favours
twelve years. What will the seller say? Suppose under the
terms of the contract the seller has in advance waived any
period of limitation, but under both English (88) and German
(89)
law such waiver is void. How could any arbitrator be
allowed to override legal policy and hold the parties to their
(void) bargain?
Such and similar questions, it is hoped, will give food for

thought to those lawyers who, far too readily, participate in
the movement for the â€˜liberationâ€™ of arbitrators from
the law. Perhaps they will come to acknowledge that the
movement is dangerous and far from progressive. It is no
answer that, if the parties make an agreement to eliminate
the operation of the law, there is no need for protecting them
against their own folly. The law never takes so shortsighted a

view: in numerous cases it invalidates a contract, because it
does not think it proper that the parties should be able to do
something unwise, though not necessarily illegal. This is
particularly so where there is a danger of abuse in cases in
which one party is more powerful than the other. Nor is it an
answer to draw attention to the lack of judicial control over
arbitrators, which characterises the law of some countries.
We are concerned with arbitral attitudes. The problem of
control is a different and very difficult one, which has
nowhere been satisfactorily solved, some countries
exercising far too little, others, like England, exercising
probably too close a control over the legal aspects of
arbitration. It may well be that the problem of the arbitrator's
discretion is not the only one requiring further consideration.
But it is the only one with which the present discussion is
concerned and it is not solved by pointing to other, perhaps
equally pressing problems.
Not long ago a New York attorney wrote as follows about an

arbitration which was then proceeding in New York under
the auspices of the American Arbitration Association:
... decision or award or lack of award by the

chosen panel of arbitrators is intended to be a
â€˜Solomon-like rulingâ€™ which would
eliminate the necessity of consideration of
points of law. Further ... the writer has always
felt that in arbitration the best thing that can be
expected is exactly what the word
â€ãrbitrationâ€™ means, namely, the
arbitrators take the position of both sides and
come to an in-between figure which as often as
not is a fairly reasonable figure, since most of
the arbitrators are old-time business men who
know the vicissitudes and problems of business
operations. page "260"
If such were the true view of arbitration, it would go even

beyond the idea underlying the institution of an amiable
compositeur in the French sense, for he can function only as
the result of an express appointment. In truth, the attitude
summarised by the New York lawyer is liable, and almost
bound, to produce a dangerous lack of certainty and
predictability, arbitrariness and injustice, grievance and
dissatisfaction. (90) Lawyers have the duty to combat it.
Under the leadership of Martin Domke the American
Arbitration Association will, it is hoped, disown and
eradicate it.
1Â
See, in particular, F. Schulz, â€˜Bracton on
Kingshipâ€™, English Historical Review 55 (1945) 136.
2Â
Mainly in Germany under the impact of the abuse of
legislation by National-Socialism. But even in Germany it
has never been suggested or held that a Judge is entitled to
disregard legislation where it does not violate natural law or
the Constitution.
3Â
For a survey in the English language see, for instance, the
particularly learned and valuable article by E. J. Cohn,
Commercial Arbitration and the Rules of Law, IV (1941)
University of Toronto L.J. 1. See also Cohn, â€˜The
Unification of the Law of Commercial Arbitrationâ€™,
Transactions of the Grotius Society 24 (1939) 1.
4Â
See, in particular, RenÃ© David, â€˜Rapport sur
l'Arbitrage Conventionnel en Droit PrivÃ©â€™, Etude de
Droit ComparÃ© (1932).
5Â
The contributions to Schmitthoff (ed), The Sources of the
Law of International Trade (1964), are remarkably eclectic
in their references to earlier work. Philippe Fouchard, Lâ€™
Arbitrage Commercial International (1965) only in rare
cases considers work that appeared before 1939.
6Â
This expression is used by Domke in Sanders,
International Commercial Arbitration I, 205, where he says
that American arbitrators generally â€˜decide on equity
principles and in justiceâ€™. It would be a frightening state
of affairs if this were true. See below p. 174, sqq. The
expression is wrong, because in the Anglo-American legal
system â€˜equityâ€™ denotes a specific branch of the law.
7Â
Professor Tallon, in Schmitthoff (ed), above note 5, at p.
157.
8Â
Fouchard, above note 5, pp. 401 sqq.
9Â
â€˜Les Conflits de Lois dans l'Arbitrage International de
Droit PrivÃ©â€™, Recueil des Cours 109 (1963 II) 351, at
p. 380.
10 Â
Rev. Crit. 1960, 1, at p. 14.
11 Â
At p. 15.
12 Â
At pp. 17, 18.
13 Â
At p. 17. It should be pointed out in the present
connection that the partiesâ€™ â€˜impressionâ€™ or their
desire to â€˜sâ€™Ã©lever au-dessus du tout ordre
Ã©tatique dÃ©terminÃ© et faire trancher leurs litiges
Ã©ventuels dans une procÃ©dure vraiment
internationaleâ€™ (Klein, Annuaire Suisse de Droit
International 1963, 41, at p. 52) is surely in law irrelevant;
there are many things that parties desire but that the
legislator does not think fit to grant them and that may in fact
be undesirable. Fragistas and Klein l.c. also disclose a most
disturbing feature of arbitration under the auspices of the
International Chamber of Commerce. In most of these cases,
so they state, the parties have â€˜l'impression de soumettre
leurs litiges Ã un arbitrage qui se trouve au-dessus de tout
ordre Ã©tatiqueâ€™. If this is so it is surely the duty of the
International Chamber of Commerce to do all it can to
eliminate any illusions.

14 Â
On these tribunals see, in particular, Lipstein,
Transactions of the Grotius Society, 27 (1942) 142; 29
(1944) 51 and the literature referred to by him, especially
Gutzwiller, Internationales Jahrbuch fÃ¼r
Schiedsgerichtswesen III (1931) 128 and, more recently,
Gentinetta, â€˜Was ist Lex Fori Privater Internationale
Schiedsgerichte?â€™ in Zeitschrift fÃ¼r Schweizerisches
Recht 84 (1965) 139, 142, sqq.
15 Â
This suggestion was put forward by Mann, â€˜The Law
Governing State Contractsâ€™, in British Year Book of
International Law 1944, 11; 1959, 34, also (in German) in
Jus et Lex (Festschrift fÃ¼r Max Gutzwiller, Basel 1959), p.
465. It has given rise to a substantial literature and also,
unfortunately, to much confusion. This is an additional
reason for disregarding it in the present context. It should
perhaps be mentioned specifically that nothing suggested in
those two contributions supports what Fragistas has put
forward in regard to â€ãrbitrage supranationalâ€™ (above
note 11), or justifies Klein (above note 13) at pp. 53, 54 in
treating the views of Professor Fragistas about arbitration as
an aspect of the present writer's views on State contracts. It
should be noted that in Orion Cia. Espanola de Seguros v.
Belfort Maats., (1962) 2 Ll.L.R. 257, at p. 264 Megaw J also
thought it possible that where a sovereign State was a party
to a contract the legal relations â€˜should be decided by the
arbitral tribunal. .. perhaps on the basis of principles of
public international lawâ€™.
16 Â
These include procedural problems on which see some
of the material collected by Suratgar, The Columbia Journal
of International Law, 3 (1965) 152.
17 Â
In this sense, in particular, Lorenz, Archiv fÃ¼r die
civilistische Praxis 1957 (1958/59) 265, at p. 269; Gentinetta
(above note 14) p. 172, Niederer, EinfÃ¼hrung in die
Allgemeinen Lehren des Internationalen Privatrechts (1954)
p. 110 wrongly treats private arbitration tribunals as
international tribunals.
18 Â
Art. I (1) (a).
19 Â
Above note 5, at p. 23.
20 Â
Pp.23â€“27.
21 Â
22 Â
For clear statements to this effect see, for instance,
Nussbaum, Deutsches Internationales Privatrecht (1932) pp.
468, 469, or Schnitzer, Handbuch des Internationalen
Privatrechts (4th ed, 1958) p. 884, also Tallon in
Schmitthoff (above note 5) pp. 159, 160 and Ionasco and
Nestor, ibid, pp. 185â€“187. This view is frequently said to
be based upon â€˜la notion du caractÃ¨re juridictionnel de
l'arbitrageâ€™: in this sense Balladore Pallieri, 51 (1935 I)
Recueil des Cours 291, at p. 340 or Klein, ConsidÃ©rations
sur l'arbitrage en Droit International PrivÃ© (1955), among
others. But it does not rest upon any such conceptualist
argument at all. It rests on highly practical considerations, as
will be shown in the text.

23 Â
Annuaire (1952) I, 469 sqq., the Draft Resolution is at p.
593; the members of the Commission are mentioned at p.
469, note 1.
24 Â
The present discussion is of a general character. For
more specific reasoning see below section V.
25 Â
This elementary and obvious fact is frequently
overlooked. It is sometimes said or assumed that autonomy
of the parties and freedom of contract exist as a result of a
law of nature and do not depend on recognition and
definition by a given legal system. This is, of course,
untenable. The differences between the various legal systems
prove the contrary. For a fundamental discussion see Flume,
Das RechtsgeschÃ¤ft (1965) pp. 14 sqq.
26 Â
Goldman, above note 9, pp. 373, 374.
27 Â
This was apparently first suggested by Professor
Balladore Pallieri (above note 22) at p. 340. In more recent
times one of the principal protagonists of this view which,
however, he qualifies in many respects, has been Klein
(above note 22) and also Fragistas (above note 10) at pp. 8
and 9. It is a wholly impracticable doctrine, because it
neglects the primary question of the law which decides
whether the contract is subject to the one or the other legal
system â€“ a question which in different countries is liable to
meet with different answers. The summary of a lecture given
by Professor Batiffol in Revue de l'Arbitrage 1957, 110 may
suggest that he belongs to this school of thought, but is too
cursory to permit firm conclusions.
28 Â
Gentinetta (above note 14), pp. 173, 175.
29 Â
Zeitschrift fÃ¼r Schweizerisches Recht 84 (1965) 361.
30 Â
The assertion to the opposite effect by Kopelmanas, 61
(1961) Col. L.R. 384, at p. 398 is wrong and unproven. The
seat determines the language of the arbitration.
31 Â
Cf. Schnitzer (above note 22) p. 882 with reference to
Swiss decisions.
32 Â
Another problem is that of the admissibility and
enforceability of arbitration agreements made in foreign
jurisdictions. It is a problem of classification to be answered
by the lex fori or rather by the lex arbitri whether this is a
procedural matter and therefore governed by the lex arbitri
or relates to substantial validity and is therefore subject to
the proper law of the contract. The former solution prevails
in Switzerland (Schnitzer, above note 22, at p. 878 with
references), Quebec (Natara Sales Ltd v. National Gypsium
Co, (1964) S.C.R. 144 or (1963) 2 Lloyds L.R. 499), and in
New York: see Note on Commercial Arbitration and the
Conflict of Laws, 56 (1956) Col. L.R. 904 and, in particular,
Meacham v. Jamestown F. & C.R.E. 211 N.Y. 346, 105 N.E.
653 (1914); although the law was altered by statute, Cardozo
J's dictum â€ãrbitration relates to remedies and the law that
governs remedies is the law of the forumâ€™ continues to
be interesting. The latter view is followed in England, France
and many other countries. The problem cannot be solved
except within the framework of a given legal system.

33 Â
Paragraph 2 (1).
34 Â
Art. IV (1) (b) (iii).
35 Â
Cf. Mezger, Rabels Z 29 (1965) 231, at pp. 275, 276;
also Goldman (above note 9) p. 434. The German Supreme
Court (rightly) held that where a dispute between a German
and a Swedish firm was decided by a Swedish arbitrator
appointed by drawing lots, the residence of the arbitrator was
lex arbitri and determined the procedure: 3 October 1956,
BGHZ 21, 365. At p. 370 the Supreme Court stated that the
proper law of the contract had no bearing upon the problem
of procedure. For the view that the law of the seat supplies
the procedure see also E. J. Cohn, Int. Comp. L. Q. 14 (1965)
132, 151 sqq.
36 Â
S. 1034 (2) of the Code of Civil Procedure.
37 Â
It was put by Professor Klein, Annuaire Suisse de Droit
International 1963, 41, at pp. 45, 46.
38 Â
It is entirely disregarded by Professor Klein.
39 Â
Professor Klein puts it into the forefront.
40 Â
5 July 1955, Rev. Crit, 1956, 79 with note by Mezger.
The court treated the clause as a waiver of the right of appeal
against the award under French law and investigated whether
an error of law appeared on the face of the award, ie, it
proceeded as if it were an English court. See, generally,
Fouchard (above note 5) pp. 299 to 350 whose review of
case law is not always convincing.
41 Â
In the same sense Cohn (above note 33) p. 150.
42 Â
Dicey, Conflict of Law (7th ed, 1958) pp. 731, 732 with
references.
43 Â
Klein (above note 22) pp. 211, 212, and passim.
44 Â
â€˜The Arbitrator and Private International Lawâ€™, in
Domke (ed), International Trade Arbitration (New York,
1958) pp. 229 sqq. 236.
45 Â
This is the traditional view which still commands wide
acceptance. See, for instance, Sauser-Hall (above note 23)
pp. 571, 572; Mezger (above note 39) p. 239; Cohn (above
note 33) pp. 161, 162. Raape, Internationales Privatrecht
(5th ed, 1961) pp. 563, 564 whose remarks on arbitration
display a singular lack of precision seems to agree with the
text in regard to arbitration tribunals forming part of an
institution. For other arbitrations he recommends that the
parties should select the conflict rules which their arbitrators
should apply! The remarkable aspect of Raape's discussion is
that he expressly states that the arbitrator legibus solutus est:
p. 561. According to the Resolutions of the Conference on
Commercial Arbitration organised by the United Nations
Economic Commission for Asia and the Far East
(International Legal Materials V (1966) 547, at p. 553)
arbitrators should â€˜in case the parties have not decided
which law is applicableâ€™ proceed â€˜in accordance with
the rules of conflicts of lawâ€™. Which rules?
46 Â
What is said in the text about the national judge is by
way of analogy. It is not intended to participate in the

discussion of â€˜la thÃ¨se juridictionelleâ€™. See above
note 22.
47 Â
A very significant example is the operation of the
doctrine of renvoi in the sphere of contracts. See below note
51.
48 Â
Balladore Pallieri (above note 22) pp. 354 sqq; Klein
(above note 22) p. 247; Fragistas (above note 10) p. 9. This
is probably also the effect of Art. VII of the Geneva
Convention of 1961, though its text is again very obscure.
Against this view Fouchard, pp. 363, 364 who also criticises
the view propounded in the text (pp. 364â€“367),
particularly on the ground of its â€˜trop grande
rigiditÃ©â€™ (p. 368), though he does not reject it
altogether, for the conflict rules of the seat â€˜peuvent
parfois Ãªtre prÃ©fÃ©rÃ©esâ€™. A detailed explanation is
missing.
49 Â
In this sense Fragistas (above note 10).
50 Â
Klein (above note 22) pp. 211, 212 and passim.
51 Â
This is generally admitted except in Germany. On the
German practice see Mann, Juristenzeitung 1962, 6, at pp.
12â€“14.
52 Â
Private International Law (2nd ed, 1950) section 88.
Although the learned author's system is much more
complicated, its net effect seems to be that arbitrators should
be both bound and entitled to make their own search for the
law with which the legal relationship in essence is most
closely connected.
53 Â
Above note 5, pp. 351, 352.
54 Â
Pp.378, 379.
55 Â
Above note 9, pp. 380 sqq.
56 Â
P. 414.
57 Â
Pp.432,433.
58 Â
Professor Goldman and M. Fouchard support their
argument by copious references to extracts from awards
rendered in unknown countries by unidentified arbitrators in
circumstances which are left obscure. This is inadmissible
and valueless evidence. It should be obvious that the legality
and propriety of such awards is not proved by their
existence. Unknown arbitrators have no power to make law.
It is only if the arbitrator is known to be a lawyer of standing
that his award may have a certain persuasive authority.
59 Â
See, however, certain dicta in the decision of Megaw J,
above note 15.
60 Â
Cohn (above note 3) pp. 3 sqq. has a third group of
countries where even in the absence of an express clause an
arbitrator is presumed to be free to decide contrary to law.
He says that Scottish, German, Austrian, Norwegian, Polish,
Danish and Japanese law proceeds on these lines and that the
common law of the United States as well as the statute law
of many States of the Union is to the same effect. It has not
been possible completely to check this statement. As
concerns Germany, it is probably, as regards Scotland it is

certainly, inaccurate. See the text.
*Â
Les arbitres et tiers arbitres dÃ©cideront d'aprÃ¨s les
rÃ¨gles du droit, Ã moins que le compromis leur donne
pouvoir de prononcer comme amiables compositeurs.
61 Â
Particularly Belgium, Holland and South American
countries.
62 Â
Robert, TraitÃ© de l'Arbitrage Civil et Commercial
(1961) No. 143.
63 Â
Ibid; in the same sense Tallon (above note 7) p. 163.
64 Â
Ibid.
65 Â
See s. 134 of the Civil Code and s. 1041, subsection 1,
paragraph 1 of the Code of Civil Procedure. For a clear
statement see Lorenz (above note 17) p. 277.
66 Â
Stein-Jonas, note III, l, c. on s. 1041; Baumbach-
Schwab, Schiedsgerichtsbarkeit (2nd ed, 1960) p. 122.
67 Â
Yet a provision that the arrangement between the parties
should constitute only a gentleman's agreement invalidates
the contract: Flume, Das RechtsgeschÃ¤ft (1965) pp. 92 sqq.,
whom Erman-Hefermehl, note 1 before s. 145 follows. The
decision of the Supreme Court of 22 January 1964,
Monatsschrift fÃ¼r Deutsches Recht 1964, 570 is almost
incomprehensible and probably wrong.
68 Â
Court of Appeal at Celle, 14 July 1907, Zeitschrift fÃ¼r
Zivilprozess 45, 220 (arbitrators are bound by law); Bavarian
Supreme Court, 20 October 1928, Juristische Wochenschrift
1929, 866 (arbitrators are normally free from law).
69 Â
19 November 1929, Juristische Wochenschrift 1930,
1862.
70 Â
Zeitschrift fÃ¼r Zivilprozess 47, 105.
71 Â
Juristische Wochenschrift 1926, 13.
72 Â
According to the better view arbitrators must decide
according to law, unless they are exempted: Rosenberg,
Lehrbuch des Zivilprozessrechts (9th ed, 1961) p. 875;
Baumbach-Schwab, above note 60. On the other hand, Stein-
Jonas, note I.2 on s. 1034 suggests that arbitrators are
ordinarily free from the law. In Switzerland it is the law in
all Cantons except Aargau, Ticino and Valais that, except in
the case of express exemption, arbitrators have to apply the
law (see Guldener in Sanders, International Arbitration I,
447); this is particularly so in Zurich and Geneva, two
centres of great significance to international arbitration.
73 Â
Rose and Frank & Co v. Crompton Bros, (1925) A.C.
445; Appleson v. Littlewood Ltd, (1939) 1 All E.R. 464.
74 Â
Orion Cia. Espanola de Seguros v. Belfort Maats.,
(1962) 2 Ll. L.R. 257. In the same sense Maritime Insurance
Co v. Assekuranc Union von 1869, 52 (1935) Ll. L.R. 16.
75 Â
This duty is most clearly established by the Court of
Appeal in David Taylor & Son Ltd v. Barnett Trading Co,
(1953) 1 W. L. R. 562, but follows also from the decision of
the House of Lords in N. V. Vulcaan v. A/s Mowinckels,
(1938) 2 All E.R. 152 where it was held that the Statute of
Limitation could be pleaded in arbitration proceedings.

76 Â
By virtue of sections 21 and 23 of the Arbitration Act,
1950, which provide for a case to be stated for the decision
of the court and for the award which on its face is erroneous
in law to be set aside.
77 Â
Where a specific question of law is referred to
arbitration an award which on its face discloses an error of
law will not be set aside: Absalom Ltd v. Great Weston etc
Village Society, (1933) A.C. 592 and the authorities there
referred to. But even in such cases the intentional, as
opposed to the inadvertent, disregard of the law may,
apparently, result in the award being set aside: Darlington
Waggon Co v. Harding, (1891), 7 T. L. R. 106.
78 Â
The powers of the court are discretionary and will not be
exercised where the point is insubstantial.
79 Â
80 Â
Mitchell-Gill v. Buchan, (1921) S.C. 390, at p. 395 per
Lord President Clyde.
81 Â
The freedom which is only impliedly permitted
constitutes an a fortiori case. But as emphasised above, this
is a field where the implication of terms should not be
possible.
82 Â
Fouchard (above note 5) p. 351.
83 Â
Cohn (above note 3) pp. 1, 2.
84 Â
56 (1942â€“1943) Harv. L. R. 219, at p. 239.
85 Â
Expression of Megaw J in the case referred to above
note 74, at p. 263.
86 Â
Czarnikow v. Roth Schmidt & Co, (1922) 2 KB 478, at
p. 484; see also Atkin L.J. (as he then was) at p. 491.
87 Â
S. 477 of the Civil Code.
88 Â
In fact, it seems that such an agreement may validly be
made: Preston & Newsom, Limitation of Actions (3rd ed,
1953) pp. 32, 33.
89 Â
S. 225 and s. 477 of the Civil Code.
90 Â
In this connection it is worth noting the strong warning
of Jean Robert against an amiable compositeur if â€˜la
bonne foi et la sincÃ©ritÃ©â€™ are not assured: above note
62, Nos. 47, 143.
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Mann Lex Facit Arbitrum

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The UNCITRAL Model Law - Lex Facit

Few aspects of legal history have had so memorable and

United Kingdom is almost the only State in the Western

It is against this background that one notices with a little

In the course of the last decade or so, however, a further

l'arbitrage supranational doit done Ãªtre un

pour Ãªtre soumis directement au droit

This, according to the learned author, in practice means the

dans ces cas les parties n'entendent pas se

It is proposed to enquire into the soundness of such theories

The latter is intended as an inquiry into principles. It does

Although, where international aspects of some kind arise, it

some countries arbitrations displaying an international

Numerous attempts have been made in recent years to define

Which is the lex fori that necessarily governs every

The question is not always put in this way. Very frequently,

It would clearly be open to any given country to adopt either

resides or of which he is a national has no comparable

Perhaps the lex fori so determined allows the law chosen by

This is also the answer to certain scholars who argue that

The same answer must also be given to those who suggest

Frequently the seat is expressly determined by the parties:

It may happen that, for instance, a Stockholm arbitrator,

Where there is any doubt, an arbitrator or umpire should, in

It is thus clear that by their direct or indirect, express or

The law of the arbitration tribunal's seat initially governs the

The reasons which require the adoption of these views, and

1.Â As regards the procedure to be observed by arbitrators,

intervenes. The former method is followed by Art. 1009 of

Where the lex arbitri allows the parties to regulate the

instance, as this makes arbitrators subject to the supervision

It should, however, be made clear that the fact of the

Finally, in procedural matters the control of the lex arbitri is

We therefore think that the parties should be

Why only a â€˜strong presumptionâ€™? Where is its legal

What, with far too little reference to a specific country, has

2.Â Just as the judge has to apply the private international

other system than the lex arbitri that could provide an

Perhaps the strongest support for the inevitability of the

The alleged necessity for submitting arbitration to a single

has not been ascertained, if arbitrators sitting in Zurich have

Another view which has recently been suggested (though to

DÃ¨s lors, en effet, que l'arbitre international

Such theories have no basis in the existing law. A given legal

under a French contract may, under page "253"French law,

Once again, these submissions are likely to conform to

This, then leads to the question whether there are any

A broad survey of the principal legal systems seems to

The first group is represented by France where Art. 1019 of

Germany probably belongs to the same group. In the first

this argument in so guarded a fashion as to leave it entirely

... it may be true that arbitrators may to a certain

The arbitration clause is to be treated primarily

Today most authors seem to think that an implied exemption

allude, but which clearly precludes arbitrators from deciding

In England, on the other hand, the law may be said to be well

The essence of the matter, as I see it, is that so

It is not without interest to observe that in Scotland where

When it is said that an arbiter in Scotland is the

but according to the caprice of personal

The distinctions between the two systems which have been

Those scholars who take the opposite view tend to found it

par l'arbitrage, les parties Ã un litige