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Applicable Laws
(Redfern and Hunter)

3. Applicable laws

A. Overview

(a) Introduction

 The arbitral tribunals relies on the aspects and facts of the dispute rather than
on legal principles to make their decisions. Therefore, the laws are briefly
mentioned. Nonetheless, its not right to say that arbitration is in a legal vacuum.
It’s not in a legal vacuum because it’s regulated by any specific rules of
procedures that have been agreed or adopted by the parties and the arbitral
tribunal, and its also regulated by the law of the place of arbitration.
 As long as the parties are treated equally, mordem law arbitration are content to
leave parties and arbitrators to decide upon their own specific rules of the
procedure. However, those rules need the sanction of law to be effective

(b) A complex interaction of laws

 International arbitration usually involves more than one system of law or legal
rules. It’s easy to identify at least 5 different systems of law that, in practice,
may have a bearing on an international arbitration. The chapter deals with: the
law governing the agreement to arbitrate; the law governing the arbitration itself
(the lex arbitri); the law governing the substantive matters in dispute (the
substantive law); the law or rules governing conflicts of law

B. Law governing the agreement to arbitrate

(a) Introduction

 The authors starts by the law governing the parties’ agreement to arbitrate. This
chosen law is important because it establishes the rules and norms that will
determine any dispute over the validity, scope, or interpretation of that
agreement.
 i. The law of the arbitration agreement will be relevant if there is a dispute over
 whether the tribunal’s jurisdiction extends to a particular issue;
ii. to determining whether the arbitration agreement extends to third parties case,

iii. The law of the arbitration agreement will determine the validity of the
arbitration agreement.
iv. The law of the arbitration agreement may also be relevant to deciding the
applicable method of dispute resolution, where the parties’ choice is not clearly
set out, or where multiple methods are proposed in one arbitration agreement.
 The law governing arbitration agreements, might readily be assumed that is the
same law as that which the parties chose to govern the substantive issues in
dispute. Commercial parties may be less familiar with the possibility that
multiple laws can cover different aspects of the same contract. However, its
precisely the separability of an arbitration agreement that gives credence to the
possibility, at least in principle, that the law governing the contract as a whole
and the law governing the arbitration agreement might differ.
 Given the potential that exists for parties to argue, as a preliminary issue, about
which law applies to an arbitration agreement, the best course of actions if for
parties who are entering in an arbitration agreement to make clear what law is
to apply to that agreement. This can easily be done, for example by stating the
chosen law in the arbitration clause itself, as long as this stating law is not
contrary to public policy, which may be a different law (if they wish). , if there is
no express choice of law (a situation that arises more frequently than not), and it
becomes necessary to determine the law applicable to the agreement to arbitrate,
the question that then arises is: how is a court or an arbitral tribunal to identify
the relevant law? The answer may differ according to whether it is a court or
tribunal that has to make the decision, If it is a national court, that court will
be expected to decide the question in accordance with its own rules of private
international law. If the question is posed to an international arbitral tribunal, the
answer isless easy (the author will approach it later).

(b) The applicable choice of law rules

 The article V(1) from the NY convention does not deal directly with deciding
wuat law governs or is likely to govern an agreement to arbitrate, but states that
if there is a plea before a national court to the effect that an arbitration
 agreement isinvalid, it must be shown that it wasinvalid ‘under the law to which
the parties have subjected it or, failing any indication thereon, under the law of
the country where the award was made’. This means that if the parties don’t
express anything, it should be applied tha law of the seat, being the law of the
country where the award was made.
 Given the wide acceptance of the New York Convention, we might expect to see
conformity in the approach taken by courts in different jurisdictions to the
question of which law applies to an arbitration agreement. however, there are
significant divergences in the specific approaches taken across different
jurisdictions. This lack of uniformity among major arbitral jurisdictions can have
practical repercussions.

(c) The law of the contract as the applicable law of the arbitration agreement

(i) The commercial intent of the parties

 The main question: if the parties explicitly choose a law to govern their contract,
should a different law apply to the arbitration clause within that contract?
 A French commentator has said: The autonomy of the arbitration clause and of
the principal contract does not mean that they are totally independent one from
the other.
 The “Enka v Chub” case is the leading authority on the approach taken under
English law to ascertain the law of the arbitration agreement.

(ii) Potential conflict with the autonomy of an arbitration clause

 A conceptual difficulty in applying the law of the contract to all terms of the
contract is that it arguably runs into conflict with the ‘autonomy’ of the
arbitration clause. Even those jurisdictions that apply a presumption that the
contract and its arbitration agreement are governed by the same law recognise
that this is not always the case. The separability of an arbitration clause therefore
supports the argument that it is possible for it to be governed by a different law
from that which governs the main agreement.
 The NY convention points towards this conclusion. the agreement under which
the award is made must be valid ‘under the law to which the parties have
subjected it’, or, failing any indication thereon, ‘under the law of the country
 where the award was made’ (which will be the law of the seat of the arbitration).

(d) Law of the seat of the arbitration

(i) the autonomy of an arbitration agreement

 In Enka v Chubb, the UK Supreme Court rejected the proposition that the parties
could be taken to have selected a governing law of the contract as a whole on the
sole basis of their choice of an arbitral seat and found that, in the same way, the
law of the seat did not necessarily imply a choice of law of the arbitration
agreement. But this view is not universally held.
 Choosing a seat means that many aspects of the arbitration agreement will be
governed by the law of the seat in any event, regardless of which law applies to
the matrix contract.
 In cases where many aspects of the arbitration will be governed by the law of the
seat, the natural inference is that the parties intended the entirety of that
agreement to be governed by that law.

(ii) the requirements of the law of the seat

 Again, in the instance of the law of the seat itself stipulating that it is to be
applied as the law governing the arbitration agreement, the choice of the law of
the seat reflects the parties’
 Unless the parties have explicitly agreed on something different, there are some
institutional and national laws providing that “where applicable as the law of the
seat, the same national law will govern the arbitration agreement, absent
agreement between the parties to the contrary.”
example: the law of Scotland provides that where parties have agreed to seat
their arbitration in Scotland, but have failed to specify the law governing an
arbitration, the arbitration agreement is to be governed by Scottish law.

(iii) The law of the seat as a means to avoid invalidity

 The parties’ implied choice of law to govern their arbitration agreement might
also be the law of the seat, where the law of the contract as a whole would
otherwise invalidate the parties’ agreement to arbitrate.
 The principle that a contracting parties could not reasonably have intended a
 clause in their contract to be invalid will give effect to an aim or purpose to
which the parties can be taken to have had in view. (the authors give Hamlyn v
Talisker to exemplify). “It is more reasonable to hold that the parties contracted
with the common intention of giving entire effect to every clause rather than of
mutilating or destroying one of the most important provisions”

(e) Delocalisation – a French “third way”

 The French courts have adopted a different approach from the ones we have
seen, whereby the existence and scope of the arbitration agreement is
determined exclusively by reference to the parties’ discernible common
intentions. This approach, which fundamentally envisages international
arbitration as a truly autonomous system has the advantage of avoiding the need
to have regard to the particular, local “conflict law” rules developed by different
states around the globe. It seeks instead to implement what the court or tribunal
finds to be the common intention of the parties.
 In this context, the reference to the legal independence of the arbitration
agreement is a reference to the doctrine of separability of the arbitration
agreement, and which leads to the arbitration agreement being regarded as being
itself autonomous.

(f) Combining several approaches – a Swiss model

 As regards its substance, the arbitration agreement shall be valid if it conforms

C. Law governing the Arbitration

(a) Introduction

 The lex arbitri will usually be different from the law that governs the substantive
matters in dispute.
 This difference between the lex arbitri and the law governing the substance of
 the dispute was part of the juridical tradition of continental Europe, but is now
firmly established international arbitration.
 The parties choosing a “neutral” place doesn’t mean that they necessarily intend
to chose the law of that place to govern their relationship. as well as choosing a
place of arbitration, they may well choose a substantive law that has no
connection with that place.
 If the parties do not make an express choice of the place of arbitration, the
choice will have to be made for them, either by the arbitral tribunal itself or by a
designated arbitral institution. In cases of this kind, the place of arbitration will
usually be determined by reference the the priority of neutrality as between the
parties and choosing a place that can provide a supportive and reliable
supervisory jurisdiction to the arbitration process.

(B) What is the lex arbitri?

A body of rules which sets a standard external to the arbitration agreement, and the
whishes of the parties, for conduct of the arbitration. (law of the place of arbitration)

(i) the content of the lex arbitri

 Each state will decide for itself what laws it wishes to law down to govern the
conduct of arbitrations within its own territory. Ex: some will consider consumer
protection, others won’t
 Highlights the distinction between domestic and international arbitration, with
some countries having specific laws for international cases.
 the Model Law is the baseline for modernizing arbitration laws in jurisdiction,
which allows parties to agree on procedures or empowers tribunals to decide.
 Examples of the matters with which the lex arbitri might be expected to deal:
i. the definition and form of an agreement to arbitrate;
ii. whether a dispute is capable of being referred to arbitration (that is, whether it
is ‘arbitrable’ under the lex arbitri);
iii. the constitution of the arbitral tribunal and any grounds for challenge of that
tribunal;
iv. the entitlement of the arbitral tribunal to rule on its own jurisdiction; v. equal
treatment of the parties;
vi. freedom to agree upon detailed rules of procedure;
 vii. interim measures of protection;
viii. statements of claim and defence;
ix. hearings, including the permissibility of virtual hearings;
x. default proceedings;
xi. court assistance, if required;
xii. the powers of the arbitrators, including any powersto decide as amiables
compositeurs;
xiii. the form and validity of the arbitration award; and
xiv. the finality of the award, including any right to challenge it in the courts of
the place of arbitration.
Three essential points of this should be made now.
First: the effective conduct of an international arbitration may depend upon the
provisions of the law of the place of arbitration. A way of illustrating this is
because the power to enforce orders, the arbitrator can order some interim
measures, but the enforcement can only be made by a sovereign state.
Second:
 the lex arbitri can have unexpected consequences, like allowing consolidation of
arbitrations or enforcing legal sanctions.
 some states may have a "state monopoly" over certain types of disputes, making
them not arbitrable under their law. This can lead to forum shopping (choosing a
jurisdiction favorable to arbitration).

CLASS

 the lex arbitri

CISG, UN MODEL LAW