Transnational Construction Arbitration
Page 5
CHAPTER 2
The law governing the arbitration agreement: a transnational solution?
The law governing the arbitration agreement: a transnational solution?
Introduction
2.1 Parties rarely choose the law applicable to the arbitration agreement. This frequently gives rise to complexities. The obvious solution, but one that, for some reason, is not yet prevalent, is for arbitration clauses to make an express choice of the law applicable to the clause itself, rather than to the matrix contract of which the clause is an element. It is impossible not to endorse this solution. If the parties choose the law applicable to the arbitration agreement, in all but rare cases such a choice will be given effect by arbitrators and courts. The determination of the law applicable to the arbitration agreement will not be problematic. And this is the end of the matter. 2.2 However, the existence of a drafting solution does not mean that the analysis of the legal solution in the absence of clear drafting on the point is an unnecessary effort. The first reason is practical: not all arbitration clauses have an express choice of law provision concerning the law applicable to the clause itself. Indeed, this is currently the case for the vast majority of arbitration clauses. And even when everybody has become aware of the need for such a choice, there will no doubt still be arbitration clauses without an express choice of law provision concerning the clause itself because, for example, the parties could not agree on such a law or simply for neglect or forgetfulness. After all, there is an enormous amount of literature on arbitration clauses and how to draft them. And yet there are still problematic clauses that give rise to disputes. The perfect world of perfectly drafted contracts with perfectly drafted arbitration clauses does not yet exist. And problems arise. 2.3 The second reason is theoretical: the study of the law applicable to the arbitration clause provides fertile ground for an analysis of the transnational dimension of international arbitration, that is, of the way in which international arbitration interacts with multiple national legal systems and multiple national legal systems interact with each other in framing internationally accepted solutions to legal problems. This chapter contributes to this debate by examining the problem of the law applicable to the existence, validity, and effectiveness of the arbitration agreement when there is noPage 6
The need for a separate inquiry into the law governing the arbitration agreement
2.5 It is trite that a complex matrix of laws applies in international commercial arbitration. Generally, the expressions ‘applicable law’, ‘proper law’, ‘governing law’ are used as synonymous and interchangeable. In arbitration, the applicable law has three main aspects: (1) the law governing the substance of the dispute (lex causae or substantive law); (2) the law governing the arbitration agreement itself; and (3) the law governing the proceedings (lex arbitri). Thus, in the Channel Tunnel case, Lord Mustill famously explained:4It is by now firmly established that more than one national system of law may bear upon an international arbitration. Thus, there is the proper law which regulates the substantive rights and duties of the parties to the contract from which the dispute has arisen. Exceptionally, this may differ from the national law governing the interpretation of the agreement to submit the dispute to arbitration. Less exceptionally it may also differ from the national law which the parties have expressly or by implication selected to govern the relationship between themselves and the arbitrator in the conduct of the arbitration: the ‘curial law’ of the arbitration, as it is often called.