Academic journal article University of New Brunswick Law Journal

Party Autonomy and Choice of Law: Is International Arbitration Leading the Way or Marching to the Beat of Its Own Drummer?

Academic journal article University of New Brunswick Law Journal

Party Autonomy and Choice of Law: Is International Arbitration Leading the Way or Marching to the Beat of Its Own Drummer?

Article excerpt

When a choice of law issue arises, who decides: the parties (i.e., party autonomy) or the adjudicator? If the adjudicator decides, by what rules will the decision be made? As Catherine Walsh described in her 2010 Rand Lecture, party autonomy has been a flashpoint in discussions of domestic choice of law regimes. Over the past few decades, party autonomy has generally expanded, but a variety of limitations remain. If an adjudicator automatically applies the law or rules of law chosen by the parties, (1) it would seem that their rights and interests have been protected. However, acceding to contractual choices of law may harm third parties or contravene the public policy of a country. Accordingly, courts have restricted party autonomy in choice of law. The advisability of such restrictions has led to deep philosophical debates about the interests that choice of law should serve and to earnest discussions of the proper scope of party autonomy. Party autonomy may be on the march, but it continues to face opposition.

International arbitration provides an interesting counterpoint. One might think that similarly earnest discussions and deep debates would have taken place within the international arbitration community. After all, parties to international arbitrations by definition come from different states, and arbitral tribunals are not tied to any particular state. As a result, choice of law is always implicated and there is no default law to serve as a starting point for determinations. Nevertheless, the march of party autonomy in international arbitration has been unhindered. The discussions have not been philosophical but rather practical: how best to promote party autonomy and expand its scope.

National courts have abetted this process in the international arbitration context, even as they have maintained restrictions on party autonomy in choice of law within their own legal systems. This phenomenon, combined with the gradual loosening of restrictions on party autonomy in national legal systems, has led some to claim that international arbitration is leading the nations of the world into a global choice of law regime in which party autonomy reigns. Such triumphalists look forward to the day when party autonomy is as unrestricted in national courts as it is in arbitration.

That day is unlikely to arrive. The different pressures and interests that shape national court litigation on the one hand, and international arbitration on the other, are likely to generate different levels of support for party autonomy in choice of law. As a result, regardless of whether more party autonomy in choice of law is preferable in all contexts or whether it ought to have a wider scope in arbitration than in litigation, arbitrators are likely to maintain greater deference to party autonomy than will national legislatures or courts. (2)

Part I considers the choice of law process in international arbitration and how it differs from that prevailing in national courts, with particular attention to party autonomy. Part II proposes some reasons why international arbitral tribunals and national courts have accepted party autonomy to different degrees, and why this disparate treatment is likely to continue. Part III concludes and suggests a few lessons that national courts and international arbitral tribunals might learn from each other.

I PARTY AUTONOMY AND CHOICE OF LAW IN INTERNATIONAL ARBITRATION

International arbitral tribunals have no inherent lex fori. Therefore, they have no inbuilt predisposition toward any particular national law and no nationally generated choice of law regime. They begin the choice of law process from the expectations of the parties, rather than from the point of view of any national system of law. If the contract contains a clear choice of law clause, the tribunal will respect that choice. The rules of procedure of most arbitral institutions require the tribunal to apply any laws or rules of law chosen by the parties. …

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