Commercial Arbitration Research

 

What is the impact on International Commercial Arbitration agreements after the introduction of French Arbitration Rules?

 

Introduction 

Arbitration is a private justice that is born by the will of parties to settle their disputes, usually but not, exclusively of commercial nature and out of court. Theoretically parties are free to agree to arbitrate, choose arbitrators, design procedures and select substantial laws governing the merits of their case. Finally, they could be rendered an award to decide their disputes. Arbitration as an alternative form of dispute resolution existed in domestic or national arbitration for many years. In domestic arbitration all disputes took place in the jurisdiction of a country and municipal laws naturally either governed or over saw the process of arbitration. But with the emergence of global trade more and more disputes became complex with international dimensions and conflict of state laws became apparent. Both national and international Commercial arbitration have several defining characteristics. Firstly arbitration is mostly consensual and thus the type and form of the arbitration agreement controls the process of arbitration. Secondly arbitrators do not act as judges or government agents and infect are agreed by the parties. Finally, in its nature arbitration is completely flexible, confidential and autonomous[1].

Thus the harmonisation of domestic and international arbitration laws required theoretical foundations and two very distinct approaches were formed. First it was argued that the law of the country where arbitration is to take place, lex arbitri  or the country where the arbitral award is enforced should govern commercial arbitration. This is called the ‘seat theory’. Second approach is to detach an international commercial arbitration from the control of national law of the place where arbitration proceedings are held. This is called delocalisation theory. The rationale for such an autonomous approach is that there should only be one point of control and that is the place where arbitral award is to be enforced instead of a dual control system. It is therefore argued that this way, the whole world or most of it, would be available for international commercial arbitrations and international commercial arbitration itself would be supra-national, a-national, transnational, delocalised, or even expatriate. More poetically, such arbitration would be a floating arbitration, resulting in a floating award[2].

Therefore in the scope of this study it is reparative that these theoretical aspects of arbitration, in context of party autonomy, are explained and analysed to fully appreciate the inner working of international arbitration.

 

Seat Theory and Party Autonomy

This is perhaps the most obvious and important theoretical approach in international commercial arbitration. This section is limited to the explanation of different components of seat theory as well as of its critical analysis from party autonomy point of view. As mentioned above the concept of arbitration is based upon party autonomy and that means parties can decide, by way of an agreement how they would like to resolve their dispute. However it is equally important that the commercial aspects of a dispute should never be over looked. Before a critical analysis is presented it is imperative to ascertain that seat theory is not only endorsed by UK courts but also has a support of various international jurisdictions.

English courts have implemented the concept of seat theory and there are various cases that could be looked into it.  Starting point will be comments of Steyn J. in the English case of Paul Smith Ltd v H&S International Holding Inc[3] where he explained the concept of lex arbitri as a necessary supportive role of the courts to promote arbitration. Secondly F.A. Mann[4] who is a fundamentalist supporter of seat theory noted the court of appeals decision in Naviera Amazonica Peruana SA v Compania Internacional de Seguros de Peru[5]. Mann not only supports courts decisions but also professes that in fact international arbitration is national arbitration. It could be argued that it is an orthodox yet simple view that ignores party autonomy as a foundation of international commercial arbitration. It is further argued that parties also should be free to choose the supervisory, supportive and conclusive role of national courts as parties to an arbitration agreements know in advance that by choosing the judicial seat of arbitration[6] they are agreeing to principles of lex arbitri. Therefore freedom to choose should not be limited to the exclusion of lex arbitri but should be an inclusive option of choice. Nevertheless it seems that as far as English courts are concerned, national courts will have inherent jurisdiction over arbitration agreements if the agreement stipulates England as its judicial seat of arbitration.

Various international courts have also sided with seat theory. For example in the case of Rupali Polyester Ltd[7]Malik Muhammed Qayyum J. of the Supreme Court of Pakistan supported the view that the national court should have jurisdiction over arbitral process. Furthermore in National Thermal Power Corp[8] the Indian supreme court not only endorsed to lex arbiti but also went on to say that it is an inherent jurisdiction of the Indian court to govern the arbitration agreement. Finally Chao Hick Tin J.A.'s judgment in PT Garuda Indonesia[9] adheres to seat theory by putting forward territorial arguments. However, in the context of international commercial arbitration, it is somewhat ambiguous whether courts of other jurisdictions are following the decision of English courts or have genuinely relying upon philosophical arguments of seat theory that in fact compliments their domestic legal jurisprudence.

In addition to that the seat theory is also entrenched in the UNICITRAL Model Law on International Commercial Arbitration. According to Article 1 of the Model Law and by virtue of its sovereign power, it is to supervise over the commercial arbitration[10]. Furthermore Article 8 and 9 states very clearly that court’s role is to assist and to provide support as oppose to intervene. Therefore to evaluate the seat theory and its impact on party autonomy the following four points are made.

Firstly the seat theory, although is not only enforced by national and international courts but also has been recognised by various treaties and conventions, approach has been criticised because it has limited the scope of party autonomy which is the central pillar of commercial arbitration. It has been expressed by Mance L.J[11] that because of a limited scope of seat theory the concept of party autonomy may only become a ‘myth’ if domestic courts do not stop interference in the arbitral process. However the author would argue that domestic courts do not interfere but are there to support and assist should the parties to the arbitral contract require. Most importantly it is just not enough to merely say that lex arbitri should not prevail due to the autonomous nature of the Commercial Arbitration and not present a valid and credible alternative process to deal with all arbitral anomalies and eventualities. This has also been well stated by Lord Mustills judgement in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd[12]. His lordship elaborated that the parties are perceived to have the freedom to choose the formation of the arbitral agreement any way they please but by choosing the seat of arbitration means expressly or impliedly that the lex arbitri principles apply and therefore national courts will have inherent jurisdiction to assist and to support the arbitral process. This seems a reasonable approach especially if the parties to the arbitration agreement have a dead lock over issues akin to the contract than there must be a sovereign authority that should resolve the issues by way of making legally binding decisions. Furthermore Massood Ahmed[13] commenting on Lord Mustills judgement notes that this supervisory role of the courts is not necessary for the smooth running of the actual arbitral proceeding but also parties could potentially avoid non enforcement of arbitral award.

Secondly there is a commercial argument upon which, in authors view the concept of party autonomy rests. It is argued that it is easier to forget why those parties to an arbitration agreement are in arbitration proceedings at all. In commercial terms claimant usually is claiming for damages by way of an award. Therefore if the parties know that after going though the hurdles of arbitration, considerable expense and economic loss award may not be rendered or set aside or non enforceable than they might consider commercial litigation instead. Therefore to promote the idea of International Commercial Arbitration not only the process needs to be efficient, confidential, coherent and cheaper but also have the power to enforce award.

Thirdly and most importantly the concept of party autonomy also requires justifiable limitations for the process to be credible, in expensive, quick and confidential. Redfern and Hunter[14] commented on Article 19(1) of the UNICITRAL Model Law that provides that “subject to the provision of this law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings”. Furthermore where the applicable rules are agreed before the constitution of the tribunal it is unlikely that those rules could be amended without the consent of the arbitral tribunal. Therefore it seems that in practice and its application the party autonomy does have limitations that are imperative for fair and justice process[15].

Finally in the course of excising party autonomy parties must also be allowed to choose, if they may wish, to have the assistance of the national court as a safety net. Therefore it could be argued that this protection cannot be achieved if there is no ‘fall back’ position available for the parties. William Park has maintained that some control of international commercial arbitration by municipal courts is necessary in order to deal with deficiencies in the arbitral award and the arbitral process[16].

 

Delocalised Theory and Party Autonomy

In essence the delocalisation theory maintains that Commercial Arbitration should be free from the constrains of the national laws and therefore should not be influenced or governed in any shape or form by those laws but only for the purpose of enforcement of arbitral awards. There are number of cases and treaties and conventions that have illustrated the delocalised view but for the purpose of this essay three main cases shall be critically analysed. The section shall also comment on the view point of other notable authors and there learned views.

Jan Paulsson[17], a renowned supporter of delocalised theory explains the concept that “The sometimes-used expression ‘floating arbitration’ is not entirely satisfactory, because all arbitral awards may, and frequently do, float”. Delocalised theory found its strength in the flowing three cases. In Gotaverken Arendal AB v Libyan General National Maritime Transport Co[18] claimants enforced the arbitration agreement and sought the defendant to take delivery of three oil tankers. Defendants refused to take the delivery and contended that claimant has breached the arbitration agreement. The arbitral tribunal, under the rules of International Chamber of Commerce (ICC) decided against the defendant. Defendant appealed to the Paris court to have the award set aside on the grounds of tribunal not providing sufficient reasons for the award. The Paris court rejected defendant’s arguments and maintained that due to the ‘international’ nature of the award it does not have jurisdiction. Claimant eventually enforced its tribunal award in Sweden. Massod Ahemed explains that the heart of the court of appeal’s decision was “The place of the arbitral proceedings, chosen only in order to assure their neutrality, is not significant; it may not be considered an implicit expression of the parties' intent to subject themselves, even subsidiary, to the ‘loi procedural francaise”. This case was particularly encouraging for the supporters of delocalised theory but they failed to appreciate the uncertainty that it spread in the arbitration world. If this case did not create enough sensation, confusion and uncertainty than in Hilmarton Ltd v Omnium de Traitement et de Valorisation[19] the Cour de Cassation recognised an arbitral award that was set aside by the Swiss court on the grounds of public policy. The court held “the award is not integrated in the legal system of that State, so that it remains in existence even if set aside and its recognition in France is not contrary to international public policy.” This case was very significant as it brought out the real impractical nature of the delocalised theory. Most importantly international arbitration perhaps could deal with the floating awards but drifting awards are degrading the very integrity of the arbitration process. Further in PT Putrabali Adyamulia v Rena Holding[20] where the parties to an arbitration agreement started proceeding in London as their chosen seat of arbitration. The Tribunal made an award in favour of the claimant and defendant appealed to the high court under the Arbitration Act 1996 s (69)[21] and high court referred the matter back to the tribunal which issued a second award in favour of the defendant. Claimant made an application to the French court for the recognition and enforcement of their award and it, following its earlier decisions, recognised the award. The Cour de Cassation held “an international arbitral award, which is not linked to any national legal order, is a decision of international justice, whose validity is reviewed in accordance with the rules applicable in the country where its recognition and enforcement is sought.”

It appears that the delocalisation argument is not only circular but also presents conflicts within. To elaborate this notion Masood Ahmed states in his well balance and meticulous article that “why should states not be given the right to govern the arbitral process before the award is rendered in another state? In the interest of justice, enforcement should not be allowed where an award has already been set aside or annulled at the seat of arbitration this would clearly lead to unfairness to the parties and will have the undesired effect of undermining international commercial arbitration”. The reality is that due to those French decisions the concept of party autonomy perhaps needs to be revised in the context of delocalisation. Furthermore it is argued that theorists have to also focus on the objectives of arbitration and those are that commercial entities require, cheap, private, efficient, reliable, consistent, protective and institutional justice that could never shy away to assist or to enforce awards rendered instead of making them disputed[22].

Further the delocalists always point toward the New York Convention 1958 as the convention that supports their views. It is considered one of the successful conventions if not the only convention in recognition and enforcement of arbitral awards. The delocalists argue that the states those are party to this convention have not only the duty to recognise the arbitral award but also have to recognise and enforce the award. Therefore this notion points out the fact that states must recognise the award regardless of where it was rendered. However writer would pose this question as to how could a sovereign court’s power be restricted to only recognising and enforcing the arbitral awards without accepting court’s jurisdiction to supervising the arbitral award?

The delocalised arbitration is further criticised as being “wholly unrealistic” because it attempted to put international commercial arbitration in a legal vacuum. For example a contract, this is derived from the parties’ autonomy but is a necessarily subject to local contract law and other relevant laws. The autonomy of the contractual parties is not absolute and is controlled by mandatory rules and public policy of a state. The same rationale also applies to national as well as international arbitration[23].

Finally it seems that as Lainé has argued that it is a fact that no arbitration can legally exist or be performed without the parties' agreement. However, he does not accept that the parties' arbitration agreement constitutes or stipulates the ‘jurisdiction of the arbitration’. It is also a misconception that arbitrators are judges, in reality the judges assert their power directly from the sovereign whereas the arbitrators derive their authority from the sovereign but their nomination is a matter for the parties[24]. Similar point has also been made by Pillet who stated in relation to the arguments that arbitration agreement is irrelevant once the arbitrator has been appointed “The arbitration agreement is necessary to give the arbitrators their authority, but once that authority has been conferred on them, provided they keep within the limits of the task given to them, their freedom is absolute and the arbitration agreement has no influence on their award which is based on quite different matters.”[25] . Therefore from the party autonomy’s point of view delocalised approach or not, once arbitration is structured on the jurisdictional framework, parties are allowed to rely on party autonomy to decide how arbitration procedures shall be followed. However, the scope of autonomy is only recognised within the jurisdictional framework[26].

Party autonomy is the central pillar of international commercial arbitration but has obvious limitations and cannot be absolute. Because if the concept of party autonomy is stretched to the point of an absolute private law and justice mechanism than it will have two immediate effects. Firstly expressly or impliedly the concept of sovereignty from which all state and court powers are derived, shall by default, be limiting itself within its own jurisdiction. This will represent a serious conflict of legal jurisprudence theories. Secondly who will be observing the implied conditions necessary to exercises ‘freedom of contract’ and if there is a un resolvable issue between the parties how could it be settled justly without the assistance of the courts.

However it is obvious from the case law that it is French and English courts that are divided in their decisions. It seems that French courts prefer the delocalised approach whereby English courts have sided with the seat theory. In the mist of this confusion the argument of commerciality is being ignored and it is the international business entities that are the real corner stone of Commercial arbitration and party autonomy, because without the arbitration agreement, international commercial arbitration will simply not exist. The most important objective of any arbitration proceeding is that after business relationship between the parties has been broken down and claimant want a just and equitable award for its grievance. Therefore the above arguments presented by the seat theory and delocalisation theory could be summarised that in practice seat theory is more likely to produce a coherent and enforceable award than the delocalised theory. Nevertheless confusion and inconsistency in arbitral awards and proceedings shall remain until the match between those theories is not decided and the principles are accepted by the courts of major countries, such as France and England.

Perhaps a point of contention could be the hybrid theory that allows the autonomous approach of the parties but limiting only to the assistance of the courts for the enforcement of an arbitral award. Briefly, it has the right components of delocalised and seat theories.

 

Arbitration Agreements and New York Convention;

Issues and Analysis

 

One of the major reasons for confusion which has prevailed over the past years in the area of the law applicable to the arbitration agreement comes from the fact that very often basic distinctions between essential issues and elements relating to the validity of arbitration agreements are neglected, misunderstood or not precisely anticipated by arbitral tribunals.[27] Most importantly, there are many, often closely related factors which might affect the existence and validity of the arbitration agreement, all of which may be submitted to different laws.[28] Ignoring these crucial distinctions have caused misleading and some time unproductive discussions creating more uncertainty instead of stability.

Arbitration is predominantly an agreement to establish “private justice” or in other words private dispute resolution by a private tribunal.[29] This is why it is generally recognized today that arbitration agreements have a somewhat ‘hybrid nature’ containing both procedural and contractual elements[30]. Ignoring very special circumstances such as arbitration under investment protection treaties[31] or free trade agreements, almost all arbitration proceedings require an agreement by the parties. The English Commercial Court has explained the contractual character of arbitration as follows:

 

“An arbitration clause in a commercial contract like the present one is an agreement inside an agreement. The parties make their commercial bargain, i.e. exchange promises in relation to the subject matter of the transaction, but in addition agree on a private tribunal to resolve any issues that may arise between them”[32]

 

Arbitration agreement is “the gateway to arbitration”[33] however it is surprising to know that the determination of the law applicable to actual agreement is definitely a complex task than establishing the law governing the actual contract. In spite of these alleged hurdles, parties who negotiate and draft an arbitration agreement do not agree on the law applicable to the arbitration agreement but rather “rely on the future arbitrators' wisdom”[34].

Provided that there is also the law applicable to the parties' capacity to conclude the arbitration agreement, the law applicable to the arbitral procedure (lex loci arbitri), the law applicable to the arbitrator's contract (receptum arbitri)[35], the law applicable to the contract between the parties and the administering institution and the law applicable to the substance of the dispute[36], one would be faced with fourteen conflict of laws issues in international arbitration. In light of this plethora of legal theories, Marc Blessing rightly asked the question: “Are we thus faced with a magnificent confusion?”[37]

  

Formality of Arbitration Agreements

Most arbitration laws, domestic as well international, contain formal validity requirements applicable to the arbitration agreements. The rationale for these requirements is that the parties shall be made aware that by having an arbitration agreement they are excluding the jurisdiction of the domestic courts and this certainty serves a warning purpose. Secondly writing requirements serve to preserve the text of the arbitration agreement if the jurisdiction of the arbitral tribunal is disputed and therefore provides certainty to proceedings[38]

Furthermore if a tribunal has to deal with the formal validity of the arbitration agreement, it must apply the formal validity rule contained in the lex loci arbitri. This very clear rule follows from the fact that, first, these formal validity rules must be qualified as substantive rules of private international law[39]. Secondly, the domestic connection of the arbitration to the arbitration law of the seat, which is so widely accepted today, necessarily leads to the conclusion that an arbitral tribunal sitting in that country must apply the mandatory formal validity rules contained in that law[40].  It is in view of this clear-cut rule that most international arbitration rules perhaps ignore the formal validity issue[41].  It is therefore a reason that the drafters of the UNCITRAL Model Law stated that “the model law is intended to govern all international commercial arbitration agreements”[42].

In reality it creates an issue in relation to this very clear rule and therefore application of it becomes more complicated especially when faced with the legalities of domestic law and international uniform law and in particular, Art. II(2) New York Convention. Therefore a distinction should be drawn between the arbitration agreement being examined by the arbitral tribunal or by a state court.

In this regard, the first point is that the uniform rules contained in the New York Convention are addressed to courts and not to arbitral tribunals. International arbitrators are therefore under no treaty obligation to apply the formal validity requirements of the Convention. However, they may feel a practical necessity to ensure compliance with the Convention if parties indicate possible enforcement for and the arbitrators realize that the enforcement judge will apply the New York Convention[43]. Secondly, these were the practical reasons, the tribunal in ICC 16 Award no. 5730, not only rejected the theory of the direct application of the New York Convention by international arbitrators but also suggested that it is nonetheless desirable that international arbitral tribunals do not “without serious reasons” depart from the formal validity rule laid down in Art. II (2) New York Convention in order to ensure that the tribunal will not judge its competence along criteria which are different from those that a judge would apply under Art. V New York Convention[44]. It should be noted that this practical approach follows from the arbitrators' “soft” obligation to render an enforceable award. Nevertheless the clear rule stated above and the international arbitrators' willingness to accept jurisdiction means that if the arbitration agreement is not in accordance with Art. II(2) of the Convention but meets the more lenient requirements of the formal validity rule of the law of the seat, then the tribunal must apply this rule[45] because it is under a legal duty, and not just a practical “nobile officium” obligation to do so[46].

In circumstances of a court facing with the question of which formal validity rule should apply to an arbitration agreement, it than entirely depends upon where the seat of the arbitration is located.

However, if the seat is located in the country where the court sits, the court will apply the formal validity requirements of Art. II (2) of the New York Convention if it is concerned with the enforcement of the arbitration agreement under Art. II, irrespective of whether the law at the seat contains stricter form requirements. The Convention sets a maximum standard and supersedes any stricter form requirements within its scope[47].

It is therefore necessary to examine the minimum requirements imposed by the New York Convention Art. II (2). If a party decides to profit from the more favourable rights provision in Art. VII (1) of the New York Convention, it may rely on a more lenient formal validity rule contained in the lex arbitri. However in that scenario enforcement of the arbitration agreement or the award is based on non-unified local law and not on the unified and widely tested and respected enforcement system of the New York Convention. It must be assumed that Art. II of the New York Convention provides not only a maximum, but also a minimum form requirement for the enforcement of arbitration agreements and awards under the Convention. The Convention is a self regulatory set of laws and it would be contrary to the intention of its makers if awards made on the basis of an agreement that did not comply with the Convention's formal validity requirement would nevertheless benefit from its regime. This means that a party is not allowed to combine the enforcement provisions of the Convention with the lenient form requirements of domestic law. Rather, a choice must be made to rely either on the New York Convention or on domestic law[48]. In practice it makes a considerable difference[49].

In context of UNCITRAL it has made considerable progress to modernize Art II (2) of the New York Convention and put forward revised Art. 7(2) of the Model Law. However, UNCITRAL Working Group on Arbitration tends to assume that the New York Convention contains nothing to prevent the use of some of its provisions in conjunction with other less formal requirements of domestic laws[50]. This is also a position which is shared by some domestic courts[51]. Relying on this very approach the Working Group has suggested a draft interpretative declaration regarding the interpretation of Art. VII (1) and Art. II (2) of the New York Convention. Such a non-binding instrument is regarded as a viable alternative to the promulgation of a binding amending protocol relating to Art. II (2) on which the Working Group has not been able to reach a consensus[52]. In terms of the more favourable rights provision of the Convention the draft interpretation of the declaration recommends that:

 

“Article VII, paragraph (1), of the Convention should be applied to allow any interested party to avail itself of rights it may have, under the law or treaties of the country where the arbitration agreement is sought to be relied upon, to seek recognition of the validity of such arbitration agreement”[53].

 

In reality this opens the New York Convention to the application of more relaxed requirements of domestic law, for example those based on the revised Art. 7(2) UNCITRAL Model Law[54]. These are considered as means to promote the modernized form requirements of the Model Law. At the same time, the Working Group seeks to create a friendly bridge between the new form requirements in Art. 7(2) Model Law and Art. II (2) New York Convention. That is by promoting a liberal, flexible and broad approach to the interpretation of the form requirement of Art. II (2) of the New York Convention. Thus, in promoting a liberal interpretation of the form requirement instead of adapting the text of Article II (2), the requirements of modern trade avoids the potential damage in a sense that change in the text of the provision could do to the complex and vulnerable enforcement mechanism, established in the New York Convention as an instrument of international uniform law. It was recommended by the legislatures that Article II, paragraph (2), of the Convention be applied recognizing that the circumstances described therein are not exhaustive[55].

Moreover, with the reference in the draft declaration to the modernized form requirement of Art. 7(2) Model Law and to the UNCITRAL Model Law on Electronic Commerce, the UNCITRAL Model Law on Electronic Signatures and the UN Convention on the Use of Electronic Communications in International Contracts, this recommendation is intended to ensure that state courts understand that the express reference to “letter or telegram” in Art. II (2) of the Convention does not prevent an interpretation which allows for the formally valid conclusion of an arbitration agreement through modern means of telecommunication[56]. The rationale of using Art. 7(2) Model Law as an interpretation tool[57] to clarify the application of Art. II (2) of the Convention is in accordance with the Swiss Federal Tribunal's approach to modernize the outdated form requirement of Art. II (2) New York Convention by construing Art. II (2) New 18 York Convention in light of Art. 7 UNCITRAL Model Law[58]. To speed up this process of modernizing the form requirement of the Convention, the Working Group also considers the promulgation of a non-binding commentary to be used by domestic courts as guidance in their application and interpretation of the form requirement of the New York Convention[59]. Therefore, UNCITRAL is taking a twofold approach to the creation of harmonized and modernized formal validity rules for international arbitration agreements. The “friendly bridge” which it promotes to build between the Model Law and the New York Convention is not absolute. The more favourable rights provision in Art. VII (1) of the Convention is seen as a catalyst for the adoption of the modernized form requirement of Art. 7(2) Model Law by domestic legislatures worldwide. At the same time, the modernized Art. 7(2) Model Law – provided that it is adopted by as many legislatures as possible and shall serve as means for a more liberal interpretation of Art. II (2) of the Convention by domestic courts which is in line with modern trade practice. 

Situation with state courts in countries other than the country of the seat will be that if the seat of the arbitration is outside the country where the court sits, the court will apply the formal validity rule of Art. II (2) New York Convention in all cases covered by the Convention. In all other cases, the territoriality rule should make the court to apply the formal validity requirement, to be qualified as “règles materielles”, of the arbitration law in force at the seat of the arbitration. This would follow from a logical application of the two principles outlined above. However the policy judgments behind the formal validity rules of domestic law, especially their function to protect the parties from an unwilling derogation of the competence of the state courts, makes most domestic courts apply the formal validity rules of their own law because they do not accept that this question should be decided by a law other than their own domestic laws[60]. The courts adopt a similar approach to that of objective arbitrability where the enforcement courts are called upon to apply their own law instead of that of the seat of the arbitration.

 

Substantive Validity and Arbitration Agreements

It seems that in respect to ascertaining the law governing the substantive validity of the arbitration agreement, there is a lot of discrepancy between the amount of doctrinal writings and the need for clarification. Far from the nine theories listed by Marc Blessing in his comment to Julian Lew's 1998 ICCA Report the conflict rule contained in Art. V (1) (a) New York Convention reflects the modern view of a single conflict of laws rule for the determination of the law applicable to the arbitration agreement. It provides that enforcement of the arbitral award may be refused if the arbitration agreement is not 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.

Furthermore under Art. 31(3) UNCITRAL Model Law,

  “the award shall be deemed to have been made at the place of arbitration”.

Contrary to the alternative Swiss conflict rule[61], the conflict rule establishes a hierarchy between party autonomy, to which it attaches primary importance, and the law of the place and that is seat of arbitration, which applies in those cases where the parties have not chosen the law applicable to the arbitration agreement.

Firstly the reason behind the application of the law of the seat of the arbitration is that it offers the closet link to a generally accepted principle of conflict of laws[62]. Secondly it is widely acknowledged today that an agreement to arbitrate is more closely connected with the law of the seat of the arbitration as the place of performance of the arbitration agreement than with any other country[63].  Finely the close functional connection between the arbitration agreement and the arbitral procedure, which is reinforced if the parties include detailed procedural stipulations in the agreement to arbitrate, should then also lead to the application of this law to the arbitration clause[64]. Therefore the choice of the seat by the parties, or on their behalf by the arbitral institution or the arbitral tribunal, functions as an indirect choice of law not only for the law applicable to the arbitration procedure[65] but also for the law applicable to the substantive validity of the arbitration agreement, and, as we have seen above, for the law that determines the arbitrability of the claims raised and the formal validity of that agreement. In fact, this approach has been taken by some older French court decisions[66]. While from a practical perspective, the significance of the seat of the arbitration is reduced to a mere “formal legal domicile” (formales Legaldomizil) of the arbitration, its significance for choice of law issues related to the arbitral procedure and the arbitration agreement cannot be emphasized enough[67]. Also, since we are dealing here with one single connecting factor for a variety of legal issues, the seat of the arbitration has an important harmonizing effect on applicable law issues in international commercial arbitration.

Nevertheless it has been argued that the value of the seat of the arbitration as the connecting factor for the law applicable to the substantive validity of the arbitration agreement is relatively low[68]. However this view has not been accepted but it is still justified in cases where the seat has not, for the time being, been fixed by the parties or on their behalf by the arbitral institution or the arbitral tribunal. Indeed, English courts have sometimes taken the approach that in such a case, the law of the contract, which was English law, governs the arbitration agreement and have then applied certain sections of the previous English arbitration laws by regarding them as statutory implied terms in the arbitration agreement governed by English law, thereby qualifying these provisions of the Arbitration Act as a matter of substance[69]. This rather confusing approach has raised the question whether in cases where the arbitration has its seat in England, but the arbitration agreement is governed by a foreign law, the English courts might not be able to apply these provisions of the English Arbitration Act due to their substantive qualification.

In any case, Art. VI(c) 1961 European Convention provides that in such cases, the courts shall determine the substantive validity of the arbitration agreement

 

 “by virtue of the rules of conflict of the court seized of the dispute”.

 

This rule simply repeats the very obvious that the court will apply the conflict rule of its own lex fori, which will almost certainly be the closest-connection or centre-of-gravity test. Application of this objective conflict rule will in most cases lead to the application of the law of the main contract. It therefore should be noted that this approach is characterized by two issues. Firstly, the application of the lex contractus to the arbitration agreement does not result from an extension of the parties' choice of law clause but from the application of the objective closest connection test. Secondly, if the seat of the arbitration is later fixed by the parties or by the arbitral institution or the arbitral tribunal, then the law of that seat apply to the arbitration agreement. If this law is different from the law applicable to the main contract, then the subsequent choice of the seat leads to a change of the law applicable to the arbitration agreement (Statutenwechsel). Such a change is nothing unusual in conflicts doctrine and is provided for in Art. 3(2) Rome Conventions on the Law Applicable to Contractual Obligations[70]. Also, this change of the applicable law is inherent in the general conflict rule which links the arbitration agreement to the law of the seat, given that there is no indication in the Conventions or the UNCITRAL Model Law or the domestic arbitration laws from which this rule is derived that it shall apply only in cases where the seat of the arbitration has been fixed in advance by the parties.  Finally, the subsequent choice of the seat is always connected to the will of the parties, either directly or because the parties have delegated that power to the arbitral institution or the arbitral tribunal[71].

Considering the above arguments it is fair to assume that the conflict rule contained in Art. V (1) (a) New York Convention, Art. VI (a) and (b) European Convention, in Arts. 34(2) (a) (i) and 36(1) (a) (i) UNCITRAL Model Law, Sect. 1059(2)1.a) and 1060(2) German Arbitration Act, Art. 1073 Dutch Arbitration Act and Sect. 48 Swedish Arbitration Act has developed into a truly transnational conflict rule for the determination of the law governing the substantive validity of the arbitration agreement[72]. This rule has been applied in numerous international arbitral awards and is indorsed by international arbitral doctrine[73] and has been accepted by domestic courts[74]. Therefore the importance and convincing force of the New York Convention must lead international arbitrators to apply this conflict rule.

The fact that the law applicable to the arbitration clause is rarely the subject of a specific stipulation, it is hardly surprising to find that most national court decisions under the New York Convention have applied the law of the country where the award was rendered. What this means is that competent ICC arbitrators, although free to decide on the validity of the arbitration clause without reference to a national law should also deem themselves bound, under Article 35's exhortation that they „shall make every effort to make sure that the Award is enforceable at law‟, to take account of the law of the place of arbitration[75].

In view of its transnational character, the rule applies irrespective of whether a tribunal or court deals with the question of the validity of the arbitration agreement in the pre-award stage or a court deals with this issue in the post-award stage in setting aside or enforcement proceedings[76]. This means that in practice the territorial connection of the arbitration law to the law of the seat of the arbitration prevails over any attempts to transnationalize the arbitration clause.

Further question that is still not settled is whether the choice of law clause of the main contract also extends to the arbitration clause contained in the contract. (93) The majority view answers this question in the affirmative and reformulates the general conflict rule explained above by stating that:

“the real choice [today] – in the absence of any express or implied choice by the parties – appears to be [only] between the law of the seat and the law which governs the contract as a whole[77]. (94)

 Likewise, Julian Lew, in his 1998 ICCA Report, argued that

 

“in practice, one may wonder whether the proper law of the arbitration clause would be deemed to be other than either the law of the main agreement in which it is contained, or the law of the seat of arbitration”[78].

 

This particular prospective has also been indorsed in a variety of arbitral awards[79]. It extends the parties' choice of law to the arbitration agreement included in the contract because it would be artificial to assume that the choice of law clause whose purpose is to fix the law for the whole contract does not cover the arbitration clause which is an integral part of that contract[80]. Also it is argued that due to the substantive nature of arbitration agreements, the law governing this agreement is to be determined by virtue of the principles of the “proper law” of the contract. One exception from this rule is made for submission agreements concluded after the dispute has arisen. It is argued that since such agreements are physically separated from the main contract, there may be less reason to imply the same proper law as that applicable to the main contract[81].

However, this view ignores the legal effects of the doctrine of separability. That doctrine separates the arbitration agreement legally from the main contract even if it is physically included in that contract, and the particular character of an arbitration agreement involving both substantive and procedural aspects ascribes it a special character different in nature from the main contract[82]. Both aspects speak against an automatic extension of the standard choice of law clause to the arbitration agreement. Craig, Park, Paulsson have rightly stated: Even when a contract is expressly subject to a particular law, as by a stipulation for example that „any difference arising hereunder shall be settled … according to Belgian law‟, it is not certain that the validity, scope, and effects of the arbitration clause would be determined by reference to Belgian law[83].

This is so because of the autonomy of the arbitration clause by referring to ICC arbitration, the parties have accepted that the arbitrators are to decide upon challenges to their jurisdiction and to the validity of the main contract. In so doing, ICC arbitrators need not apply the law applicable to the merits of the dispute[84].

In addition, even though both clauses are typically located at the very end of the contract, the parties rarely consider the arbitration clause when negotiating the choice of law clause in the contract. Finally, extending the general choice of law clause to the arbitration agreement would be inconsistent with a stipulation in the arbitration clause that any dispute should be determined by an arbitral tribunal having its seat in a country different from the one whose law is to govern the substance of the dispute[85].

Therefore, since the parties usually fail to include a special choice of law clause for the arbitration agreement into their contract and absent any special indications hinting at a later choice of law for the arbitration agreement, the second tier of the two-tier transnational conflict rule shall apply. The law of the seat of the arbitration should be applied to establish the substantive validity of the arbitration agreement. This principle was also acknowledged by the UN Working Group that drafted the UNCITRAL Model Law:

 

“to use the place of arbitration as a secondary criterion was beneficial in that it provided the parties with a degree of certainty which was lacking under [other suggested approaches, like the application of the law of the main contract]. There were also doubts as to whether in fact a trend could be discerned in favour of determining the question of the validity of the arbitration agreement according to the law of the main contract[86]

 

This means that in many cases, the seat of the arbitration is transformed from a subsidiary to the primary connecting factor for the determination of the law applicable to the arbitration agreement[87]. Thus, rejecting the automatic extension of the choice of law clause to the arbitration agreement achieves harmonization of decisions between the law applicable to the arbitral procedure and the law applicable to the arbitration agreement. This approach takes account of the fact that the arbitration clause is a contract intended to achieve procedural effects, i.e., the establishment of a system of private justice for the parties. The smooth running of this procedural system requires harmonization of decisions between the arbitration agreement as the basis of this system and the procedure itself. This is confirmed by the fact that there are no overwhelming party interests requiring a harmonization of the law applicable to the arbitration agreement and the law applicable to the main contract.

In conclusion to this section the law determined according to the conflict of laws rule explained above governs all issues that relate to the substantive validity of the arbitration agreement. This includes the conclusion of the arbitration agreement, i.e., the validity of offer and acceptance and the determination of the moment of conclusion of contract, as well as errors of consent such as fraud, error, coercion, undue force, etc., and the execution and termination of the arbitration agreement, e.g., duration, impossibility, the prerequisites and consequences of cancellation and the application of the rule exceptio non adimpleti contractus[88]. Finally, this law governs all questions that relate to the scope of the arbitration agreement, including the extension of the arbitration agreement to third parties. Typically, this latter issue must be determined by applying the rules of contract interpretation of that law, including the principle of in favorem validitatis dealt with above. (124)

In certain circumstances, it can be difficult to ascertain whether a certain legal issue is to be determined under the law applicable to the substantive or the formal validity of the arbitration agreement. Therefore, Art. 7(2) UNCITRAL Model Law provides that an arbitration clause contained in standard terms is formally valid only if

 

 “the reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract”.

 

 The first part of this provision is certainly a formal validity requirement. The situation is not so clear with respect to the second, highlighted passage of this provision. In this context one is frequently confronted with the observation that inclusion by reference of an arbitration clause contained in standard forms does not only concern the formal validity of the arbitration agreement but at the same time decides on the existence of the parties' consent to submit the dispute to arbitration[89]. It would not be correct to deduce from this observation a strong interaction of formal and substantive requirements, in a way that the formal requirements, construed restrictively, decide over the substantive consensus of both parties[90] or that the question of formal validity is decided solely on the basis of the substantive national law which governs the question of consent of the parties. Confusing substantive and formal validity requirements does not do justice to the different functions of both kinds of rules and runs the risk of restricting the ways of including an arbitration clause by reference to an extent which is incompatible with the needs of modern commercial transactions[91]. Instead, the problem of inclusion by reference has to be tackled by taking into account the specificity of international commercial arbitration. The customs and usages of international trade and commerce and not the law of the seat decide over the question of whether “the reference was such as to make that clause part of the contract”[92]. Based on these considerations, two rules have been developed by international doctrine. First, a specific reference to the arbitration clause contained in a set of standard terms is always sufficient to make that clause part of the contract. Second, in case of a global reference to a set of standard terms which contains an arbitration clause that is not specifically mentioned in the reference, the generally accepted view is that the formal validity rule is met if the other party is already in possession of the standard forms or if the other party is put in a position to check the reference, for example where the conditions are set out on the reverse side of the contract or attached to it or, alternatively, if dispute settlement through arbitration is customary in that particular business[93]. 

 

Comparative analyses 

There are few points that shall be made in terms of comparison. First point will be to compare and critically analyse the concept of Arbitrability with the validity of the arbitration agreement.

The arbitration agreement forms the basis of the tribunal's jurisdiction. American courts and legal doctrine are using the sweeping term “arbitrability” to cover all issues of jurisdiction. This term, however, can mean different things[94]. In Europe, its meaning is limited to “subject matter arbitrability”. Subject matter arbitrability determines those types of issues which can or cannot be submitted to dispute settlement by arbitration[95]. If the subject matter of the dispute is non-arbitrable, the arbitration agreement is invalid and the tribunal has no jurisdiction to decide the dispute even if both parties desire to do so[96]. The arbitrability issue, therefore, resolves the conflict between public policy and party autonomy. However, American courts and legal doctrine extend this concept beyond the ambit of public policy to cover the validity and scope of the arbitration agreement. From a conflict of laws perspective, this extended view is problematic because subject matter arbitrability and contractual arbitrability are subject to completely different conflict of laws approaches.

At present most modern arbitration laws contain substantive rules of private international law which govern the subject matter arbitrability of claims that are in dispute in arbitrations which have their seat in that jurisdiction. Art. 177 Swiss Statute on Private International Law[97], Sect. 1030(1) German Arbitration Act[98], Sect. 1020(3) Dutch Arbitration Act[99] or Sect. 1(1) Swedish Arbitration Act[100] contains such “règles materielles”. These mandatory rules replace classical conflict of laws analysis. Due to the territoriality principle[101], these substantive rules apply as soon as the seat of the arbitration is fixed in that country. The seat serves as the connecting factor for these rules when the question is to be determined by the tribunal itself. However, when this issue is to be determined by a court in a country other than that where the arbitration had its seat, e.g., in recognition and enforcement proceedings, that court will determine that issue according to its own law. This approach is confirmed by Art. V (2) (a) New York Convention and Art. 36(1) (b) (i) UNCITRAL Model Law on International Commercial Arbitration which provide that recognition and enforcement of the award may be refused if the subject matter of the dispute is not arbitrable under the law of the state where enforcement is sought. Thus, the legal determination of the objective arbitrability of the subject matter of the arbitration is only relative, i.e., limited to the viewpoint of the forum whose rules are applied. The significance of this problem is substantially reduced due to the worldwide trend in favour of arbitrability which has begun with the Mitsubishi decision of the US Supreme Court[102].

The substantive validity of the arbitration agreement, that is the contractual arbitrability, however, is governed by the choice of law principles and related to form and substance arguments. Again, in spite of these different approaches both subject matter and contractual arbitrability may be governed by the same law. One must be aware of the fact that such a result does not follow from a uniform conflict of laws principle and that both kinds have to be distinguished from each other in terms of conflicts of laws methodology.

Second essential point relates to the difference between substance and form[103]. The former relates to the question whether there was a valid meeting of the minds of the parties with respect to dispute settlement through arbitration. The latter concerns special formal validity rules established to ensure that the parties are aware that by concluding the arbitration agreement, they oust the jurisdiction of the otherwise competent state courts. There is a hierarchy between both issues. The formal validity comes into play only if and to the extent that the parties have reached an agreement to arbitrate. As in general conflict of laws theory, formal and substantive validity is subject to different conflict of laws approaches. This could, but must not necessarily mean that both issues are governed by different laws. Even though the distinction seems to be obvious and clear, state courts have sometimes not differentiated between the formal validity requirements governed by the New York Convention and the substantive validity requirements governed by domestic law, and have applied the latter to both requirements[104]. However, there may also be other issues in dispute between the parties which relate to the validity of the arbitration agreement. Thus, the parties' capacity to arbitrate, sometimes called “subject arbitrability”, may be in question. Also, a party's authority to represent another party in the conclusion of the arbitration agreement may be disputed. Finally, one party may challenge the objective “arbitrability” of all or certain claims that are in dispute. All these issues can be governed by different laws. In any event, it would be wrong to say that we are dealing with “the law” applicable to the arbitration agreement. The above considerations as well as the following observations show that we are searching for “the laws” applicable to that agreement.

Third point that is often overlooked but equally is a vital distinction. It is the issue of the existence and validity of the arbitration agreement may arise in different form and at different stages of the proceedings. A basic distinction must be made in this respect between arbitral tribunals and state courts.

Arbitral tribunals must determine the law applicable to the arbitration agreement whenever they have to ascertain the basis of their own jurisdiction. They are allowed to do this under the generally accepted principle of Kompetenz-Kompetenz[105]. Such an examination of the existence, validity or scope of the arbitration agreement under the law applicable to it is required if one party challenges the jurisdiction of the tribunal for all or certain claims submitted to it or if one party requests arbitral interim relief which, as an annex to the tribunal's decision-making power requires the validity of the arbitration agreement as the basis of the tribunal's jurisdiction. However, the arbitral tribunal has no lex fori[106]. This means that the tribunal is under no legal obligation to have resort to the conflict of laws rules at the seat of the arbitration to determine the law applicable to the arbitration agreement. Due to the territoriality principle, arbitral tribunals are under an obligation to apply the arbitration law at the seat of the arbitration. However, only very few of these arbitration laws contain specific conflict rules for the determination of the law applicable to the arbitration agreement by the arbitral tribunal, the Swedish Act being a notable exception to this rule. Those conflict rules that deal with this issue are concerned with the determination of the applicable law by the courts in setting aside and enforcement proceedings[107]. Therefore, the tribunal must develop its own conflict rules in order to determine the law applicable to the arbitration agreement. This, of course, entails the tribunal's right to draw inspiration from the conflict laws of domestic laws, including those in force at the seat of the arbitration, and from international uniform law instruments such as the New York Convention and the UNCITRAL Model Law.

The situation is different when the law applicable to the arbitration agreement is to be determined by state courts. This may be the case if a party is sued before a state court and invokes the existence of an arbitration agreement, if a party seeks interim relief or other measures of assistance from a state court under the applicable arbitration law in force at the seat of the arbitration or in another jurisdiction or in the post-award stage, if the losing party seeks to have the award set aside by the courts at the seat of the arbitration for lack of a valid arbitration agreement or if the winning party seeks to have the award enforced at the seat of the arbitration (34) or in another jurisdiction[108]. Under German arbitration law, a German court may also have to determine the law applicable to the arbitration agreement if one party seeks a declaration as to the admissibility or non-admissibility of the arbitration proceedings prior to the constitution of the arbitral tribunal under Sect. 1032(2) German Arbitration Act.

There are two major differences in these state court scenarios when compared with the determination of the law applicable to the arbitration agreement by arbitral tribunals. Firstly, unlike arbitral tribunals, state courts have a lex fori and they must apply the conflict of laws rules of that lex fori. This may lead to a forum-shopping effect, meaning that different laws are applied to the same arbitration agreement in different jurisdictions. Secondly, to avoid these forum shopping effects, state courts are under an obligation to apply conflict of laws rules contained in international uniform law instruments. The two most important instruments are the New York Convention and the 1961 European Convention. Both contain conflict of laws rules related to the law that determines the substantive validity of the arbitration agreement and formal validity rules in the form of directly applicable règles materielles.

Fourth point is the complex relationship between domestic laws and international uniform instruments. Given the freedom of international arbitrators in choice of law issues, it seems to be an open question which law a tribunal should apply to the formal or substantive validity of the arbitration agreement. Or should it apply the conflict rules or formal validity rules of the New York Convention even though the scope of this Convention is restricted to proceedings before state courts on the enforcement of arbitration agreements and foreign awards? A state court, on the other hand, can apply international uniform law in lieu of its own domestic law only if the state in which it sits has ratified the instrument and the problem with which the court is concerned in a given case falls within the scope of the instrument. Unfortunately, the latter question is not always clear. The European Convention defines its scope in a clear and unambiguous way. Art. I(1)(a) provides that the Convention applies to arbitration agreements concluded for the purpose of settling disputes arising from international trade between physical or legal persons having, when concluding the agreement, their habitual place of residence or their seat in different contracting states. Due to the drafting history of the New York Convention, there is no such clear rule with respect to the formal validity rule of Art. II New York Convention. However, it is generally recognized today that this rule applies whenever the arbitration agreement will probably lead to an award covered by the New York Convention pursuant to its Art. I, i.e., where the award will be made in a different contracting state irrespective of the country where the parties are resident.  Another source of confusion is the fact that the conflict rule related to the substantive validity of the arbitration agreement which is contained in Art. V (1) (a) New York Convention is concerned only with the enforcement of foreign arbitral awards, i.e., with the post-award stage. The same is true for conflict rules contained in domestic laws such as Arts. 34 and 36 UNCITRAL Model Law which deal only with the setting aside and the enforcement of awards. If a court has to determine the law applicable to the arbitration agreement in the pre-award phase, e.g., when determining the admissibility of the arbitration pursuant to Sect. 1031(2) German Arbitration Act, can it apply these conflict rules?    

Fifth point is that under Art. 7(1) UNCITRAL Model Law, Sect. 1029(2) German Arbitration Act and the provisions in most arbitration laws around the world, an arbitration agreement may be in the form of a separate agreement (separate arbitration agreement) or in the form of a clause in a contract (arbitration clause). A separate arbitration agreement may deal with future disputes arising out of a contract to which they are attached. However, it may also deal with an existing dispute which it submits to arbitration instead of dispute resolution before domestic courts. For these “submission agreements”[109], the qualification attached to them by the English Commercial Court quoted in the introduction[110] “an agreement inside an agreement” does not apply. The submission agreement is a freestanding contract. This has important repercussions on conflict of laws analysis. It is a much debated question whether the law applicable to the main contract also applies to the arbitration clause contained therein.  For submission agreements, this question cannot arise. Typically, this contract contains nothing more than the arbitration agreement itself and a choice of law clause contained therein necessarily governs that agreement.

Where the agreement to arbitrate is set out in a specially drawn submission agreement, the parties should choose a law to govern that agreement and should set out their choice in an appropriate clause. This is what the parties would normally do in any other kind of international agreement; and in this respect a submission agreement is no different. If no express choice of law is made, and a question arises as to the law governing the submission agreement, the general principles as to the choice of law will apply.

Sixth point in relation to this section of this study is the eternal conflict between territoriality and transnationalism is not limited to the determination of the law applicable to the substance of the dispute where the doctrine of the “new lex mercatoria” has provoked strong reactions from those who favour a more traditional, positivistic approach to conflict of laws in international arbitration[111]. The same conflict between territoriality and transnationalism exists with respect to the determination of the law applicable to the substantive validity of the arbitration agreement. The transnational approach to the substantive validity of international arbitration agreements is a particularity of French legal doctrine. Rather than relying on a classical, and by its very nature territorial, conflict of laws approach, French courts have developed a substantive rule of international arbitration law pursuant to which the arbitration agreement is not only independent from the main contract but which also provides that, subject only to mandatory provisions of French law and the French international ordre public, the existence and validity of the arbitration agreement “depends only on the common intention of the parties, without it being necessary to make reference to a national law”[112]. This transnational approach had already been adopted by a three-member arbitral tribunal in the famous Isover Saint Gobain interim award in which the tribunal, apparently influenced by French arbitration doctrine and decisions of the French Cour de cassation going back to 1975[113],  held that the tribunal had determined the scope and effect of the arbitration clause in question, and thereby reached its decision regarding jurisdiction, by reference to the common intent of the parties to these proceedings, such as it appears from the circumstances that surround the conclusion and characterize the performance and later the termination of the contracts in which they appear to ensure the enforceability of the award in France, the tribunal] will assure itself that the solution it adopts is compatible with international public policy, in particular, in France[114]. In his 1998 ICCA Report, Julian Lew maintained the view that

 

“in reality, courts, arbitrators and parties today recognize that the arbitration clause is governed by the common intention of the parties, general principles and usages of international business”[115].

 

In his comment to Julian Lew's Report, Marc Blessing argued that since the “strictly academic approach”, which favours a traditional conflict of laws analysis, has produced unsatisfactory answers and results, international arbitrators should indeed

 

“go back to the parties and take the most determinative guidance from the intentions which the parties have expressed (either explicitly or implicitly and by their behaviour), taking into account their fair and reasonable expectations and the kind of usage which may exist between them”[116]

 

Such a transnational approach certainly has the beauty of avoiding the uncertainties and idiosyncrasies connected with the application of a multiplicity of connecting factors and resulting domestic laws to international arbitration agreements. Such an approach is particularly relevant in international arbitration, where practice and doctrine have always strived to escape the pitfalls of domestic laws. However, there are two reasons why such a transnational approach should not be adopted in this context. First, a “reasonable contract interpretation” as the essential source of guidance for the determination of the validity of the arbitration agreement does not necessarily require the abandonment of traditional conflict of laws analysis. As we will see below, the notion of in favorem validitatis as the guiding principle for the interpretation of international arbitration agreements is part of almost any developed legal system. The French approach may thus be characterized as an unnecessary exaggeration of transnationalism. Piero Bernardini's comment to Julian Lew's Report at the 1998 ICCA conference is still valid today.

The French rule, with its extreme liberalism, may bring about results going beyond parties' expectations in view of the wide discretion left to the arbitrator in determining the parties' common intent, considering also the absence of any requirement of form of the arbitration clause in case of international arbitration.

Secondly and more importantly, the need to ensure the validity and enforceability of the award will usually prevent international arbitrators from “transnationalizing” the arbitration agreement from which they derive their jurisdiction. If the award is attacked in setting aside proceedings before the courts at the seat of the arbitration or in recognition and enforcement proceedings for lack of a valid arbitration agreement, these courts will determine the validity of the agreement pursuant to the conflict of laws rules of their lex fori, whether they are derived from autonomous domestic law or unified law. These conflicts of laws rules are based on the traditional conflict of laws approach. A purely transnational character is read into these rules in only very few jurisdictions. France is the exception, not the rule. It was (only) due to this extremely liberal and transnational approach of French law to the validity of international arbitration agreements that the arbitral tribunal in the Isover Saint Gobain award (53) could apply transnational principles to the substantive validity of the arbitration agreement without risking the refusal of enforcement of the award in France. (54) Not surprisingly, a survey of arbitral case law reveals “how important still are more traditional or conservative approaches to the determination of choice-of-law issues concerning international commercial arbitration”[117].

Here lies the basic difference between the transnationalization of substantive law and of the law applicable to the arbitration agreement. With respect to the former, a conflict with a traditional, territorial attitude of the courts is unlikely given that the well-known prohibition of a “révision au fond” of the arbitral tribunal's substantive decision prevents a full-fledged scrutiny of the tribunal's conflict of laws decisions. With respect to the latter, there are no such limitations of the courts‟ powers to examine en detail the tribunal's conflict of laws decision relating to the arbitration agreement. It is for this reason that arbitral tribunals that determine their jurisdiction based on the will of the parties and general arbitration practice make sure that the law of the seat of the arbitration does not conflict with such solutions.

This view has recently been confirmed by the English High Court in its Peterson Farms judgment of 4 February 2004. In the award that was before the court, the tribunal had argued that the law applicable to the arbitration agreement may differ from the law applicable to both the substance of the contract and to the arbitral proceedings themselves, i.e., the law of the seat. It then decided the question whether other group entities of the claimant were bound by the arbitration agreement and whether claimant could claim (the vast majority) of the alleged damages on their behalf by interpreting the arbitration agreement according to the common intent of the parties, without referring to any domestic law. The court set aside that part of the award for want of jurisdiction and argue 

There was … no basis for the tribunal to apply any other law whether supposedly derived from the „common intent of the parties‟ or not. The common intent was indeed expressed in the Agreement: that is both English [as the law of the seat of the arbitration which did not know the group of companies doctrine] and Arkansas [as the law chosen by the parties in the choice of law clause contained in the contract which likewise did not know the group of companies doctrine] law … The „law‟ the tribunal derived from its approach was not the proper law of the agreement nor even the law of the chosen place of arbitration but, in effect, the group of companies doctrine itself.

It may well be that the tribunal's approach of effectively de-localizing the law applicable to the arbitration agreement may have given rise to difficulties in enforcing the award had it not been challenged under Sect. 67 English Arbitration Act 1996[118].

It was for these reasons that Julian Lew, even though in favor of a transnational approach towards the determination of the substantive validity of the arbitration agreement, had to conclude his 1998 ICCA Report by stating that “the application of national laws prevails in this field”. This view is even more valid today. It goes without saying that this does not prevent an arbitral tribunal from attaching more persuasive force to its decision on jurisdiction by arguing that the solution reached on the basis of domestic law is compatible with a-national legal rules or international arbitral practice.

Final point is that most modern jurisdictions it is generally acknowledged that the principle of “in favorem validitatis” must be applied to international arbitration agreements. This pro-arbitration approach serves to enforce the common intention of the parties to have their dispute decided before an international arbitral tribunal:

An agreement to arbitrate before a specified tribunal is, in effect, a specialized kind of forum-selection clause…. The invalidation of such an agreement … would not only allow the respondent to repudiate its solemn promise but would, as well, reflect a parochial concept that all disputes must be resolved under our laws and in our courts[119].

The in favorem approach to arbitration agreements is also a consequence of today's arbitration-friendly climate which is based on the understanding that dispute settlement by international arbitral tribunals has the same value and standing as adjudication before domestic courts. International arbitrators, therefore, show a natural tendency to respect the common intention of the parties as expressed in their agreement to arbitrate and tend to adopt a very liberal “pro-arbitration” approach in order to make sure that the will of the parties to arbitrate their disputes is not frustrated.

The arbitrators have from the [arbitration] clause and the pleadings of the parties decided that both parties desire a settlement of disputes outside state jurisdiction.

 

“That wish, expressed by both parties, has essentially determined the attitude of the arbitrators vis-à-vis the clause inserted into the contract. They felt an obligation to help the parties realize such a wish”[120]

 

This in favorem rule has two important effects.

First, an arbitration agreement should be construed in good faith  and in a way that upholds its validity.  Julian Lew argued in his Report to the 1998 ICCA Congress that “the validity of the arbitration clause is presumed”.  Others argue that “doubts about the intended scope of an agreement to arbitrate are to be resolved in favor of arbitration”[121].  This means that a liberal way of construing arbitration agreements has to be pursued even in those cases where in general contract law the ambiguity could not be resolved through the application of traditional means of interpretation. However, one must stress that the in favorem rule relates to the interpretation of the arbitration agreement which is the way to determine its substantive validity. It goes too far to argue that under this rule “the formal and substantive validity of the arbitration clause is presumed”.

Second, in determining the law applicable to the arbitration agreement, the tribunal should seek a solution that upholds the validity of the arbitration agreement. This approach is known as “favor negotii” in general conflict of laws theory[122].  This in favorem approach with respect to the determination of the law applicable to the arbitration agreement has been adopted by the Swiss legislature in Art. 178(2) Swiss Federal Statute of Private International Law. An identical rule is contained in Sect. 458 bis 1(3) Algerian Code of Civil Procedure. (75) Art. 178(2) provides that: As regards its substance, an arbitration agreement shall be valid if it conforms either to the law chosen by the parties, or the law governing the subject matter of the dispute, in particular the law governing the main contract, or if it conforms to Swiss law. The idea of alternative application of different laws to the substantive validity of the arbitration agreement has also been employed in a similar vein and with express reference to the legal concept of in favorem validitatis in Art. 4 of the Santiago de Compostela Resolution of the Institut de Droit International:

Where the validity of the agreement to arbitrate is challenged, the tribunal shall resolve the issue by applying one or more of the following: the law chosen by the parties, the law indicated by the system of private international law stipulated by the parties, general principles of public or private international law, general principles of international arbitration, or the law that would be applied by the courts of the territory in which the tribunal has its seat. In making this selection, the tribunal shall be guided by the principle in favorem validitatis[123].

While the drafters of the Swiss provision acknowledge that this alternative conflict rule implements the in favorem validitatis principle, they also emphasize that in all cases and whatever the law applicable to the arbitration agreement is, it must always also meet the formal validity requirements established in Art. 178(1) Swiss Federal Statute of Private International Law, which in their view means that in many cases, the absence of a written text as required by Art. 178(1) will prevent the enforcement of the arbitration agreement even under the extremely liberal conflict of laws rules of Swiss arbitration law[124].

 

The New French Law

This new French Law has introduced six key features of reforms. Firstly it eliminates requirements as to form for arbitration agreements and eases the conditions for recourse to arbitration[125]. Secondly it confirms the key role to be played by the president of the Tribunal de Grande Instance in assisting with difficulties encountered during the arbitration procedure[126]. Thirdly it reinforces the powers of the arbitration tribunal[127]. Fourthly it consecrates the obligations of fairness and swiftness affecting both parties and arbitrators but excludes the principal of confidentiality from international arbitration[128]. Fifthly it modifies the rules applicable to arbitration award annulment procedures and enforcement, including eliminating automatic stays of enforcement, and finally simplifies the procedural rules applicable to the recognition and enforcement of arbitral awards.

To commence its task of codification of the issues relating to the agreement to arbitrate, the French Code of Civil Procedure Decree (FCCP degree hereinafter) confirms the long established principle of autonomy of the arbitration agreement in international  arbitration practice. Purpose of the principle is to separate the  arbitration agreement from the voidable main contract so the parties can take advantage of the arbitration agreement in order to resolve disputes between  the parties if part or all of the performance required by the main contract has been carried out. It reads:

 

“An arbitration agreement is independent of the contract to which it relates. It shall not be affected if such contract is void.”According to the report accompanying the CCP Decree (the Report hereinafter), this provision “takes into account the case  law according to which an arbitration cause is not affected by the unenforceability of the contract, in particular by its inexistence (in case of error) by its expiry, its rescission or its termination.”[129]

 

Therefore as mentioned at the beginning of this section firstly one of the most radical changes is the elimination of formality requirements for international commercial arbitration agreements. For international commercial   arbitration, in accordance with art.1507 of the FCCP Decree, an   arbitration agreement which is intended to resolve disputes concerning international trade interests5 is not subject to any formal requirements. This provision, following the former art.1495 of the National Civil Procedural Code 1981 (NCCP Decree hereinafter) and related case law, confirms the principle according to which an international arbitration agreement is not subject to any condition of form. The elimination of the writing requirement under the CCP Decree is said to accommodate the frequent  lack of formal written consent to arbitration on the part of the investor in investment arbitrations.

While the CCP Decree removes the writing requirements for arbitration agreements, it is reasonable to assume that an  arbitration agreement can be made orally in theory. However, the issue of oral agreements was thought to be hypothetical in nature, as art.1515 of CCP Decree requires that an order for enforcement of international arbitral award made in France or abroad cannot be granted unless, “the existence of an arbitral award is proven by producing the original award, together with the   arbitration agreement, or duly authenticated copies of such documents”. In accordance with this provision, an   arbitration agreement must be submitted to the courts when recognition and enforcement of an award is sought[130] This is also apparent from the language used in art.II of the New York Convention.

However, complications can arise if an award is made in France but enforcement is sought in other countries. One of the issues which arises is how art.1507 of the CCP Decree reconciles its discrepancy from the wordings of arts II (1) and IV of the New York Convention, which requires   arbitration agreement to be in writing and for the original agreement or a duly certified copy of the agreement to be submitted to the enforcing court. This is especially problematic if the award is made in France and the recognition and enforcement of the award is sought in a country which imposes strict interpretation of arts II (1) and IV of the  New York Convention. Under these circumstances, the request for recognition and enforcement of an award may be refused on the grounds of lack of formality or public policy by the enforcing courts.

Second change that FCCP Degree presents is that it empowers the president of the Tribunal de Grande or the “juge d’appui”to resolve matters that may arise during the proceedings.

As the title makes clear, the juge d'appui is the State judge whose role is to supervise and support arbitration. Although the  new Decree permits some court intervention in   arbitration such intervention, as we shall explore below, is strictly controlled and applies only in very limited circumstances. For domestic   arbitrations, the President of the relevant Tribunal de Grande Instance will be required to assume the role of the juge d'appui and the President of the Tribunal de Grand Instance of Paris will be required to assume the role of the juge d'appui[131]  

Title II of the CCP Decree concerns provisions which specifically relate to international arbitration. Article 1505 of Title II sets out four distinct circumstances in which the juge d'appui will have jurisdiction in respect of international   arbitration matters. The first two circumstances, contained in art.1505(1) and (2), have been incorporated from the previous Decrees and, as well as art.1505(4), have the effect of automatically providing the   French courts with jurisdiction to support and supervise arbitral proceedings. Article 1505(1) provides for the application of the lex arbitri and states that the jurisdiction of the juge d'appui will apply where the parties have designated France as the seat of   arbitration. Article 1505(2) stipulates that if the parties have agreed that   French procedural   law shall apply to their   arbitration then the juge d'appui will have jurisdiction.

Article 1505(4) provides the French courts with wider jurisdiction over   arbitrations which have no connection with France (and therefore do not fall within art.1505(1)-(3)) but which still confers upon the juge d'appui jurisdiction to intervene and support arbitral proceedings where it appears that one of the parties to the dispute, “…is exposed to a risk of a denial of justice.” Article 1505(4) is not a novel concept in   French arbitration law and is a practice which was adopted by the Cour de Cassation in State of Israel v National Iranian Oil Company (NIOC)[132]. In that case, the Cour de Cassation affirmed the   French courts' right to appoint an arbitrator on behalf of one of the parties on the basis that not doing so would have effectively blocked the other party from exercising its right to   arbitration and therefore would have amounted to a denial of justice even though the   arbitration appeared to have a weak link to France. In doing so, the Cour de Cassation reinforced the jurisdiction of the   French Courts to support the arbitral process.

At first instance there are number of issues that could be rasied regarding art.1505(4). Although, upon first reading, art.1505(4) appears to reflect a public policy issue of ensuing that parties to arbitration are not denied justice, the jurisdiction which art.1505(4) provides the juge d'appui appears to be unclear in a number of respects. Firstly, It is unclear as to what is meant by an exposure to a “risk”. What is meant by “risk” and “denial of justice”? And what degree of risk is required before the juge d'appui can justifiably provide its support? There is a lack of clarity and guidance on these issues. Secondly, if one of the parties to   arbitration decides that the other party is obstructing his right to an arbitral hearing and decides to seek the assistance of the   French court pursuant to art.1505(4) and succeeds, the other party may simply refuse to submit to the jurisdiction of the   French courts. This would leave the other party in the same position he was in before his application to the   French courts for assistance. There is nothing within art.1505 or the   new Decree generally which forces the other party to submit to the jurisdiction of the juge d'appui.

Third significant of the FCCP Degree is that it also seeks to consolidate the case law which established the arbitral tribunal's authority in order to ensure the smooth operation of arbitral proceedings. The arbitral tribunal is provided with powers to take all necessary steps concerning evidentiary and procedural matters as well as calling upon any person to provide testimony. The tribunal can also order any of the arbitrating parties to produce items of evidence in his possession. If the party fails to do so, the tribunal will be able to impose penalties. This provision restates the position held in art.1461 NCPC Decree with further powers [133].

Intervention  in the arbitral proceedings by the French courts is limited to the areas where the tribunal does not possess necessary power. In relation to evidence held by a third party which is required by an arbitrating party to rely on it for his case, the arbitral tribunal can issue a leave and have that third party summoned before the President of the Tribunal de Grande Instance in order to obtain a copy or the production of the deed or item of evidence under FCCP Degree art.1469. Taking the issue of privity into consideration, this provision is intended to assist the tribunal when the tribunal's powers do not extend to any third parties outside of the   arbitration agreement. However, due to the technical issues of such procedures, the jurisdiction falls to the President of the Tribunal de Grande Instance alone to deal with such claims with the tribunal's invitation on the basis of territorial jurisdiction. As the President is involved in the framework of measures requested as against persons who are not party to the arbitrator procedure, the CCP Decree states that only the President shall have jurisdiction over such claims rather than providing such powers to juge d'appui.

Article 1470 also offers the arbitral tribunal the powers to rule on a party's request to verify the handwriting or claim of forgery. The Report indicates that the arbitral tribunal is in exactly the same position as that of any state court other than the Tribunal de Grande Instance. If the forgery claim is incidental then the tribunal must stay its proceedings until the claim of forgery has been decided unless the claim can be decided without considering the notarised instrument. The tribunal is also empowered to stay the arbitration proceedings if it is necessary[134].

As discussed above, art.1505 of the CCP Decree provides the legal basis for juge d'appui 's jurisdiction. This provision provides that the juge d'appui shall be the present of the tribunal de grande instance of Paris when the seat of arbitration is in France or the parties have subjected themselves to the   French procedural   law. Alternatively, in the case where the   arbitration takes place outside of France, the juge d'appui will be able to exercise jurisdiction over the disputes with parties' express granting of jurisdiction to   French courts over disputes relating to the arbitral procedure. Over and above, the most controversial issue concerning the role of juge d'appui is that the juge d'appui would be able to exercise his jurisdiction if one of the parties is exposed to a risk of denial of justice. This provision follows the precedents of   French courts in practice. Judgement handed down by French Cour de Cassation in 2005[135], the jurisdiction issue was raised by one of the parties as to whether a   French court can appoint an arbitrator in an   arbitration which did not take place in France or subject to   French procedural   law if the other party tried to obstruct the   arbitration proceedings. The arbitration was submitted tothe ICC which required that each party nominate an arbitrator and that both parties agree on a third arbitrator. If the parties were unable to agree on the appointment of a third arbitrator, the nomination would be made by the ICC. NIOC requested the State of Israel to appoint an arbitrator within 30 days of the notification. Israel claimed that the dispute arose from governmental actions and therefore the matter was not arbitrable. Furthermore, Israel argued that no action had been taken regarding their nomination of an arbitrator. The   arbitration clause also failed to specify the seat of   arbitration lower French court sought assistance from the French Tribunal de Grande Instance which dismissed the action on the basis of lack of jurisdiction.

On appeal the Cour de Cassation upheld the French court's jurisdiction in appointing an arbitrator on behalf of the party who intended to delay   arbitration proceedings as such delay would affect the other party's right to resolve the dispute by means of   arbitration. Such a delay tactic was regarded as a denial of justice and the Cour de Cassation reached its conclusion despite the matter having a weak link with France. Although such a decision may be applauded by supporters of arbitration who would perceive the decision as removing potential obstacles to arbitration such as fraud or mere unwillingness to co-operate, questions remain in terms of the definition of universal jurisdiction and the rights of the other party who is to be dragged through the French judicial system involuntarily.

Final point in relation to the New French Degree is that it not only simplifies the enforcement of awards in France but also changes the rules related to the annulment of awards. For instance Title II of the new Decree is dedicated to international   arbitration. Chapter III of Title II is concerned with the recognition and enforcement of arbitral awards made abroad or in international   arbitration. Chapter II begins with art.1514 which is a mandatory provision and states that an arbitral award shall be recognised and enforced in France. This article, like art.1487, reaffirms the pro-enforcement position in   French arbitration law regarding the recognition and enforcement of arbitral awards. This is, however, subject to two basic and common exceptions to the recognition or enforcement of domestic and international arbitral awards. First, the party seeking to rely upon the arbitral award must be able to prove its existence. This is a basic requirement and will be easily satisfied upon product of the arbitral award itself together with the   arbitration agreement (art.1515). The second exception to the recognition or enforcement of the arbitral award is that it must not be manifestly contrary to international public policy.

Furthermore, there is no longer a requirement for the production of a certified translation of the award or the presentation of the original copy of the award. A party is simply required to prove the existence of the award by producing the original award, together with the arbitration agreement, or duly authenticated copies of such documents[136]. If any of these documents are in a foreign language then the minimum requirement of authenticity will need to be met in that a translation must be provided by a translator whose name appears on a list of court experts or a translator accredited by the administrative or judicial authorities of another Member State of the European a Contracting Party to the European Economic Area Agreement or the Swiss Confederation[137]. An international arbitral award can only be enforced by virtue of an enforcement order (exequatur ) made by the Tribunal de Grande Tribunal56 and filed by the most diligent party to the Court Registrar[138].

What is apparent from art.1515 is that there is no obligation upon the parties to an international arbitration to produce official certified translations of the arbitral award or the   arbitration agreement when seeking recognition or enforcement. This is a further relaxation of the formalities which are required to be followed in international   arbitration and a further illustration of France's desire to modernise and thereby improve the efficiency of its   arbitration laws. The degree of relaxation of the requirement to produce a certified translation can be appreciated by contrasting art.1515 with art.IV of the   New York Convention. Article IV(2) of the   New York Convention states that where an award or   arbitration agreement is not made in an official language of the country in which the award is relied upon, the party apply for recognition and enforcement, “shall produce a translation of these documents”. Article IV(2) goes on to make clear that, “The translation shall be certified by an official or sworn translator or by a diplomatic or consular agent.” Article 1515 simply requires the party seeking recognition or enforcement to “produce a translation”. 

 

 

Conclusion

New York Convention is one of the most successful conventions as it has been indorsed by nearly one hundred and forty five countries.  The very first chapter will explore the New York Convention in particular Articles II (1) and IV which requires   arbitration agreement to be in writing and for the original agreement or a duly certified copy of the agreement to be submitted to the enforcing court. However it was always thought that at least theoretically an oral arbitration agreement is possible but in practice it will be cumbersome to pursue[139].  Furthermore this section shall also explore and analyse the fact that if there is an arbitration agreement without formalities how could the contractual terms be ascertained, who should have the jurisdiction to construct an arbitration agreement and even if those hurdles are successfully negotiated when it comes to implementation of orbital awards, especially in different states, it is necessary to produce to the court of enforcement both the award itself (or an authenticated copy) and the agreement referred to in the New York Convention Article II. The need for this to be a valid agreement is emphasised in Article V (1) (a) of New York Convention, which provides that recognition and enforcement might be refused, if the parties to the agreement were under some incapacity or if the agreement itself is invalid 

As the plan of the dissertation suggests, the next section is all about the New French Law that has been implemented in May 2011. In this section some historical back ground will be explained, especially in the absence of massive body of case law. It is imperative that the reader understands its path of evolution. This new French Law has introduced six key features of reforms. Firstly it eliminates requirements as to form for arbitration agreements and eases the conditions for recourse to arbitration[140]. Secondly it confirms the key role to be played by the president of the Tribunal de Grande Instance in assisting with difficulties encountered during the arbitration procedure[141]. Thirdly it reinforces the powers of the arbitration tribunal[142]. Fourthly it consecrates the obligations of fairness and swiftness affecting both parties and arbitrators but excludes the principal of confidentiality from international arbitration[143]. Fifthly it modifies the rules applicable to arbitration award annulment procedures and enforcement, including eliminating automatic stays of enforcement, and finally simplifies the procedural rules applicable to the recognition and enforcement of arbitral awards.

As explained above the New York Convention requires an arbitration agreement to be in writing whereas the French Law takes this formality away therefore serious complications can arise if an award is made in France but enforcement is sough in another country that implies strict interpretation of art II (1) and IV of the New York Convention. It seems that under these circumstances enforcement and recognition of award will be refused upon the grounds of lack of formality or public policy. In addition to that the rationale of arbitration is to resolve a dispute and commercially obtain an award for the grieved party. However if a party to the dispute knows that even if it goes through the trouble of arbitration it may not be able to enforce the award and therefore the whole process of commercial arbitration becomes point less. Furthermore complication can arise if the arbitration agreement is not in writing and one party denies its existence altogether under those circumstances who will construct an arbitration agreement or even an arbitration clause? However one could argue that the Juge d'appuimay come to rescue under Article 1505 of the French Law. In any case theJuge d'appui, on the face of one party’s denial, will not have that extensive power to construe an arbitration agreement or an arbitration clause. Nevertheless judge would certainly be not promoting the idea of justice that is so forcefully professed by the French Law 

Since the French Law only came into force recently, one has to wait for the case law to develop on the above particular point of enforcement. Perhaps that is the reason legislatures envisaged and excluded confidentially of arbitration agreements so that more cases law could be reported.

The French Law has some modern and very liberal reforms but the reality is that most commercial organisations use forms of arbitrations to resolve their commercial disputes and if at the end of a dispute there is little or no chance of enforcement of arbitral award then perhaps it is far better to have arbitration agreements that are managed by the New York Convention. Although the New York Convention was signed up in 1958 but one has the certainty of process that has so been tried and vigorously tested over the years.

 

 

 

 

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------------------------------------------------------------------------------------- 

 

 

 

Bibliography

  

Primary Sources;

 

Statues

New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards

French code of Civil Procedure Decree No. 2011-48 Title II (FCCP Degree 2011 Title II)

Resolution “L'arbitrage entre Etats et entreprises étrangères”, adopted at the 18th Session in Santiago de Compostela, 4-14 September, 1989, (5) ICSID Rev–FILJ (1990) p. 139 at p. 141

 

Text Books

REDFERN. A and HUNTER. M; Law and Practice of International Commercial Arbitration, (4th edn, Sweet & Maxwell 2004)

Tweeddale. A and Tweeddale. K ; Arbitration of Commercial Disputes: International and English Law Practice (1st edn OUP 2007).

  

Journals

Hong-Lin Yu, ‘How far ca party autonomy be stretched in setting the grounds for the refusal of arbitral awards’ 2011 International Arbitration Review.

Yves FORTIER, “Arbitrability of Disputes” in Global Reflections on International Law, Commerce and Dispute Resolution; Liber Amicorum in honour of Robert Briner, 2005(ICC Publishing ) 

Horacio A. GRIGERA-NAÓN, “Choice-of-law Problems in International Commercial Arbitration”, 289 Rec. (2001) Cours 

Emmanuel GAILLARD and John SAVAGE, Fouchard Gaillard Goldman on International Commercial Arbitration (1999) Kluwer Law International, p 435.

Piero BERNARDINI, “Arbitration Clauses: Achieving Effectiveness in the Law Applicable to the Arbitration Clause” in Improving the Efficiency of Arbitration Agreements and Awards, 40 Years of Application of the New York Convention, (1999) ICCA Congress Series no. 9

John P. GAFFNEY, “The Law Applicable to the Arbitration Agreement”, (June 2004) Int'l. Arb. Rep. p. 1 at pp.

Julian D.M. LEW, Loukas A. MISTELIS, Stefan M. KRÖLL, Comparative International Commercial Arbitration (2003) Kluwer Law International,  no. 7-61

Pierre LALIVE, Jean-Francois POUDRET, Claude REYMOND, Le Droit de l'Arbitrage. Interne et International en Suisse (1989) Editions Payot , Art. 178, no. 14 and 16.

Hong-Lin Yu and  Masood Ahmed, ‘Legislative Comment; The new French Arbitration Law: an analysis’ (2012) International Arbitration Law Review

Christophe von Krause, “  New French Arbitration Law Clarifies Role of National Courts and Reinforces Recognition and Enforcement of   Arbitration Awards” (February 25, 2011) Kluwer

 

Case Law

Mitsubishi Motors Corp. v. Soler Chrysler Plymouth Inc., [1985] 473 US 614

Sole Arbitrator Dupuy in Texaco Overseas Petroleum Co & California Asiatic Oil Co. (TOPCO) v. The Government of the Libyan Arab Republic, Int'l L. Rep. (1979) 389, 405

Compagnie de Navigation de Transports SA v. MSC Mediterranean Shipping Company SA, BGE 121 III 38

Menicucci v. Mahieux, [1977] Rev. d'Arb. p. 147

El Mergeb v. Dalico Contractors Clunet [1994] Journal du Droit International, p. 432;

French Cour de cassation, decision of 20 December [1993], Comité populaire de la municipalité de Khoms

Peterson Farms Inc. v. C&M Farming Ltd., [2004] 1 Lloyd's L. Rep. 603, 610;

Amin Shipping Corporation v. Kuwait Insurance Co., [1983] 2 Lloyd's L. Rep. 365, 371

Scherk v. Alberto-Culver Co., [1974] U.S p417-506, 519.

Kaplan v. First Options of Chicago, Inc., 19 F.3d 1503, 1512 (3rd Cir. 1994);

Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983).

Kaplan v. First Options of Chicago, Inc., [1994] 19 F.3d 1503, 1512, 3rd Cir.

Peterson Farms Inc. v. C&M Farming Ltd., [2004] 1 Lloyd's L. Rep. 603, 610

State of Israel v National Iranian Oil Company (NIOC) judgment of the French Cour de Cassation, First Civil Chamber, February 1 2005, case No.01-13.742/02-15.237

 

Other Sources

 

Maxi Scherer, ‘Long-Awaited New French Arbitration Law Revealed’ (Wolters Kluwer, Jan2011) < http://kluwerarbitrationblog.com/blog/2011/01/15/long-awaited-new-french-arbitration-law-revealed / > accessed 20 December 2012

 

Secondary Sources; 

Statute

The Arbitration Act 1996

New York Convention 1958

Swiss Private International Law Act 1987

 

Textbooks 

Delvolve J, Pointon G and Rouche J; French Law and Practice (Kluwer 2009)

Blackaby. N, Partasides. C, Redfern. A and Hunter. M;  Redfern and Hunter on International Arbitration – Student Version (5th Edition, OUP 2009)

McClean. D and Beevers. K: The Conflict of Laws (7th Edition, Sweet & Maxwell 2005)

Murray. C;  Export Trade: The Law and Practice of International Trade (11th edn, Sweet and Maxwell 2007)

Goode. R, Kronke. H, McKendrick. E and Wool. J;  Transnational Commercial Law: Texts, cases and Materials (OUP 2007)

Goode. R, Kronke. H, McKendrick. E and Wool. J;  Transnational Commercial Law: Primary Materials (OUP 2007)

Goode. R, Kronke. H, McKendrick. E and Wool. J;  Transnational Commercial Law: International Instruments and Commentary (OUP 2007)

Mustill. M. and Boyd. S.C; Commercial Arbitration (2nd edn, Butterworths 2001)

Marshall. E ;  Gill: The Law of Arbitration (4th edn, Sweet and Maxwell 2001)

Chuah. J; The Law of International Trade: Cross-Border Commercial Transactions (4th edn, Sweet and Maxwell 2009)

 Strong S, Research and Practice in International Commercial Arbitration (Oxford University Press, 2009).

Shaw M; International Law (5th edn Cambridge University Press, 2003),

 

Journals 

Loukas Mistelis, “Trends and Challenges in International Arbitration” (2008) 2 World Arb. & Med. Rev. 83.

Jan Paulsson, “Arbitration Unbound: Award Detached From the Law of Its Country of Origin” (1981) 30 I.C.L.Q. 358.

Michael  Haravon, “Enforcement of Annulled Foreign Arbitral Awards: The French Supreme Court Confirms The Hilmarton Trend” (2007) 22 Mealey's International Arbitration Report

Roy Goode, “The Role of the Lex Loci Arbitri in International Commercial Arbitration” (2001) 17 Arbitration Int. 19

Michael Mustill, “Arbitration: History and Background” (1989) 6 J. Int'l Arb. 43

F.A. Mann, “Lex Facit Arbitrum” (1967) International Arbitration 160.

P. Lalive, “Les règles de conflit de lois appliquées au fond du litige par l'arbitre international siègeant en Suisse” (1976) 145 Recueil Des Cours 2.

Nicola Nygh and Samuel Lutrell, “The Domestication of the Model Law in Australia” (2009) 75 Arbitration 487

Shahid  Jamil, “Pakistani Arbitration: Towards the Model Law” (2009) 75 Arbitration 532.

Minmetals Germany GmbH v Ferco Steel Ltd [1999] 1 All E.R. 315 QBD. (Comm)

 

Case Law

Smith Ltd v H&S International Holding Inc [1991] 2 Lloyd's Rep. 127 QBD (Comm)

Union of India v McDonnell Douglas Corp [1993] 2 Lloyd's Rep. 48 QBD (Comm)

Arab Republic of Egypt v Chromalloy Aeroservices, Inc, 939 F. Supp. 907 (D.D.C. 1996)

Gotaverken Arendal AB v Libyan General National Maritime Transport Co Cour d'Appel de Paris (Feb. 21, 1980), reprinted in (1980) J. Dr. Int. 660 and [1980] Revue de l'Arbitrage 524.

Société PT Putrabali Adyamulia v SA Rena Holding, [June 29, 2007] C.cass, 1ère civ,

Swift-Fortune Ltd v Magnifica Marine SA [2007] 4 L.R.C. 819; [2006] SGCA 4

PT Garuda Indonesia v Birgen Air [2002] 5 LRC 560

Naviera Amazonica Peruana SA v Compania Internacional de Seguros de Peru [1988] 1 Lloyd's Rep. 116 CA.

Rupali Polyester Ltd v Bunni [1995] 3 L.R.C. 617.

National Thermal Power Corp v Singer Co [1992] 2 Com. L.J. 256; [1992] INSC 146.

PT Garuda Indonesia v Birgen Air [2002] 1 S.L.R. 393 (CA); [2001] SGHC 262.

Department of Economic Policy and Development of the City of Moscow v Bankers Trust Co [2004] EWCA Civ 314; [2005] Q.B. 207 at 314.

Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] 2 W.L.R. 262 HL.

Weissfisch v Julius [2006] EWCA Civ 218; [2006] 1 C.L.C. 424

A v B [2006] EWHC 2006 (Comm); [2007] 1 Lloyd's Rep. 237;

XL Insurance v Owens Corning [2001] C.L.C. 914 QBD (Comm).

Chalbury McCouat International Ltd v PG Foils Ltd [2010] EWHC 2050 (TCC) at [18].

AEGIS Ltd v European Reinsurance Co of Zurich [2003] UKPC 11; [2003] 2 C.L.C. 340.

 

Other Sources

White & Case ‘Insight; International Arbitration’ (Jan 2011) <

http://www.whitecase.com/files/Publication/1e1e8b6a-46f7-4a85-9447-2b7eff5e3436/Presentation/PublicationAttachment/70f14e8e-ec6b-4be0-86c3-49b18552671e/alert_New_French_Arbitration_Law_January_2011.pdf > accessed 21 December 2012

http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html  >accessed 1December 2012

Beijing Arbitration Commission < http://www.bjac.org.cn/en/about_us/index.html >Accessed 19 September 2012

Hong Kong International Arbitration Centre http://www.hkiac.org < accessed 25 September 2012

Gilles Cuniberti ‘ French like it Delocalised; Lex Non Facit Arbitrum; (Conflict of Laws.net 24 July 2007) <http://conflictoflaws.net/2007/the-french-like-it-delocalized-lex-non-facit-arbitrum > accessed 25 September 2012

 

 


[1]    International Commercial Arbitration, Commentary and Materials, Gary B. Born, 2001 Transnational Publisher INC

[2]    See in particular Lew, Achieving the Dream: Autonomous Arbitration (2006) 22 Arb Intl 178, at 202; Fouchard, L'Arbitrage Commercial International (Litec, 1965), 2227; Paulsson, Arbitration Unbound: Award Detached from the Law of its Country of Origin (1981) 30 ICLQ 358; and Paulsson, Delocalisation of International Commercial Arbitration: When and Why it Matters (1983) 32 ICLQ 53. For a continuation of the debate see Nakamura, The Place of ArbitrationIts Fictitious Nature and Lex arbitri 15(10) Mealey's Intl Arb Rep 2329 (October 2000); Rubins, The Arbitral Seat is No Fiction: A Brief Reply to Tatsuya Nakamura's Commentary, The Place of ArbitrationIts Fictitious Nature and Lex arbitri 16(1) Mealey's Intl Arb Rep 2328 (January 2001); Pinsolle, Parties to An International Arbitration With the Seat in France are at Full Liberty to Organise the Procedure as They See Fit: A Reply to the Article By Noah Rubins 16(3) Mealey's Intl Arb Rep 30 (2001); and Nakamura, The Fictitious Nature of the Place of Arbitrationa May not Be Denied 16(5) Mealey's Intl Arb Rep (2001).

[3] Paul Smith Ltd v H&S International Holding Inc [1991] 2 Lloyd's Rep. 127 QBD (Comm).

[4] F.A. Mann, “Lex Facit Arbitrum” (1967) International Arbitration 160.

[5] Naviera Amazonica Peruana SA v Compania Internacional de Seguros de Peru [1988] 1 Lloyd's Rep. 116 CA.

[6] The Arbitration Act 1996 s.3 provides a statutory definition of the seat of the arbitration: “In this Part ‘the seat of the arbitration’ means the juridical seat of the arbitration designated--(a) by the parties to the arbitration agreement, or (b) by any arbitral or other institution or person vested by the parties with powers in that regard, or (c) by the arbitral tribunal if so authorised by the parties, or determined, in the absence of any such designation, having regard to the parties' agreement and all the relevant circumstances.” Professor Goode has explained the seat of the arbitration as: “the jurisdictional seat designated by the parties to the arbitration agreement or by any arbitral or other institution or person vested by the parties with powers in that regard or by the arbitral tribunal if so authorised by the parties. The judicial seat is the place whose law is intended by the parties to govern the arbitral proceedings, not the place where the proceedings are actually held or the award given” (R. Goode, Commercial Law, 3rd edn (London: Penguin, 2004), at p.1170). Also, in Union of India v McDonnell Douglas Corp [1993] 2 Lloyd's Rep. 48 the court held: “Although the choice of a ‘seat’ also indicates the geographical place for the arbitration, this does not mean that the parties have limited themselves to that place. As is pointed out in a passage approved by the Court of Appeal in Naviera Amazonica Peruana SA v Compania Internacional de Seguros de Peru … it may often be convenient to hold meetings or even hearings in other countries. This does not mean that the ‘seat’ of the arbitration changes with each change of country. The legal place of the arbitration remains the same even if the physical place changes from time to time, unless of course the parties agree to change it.” This understanding of the seat of arbitration can also be taken from the comments of the Supreme Court of Singapore in Swift-Fortune Ltd v Magnifica Marine SA [2007] 4 L.R.C. 819; [2006] SGCA 42 in which Chan Sek Keong C.J. stated: “The choice of venue is dictated by diverse factors and the stipulated seat of arbitration may not ultimately be the chosen venue. PT Garuda Indonesia v Birgen Air [2002] 5 LRC 560 is an example of a case where the seat of arbitration was Jakarta, but the arbitration itself was conducted in Singapore.” (See [2002] 1 S.L.R. 393 (CA); [2001] SGHC 262.)

[7] Rupali Polyester Ltd v Bunni [1995] 3 L.R.C. 617.

[8] National Thermal Power Corp v Singer Co [1992] 2 Com. L.J. 256; [1992] INSC 146.

[9] PT Garuda Indonesia v Birgen Air [2002] 1 S.L.R. 393 (CA); [2001] SGHC 262.

[10] “(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

(2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.

[11] Department of Economic Policy and Development of the City of Moscow v Bankers Trust Co [2004] EWCA Civ 314; [2005] Q.B. 207 at 314. Further, the English Arbitration Act 1996 Pt I s.1 (General principles) reflects the principle of party autonomy albeit with some limitations. Section 1(b) provides: “the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest”

[12] Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] 2 W.L.R. 262.

[13] A. Massood, “The influence of the delocalisation and seat theories upon judicial attitudes towards international commercial arbitration”  2011Arbitration

[14] Redfern and Hunter, with Blackby and Parasides, Law and Practice of International Commercial Arbitration, 4th Edition, 2004 at p315

[15] P Michael ‘Limits to Party Autonomy in Arbitral Procedure’ President, Australian Centre for International Commercial Arbitration;

[16] W. Park, “The Lex Loci Arbitri and International Commercial Arbitration” (1983) 32 I.C.L.Q. 21.

[17] J. Paulsson, “Arbitration Unbound: Award Detached From the Law of Its Country of Origin” (1981) 30 I.C.L.Q. 358

[18] Gotaverken Arendal AB v Libyan General National Maritime Transport Co Cour d'Appel de Paris (Feb. 21, 1980), reprinted in (1980) J. Dr. Int. 660 and [1980] Revue de l'Arbitrage 524.

[19] (1997) XXII Ybk Comm. Arbn 696 (Cour de cassation, June 10, 1997).

[20] CA Paris, Société PT Putrabali Adyamulia v SA Rena Holding, C. cass, 1ère civ, June 29, 2007. See also M. Haravon, “Enforcement of Annulled Foreign Arbitral Awards: The French Supreme Court Confirms The Hilmarton Trend” (2007) 22 Mealey's International Arbitration Report ; and G. Cuniberti, “The French Like It Delocalised: Lex Non Facit Arbitrum”, available at Conflicts of Law.net: http://conflictoflaws.net/2007/the-french-like-it-delocalized-lex-non-facit-arbitrum [Accessed September 9, 2011].

[21] Section 69(1) provides: “Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings.”

[22] Goode, “The Role of the Lex Loci Arbitri in International Commercial Arbitration” (2001) 17 Arbitration Int. 19.

[23] A. Tweeddale and K. Tweeddale, Arbitration of Commercial Disputes, International and English Law and Practice (Oxford: OUP, 2007), para.7.78.

[24] J-P. Niboyet, Traité de Droit International Privé Français, para.1985, 137; cited from J. Lew, Applicable Laws in International Commercial Arbitration (The Hague: Kluwer Law International, 1978), p.53.

[25] A. Pillet, Traité Pratique de Droit International Privé (Grenoble: Imp. Allier, 1923), vol.2 at p.537; translation from A. Samuel, Jurisdictional Problems in International Commercial Arbitration. A Study of Belgian, Dutch, English, French, Swedish, USA and West German Law (Zurich: 1989), 52.

[26] Hong-  Lin Yu “How far can party autonomy be stretched in setting the grounds for the refusal of arbitral awards” International Arbitration Law Review 2011.

[27]Horacio A. GRIGERA-NAÓN, “Choice-of-law Problems in International Commercial Arbitration”, 289 Rec. Cours (2001), p. 13 at p. 41. 

[28] Julian D.M. LEW, Loukas A. MISTELIS, Stefan M. KRÖLL, op. cit., fn. 2, no. 6-26.

[29] E. I. Du Pont De Nemours and Co. v. Rhodia Fiber and Resin Intermediates SAS, Int'l Arb. Rep. (June 2001) p. 13 at pp. 15 et seq. (US Court of Appeals for the 3rd Circuit): “Arbitration is fundamentally a creature of contract, characterized by consent. As a matter of contract law, no party should be forced to arbitrate its claims unless that party has agreed to do so”; see also Reinhold GEIMER, in Richard ZÖLLER (ed.), Zivilprozessordnung, 25th edn. (Otto Schmidt Verlag 2005) Vor Sect. 1025, no. 4: “… nobody may be deprived of the state court system against his will”.

[30] See Julian D.M. LEW, Loukas A. MISTELIS, Stefan M. KRÖLL, Comparative International Commercial Arbitration (Kluwer Law International 2003) no. 5-23: “In spite of their apparent diametrically opposed views, the jurisdictional and contractual theories can be reconciled. Arbitration requires and depends upon elements from both the jurisdictional and the contractual viewpoints; it contains elements of both private and public law; it has procedural and contractual features. It is not surprising that a compromise theory, claiming arbitration to have a mixed or hybrid character should have been developed.”

[31] See Torsten LÖRCHER, Neue Verfahren der Internationalen Streiterledigung in Wirtschaftssachen (Peter Lang Verlag 1999) pp. 173 et seq.

[32] Union of India v. McDonnell Douglas Corp., (1993) 2 Lloyd's L. Rep. 48, 50.

[33] Thomas E. CARBONNEAU, Cases and Materials on the Law and Practice of Arbitration, 3rd edn. (Thomson-West 2005) p. 17.

[34]Piero BERNARDINI, “Arbitration Clauses: Achieving Effectiveness in the Law Applicable to the Arbitration Clause” in Improving the Efficiency of Arbitration Agreements and Awards, 40 Years of Application of the New York Convention, ICCA Congress Series no. 9 (1999) (hereinafter ICCA Congress Series no. 9) pp. 197 and 199; see also Pierre LALIVE, Jean-Francois POUDRET, Claude REYMOND, Le Droit de l'Arbitrage. Interne et International en Suisse (Editions Payot 1989) Art. 178, no. 14. 

[35] Klaus Peter BERGER, International Economic Arbitration (Kluwer 1993) p. 232.

[36]Alan REDFERN and Martin HUNTER, Law and Practice of International Commercial Arbitration, 4th edn. (Sweet & Maxwell 2004) no. 2-86. 

[37] Marc BLESSING, “The Law Applicable to the Arbitration Clause and Arbitrability” in ICCA Congress Series no. 9, p. 168 at pp. 169 et seq.

[38] Klaus Peter BERGER, op. cit., fn. 8, pp. 135.

[39] Julian D.M. LEW, Loukas A. MISTELIS, Stefan M. KRÖLL, op. cit., fn. 2, no. 6-37.

[40] Manja EPPING, op. cit., fn. 93, p. 55; see also Julian D.M. LEW, Loukas A. MISTELIS, Stefan M. KRÖLL, op. cit., fn. 2, no. 6-47: “The principle of territoriality enshrined in the Model Law is an argument in favour of relying on the place of arbitration.”

[41] Julian D.M. LEW, op. cit., fn. 13, p. 130.

[42] UN Doc. A/CN.9/264, para. 6.

[43] Klaus Peter BERGER, op. cit., fn. 8, p. 135; Julian D.M. LEW, Loukas A. MISTELIS, Stefan M. KRÖLL, op. cit., fn. 2, no. 6-48.

[44] ICC Award no. 5730, Clunet (1990) p. 1033.

[45] Julian D.M. LEW, Loukas A. MISTELIS, Stefan M. KRÖLL, op. cit., fn. 2, no. 6-49.

[46] Award of the Netherlands Tribunal for Metal Industry and Trade, Yearbook XI (1986) p. 185; ICC Award no. 6281, Clunet (1991) p. 1054; see also ad hoc award of Hamburg Commodity Exchange arbitration tribunal of 18 July 1986, Yearbook XVI (1991), p. 13 at p. 14; Award of the Hamburg Friendly Arbitration of 15 January 1976, in Kuno STRAATMANN and Peter ULMER (eds.), Handelsrechtliche Schiedsgerichtspraxis, vol. 2, (Verlag Dr. Otto Schmidt 1982) no. B 24 stating that the rule of Art II(2) New York Convention does not impose a rule of universal applicability.

[47] Julian D.M. LEW, Loukas A. MISTELIS, Stefan M. KRÖLL, op. cit., fn. 2 no. 6-39.

[48] Court of Appeal of Cologne of 16 December 1992, Yearbook XXI (1996), p. 535; UN Doc. A/CN.9/WG.II/WP.139 of 14 December 2005, p. 19.

[49]Klaus Peter BERGER, op. cit., fn. 8, p. 135; Julian D.M. LEW, Loukas A. MISTELIS, Stefan M. KRÖLL, op. cit., fn. 2, no. 6-44; Pierre LALIVE, Jean-Francois POUDRET, Claude REYMOND, op. cit., fn. 6, Art. 178. 

[50] Doc. A/CN.9/WG.II/WP.139 of 14 December 2005, p. 20.

[51] Court of Appeal of Hamm of 2 November 1983, Yearbook XIV (1989) p. 629; Netherlands Court of First Instance of Rotterdam of 24 November 1994, Isaac Glecer v. Moses Israel Glecer and Estera Glecer-Nottman, Yearbook XXI (1996) p. 635.

[52] UN Doc. A/CN.9/508, para. 42 et seq.; UN Doc. A/CN.9/WG.II/WP.139 of 14 December 2005, pp. 5 et seq.

[53] UN Doc. A/CN.9/607 of 13 April 2006, p. 4; Doc. A/CN.9/WG.II/WP.139 of 14 December 2005, pp. 21 et seq.

[54]The Working Group has drafted a revised text for Art. 7 Model Law, see UN Doc. A/CN.9/WG.II/WP.136 of 19 July 2005, p. 2; the draft contains the following sub-sections which take account of modern IT communication: “(2) The arbitration agreement shall be in writing. „Writing‟ means any form, including, without limitation, a data message, that provides a record of the arbitration agreement or is otherwise accessible so as to be useable for subsequent reference. (3) „Data message‟ means information generated, sent, received or stored by electronic, optical or similar means, including, but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy.” 

[55] UN Doc. A/CN.9/607 of 13 April 2006, p. 4; UN Doc. A/CN.9/592 of 27 February 2006, p. 28

[56] UN Doc. A/CN.9/WG.II/WP.139 of 14 December 2005, pp. 14 et seq.; UN Doc. A/CN.9/607 of 13 April 2006, pp. 4 et seq.

[57] UN Doc. A/CN.9/607 of 13 April 2006, p. 4.

[58] Swiss Federal Supreme Court in Compagnie de Navigation et Transports SA v. MSC (Mediterranean Shipping Company), Yearbook XI (1986), p. 690; Albert Jan VAN DEN BERG, “The Application of the New York Convention by the Courts” in ICCA Congress Series no. 9 (1999) p. 25 at p. 32: “It may indeed be questioned whether the uniform rule of Art. II(2) of the Convention should be maintained in all its respects. As almost 40 years have elapsed since its 30

drafting, it seems justified to bring its interpretation in accordance with views generally held in our times with respect to the conclusion of contracts that contain an arbitration clause.”

[59]UN Doc. A/CN.9/607 of 13 April 2006, p. 6. 

[60]Julian D.M. LEW, Loukas A. MISTELIS, Stefan M. KRÖLL, op. cit., fn. 2, no. 6-47 in fine; “Each state wants to determine for itself under which circumstances the jurisdiction of its courts can be excluded, i.e., whether or not a written agreement is required.” 

[61] Pierre LALIVE, Jean-Francois POUDRET, Claude REYMOND, op. cit., fn. 6, Art. 178, no. 14 and 16.

[62] Principle no. XV.1 of the Transnational Law Database at <www.tldb.de>. accessed 29 July 2012

[63] Alan REDFERN and Martin HUNTER, op. cit., fn. 9, no. 2-90; Julian D.M. LEW, Loukas A. MISTELIS, Stefan M. KRÖLL, op. cit., fn. 2, no. 6-61; Piero BERNARDINI, op. cit., fn. 6, p. 201; Albert V. DICEY and John H.C. MORRIS, Dicey and Morris on the Conflict of Laws, 13th edn. (Sweet & Maxwell 2000) p. 598.

[64]Albert Jan VAN DEN BERG, The New York Convention of 1958 (Kluwer 1981) p. 849; Bernd VON HOFFMANN, Internationale Handelsschiedsgerichtsbarkeit (Metzner 1970) pp. 60 et seq.; German Federal Supreme Court BGHZ 55, 162, 164; Klaus Peter BERGER, op. cit., fn. 8, p. 159.

[65] Gabrielle KAUFMANN-KOHLER, “Globalization of Arbitral Procedure”, 36 Vand. J. Transnat'l L. (2003), p. 1313 at p. 1319: “Choice of the seat indirectly effects a choice of the law governing the arbitral procedure…. Rather than directly choosing the law that governs the arbitration, the parties select a seat in a given state and the arbitration law of that state will apply, by operation of law [i.e., due to the territorial theory]. The choice of a seat results in an indirect choice of law”;see also Noah RUBINS, “The Arbitral Seat Is No Fiction: A Brief Reply to Tatsuya Nakamura's Commentary, „The Place of Arbitration in International Arbitration, its Fictitious Nature and Lex Arbitri‟”, Int'l Arb. Rep. (January 2001) pp. 23 et seq.

[66] Fouchard Gaillard Goldman, op. cit., fn. 44, no. 430.

[67] Klaus LIONNET and Annette LIONNET, Handbuch der internationalen und nationalen Schiedsgerichtsbarkeit, 3rd edn. (Boorberg 2005) p. 160; see also Klaus Peter BERGER, “„Sitz des Schiedsgerichts‟ oder „Sitz des Schiedsverfahrens‟?”, RIW (1993), p. 8 at p. 10; Klaus Peter BERGER, op. cit., fn. 28, Vol. II (Handbook), no. 16-66.

[68]Fouchard Gaillard Goldman, op. cit., fn. 44, no. 433. 

[69] Francis RUSSELL, op. cit., fn. 99, no. 2-095; International Tank and Pipe SAK v. Kuwait Aviation Fuelling Co. KSC [1975] QB 224; Mitsubishi Corporation v. Castletown Navigation Ltd., The Castle Alpha [1989] 2 Lloyd's L. Rep. 383.

[70] Art. 3(2) Rome Convention provides: “The parties may at any time agree to subject the contract to a law other than that which previously governed it, whether as a result of an earlier choice under this Article or of other provisions of this Convention.”

[71]Manja EPPING, Die Schiedsvereinbarung im internationalen privaten Rechtsverkehr nach der Reform des deutschen Schiedsverfahrensrechts (Beck 1999) p. 52. 

[72] Dutch District Court of The Hague, Yearbook XIX (1994) p. 703, where the court stated that this rule “can be considered as a general rule of private international law as a result of the broad international influence of the New York Convention”.

[73] [73] Julian D.M. LEW, “The Law Applicable to the Form and Substance of the Arbitration Clause” in ICCA Congress Series no. 9, p. 142. “There is a strong line of authority in case law for the application of the law of the seat of arbitration, which complies with this provision [Art. V(1)(a)] of the New York Convention”; Julian D.M. LEW, Loukas A. MISTELIS, Stefan M. KRÖLL, , no. 6-60; Stelios KOUSSOULIS, “Zur Dogmatik des auf die Schiedsvereinbarung anwendbaren Rechts” in Festschrift P. Schlosser (Mohr 2005) p. 415 at pp. 423 et seq.; Karl Heinz SCHWAB and Gerhard WALTER, Schiedsgerichtsbarkeit, 7th edn. (Verlag C.H. Beck 2005) p. 385; Jens-Peter LACHMANN, Handbuch für die Schiedsgerichtspraxis, 2nd edn. (Schmidt 2002) no. 196; Fouchard Gaillard Goldman, no. 429: “Where the parties have not chosen a law governing the arbitration, the seat of the arbitration is undoubtedly considered to be the most significant factor in the determination of the applicable law”; Gary BORN, International Commercial Arbitration, 2nd edn. (Kluwer Law International 2001) p. 111, note (d); Horacio A. GRIGERA-NAÓN, pp. 65 et seq; Klaus Peter BERGER, “Power of Arbitrators to Fill Gaps and Revise Contracts to Make Sense”, 17 Arb. Int'l (2001) p. 389 at p. 392 (“hard and fast rule”); Alan REDFERN and Martin HUNTER,p. 2-87, 2-90; Klaus Peter BERGER, 28 Vol. II (Handbook), no. 16-66; Pieter SANDERS, Quo Vadis Arbitration? (Kluwer Law International 1999) p. 330; cf. also UN Doc A/CN.9/WG.II/WP.49, para. 37 stating that a general conflict of laws rule applicable to the arbitration agreement should refer to the law chosen by the parties, or, failing such, to the law of the place of arbitration.

[74] XL Insurance Ltd v. Owens Corning [2000] 2 Lloyd's L. Rep. p. 500 at p. 508: “… by stipulating for arbitration in London … the parties … by implication chose English law as the proper law of the arbitration clause”.

[75] William L. CRAIG, William PARK, Jan PAULSSON, International Chamber of Commerce Arbitration, 3rd edn. (Oceana Publ. 2000) para. 5.05.

[76] Julian D.M. LEW, Loukas A. MISTELIS, Stefan M. KRÖLL, Comparative International Commercial Arbitration (Kluwer Law International 2003) no. 6-55:

[77] Alan REDFERN and Martin HUNTER, Law and Practice of International Commercial Arbitration, 4th edn. (Sweet & Maxwell 2004) no. 2-86.

[78] Julian D.M. LEW, “The Law Applicable to the Form and Substance of the Arbitration Clause” in ICCA Congress Series no. 9, p. 142.

[79] ICC Award no. 2626, in Sigvard JARVIN and Yves DERAINS (eds.), op. cit., fn. 88, p. 316; ICC Award no. 3572, in Sigvard JARVIN, Yves DERAINS, Jean-Jacques ARNALDEZ (eds.), Collection of ICC Arbitral Awards 1986-1990 (ICC Publishing SA 1994) p. 154; ICC Award no. 6379

[80] ICC Award no. 2626, Clunet (1978) p. 981; no. 6379, Yearbook XVII (1992) p. 215; BGH, RIW (1976) p. 449; Union of India v. McDonnell Douglas Corp, supra, fn. 4; Sonatrach Petroleum Corporation (BVI) v. Ferrell Internatinal Ltd, [2002] 1 All ER (Comm) 627

[81] Francis RUSSELL, Russell on Arbitration, 21st edn. (Sweet & Maxwell 1997) no. 2-094.

[82] Julian D.M. LEW, Loukas A. MISTELIS, Stefan M. KRÖLL, “Comparative International Commercial Arbitration”, p 6-9.

[83] ICC Award no. 3380, Clunet (1981) p. 927; no. 4131, Clunet (1984) p. 899; no. 4381, Clunet (1986) p. 1102; no. 4504, Clunet (1986) p. 1118; no. 5065, Clunet (1987) p. 1039; Albert Jan VAN DEN BERG, op. cit., fn. 81, p. 293; Peter SCHLOSSER, Das Recht der privaten internationalen Schiedsgerichtsbarkeit, 2nd edn. (Mohr 1989), no. 840; Marc BLESSING “Das neue internationale Schiedsrecht der Schweiz – ein Fortschritt oder ein Rückschritt?” in Karl-Heinz BÖCKSTIEGEL (ed.), Die internationale Schiedsgerichtsbarkeit in der Schweiz (II) (Carl Heymanns Verlag 1989) p. 13 at p. 40; Klaus Peter BERGER, op. cit., fn. 8, p. 158; Dominique HASCHER in Yearbook XX (1995) p. 1027; Yves DERAINS, Clunet (1985) p. 980

[84] William L. CRAIG, William PARK, Jan PAULSSON, International Chamber of Commerce Arbitration, 3rd edn. (Oceana Publ. 2000) para. 5.05.

[85]XL Insurance Ltd v. Owens Corning [2000] 2 Lloyd's L. Rep. p. 508

[86] UN Doc. A/40/17, para. 284.

[87]Klaus LIONNET and Annette LIONNET, Handbuch der internationalen und nationalen Schiedsgerichtsbarkeit, 3rd edn. (Boorberg 2005) p. 131

[88] Dalmia Dairy Industries Ltd. v. National Bank of Pakistan [1978] 2 Lloyd's L. Rep. 223; Black-Clawson International Ltd v. Papierwerke Waldhof-Aschaffenburg AG [1981] 2 Lloyd's L. Rep. 446.

[89] Klaus LIONNET and Annette LIONNET, Handbuch der internationalen und nationalen Schiedsgerichtsbarkeit, 3rd edn. (Boorberg 2005) p. 150

[90] Albert Jan VAN DEN BERG, The New York Convention of 1958 (Kluwer 1981) p. 177

[91] ICC Award no. 4710, ASA Bulletin (1985) p. 65 at pp. 66

[92] Howard M. HOLTZMANN and Joseph E. NEUHAUS, A Guide to the UNCITRAL Model Law on International Commercial Arbitration (Kluwer Law and Taxation Publishers 1989) p. 264

[93] Albert Jan VAN DEN BERG, “New York Convention of 1958 Consolidated Commentary Cases Reported in Volumes XIII (1988) – XIV (1989)”, Yearbook XIV (1989) p. 552;

[94] William W. PARK, “The Arbitrability Dicta in First Options v. Kaplan: What Sort of Kompetenz-Kompetenz Has Crossed the Atlantic?”, 16 Arb. Int'l (1996) p. 137

[95] Thomas E. CARBONNEAU, Cases and Materials on the Law and Practice of Arbitration, 3rd edn. (Thomson-West 2005) p. 17.

[96] Swiss law Christoph MÜLLER, International Arbitration – A Guide to the Complete Swiss Case Law (Unreported and Reported) (Schulthess 2004) p. 19

[97] Art. 177(1) provides: “Any dispute involving an economic interest may be the subject matter of an arbitration.”

[98] Section 1030(1) German Arbitration Act provides that “any claim involving an economic interest (vermögensrechtlicher Anspruch) can be the subject of an arbitration agreement. An arbitration agreement concerning claims not involving an economic interest shall have legal effect to the extent that the parties are entitled to conclude a settlement on the issue in dispute.”

[99] Section 1020(3) Dutch Arbitration Act provides that the “arbitration agreement shall not serve to determine legal consequences of which the parties cannot freely dispose”.

[100]Section 1(1) provides that all disputes are arbitrable that “concern matters in respect of which the parties may reach a settlement”. 

[101]Art. 1(2) Model Law which provides that “[t]he provisions of this Law, except articles 8, 9, 35 and 36, apply only if the place of arbitration is in the territory of this State”. 

[102]  Mitsubishi Motors Corp. v. Soler Chrysler Plymouth Inc., [1985] 473 US 614  L. Yves FORTIER, “Arbitrability of Disputes” in Global Reflections on International Law, Commerce and Dispute Resolution; Liber Amicorum in honour of Robert Briner (ICC Publishing 2005) p. 269 at p. 284. “Indeed, in the vast majority of cases, it could be said that arbitrability has become a non-issue”.

[103] Julian D.M. LEW, “The Law Applicable to the Form and Substance of the Arbitration Clause” in ICCA Congress Series no. 9, p. 119.

[104] Swiss Federal Tribunal, Compagnie de Navigation de Transports SA v. MSC Mediterranean Shipping Company SA, BGE 121 III 38; Italian Supreme Court in Conceria G De Maio & F snc (Italy) v. EMAG AG (Switzerland), ICCA Yearbook Commercial Arbitration XXI (1996) (hereinafter Yearbook) p. 602; UN Doc. A/CN.9/WG.II/WP.139 (14 December 2005) pp. 18 et seq

[105] Sole Arbitrator Dupuy in Texaco Overseas Petroleum Co & California Asiatic Oil Co. (TOPCO) v. The Government of the Libyan Arab Republic, Int'l L. Rep. (1979) 389, 405

[106] Alan REDFERN and Martin HUNTER, Law and Practice of International Commercial Arbitration, 4th edn. (Sweet & Maxwell 2004) no. 2-80.

[107] German Arbitration Act  Article 34 Model Law.

[108] New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards Article 5

[109] Julian D.M. LEW, “The Law Applicable to the Form and Substance of the Arbitration Clause” in ICCA Congress Series no. 9, p. 119.

[110] Union of India v. McDonnell Douglas Corp., (1993) 2 Lloyd's L. Rep. 48, 50.

[111] Klaus Peter BERGER, The Creeping Codification of the Lex Mercatoria (Kluwer Law International 1999) p. 32.

[112] French Cour de cassation, decision of 20 December 1993, Comité populaire de la municipalité de Khoms El Mergeb v. Dalico Contractors, Clunet (Journal du Droit International) 1994, p. 432; see also Cour de cassation, decision of 21 May 1997, Renault v. V 2000 (formerly Jaguar France), Rev. d'Arb. (1997) p. 537; Emmanuel GAILLARD and John SAVAGE, Fouchard Gaillard Goldman on International Commercial Arbitration (Kluwer Law International 1999) p 435.

[113] Paris Court of Appeals in Menicucci v. Mahieux, Rev. d'Arb. (1977) p. 147.

[114] ICC Interim Award no. 4131, Dow Chemical France et al. v. Isover Saint Gobain, Yearbook IX (1984) p. 131 at p. 134.

[115] D.M. LEW, “The Law Applicable to the Form and Substance of the Arbitration Clause” in ICCA Congress Series no. 9, p. 113.

[116] Piero BERNARDINI, “Arbitration Clauses: Achieving Effectiveness in the Law Applicable to the Arbitration Clause” in Improving the Efficiency of Arbitration Agreements and Awards, 40 Years of Application of the New York Convention, ICCA Congress Series no. 9 (1999)

[117] Horacio A. GRIGERA-NAÓN, “Choice-of-law Problems in International Commercial Arbitration”, 289 Rec. Cours (2001), p 95.

[118] Peterson Farms Inc. v. C&M Farming Ltd., [2004] 1 Lloyd's L. Rep. 603, 610; see also John P. GAFFNEY, “The Law Applicable to the Arbitration Agreement”, Int'l. Arb. Rep. (June 2004) p. 1 at pp. 5 et seq.; see also Amin Shipping Corporation v. Kuwait Insurance Co., [1983] 2 Lloyd's L. Rep. 365, 371 where the court held that under English law an arbitration agreement, like any other contract, must be governed by some system of private law.

[119] Scherk v. Alberto-Culver Co., U.S (1974) p417-506, 519.

[120] Julian D.M. LEW, Loukas A. MISTELIS, Stefan M. KRÖLL, Comparative International Commercial Arbitration (Kluwer Law International 2003) no. 7-61

[121] Kaplan v. First Options of Chicago, Inc., 19 F.3d 1503, 1512 (3rd Cir. 1994); see also Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983).

[122]Kaplan v. First Options of Chicago, Inc., 19 F.3d 1503, 1512 (3rd Cir. 1994); see also Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). 

[123] Resolution “L'arbitrage entre Etats et entreprises étrangères”, adopted at the 18th Session in Santiago de Compostela, 4-14 September, 1989, (5) ICSID Rev–FILJ (1990) p. 139 at p. 141

[124] Pierre LALIVE, Jean-Francois POUDRET, Claude REYMOND, Le Droit de l'Arbitrage. Interne et International en Suisse (Editions Payot 1989) Art. 178, no. 14 and 16.

[125] French code of Civil Procedure Decree No. 2011-48 Title II (FCCP Degree 2011 Title II) Art 1507.

[126] FCCP Degree 2011 Title II, Art 1505.

[127] Hong-Lin Yu and Masood Ahmed, Legislative Comment, The new French Arbitration Law: an analysis, (2012) International Arbitration Law Review.

[128] FCCP Degree 2011 Title II, Art 1464.

[129] FCCP Decree 2011 Art.1447.

[130] Similar provision can be seen in art.1499 NCPC Decree. Jean-Louis Delvolvé, Jean Rouche and Gerald H. Pointon, French Arbitration law and Practice (Kluwer Arbitration International, 2003), p.58.

[131] FCCP Degree 2011, Article 1505.

[132] Case No.01-13.742/02-15.237.

[133] FCCP Decree art.1467.

[134] FCCP Decree art.1472.

[135] State of Israel v National Iranian Oil Company (NIOC) judgment of the French Cour de Cassation, First Civil Chamber, February 1 2005, case No.01-13.742/02-15.237. Discussion can also be seen in Christophe von Krause, “  New French Arbitration Law Clarifies Role of National Courts and Reinforces Recognition and Enforcement of   Arbitration Awards” (February 25, 2011) Kluwer   Arbitration Blog. 

[136] FCCP Decree art.1515(1).

[137] FCCP Decree art.1515(2).

[138] FCCP Decree art.1516(3).

[139] Hong-Lin Yu and Masood Ahmed, Legislative Comment, The new French Arbitration Law: an analysis, (2012) International Arbitration Law Review

[140] French code of Civil Procedure Decree No. 2011-48 Title II (FCCP Degree 2011 Title II) Art 1507.

[141] FCCP Degree 2011 Title II, Art 1505.

[142] Hong-Lin Yu and Masood Ahmed, Legislative Comment, The new French Arbitration Law: an analysis, (2012) International Arbitration Law Review.

[143] FCCP Degree 2011 Title II, Art 1464.

Go to top