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Collected Courses of the Hague Academy of International Law

Choice of Law in Arbitration Proceedings (Volume 375)


(12,137 words)

M. De Boer, Th.
Article Table Of Contents
Keywords: International commercial arbitration |
International arbitration | Choice of law | Lex fori | BIOGRAPHICAL NOTE
International law of procedure | PRINCIPAL
PUBLICATIONS(In English)
Mots clefs:
CHAPTER I - THE PROBLEM
STATED
ABSTRACT CHAPTER II - CHOICE-OF-
LAW PROBLEMS TO BE
In this course, Th. M. De Boer begins by taking stock of SOLVED
various situations in which a choice-of-law problem could
CHAPTER III - THE LACK
arise in connection with arbitration. He provides an idea
OF A LEX FORI IN
of the kind of legal problems that need to be solved,
ARBITRAL PROCEEDINGS
either by arbitration or adjudication. The author brie y
discusses a number of choice-of-law solutions that have CHAPTER IV - FREEDOM
been proposed in the literature on international OF DISPOSITION
arbitration, in national legislation, and in some actual CHAPTER V - THE LAW
decisions. It is debatable whether an arbitral tribunal GOVERNING THE
should be obliged to comply with the legal standards of EXISTENCE AND VALIDITY
the law of the place of arbitration (the lex loci arbitri) OF THE ARBITRATION
and if there is such a thing as a lex fori in arbitral AGREEMENT
proceedings. The author provides a discussion on the law
CHAPTER VI - THE LAW
governing the existence and validity of the arbitration
GOVERNING THE
agreement, the law governing the arbitration agreement,
ARBITRATION
and the law governing the substance of the dispute.
PROCEEDINGS
Dans ce cours, l’auteur commence de faire le bilan des CHAPTER VII - THE LAW
diverses situations dans les quelles un problème de choix GOVERNING THE
de la loi pourrait survenir dans le cadre de l’arbitrage. Il SUBSTANCE OF THE
prévoit une idée des problèmes juridiques qui doivent DISPUTE /
être résolus, soit par arbitrage ou jugement. L’auteur CHAPTER VIII - TO
discute brièvement un certain nombre de solutions de CONCLUDE
choix de la loi proposées dans la littérature sur l’arbitrage
PDF
international, dans la législation nationale et dans
certaines décisions. On peut se demander si un tribunal
d’arbitral devrait être tenu de respecter les normes
juridiques de loi du lieu l’arbitrage (le lex loci arbitri), et s’il existe une lex fori dans une
procédure arbitrale. L’auteur propose une discussion sur la loi régissant l’existence et de la
validité de la Convention d’arbitrage, la loi régissant la Convention d’arbitrage et la loi régissant
le fond du litige.

BIOGRAPHICAL NOTE
[p58]

Ted M. de Boer, born on 11 May 1943 in Uithoorn,


Netherlands.

LL.M. (Utrecht University) (1969) ; M.C.J. (New York


University) (1971) ; J.S.D. (cum laude, University of
Amsterdam) (1987).

Joined the University of Amsterdam law faculty (1972).


Appointed director of the Center of Foreign Law and
Private International Law, University of Amsterdam, and
tenured professor of private international law and
comparative law (1987). Co-founder and director (1994- [p55] M. De Boer, Th.
1996) of the International Law Institute of the University
of Amsterdam (now : Amsterdam Center for
International Law), and chairman of the Department of International Law, Faculty of Law,
University of Amsterdam (1997-2001). A visiting professor at Columbia University School of
Law (2001). Gained judicial experience as a deputy judge at the District Court of Alkmaar,
primarily adjudicating con icts cases (1985-2013).

One of the editors of the Netherlands International Law Review (since 1991), and one of the
commentators responsible for annotations on the Dutch Supreme Court’s decisions on private
international law published in Nederlandse Jurisprudentie. Appointed member of the Royal
Academy of Sciences of the Netherlands (1991). Member of the Netherlands Standing
Committee on Private International Law (since 2003). The University of Amsterdam granted
him the title of “distinguished professor”, in acknowledgment of his academic achievement and
his commitment to the cause of international legal studies (2009).

PRINCIPAL PUBLICATIONS
[p59]
/
(In English)

Th. M. De Boer, Beyond Lex Loci Delicti, Con licts Methodology and Multistate Torts in
American Case Law , Kluwer (Deventer, 1987)

Th. M. De Boer, ‛The EEC Contracts Convention and the Dutch Courts : A Methodological
Perspective’ , Rabels Zeitschrift (1990) 25-62

Th. M. De Boer, ‛Forty Years On, the Evolution of Postwar Private International Law in
Europe’ , Forty Years On, The Evolution of Postwar Private International Law in Europe , Th.
M. de Boer (ed.), (Deventer, 1990) 1-14

Th. M. De Boer, ‛Facultative Choice of Law, the Procedural Status of Choice-of-Law Rules
and Foreign Law’ , Recueil des cours 257 (1996) 223-427

Th. M. De Boer, ‛Prospects for European Con icts Law in the Twenty-First Century’ ,
International Con lict of Laws for the Third Millennium, Essays in Honor of Friedrich K.
Juenger , Patrick J. Borchers and Joachim Zekoll (ed.), Transnational Publishers (Ardsley,
NY, 2001) 193-214

Th. M. De Boer, ‛Jurisdiction and Enforcement in International Family Law : A Labyrinth


of European and International Legislation’ , Netherlands International Law Review (2002)
307-351

Th. M. De Boer, ‛Forum Preferences in Contemporary European Con icts Law : The Myth
of a Neutral Choice’ , Festschrift Erik Jayme I (Munich, 2004) 39-55

Th. M. De Boer, ‛Unwelcome Foreign Law : Public Policy and Other Means to Protect the
Fundamental Values and Public Interests of the European Community’ , The External
Dimension of EC Private International Law in Family and Succession Matters , Alberto
Malatesta, Stefania Bariatti, Fausto Pocar (ed.), Cedam (Padua, 2008) 295-330

Th. M. De Boer, ‛The Purpose of Uniform Choice-of Law Rules : The Rome II Regulation’ ,
Netherlands International Law Review (2009) 295-332

Th. M. De Boer, ‛Living Apart Together: The Relationship between Public and Private
International Law’ , Netherlands International Law Review (2010) 183-207

CHAPTER I - THE PROBLEM STATED


[p61]

Many years ago, I met an American lawyer who told me he was head of the legal department of
a big American oil company. I had just set out on my rst explorations in the eld of private
international law, and I was glad to have an opportunity to ask an experienced practitioner
some questions on choice of law in international contracts, a topic I had chosen for my rst /
academic publication. So I asked him what he thought about the merits of the doctrine of the
characteristic performance, and whether there were any complications in its practical
application. He took a long look at me, and said : “I have no idea what you’re talking about, but
if it’s con icts law, I know nothing about it.” When I told him I could hardly believe that,
considering he was involved in international transactions every day, he gave me the obvious
answer. In the rst place, he said, all contracts he supervised contained a choice-of-law clause,
which would take care of the problem of the applicable law if it ever would arise in an actual
dispute. Furthermore, he said, virtually all disputes in which his company might be a party
would be subject to arbitration and he had never heard of arbitral proceedings in which a
choice-of-law problem needed to be solved.

I was duly impressed by this answer, and it was not until many years later that I realized that
the picture my American acquaintance had sketched of the role of private international law in
arbitral proceedings was not as simple as he had led me to believe. In a way, I submit, the
choice-of-law problem is even more complicated when the parties have agreed on arbitration
than it is in judicial proceedings. In this lecture I should like to give a short analysis of the main
choice-of-law problems arbitrators may run into when dealing with an international dispute,
and to describe various ways in which problems could be or should be solved1.
[p62]
By “choice of law”, I mean the process in which it is established by which set of rules a legal
issue is governed. In other words : the phrase refers to the determination of the applicable law,
either by reference to the intentions of the parties themselves, or by reference to an objective
standard. In both situations, we do apply a “choice-of-law rule” : either a rule that allows the
parties to designate the applicable law themselves, or a rule that determines which law applies
if a parties’ choice is not allowed, or if the parties could not agree on it. In this view, Article 3 of
the Rome I Regulation, allowing the parties to choose the law governing their contractual
relationship is as much a choice-of-law rule – or “con icts rule” – as Article 4 of the same
Regulation, in which reference is made to the domiciliary law of the party carrying out the
characteristic performance2.

CHAPTER II - CHOICE-OF-LAW PROBLEMS TO BE SOLVED


[p63]

Let us start by taking stock of the various situations in which a choice-of-law problem could
arise in connection with arbitration. In so doing we will get an idea of the kind of legal
problems that need to be solved, either by arbitration or adjudication. Next, I will brie y
discuss a number of choice-of-law solutions that have been proposed in the literature on
international arbitration, in national legislation and in some actual decisions.

An example may help to illustrate the problems that may arise. Suppose that a Japanese car
manufacturer and a French car dealer have entered into a distribution agreement pursuant to
which the French party is entitled to an exclusive distributorship in France, on condition that it
will buy at least 100 cars per year from the Japanese manufacturer. The contract contains a
choice-of-law clause in which the parties have agreed that their contractual relationship is /
governed by Swiss law. Furthermore, it contains a clause in which it says that any dispute
between the parties will be settled by arbitration in Switzerland. Two years after the
conclusion of the contract, the Japanese car manufacturer starts selling cars to another dealer
in France, justifying its decision by asserting that the distributor did not meet the agreed quota
of 100 cars per annum. As a result, the original distributor su fers considerable damages3.
[p64]
At this stage, several things could happen. Normally, a claim for damages will be submitted
to arbitration, as agreed by the parties. In that case, the arbitral tribunal will have to determine
whether the claimant is entitled to damages for breach of contract under the law applicable to
the contractual relationship between the parties, in this case – on the basis of a contractual
choice-of-law clause – Swiss law. It is possible, however, that the Japanese company chooses to
defend itself not on the merits of the case but by attacking the validity of either the contract as
such or one of its clauses, notably the choice-of-law clause or the arbitration clause. It could
argue that the parties never reached consensus on (one of) those clauses, or that, in view of
European antitrust law, the issue of exclusivity cannot be submitted to arbitration, or that, for
some other reason, the arbitral tribunal has no jurisdiction to decide the case on the merits.

Such arguments could also be advanced in a court of law. The French claimant might decide to
go to court – either in France or in Japan – rather than starting arbitral proceedings in
Switzerland, and the Japanese car dealer might ask a French court to prohibit the claimant
from seeking recourse in arbitration. In such cases, the court will have to decide which law
governs the validity of the contract as such, or of any of its clauses, including the arbitration
clause.

Such issues might also come up at a later stage, after the arbitral tribunal has ruled on the
substantive issues of the dispute. Suppose that the arbitrators in my example have awarded
damages to the French claimant. The respondent could then challenge the award in the
country in which it was rendered, in this case Switzerland, by making an application to a Swiss
court to set aside the award, for instance on the ground that under the applicable law the
tribunal had no jurisdiction to rule on the claim. Similar arguments could be advanced in any
country in which enforcement of the award is sought, in this case rst of all Japan. To that end,
the claimant would normally need a declaration of enforceability, to be issued by a court, and
in those proceedings the other party could again oppose the award on the ground that there
was something wrong with either the arbitration agreement or with the way the arbitral
proceedings were conducted.

As shown by this example, various choice-of-law problems may arise in the context of
arbitration, problems that will have to be solved either by the arbitral tribunal or by a court of
law. The rst type of problem has to do with the arbitration agreement as such, whether we are
dealing with an agreement the parties entered into after the dispute [p65] has arisen
(“compromis”), or with an arbitral clause that is included in their original contract (“clause
compromissoire”). One of the parties may try to contest the validity of the arbitration
agreement, for instance on the ground that the nature of the dispute calls for judicial
intervention rather than arbitration, or on the ground that they never actually consented to
/
arbitration. In international cases, either the court or the arbitral tribunal will have to decide
under which law such issues should be determined. Which law governs the existence and
validity of the arbitration agreement, or – to put it a little di ferently – which law determines
whether or not the arbitral tribunal has jurisdiction ?

The second set of problems requiring a ruling on the law to be applied pertains to the existence
and the proceedings of the arbitral tribunal. Suppose that the parties have failed to say
anything about the number of arbitrators or the way a panel of arbitrators should be
composed. Which rules would then apply to its appointment ? Which law determines the rules
of procedure the tribunal would have to apply, or are arbitrators totally free to make up their
own procedural rules ? May a claim or defence be amended or supplemented during the
proceedings ? What happens if one of the arbitrators refuses to sign the award ? Such questions
are mostly of a procedural nature, and in that respect they di fer from the rst type of problem,
which may warrant the application of a di ferent law to either question.

The third type of problem that, in principle, must be solved in accordance with some
applicable law – for instance French law, or Japanese law, or the Vienna Convention on
Contracts for the International Sale of Goods – concerns substantive issues. In other words :
questions that gave rise to the actual controversy between the parties. For instance, the
question of whether there has been a breach of contract, and if there was, could it possibly be
justi ed on such grounds as a failure in the performance of the other party, or by export
restrictions, or by force majeure ? Here, the issue is the substance of the relationship between
the parties and that issue must be resolved under the law governing that relationship, whether
it sounds in contract or in tort or some other legal category. In arbitration, the claim usually
sounds in contract.

CHAPTER III - THE LACK OF A LEX FORI IN ARBITRAL PROCEEDINGS


[p66]

Before going into the various solutions for the three main choice-of-law problems that could
arise in the context of arbitration4, I must point out that there is a major di ference between
judicial proceedings and arbitration, in that a court of law is bound to apply its own rules of
private international law, its own rules on international arbitration, and its own rules of civil
procedure. By contrast, an arbitral tribunal has no “home base”, no xed abode in one
particular state. The place of arbitration may be chosen by the parties, or it may be determined
by the arbitrators themselves or by the arbitral institution by which they were appointed. It is
therefore debatable whether an arbitral tribunal should be obliged to comply with the legal
standards of the law of the place of arbitration (the lex loci arbitri), and if there is such a thing
as a lex fori in arbitral proceedings. It is now generally accepted that arbitral tribunals are not
bound to the rules of private international law, or arbitration law, or procedural law of the
country in which they sit. In other words : the lex loci arbitri in arbitral proceedings cannot be

/
equated with the lex fori in judicial proceedings5. That does not mean [p67] that the law of the
place of arbitration is totally irrelevant, but it could be easily replaced by a di ferent set of
rules if the arbitrators or the parties so decide.

This also means that the concept of public policy and the concept of internationally
mandatory rules, as we know them in national systems of private international law and in
various European regulations and international conventions on the topic of the applicable law,
pose a bit of a problem6. Both have their roots in values and interests prevailing in the
community of the forum state. If the European Union has imposed restrictions on the export
of certain goods to, let us say, the Russian Federation, it may be assumed that the courts of the
member states would take account of such restrictions, regardless of the parties’ intention to
have their contract governed by non-European law. To what extent is an arbitral tribunal bound
to do the same ? Does it make a di ference if it sits in a member state or not ? Is it bound to
respect the political interests of the European Union ? And what happens if it does not ?
Member states might refuse to enforce the award, but if there is no need for enforcement in
Europe, what then ? Similar problems arise with regard to public policy. By what standards
should an arbitral tribunal be guided if it has to rule on the permissibility of a provision of the
applicable foreign law that might be considered o fensive in some jurisdictions but acceptable
in others ? Much more could be said about this topic, but at this point it should su ce just to
mention it as another aspect of the di ference between judicial proceedings and arbitration7.

CHAPTER IV - FREEDOM OF DISPOSITION


[p68]

It is about time to tackle the main problem to be discussed here : which law should be applied
to the various problems that may arise in relation to arbitration ? Our point of departure must
be that at least one of the parties wants to rely on an arbitration agreement. The other party
may contest the existence or validity of such an agreement, and either party may disagree with
the way the arbitral proceedings are conducted, or with the resolution of substantive issues by
the arbitral tribunal, but all these issues will be moot if neither party takes the initiative to have
(some of) them resolved, either by an arbitral tribunal or by a court. The extent of a dispute
between private parties and the manner of its resolution is determined by a key concept of
private law : freedom of disposition8.

In its broadest sense, freedom of disposition is the freedom of private parties to determine the
contents of their legal relationship as well as the way in which possible di ferences between
them should be settled. On the one hand, there are legal relationships in which the parties are
not bound by mandatory rules of law with regard to their mutual rights and duties : they are
free to come to an agreement on what each of them may rightfully expect from the other. On
the other hand, if they have freedom of disposition they are free to choose a mode of dispute
resolution other than judicial adjudication, as for instance mediation or arbitration. Freedom
of disposition not only determines what kind of disputes may be submitted to arbitration, or

/
where the arbitral proceedings should take place, or how the arbitral tribunal should be
composed, or which procedural rules should be observed, but also by what standards
substantive issues should be resolved.

It goes without saying that the freedom of disposition of private parties is not unlimited. It is
curbed by policy considerations that may vary both per country and in time. Generally
speaking, one could say that the freedom of disposition is subject to restrictions if a legal [p69]
relationship touches on the rights of third parties or on public interests, or if one of the parties
is socially or economically weaker than the other one. That explains why arbitration is
generally not an acceptable mode of dispute resolution in matters of family law, or in matters
of property law, or bankruptcy, or intellectual property, as those matters relate to rights and
obligations that the parties may not freely dispose of9. The same may be true with regard to
contractual relations between landlords and tenants, or consumer contracts, or contracts of
employment. In such relationships the freedom of disposition is generally restricted by rules of
mandatory law meant to protect the weaker party, and that may imply that arbitration cannot
be acceptable as a mode of dispute resolution in those areas. As a matter of fact, some legal
systems only allow arbitration if the parties are engaged in a “commercial relationship”10,
which raises the question by what standards the line between commercial and non-
commercial relationships should be drawn.

In international situations, freedom of disposition has been translated into rules allowing the
parties to choose the law governing their legal relationship on the one hand, and rules
attributing jurisdiction on a court or tribunal of their own choice on the other. If the parties are
free to opt for arbitration as their preferred mode of dispute resolution, they are also free –
generally speaking – to choose the place of arbitration, and the number of arbitrators, as well
as the law governing the agreement to submit to arbitration, the law governing procedural
issues, and the law applicable to the substance of their dispute. They may even agree to give the
arbitrators the power to decide their case not according to rules of law, but “ex aequo et bono”,
that is : in accordance with general [p70] principles of equity and justice11. Still, such freedoms
may be curbed by the applicable law(s), which raises the question which law or laws might be
applicable. Furthermore, it should be asked what should be done if the parties have not
expressly agreed on the place of arbitration, the number of arbitrators, or the law governing
either their agreement or the arbitral proceedings.

CHAPTER V - THE LAW GOVERNING THE EXISTENCE AND VALIDITY OF THE


ARBITRATION AGREEMENT
[p71]

The rst question that may come up in arbitration proceedings pertains to the validity of the
arbitration agreement as such. In essence, this is the same question that could be raised with
regard to a forum selection clause. One of the parties relies on a choice-of-forum clause in the
contract, while the other party claims that he never consented to the adoption of such a clause,
or that it is invalid for some other reason. It is generally accepted now, as con rmed by the new
/
version of the Brussels I Regulation on Jurisdiction and the Recognition and Enforcement of
Judgments12, that such issues are subject to the so-called “doctrine of separability”. Even if the
choice-of-forum clause is included in a contract that may be invalid under the law applicable to
its substance, that does not mean that the choice-of-forum clause is invalid as well. That part of
the agreement should be separated from the rest, and may be governed by its own law, which
may be di ferent from the law governing the main contract. The doctrine of separability is now
expressed in Article 25, Section 5, of the Brussels Regulation, where it says : “An agreement
conferring jurisdiction which forms part of a contract shall be treated as an agreement
independent of the other terms of the contract.” This implies that a choice of law by the parties
does not necessarily govern the forum selection clause. As a matter of fact, under Article 25,
Section 1, the validity of such a clause is governed by the law of the chosen forum.

With regard to arbitration agreements, the same principle applies. If an arbitration agreement
is part of a larger contract, its validity will be tested separately13. Even if for some reason the
main contract cannot be enforced, the arbitral agreement may still be valid, which implies that
[p72]
the rights and obligations of the parties (for instance the right to some form of
compensation) will be determined by an arbitral tribunal, not by a court of law14.

That said, it remains to be seen which law applies to the arbitration agreement as such. There
has been some di ference of opinion on this score, particularly if the validity of an arbitral
clause was contested in judicial proceedings. In the United States, the courts would normally
apply their own law, that is : US federal law15. Where the question comes up before an arbitral
tribunal, there has been a tendency to apply the law of the place of arbitration (the lex loci
arbitri)16. A quite di ferent approach has been adopted in Switzerland. The Swiss statute on
private international law, enacted in 1987, provides in Article 178 that the validity of an
arbitration agreement – whether it is an independent agreement or an arbitral clause in a
contract – is subject to the law the parties have chosen themselves with respect to the
arbitration agreement as such17. It follows from the text of the provision, in which the law
governing the main contract is listed as an alternative, that the chosen lex arbitri may be
di ferent from the law the parties have designated for [p73] the rest of their contract. For
instance, in a contract of sale between a German seller and an Austrian buyer there is a general
choice-of-law clause by which the parties have chosen domestic German law (rather than the
Vienna Convention) as the applicable law, should any dispute arise between them in respect of
their mutual rights and duties. The contract also contains an arbitration clause, in which the
parties agree to arbitration as the proper means of dispute resolution, in which they choose
London as the place of arbitration and English law is designated as the lex arbitri.

However, a speci c choice like that is very rare in practice. Normally, the parties do not
speci cally choose the law governing their arbitration agreement as such. If not, the Swiss
statute refers to the law governing “the subject matter of the dispute”, which could be either the
lex contractus chosen by the parties or, in the absence of such a choice, the law to be
determined by objective factors. In my example, that would be German law. However, Article
178 mentions a third option : the validity of the arbitration agreement could also be tested
against Swiss law. Swiss law is likely to come into play if the validity issue must be determined
/
by a Swiss court, or by an arbitral tribunal sitting in Switzerland. Article 178 is based on the so-
called rule of validation or “favour” principle : the designation of the applicable law depends on
the end result, with a preference for the law that supports the validity of a legal act and the
displacement of the law that does not. To illustrate the rule, an example may be useful. Let us
assume that under Belgian law an arbitration clause is invalid if it is included in a contract of
employment, or – to put it di ferently – before an actual dispute between an employer and
employee arises18. Suppose that a Belgian company hires a Belgian national as the new
manager of its Dutch branch. In the employment contract, the parties have chosen Belgian law
as the law governing their contractual relationship. An arbitral clause refers to arbitration in
Switzerland. A few years later, an actual dispute arises which is submitted to arbitration in
Switzerland. In those proceedings, the Belgian employer argues that the arbitral agreement is
invalid, as it is governed by Belgian law since it was signed in Belgium and both parties are
Belgian. That argument is not very compelling. The arbitral tribunal is likely to apply the rule of
validation laid down in Article 178 of the Swiss statute. Even if Belgian law, chosen by the
parties, would [p74] not allow an arbitration clause in a contract of employment, the clause
would still be valid under Swiss law, which is the law of the place of arbitration.

A similar solution has been adopted in the Netherlands. Until recently, a choice-of-law
provision in the Dutch Civil Code expanded the scope of the Rome I Regulation to all
obligations that are excluded in Article 1 (2) of the Regulation as long as they qualify as
“contractual obligations”19. Thus, despite the express exclusion of arbitration agreements in
Article 1 (2) (e), a Dutch court would still apply the Regulation’s con icts rules to designate the
law governing the validity of such agreements. Since 1 January 2015, however, this issue is
covered by its own con icts rule. Article 166 is a new addition to the Dutch statutory choice-of-
law provisions in Book 10 of the Civil Code. Like its Swiss forerunner, it is based on the rule of
validation : an arbitration agreement is enforceable if it is valid either under the law the
parties have chosen themselves, or under the law of the place of arbitration, or under the law
governing the legal relationship that gave rise to their dispute.

In the United Kingdom, the Court of Appeal has fairly recently ruled on this matter20. The
opinion by Moore-Bick LJ o fers some guidelines for an enquiry into the proper law of an
arbitration agreement. First, it should be established whether – with regard to the arbitration
agreement as such – the parties have designated the applicable law themselves. If so, that law
determines the validity or invalidity of the arbitration agreement. If there is no express choice
by the parties, it may be inferred from the circumstances that the parties have made an implied
choice. To that end, an express choice-of-law clause in the main contract could be seen as a
pointer that the parties meant that law to govern their arbitration agreement as well. But there
may be counter-indications, and in that case the court should determine with which system of
law the arbitration agreement has the “closest and most real connection”21.
[p75] In the Sulamérica case, the parties had chosen Brazilian law as the law governing their

contractual relationship, but the fact that they had opted for arbitration in London pointed to
the conclusion that they did not mean Brazilian law to govern the arbitration clause as well.
So, with regard to the arbitration agreement as such, there was neither an express nor an
/
implied choice, which led the court to the third stage of its enquiry, and there it found – not
quite surprisingly – that the agreement had its closest and most real connection with England,
as the parties had agreed on arbitration in London.

Much as I appreciate these modern e forts to shed some light on the rather ba ing problem of
the law applicable to arbitration agreements, I should like to point out that none of them
might prove to be very helpful as long as this problem is solved in di ferent ways in di ferent
countries. It should be noted that a decision on the validity of an arbitration agreement might
be challenged before a court in the country in which the arbitration took place, or it could be
contested before a court in the country where recognition and enforcement of the arbitral
award is sought.

If those courts have di ferent opinions on the law governing the arbitration agreement, the
result may be that the award is declared null and void in the state where the arbitration took
place, or that it will not be recognized in the state where its recognition and enforcement is
sought.

That is why some authors have proposed that the applicable law should be determined on a
cumulative basis : the validity of an arbitration agreement should be tested against the legal
standards of the state where the arbitration took place and those of the state where
enforcement of an arbitral award is likely to be sought22. In my example, that would mean that
the arbitral tribunal in Switzerland should not only take account of the law chosen by the
parties, or of Swiss law as the lex loci arbitri, but also of Belgian law as the law of the country
where the claimant is likely to seek recognition and enforcement of an [p76] award in his favour.
Needless to say that a cumulative approach would defeat the purpose of the rule of validation
and that it would allow the harshest law to prevail.

CHAPTER VI - THE LAW GOVERNING THE ARBITRATION PROCEEDINGS


[p77]

The second set of choice-of-law problems to be discussed concerns the existence and the
proceedings of the arbitral tribunal. What is at stake here is not the formal or substantive
validity of the arbitration agreement, nor the arbitrability of the dispute, nor the substance of
the controversy, but rather the way arbitral proceedings are conducted and the law applicable
to such proceedings. In this area, the principle of procedural autonomy that allows the parties
to opt for arbitration in the rst place also allows them to determine the place of arbitration,
the constitution of the arbitral tribunal and the procedural rules the tribunal should observe. I
can be brief about this topic, as it seldom happens that an award is challenged or a declaration
of enforceability is refused on the ground that there was something wrong with the way the
proceedings were conducted23. This is explained by the fact that in many cases arbitration
takes place under the supervision of an arbitration institution, such as the London Court of
International Arbitration, or the Court of Arbitration of the International Chamber of
Commerce, or the American Arbitration Association, institutions that have made up their own
/
procedural rules to which both the parties and the arbitral tribunal are bound. In ad hoc
arbitrations, on the other hand, the question may arise whether the rules of procedure of a
speci c country should be observed, and if so, which country24.

There is some di ference of opinion on the extent of the freedom of disposition the parties
enjoy in this area. Some authors have posited that the parties are totally free, not only to
choose any national law of procedure but even to make up their own rules of procedure,
without [p78] reference to any national law (“ oating arbitration”)25. On the other side of the
spectrum are those authors who are prepared to allow the parties freedom of choice, yet within
the limits of the law of the place of arbitration26. That means that the mandatory rules of the
lex loci arbitri prevail if there is a con ict between those rules and the procedural rules
designated by the parties.

In practice, it might not be very wise to opt for arbitration in one state, while choosing the
procedural law of another. Redfern and Hunter give as an example an arbitration to be held in
Switzerland but, by agreement of the parties, subject to the procedural law of Germany27.
Problems may arise if in the course of the proceedings it becomes necessary to have recourse
to a court of law (for instance, to force a reluctant witness to testify, or for some other interim
measure), as it is not clear whether a Swiss court would be prepared to apply German law, or
vice versa. In this case, it might have been more prudent if the parties had decided on
arbitration in Germany, subject to the German law of procedure.

CHAPTER VII - THE LAW GOVERNING THE SUBSTANCE OF THE DISPUTE


[p79]

What is left to discuss, then, is the question which law applies to the substance of the dispute,
the material issue on which the parties disagree. If this question would come up in judicial
proceedings, the court would solve this problem by looking up the relevant choice-of-law rule,
whether it is laid down in a convention to which the forum state is a party, or – if the forum
state is a member state of the European Union – in a European Regulation, or, in the absence
of such rules, in a national code or statute or in some judicial precedent. In other words, a
court of law is bound to follow its own private international law rules, or con icts rules, which
will direct it to the law to be applied.

As we have seen28, an arbitral tribunal – in contrast to a court of law – has no home base. It is
in no way connected with the public authority of the state in which the arbitration takes place,
it does not have the same authority as a court of law, and its decisions cannot be enforced
without some kind of judicial endorsement. It could be argued, therefore, that an arbitral
tribunal is not bound to apply the law of the state in which the arbitration takes place,
including its rules of private international law. This view is con rmed by a number of rules
speci cally devised with a view to choice-of-law problems in the context of arbitration. The
European Convention on International Commercial Arbitration of1961 (now rather obsolete)
allows the parties to designate the applicable law themselves, but failing any indication by the
parties, the arbitrators “shall apply the proper law under the rule of con ict that the arbitrators/
deem applicable”29. This approach, which relies on a choice-of-law analysis, is known as the
“indirect approach” or voie indirecte, as opposed to the “direct approach” (voie directe), in which
the arbitral tribunal directly refers to the substantive law it deems “appropriate”, seemingly
without any private international law detour. Thus, the UNCITRAL Arbitration Rules refer to
the law the parties have chosen, and in the absence thereof “the arbitral tribunal shall apply
the law which it determines [p80] to be appropriate”30. Similar provisions can be found in the
ICC Rules (Article 21 in the 2012 version) and in various national laws31.

There is hardly any question, nowadays, that in international commercial contracts the parties
have full freedom of choice, and that in this area the principle of party autonomy has been
accepted all over the world. That still leaves the problem what to do in a situation in which the
law chosen by the parties may violate universally accepted principles of law or human rights,
or in which the rule to be applied may be somehow repulsive to the tribunal or to the court in
the country where the arbitration took place or in the country where the claimant wants to
have the award enforced. I have already pointed out that the same problem arises with regard
to the so-called internationally mandatory rules (or lois de police), as meant, for instance, in
Article 9 of the Rome I Regulation. Apart from this complication, the designation of the
applicable law does not pose much of a problem if the parties have included a choice-of-law
clause in their contract, unless the validity of the clause itself is at issue. In that case, the
arbitrators will probably use the same method as most courts would employ in such situations.
They would pretend, for the moment, that the choice-of-law clause were valid, and determine
whether the contract or the choice-of-law clause can be upheld under the law ostensibly
chosen by the parties32. For instance : if the parties to a commercial contract have opted for the
application of New York law in case of a dispute, and one of them argues that they never
reached an agreement on the applicable law, the arbitral tribunal would probably apply New
York law to determine whether or not the choice-of-law clause in the contract is valid, and
under what conditions a contractual party must be considered to be bound by such a clause.
Much more could be said about this, but I better move on to [p81] the situation in which there is
no express choice of law by the parties, or the situation in which their choice turns out to be
invalid33.

How does an arbitral tribunal decide which law applies to the merits of the dispute in the
absence of a choice by the parties ? Neither the UNCITRAL Arbitration Rules, nor the Model
Law, nor the ICC Rules, nor the French statute tell us how to determine which law or which
rules of (con icts) law may be deemed “appropriate” or “applicable”. In practice, arbitrators
have decided on the issue of the applicable law by various means34. In older cases, they have
relied on the substantive law of the place of arbitration, without any choice-of-law detour.
They reasoned that the parties’ decision where arbitration should take place implied a choice
of that country’s substantive law35. Other arbitral tribunals opined that an agreement on the
place of arbitration implied that the parties wanted the tribunal to apply that country’s
choice-of-law rules36. This approach must now be considered obsolete. First of all, it is a legal
ction that a choice of the place of arbitration implies a choice of law or a choice of choice-of-
law rules. The same could be said about forum-selection clauses. There are countries where the
courts translate a choice-of-forum clause into a choice of the lex fori as the law to be applied37,
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but nowadays such decisions are generally rejected by most scholars38. The reasons for a choice
of forum are usually quite di ferent [p82] from a preference for a certain law to be applied. The
parties may have chosen an American forum because they set great store by a jury trial, not
necessarily because they want American substantive law to be applied. The choice of a Dutch
court may be inspired by the parties’ expectations on procedural expediency in the
Netherlands rather than by their preference for Dutch law. A neutral venue, reasonable legal
fees, or judicial expertise may be other reasons for the choice of a particular forum, and it
should not be readily assumed, therefore, that such a choice was meant to include a choice-of-
forum law. Likewise, it cannot be assumed that the parties have chosen a particular place of
arbitration with a view to the law to be applied. This is particularly true in situations in which
the place of arbitration is not determined by the parties but by the arbitration institution
responsible for the arbitration proceedings39. In choosing that place, the institution did not
mean to tell the arbitrators that they should apply the local law of the locus arbitri or the local
choice-of-law rules. In short, the choice of a certain place may be in uenced by convenience,
cost-e fectivenes, neutrality, or even trade usages, but none of these factors is very compelling
with regard to the designation of the applicable law.

Not surprisingly, there are alternatives40. One of those is a cumulative approach, in which case
the arbitral tribunal will apply the choice-of-law rules of all States “having a relation to the
dispute”41. For instance, in a dispute between an American and a Japanese corporation the
arbitrators [p83] might want to apply both American and Japanese choice-of-law standards, and
hopefully those standards will lead to the same choice-of-law result. That would certainly be
true in arbitration proceedings between parties who are both hailing from countries where the
same choice-of-law rules are in force, such as the Rome I Regulation which applies in all
member states of the European Union except Denmark. Or if both parties are from the United
States, both domiciled in states that would follow the Restatement Second on Con ict of Laws,
application of the Restatement’s rules may be deemed appropriate.

A similar approach is the one that relies on the “general principles of con icts law” or
“international choice-of-law rules”, at least as they are perceived by the arbitrators42. It has a
kind of universal pretension, in that it is based on the assumption that such general principles
or rules actually exist. I am not so sure about that. For instance, there are arbitral awards in
which the proper law of the contract is applied, as that would be the basis of all con icts rules
for contracts43. The “proper law” approach – in the United States also known as the “most
signi cant relationship” approach, or “center of gravity theory” – takes account of the various
geographical contacts there are between the parties and their transaction on the one hand and
the countries involved on the other. It is an approach that has been used in one form or
another in France, Germany and England, and to some extent under the Restatement Second,
but in Europe it has been replaced by a solution which is known as the doctrine of the
characteristic performance. The applicable law is no longer determined by an aggregate of
factual connections but, instead, by the place of business of the party carrying out the
performance that gives the contract its special character or “ avour”44. It could hardly be
maintained, therefore, that an approach based on a tally of geographical contacts re ects one
of the “general principles [p84] of con icts law”45. Moreover, there are several decisions in
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which the arbitrators obviously thought that the place where the characteristic performance is
carried out determines the applicable law46. In one arbitral award it was said that the
arbitrators relied on “international conceptions of private international law”47. As applied to a
contract of agency, that led to application of the law of the place where the commercial agent
carried out his activities. This is clearly wrong and de nitely not in tune with the “general
principles of con ict law”. The doctrine of the characteristic performance does not refer to the
place where the characteristic performance is to be carried out but to the habitual residence of
the party e fecting the characteristic performance. In a contract of agency it is therefore not
the place where the agent represents his principal but his place of business or domicile that is
decisive. If those places coincide there is no problem48, but if they do not there is a
misinterpretation of the doctrine on which the arbitrators ostensibly relied.

Another approach I should like to mention in this context is the one in which the arbitrators do
not rely on any national or universal system of choice-of-law rules at all. They do not justify
their choice by reference to a particular choice-of-law rule, nor do they claim to rely on general
principles, but they just choose the applicable law as the one they consider appropriate. This
has been called the “direct approach” to choice of law in arbitration49, but it probably comes
down to an implicit reliance on what is perceived as general principles of con icts law. To [p85]
illustrate this way of solving the choice-of-law issue, let me quote from an actual arbitral
decision, in which an award was rendered in favour of an o ce of American architects who
had provided engineering services to a Saudi Arabian company : «“The arbitral tribunal does
not deem it necessary in this case to decide on a speci c rule of con ict to designate the proper
law of the contract in view of the fact that most major rules in some form or other point to the
place of the characteristic or dominant work and that in the opinion of the arbitral tribunal
there can be no doubt that the dominant or characteristic work performed under the
agreement was performed in Georgia, USA.”50 »

It will be clear that the arbitrators misinterpreted the doctrine of the characteristic
performance, since they did not refer to the habitual residence of the American architects but
rather to the place where the “characteristic work” for this type of contract was carried out. If
they relied on “major rules of private international law”, as they suggested themselves, they
relied on a misconception of those rules. If they would just have said that they found the law of
the place of performance to be an appropriate choice, I could not have made any objection, as
this is completely in line with the direct approach and the criterion laid down in Article 21 of
the ICC rules.

CHAPTER VIII - TO CONCLUDE


[p86]

Undoubtedly, there is a lot more to be said about choice-of-law problems in arbitration


proceedings, but the time I was allotted for this lecture did not allow for further elaboration. If
there is one thing I hope to have made clear, however, it is the fact that the choice-of-law issues
that may arise in international arbitration are not as easy to solve as suggested by the
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American lawyer I quoted at the beginning of this lecture. In my opinion, the opposite is true :
in arbitration, choice-of-law issues are even more complicated than they are in ordinary
litigation, as an arbitral tribunal – contrary to a court of law – is not bound to the lex fori of the
country in which it sits. That may explain why, despite the wealth of publications on this topic
and a multitude of cases in which some con icts issue had to be resolved, there does not seem
to be any consensus on how to solve choice-of-law problems in arbitration proceedings in the
absence of an explicit choice by the parties, whether we are dealing with issues relating to the
existence and validity of the arbitration agreement or with a matter of substantive law.

Since arbitrators are not bound to a speci c set of national choice-of-law rules, their choice of
the applicable law could hardly be faulted as being “erroneous”, unless – perhaps – they have
deliberately disregarded an express choice-of-law clause51. In other words : as far as the
designation of the applicable law is concerned, anything goes. This might be acceptable if the
parties have allowed the arbitrators to act as amiable compositeurs, but I fail to see why their
decision to resort to “arbitration at law”would entitle an arbitral tribunal to apply any (rule of)
law it may deem “appropriate”. There must be more compelling grounds than spontaneous
impulse, whim or intuition on which the decision with [p87] regard to the applicable law is
based, and it would be good practice if arbitrators would try to rationalize their choice-of-law
decisions even if they are not based on national con icts rules. Eventually, such e forts should
lead to consensus on the proper choices to be made, both with regard to the law governing the
arbitration agreement as such and the law governing the substance of the dispute. As I hope to
have shown, it is these two choice-of-law issues in international arbitration that are in need of
less variable answers than they now receive both in theory and in practice.

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Notes

1. Since I was asked at short notice to take over one of the lectures of the general course on
private international law that Professor George Bermann’s illness forced him to cancel, I did
not have the time to do the research I would normally carry out preparing for a lecture meant
to be published in the Recueil des cours. While the absence of elaborate references to a wealth
of academic sources may suggest that I did not do any research at all, I did read up on the topic
on choice of law in arbitral proceedings. I feel justi ed, however, in just listing the materials (in
English) I consulted most. In order of the date of publication : William Laurence Craig, William
W. Park and Jan Paulsson, International Chamber of Commerce Arbitration, 3rd ed., Oceana
Publications, Inc., Dobbs Ferry NY, 2000, pp. 319-346 (Chapter 17 : Choice of Substantive Law) ;
Horacio A. Grigera Naón, “Choice-of-Law Problems in International Commercial Arbitration”,
Recueil des cours, Vol. 289, 2001, pp. 1-395 ; Redfern and Hunter on International Arbitration
(Nigel Blackaby, Constantine Partasides, with Alan Redfern, Martin Hunter), Law and Practice
of International Commercial Arbitration, 5th ed. (student edition), Oxford University Press,
2009, pp. 163-239 (Chapter 2 : Applicable Laws) ; Gary B. Born, International Commercial
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Arbitration, 2nd ed., 3 vols., Kluwer Law International, 2014, Vol. I, pp. 472-635 (Chapter 4 :
Choice of Law Governing International Arbitration Agreements) ; Vol. II, pp. 2614-2778
(Chapter 19 : Choice of Substantive Law in International Arbitration).

2. The phrase “choice of law” is often understood as denoting the designation of the applicable
law by the parties, therefore depending on their intentions, as opposed to a designation of the
applicable law by reference to objective standards. European Regulations dealing with the
issue of the applicable law are consistently using the term “con ict-of-law rules” or “rules on
con ict of laws” rather than “choice-of-law rules”. In the Proposals for the Rome I and the Rome
II Regulations, there are still references to “choice-of-law rules” but these have been suppressed
in the nal texts.

3. This example is loosely based on Mitsubishi Motors Corporation v. Soler Chrysler-Plymouth,


Inc., a famous decision by the US Supreme Court (473 US 614, 105 S. Ct. 3346, 87 L. Ed. 2d 444
(1985) ) on the issue of whether an arbitral tribunal sitting abroad may be trusted to take
account of American antitrust law when ruling on contractual obligations governed by Swiss
law. In Mitsubishi, the agreed place of arbitration was actually Japan rather than Switzerland.
The party actually starting arbitration proceedings was Mitsubishi rather than car dealer Soler,
who refused to submit to arbitration. Mitsubishi then started judicial proceedings to compel
arbitration, while Soler raised a counterclaim based on American antitrust law. Mitsubishi
argued that such claims are not arbitrable. According to the District Court (Puerto Rico), an
antitrust claim can be submitted to arbitration but this decision was reversed on appeal. The
US Supreme Court, however, endorsed the view that a claim based on American antitrust law
may be submitted to arbitration, as “the national courts of the United States will have the
opportunity at the award-enforcing stage to ensure that the legitimate interest in the
enforcement of the antitrust laws has been addressed” (473 US 614 at 638).

4. Cf. Franco Ferrari and Stefan Kröll (eds.), Con lict of Laws in International Arbitration,
Munich, Sellier European law publishers, 2011, a collection of essays which is divided into three
main parts : “II. Con ict of Laws questions concerning the arbitration agreement and the
jurisdiction of the tribunal”, “III. Con ict of Laws questions concerning the law applicable to
the merits”, and “IV. Con ict of Laws questions concerning the arbitration procedure”. Some
authors also treat the formal validity of the arbitration agreement and a person’s capacity to
enter into such an agreement as separate choice-of-law issues. Here, a reference to the most
recent treatises will have to su ce. As to formal validity : Born, supra footnote 1, pp. 616 et seq. ;
Redfern and Hunter, supra footnote 1, § 3-07 (pp. 159 et seq.). As to capacity : Born, pp. 625 et
seq. ; Redfern and Hunter, §§ 3-25 et seq. (pp. 172 et seq.).

5.

Cf. Stavros Brekoulakis, “Arbitrability and Con ict of Jurisdictions : The (Diminishing)
Relevance of lex fori and lex loci arbitri”, in Con lict of Laws in International Arbitration, supra
footnote 4, pp. 117-135, at p. 119 : «“The argument that ‘arbitration has no forum’ has become a

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truism for good reason : it is quite accurate and re ective of the current trend in international
arbitration that the interaction between the arbitration and the legal apparatus of the seat
should remain at minimum levels.”»

See also Redfern and Hunter, supra footnote 1, § 2-80 : “ unlike the judge of a national court, an
international arbitration tribunal is not bound to follow the con ict of law rules of the country
in which it has its seat” (at p. 145).

6. As to “internationally mandatory rules of law”, see Karsten Thorn and Walter Grenz, “The
E fect of Overriding Mandatory Rules on the Arbitration Agreement”, in Con lict of Laws in
International Arbitration, supra footnote 4, pp. 187-210 ; George A. Bermann, “Mandatory Rules
of Law in International Arbitration”, ibid., pp. 325-339 ; Grigera Naón, supra footnote 1, pp. 185
et seq., pp. 200 et seq.

7. In fact, “l’ordre public transnational dans le cadre de l’arbitrage” was the title of a lecture
given by Professor Catherine Kessedjian at the Hague Academy, just a week before I delivered
my own. That is why I felt there was no need to cover this topic again.

8. I have treated this concept extensively in my Hague lectures on facultative choice of law : Th.
M. de Boer, “Facultative Choice of Law, the Procedural Status of Choice-of-Law Rules and
Foreign Law”, Recueil des cours, Vol. 257, 1996, pp. 223-427, pp. 257 et seq., pp. 335 et seq., pp. 340
et seq.

9. The concept of “arbitrability” denotes the di ference between disputes that are capable of
settlement by arbitration and those that can only be resolved by adjudication. As a rule,
disputes relating to rights that the parties may not freely dispose of are not “arbitrable” and vice
versa. Cf. Redfern and Hunter, supra footnote 1, § 3-12-§ 3-24 (pp. 163-172) ; Born, supra footnote
1, pp. 943 et seq. ; Grigera Naón, supra footnote 1, pp. 79 et seq. National arbitration laws may
di fer in their demarcation of arbitrable and non-arbitrable disputes, which raises the question
which law applies to the issue of arbitrability. In my view, this is one of the choice-of-law
questions pertaining to the existence and validity of the arbitration agreement as such, to be
dealt with in Chapter V.

10. The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards
allows a state party to the Convention to declare that it will apply the Convention “only to
di ferences arising out of legal relationships, whether contractual or nor, which are considered
as commercial under the national law of the State making such declaration” : Article I (3). Such
“commercial reservations” can be found in many national arbitration laws. See, e.g., section
202 of the US Federal Arbitration Act. See also Redfern and Hunter, supra footnote 1, § 10-28,
footnote 53 : “Of the 134 states which were parties to the Convention by April 2004, 44 had
taken advantage of the commercial reservation.”

11. See, e.g., Article 17 (3) of the ICC Arbitration Rules (1998) : “The Arbitral Tribunal shall
assume the powers of an amiable compositeur or decide ex aequo et bono only if the parties
have agreed to give it such powers.” See also Article 187 (2) of the Swiss Statute on private
/
international law : “The parties may authorize the arbitral tribunal to decide the case ex aequo
et bono” (“nach Billigkeit”, “en équité”, “secondo equità”) ; English translation by Pierre Karrer
and Karl W. Arnold, Switzerland ‘s Private International Statute of December 18, 1987, Deventer,
Boston, Kluwer, 1989. On amiable composition, see generally Craig, Park and Paulsson, supra
footnote 1, pp. 347-354.

12. Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12
December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and
commercial matters (recast), O cial Journal, L 351/1, applicable as of 10 January 2015.

13. Cf. Redfern and Hunter, supra footnote 1, §§ 5-36 et seq. (pp. 298 et seq.) ; Born, supra
footnote 1, pp. 474 et seq. See also Article 23 (1), UNCITRAL Arbitration Rules 2013 : “an
arbitration clause that forms part of a contract shall be treated as an agreement independent
of the other terms of the contract”.

14.

Cf. Article 6 (4), ICC Rules of Arbitration 1998 : «“Unless otherwise agreed, the Arbitral
Tribunal shall not cease to have jurisdiction by reason of any claim that the contract is null and
void or allegation that it is non-existent provided that the Arbitral Tribunal upholds the validity
of the arbitration agreement. The Arbitral Tribunal shall continue to have jurisdiction to
determine the respective rights of the parties and to adjudicate their claims even though the
contract itself may be non-existent or null and void.”»

15.

Notably : the Federal Arbitration Act, Title 9 US Code. See, e.g., Gary B. Born, International Civil
Litigation in United States Courts, 3rd ed., The Hague, Boston, London, Kluwer Law
International, 1996, p. 1037 : “U.S. courts have almost unanimously applied federal U.S. law to
interpret the scope of arbitration agreements, even where a choice of law clause selected
foreign law” ; see also Born, supra footnote 1, p. 482. In Mitsubishi, supra footnote 3, the main
contract was governed by Swiss law, while the arbitration agreement provided for arbitration
in Japan under the rules of the Japan Commercial Arbitration Association. Yet, the US Supreme
Court applied American federal law to the arbitrability issue. See also Leonardo Gra , “The
Law Applicable to the Validity of the Arbitration Agreement : A Practititoner’s View”, in Con lict
of Laws in International Arbitration, supra footnote 4, pp. 19-62, p. 45 : «“This [lack of guidance
in the New York Convention, dB] explains why (particularly U.S. courts) simply refuse to apply
the private international law rules and choose to review the arbitration agreement under their
own substantive law rules (the lex fori) or the law applicable to the main contract.”»

16. Redfern and Hunter, supra footnote 1, §§ 2-05 et seq. (pp. 92 et seq.).

17.

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Article 178 (2) : «“an arbitration agreement is valid it if conforms either to the law chosen by
the parties, or to the law governing the subject matter of the dispute, in particular the main
contract, or to Swiss law” (English translation by Karrer and Arnold, supra footnote 11).»

18. Under Belgian law, arbitration agreements pertaining to disputes that should be
adjudicated by a labour court are null and void unless they are entered into after the dispute
has arisen : Article 1676 (5), Judicial Code.

19. Article 154, Book 10, Dutch Civil Code, in force since 1 January 2012.

20. Sulamérica Compañia Nacional de Seguros SA v. Enesa Engenharia SA [2012] EWCA Civ. 638 ;
Court of Appeal, [2012] WLR (D) 148.

21.

«“25.… the proper law is to be determined by undertaking a three-stage enquiry into (i) express
choice, (ii) implied choice and (iii) closest and most real connection. As a matter of principle,
those three stages ought to be embarked on separately and in that order, since any choice made
by the parties ought to be respected, but it has been said on many occasions that in practice
stage (ii) often merges into stage (iii), because identi cation of the system of law with which
the agreement has its closest and most real connection is likely to be an important factor in
deciding whether the parties have made an implied choice of proper law.”»

22. Cf. R. van Delden, Internationale handelsarbitrage, Praktijkreeks IPR No. 21, Deventer,
Kluwer, 1996, pp. 23-27, listing six possible alternatives for the lex arbitri : (a) the law chosen by
the parties, (b) the law with which the arbitral agreement is most closely connected, (c) the law
of the place of arbitration, (d) the law of the place of enforcement of the award ; (e) the
national or domiciliary law of the parties to the arbitration agreement (especially for the issue
of capacity) ; (f) the law of the place where the agreement was entered into. His conclusion (at
p. 26) is that “eventually the laws under (c), (d) and (e) or (f) will be applied cumulatively, and
also, due to the force of the actual course of events (‘the harsh reality’) must be applied”.

23. The real problem here, it would seem, relates to the role of the courts during arbitral
proceedings, particularly when interim measures need to be ordered and enforced. See
Christopher Boog, “The Laws Governing Interim Measures in International Arbitration”, in
Con licts of Laws in International Arbitration, supra footnote 4, pp. 409-457 ; Redfern and
Hunter, supra footnote 1, §§ 7-10 et seq. (pp. 393 et seq.); Grigera Naón, supra footnote 1, pp. 161
et seq.

24. This implies that most national provisions on arbitral proceedings are non-mandatory (jus
dispositivum), as they may be displaced by institutional rules. Thus, the principle of procedural
autonomy (freedom of disposition) extends to the way arbitral proceedings are conducted.

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25. Also called “supra-national”, “a-national”, or “delocalized” arbitration. See Redfern and
Hunter, supra footnote 1, §§ 2-26 et seq. (pp. 106 et seq.), referring to Philippe Fouchard,
L’arbitrage commercial international, Paris, Dalloz, 1965 ; Jan Paulsson, “Arbitration Unbound :
Award Detached from the Law of Its Country of Origin”, ICLQ, 1981, pp. 358 et seq. ; Jan Paulsson,
“Delocalization of International Commercial Arbitration : When and Why It Matters”, ICLQ,
1983, pp. 53 et seq. See also Born, supra footnote 1, pp. 1586 et seq. ; Grigera Naón, supra footnote
1, pp. 183 et seq.

26. Redfern and Hunter, supra footnote 1, §§ 2-28 et seq. ; Craig, Park and Paulsson, supra
footnote 1, pp. 443-459 ; Van Delden, supra footnote 22, pp. 30 et seq.

27.

Redfern and Hunter, supra footnote 1, § 2-20. The Swiss Statute on private international law
expressly allows the parties to choose a foreign procedural law ; Article 182 (1) : «“The parties
may, directly or by reference to rules of arbitration [such as the ICC Rules or the LCIA Rules,
dB], determine the arbitral procedure ; they may also submit the arbitral procedure to a
procedural law of their choice” (English translation by Karrer and Arnold, supra footnote 11).»

28. Supra, Chapter III.

29. Article VII (1).

30. Article 35 (1), UNCITRAL Arbitration Rules (as revised in 2010, adopted in 2013). The
UNCITRAL Model Law, on the other hand, refers in Article 28 (2) to “the law determined by the
con ict of laws rules which it considers applicable”.

31.

See, e.g., Article. 1511, New Code of Civil Procedure (Nouveau code de procédure civile ; Décret no.
2011-48 du 13 janvier portant réforme de l’arbitrage) : «“The arbitral tribunal shall decide the
dispute in accordance with the legal rules chosen by the parties, or, in the absence thereof, in
accordance with the rules of law the tribunal deems to be appropriate. In all cases, the arbitral
tribunal will take account of trade usages.”»

In the Netherlands, a similar rule applies : Article 1054 (2), Code of Civil Procedure.

32. Cf. Article 10 (1), Rome I Regulation : “The existence and validity of a contract, or of any
term of a contract, shall be determined by the law that would govern it under this Regulation if
the contract or term were valid.”

33. Since my colleague Professor Katharina Boele-Woelki was scheduled to lecture on “party
autonomy in litigation and arbitration” the next day, I felt there was no need to elaborate on
this topic.

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34. See, generally, Craig, Park and Paulsson, supra footnote 1, pp. 319-346 (Chapter 17, Choice of
Substantive Law) ; Redfern and Hunter, supra footnote 1, §§ 2-31 et seq. (pp. 109 et seq.); Born,
supra footnote 1, pp. 2615 et seq. ; Grigera Naón, supra footnote 1, pp. 183 et seq. ; Linda
Silberman and Franco Ferrari, “Getting to the Law Applicable to the Merits in International
Arbitration and the Consequences of Getting It Wrong”, in Con lict of Laws in International
Arbitration, supra footnote 4, pp. 257-323.

35. Based on the maxim qui elegit judicem elegit jus. Craig, Park and Paulsson, supra footnote 1,
p. 324, cite ICC cases 2735/1976 and 2391/1977 as examples of the voie directe.

36. This “indirect approach” was followed in, e.g., Westinghouse v. Republic of Philippines : Craig,
Park and Paulsson, supra footnote 1, p. 324.

37. The proposal for a Regulation on the law applicable to contractual obligations (now the
Rome I Regulation) included a presumption to the e fect that a choice of forum implies a
choice of lex fori : Article 3 (2), COM(2005) 650. In the nal text, Article 3 no longer refers to
forum-selection clauses. Instead, their relevance for the designation of the applicable law is
reduced to “one of the factors to be taken into account in determining whether a choice of law
has clearly been demonstrated” (recital 12, Rome I Regulation).

38.

Redfern and Hunter, supra footnote 1, § 2-78, are of the opinion that the assumption that a
choice of forum implies a choice of law “makes sense when the reference is to a court of law”
but less so when it comes to arbitration : «“A place of arbitration may be chosen for many
reasons, unconnected with the law of that place. It may be chosen because of its geographical
convenience to the parties ; or because it is a suitably neutral venue ; or because of the high
reputation of the arbitration services to be found there ; or for some other, equally valid
reason.”»

I would say that similar reasons (other than the application of forum law) could have induced
the parties to choose a particular court.

39. Which may happen if the parties were unable to decide on the place of arbitration. See, e.g.
Article 14 (1), ICC Rules : “The place of arbitration shall be xed by the Court [the International
Court of Arbitration, dB] unless agreed upon by the parties.”

40. Born, supra footnote 1, p. 2642, lists “eight main alternatives to the historic arbitral seat rule”
ranging from application of the con icts rule the tribunal considers “appropriate” to direct
application of “a” substantive law. See also Grigera Naón, supra footnote 1, pp. 233 et seq.,
distinguishing between (i) a (cumulative) application of national choice-of-law rules of
countries showing relevant contacts with the transaction or the arbitration at stake ; (ii)
application of a single choice-of-law rule which is perceived as a universal rule or which is laid
down in an international convention ; and (iii) application of general principles of substantive
law or the lex mercatoria (voie directe).
/
41. Craig, Park and Paulsson, supra footnote 1, p. 326. According to these authors, the
cumulative application of choice-of-law systems is “the most frequent method used by ICC
arbitrators”.

42. Craig, Park and Paulsson, supra footnote 1, p. 327 ; Born, supra footnote 1, p. 2650.

43. Craig, Park and Paulsson, supra footnote 1, pp. 327/328, referring to ICC cases 2585/1977 and
2734/1977. More recent cases in which the closest connection test was applied are cited by
Born, supra footnote 1, p. 2650, footnote 192, p. 2654, footnotes 212 and 213.

44. For instance, a contract of sale is characterized by the performance of the seller, being the
party transferring ownership of the goods sold, while the buyer’s obligation merely consists of
paying the purchase price. Characteristic for an insurance contract is the performance of the
insurance company, as it is taking over the risks run by the insured, while the latter’s obligation
consists of paying the insurance premium. The two examples indicate that paying a sum of
money is generally not characteristic for any kind of contract. See also : the various types of
contracts listed in Article 4 (1), Rome I Regulation, and the general rule laid down in Article 4
(2).

45. While Article 4 (3) does make an exception for cases in which the contract is “manifestly
more closely connected” with another country, the interpretation of Article 4 by the EU Court
of Justice does not leave much room for “proper law exceptions” : ECJ, 6 October 2009, Case
133-08, ECLI:EU:C:2009:617 ; ECR, 2009, I-9687 (Intercontainer Interfrigo v. Balkenende
Oosthuizen BV and MIC Operations BV).

46. It should be noted that the applicable law is not determined by the place where the
characteristic performance is carried out but by the habitual residence or place of business of
the “characteristic performer” ; cf. Article 4 (2), Rome I Regulation.

47. ICC Case 2585/1977, discussed in Yves Derains, “Cour d’Arbitrage de la Chambre de
Commerce Internationale – Chronique des sentences arbitrales”, 105 Journal du droit
international (Clunet), 1978, p. 998.

48.

Born, supra footnote 1, p. 2650, footnote 1992, cites ICC Case No. 8672, 12 (1) ICC Ct. Bull., 2001, p.
117/118, which o fers a good example of this situation : «“The arbitrator, on the basis of general
concepts of private international law, de nes the criteria to determine the law applicable to an
agency contract as those of the closest connection with the country in which the characteristic
performance of the contract is to take place and also the place where the agent has its main
location.”»

Which criteria would the arbitrator have used if those places had not coincided ?

49. Supra, footnotes 29-31 and accompanying text.


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50. ICC Case No. 4650/1985, cited by Craig, Park and Paulsson, supra footnote 1, p. 329.

51. Cf. Born, supra footnote 1, pp. 3302-3303 : “Most national courts have rejected arguments
that the arbitrators failed to comply with the parties’ agreement by applying the law of the
‘wrong’ jurisdiction.” According to Born (p. 3303), it is even doubtful whether a departure from
an express choice would be su cient reason for setting aside the award or for refusing
recognition. Silberman and Ferrari, supra footnote 34, pp. 312 et seq., on the other hand, take
the position that an award may be subject to judicial challenge if it could be argued, either
under the lex loci arbitri or under the New York Convention, that the arbitrators “exceeded their
powers” by disregarding an express choice by the parties.

M. De Boer, Th.

Cite this page

M. De Boer, Th., “Choice of Law in Arbitration Proceedings (Volume 375)”, in: Collected Courses of the Hague Academy of International Law. Consulted
online on 18 November 2019 <http://dx.doi.org.ezproxy.uniandes.edu.co:8080/10.1163/1875-8096_pplrdc_A9789004297661_02>
First published online: 2019