Choice of Law in International Commercial Arbitration

Abstract

The choice-of-law rules applied by arbitral tribunals differ in several respects from the approaches followed by domestic courts. Those differences arise in connection with three distinct choice-of-law problems: (i) the determination of the law applicable absent a choice of law by the parties, (ii) the interpretation and supplementation of the law chosen by the parties, and (iii) the application of mandatory norms. As far as item (i) is concerned, arbitration-specific choice-of-law rules typically grant arbitrators more freedom than ordinary conflict-of-laws norms. In relation to international sale of goods transactions, for example, Article 4(1)(b) of the Rome I Regulation on the law applicable to contractual obligations provides for the application of the law of the country where the seller has his habitual residence (unless the contract is more closely connected with another country), while Article 28(2) of the UNCITRAL Model Law on International Commercial Arbitration allows arbitrators to determine the applicable law on the basis of the conflict rule of their choosing. Under the arbitration laws of several countries, arbitrators are even entitled to apply non-national law such as general principles of law, the UNIDROIT Principles of International Commercial Contracts, or principles common to the parties’ legal systems. With regard to item (ii), arbitral tribunals may similarly resort to non-national legal sources when interpreting, or filling the gaps of, the applicable domestic law. This was expressly contemplated by the drafters of the aforementioned UNIDROIT Principles according to whom the Principles “may be used to interpret or supplement domestic law” (see Preamble). As to item (iii), the conflict rules of codifications such as the Rome I Regulation lay down specific rules regarding the application of the mandatory norms of both the forum and other relevant jurisdictions. The former cannot be transposed to international arbitration due to the absence of a “forum” of international arbitral tribunals. The latter, while not directly applicable, may be taken into account by arbitral tribunals. However, it is more likely that arbitral tribunals will view the question of the application of specific mandatory norms from the angle of possible enforcement problems that may result from the non-application of those norms.