Applicable Law in Commercial Arbitration
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Description
In international arbitration, arbitrators must often navigate a complex maze of norms from different legal systems. The arbitrators’ decision on which of these legal norms apply to the merits of the proceedings can have far-reaching consequences. Above all, this is because legal systems differ significantly in respect of what they consider to be just, fair, and appropriate solutions to specific legal problems. The diverging approaches towards economic hardship, the statute of limitations, or the enforceability of standard contract terms are just a few examples of the many areas of contract law in relation to which legal systems differ. Accordingly, an arbitral tribunal’s choice to apply the law of one country rather than that of a different country can be outcome-determinative. Selecting the law applicable to the merits is, however, not only important because laws reflect distinct values, which may influence the outcome of arbitration proceedings. Laws also differ in many other regards, including in terms of their accessibility, their level of detail and the existence of a well-developed body of case law. These disparities affect the parties’ ability to show norm-compliant behaviour and significantly impact the transaction costs of finding an appropriate solution once a dispute has arisen. How, then, shall an arbitral tribunal proceed to determine the law applicable to the merits? This chapter posits that the starting point for a tribunal’s analysis is an autonomous conflict provision set forth in the arbitration framework. Such autonomous conflict provisions are meta-norms because they do not offer an answer to a specific question of substantive law but guide the arbitral tribunal in determining the law applicable to the merits. As shown in greater detail below, the autonomous conflict provisions typically direct tribunals to respect the parties’ choice. Absent such choice, arbitral tribunals enjoy discretion in determining the applicable rules—a discretion that, in most cases, is exercised with due consideration of conflict rules that developed in private international law outside the arbitration framework. Irrespective of whether parties have made a choice of law or not, arbitral tribunals are called upon to respect the provisions of the contract and relevant trade usages; (overriding) mandatory norms impose further limitations upon their analysis.
Source Publication
Cambridge Compendium of International Commercial and Investment Arbitration
Source Editors/Authors
Stefan Kroll, Andrea K. Bjorklund, Franco Ferrari
Publication Date
2023
Volume Number
1
Recommended Citation
Ferrari, Franco and Rosenfeld, Friedrich, "Applicable Law in Commercial Arbitration" (2023). Faculty Chapters. 547.
https://gretchen.law.nyu.edu/fac-chapt/547
