Latest News
Party Autonomy in International Arbitration: Balancing Sovereignty and Legal Boundaries
Party Autonomy in International Arbitration: Balancing Sovereignty and Legal Boundaries
Over the past few decades, party autonomy in internal choice of legal regimes has grown, although there are still restrictions. Parties' freedom to choose their laws has been curtailed by courts because doing so might damage third parties or violate public policy. Philosophical discussions over the appropriate boundaries of party autonomy and the purposes that the choice of law should serve have resulted from this. An intriguing counterargument is offered by international arbitration, as arbitral courts are independent of any one state, and parties are located in separate states. Nonetheless, there has been no obstruction to party autonomy in international arbitration, with talks centred on advancing and broadening its application. Mandatory legal requirements, which assert or demand that they be immediately implemented or followed, have an impact on a significant portion of cases; hence, in over 50% of instances, arbitrators will find themselves faced with this challenging decision.
Cases involving the application of US export restrictions for computer software and computer chips, the exoneration of a Polish importer of a metallurgical plant, the application of Romanian exchange control regulations, and the US Racketeer Influenced and Corrupt Organisations Act have all been heard in recent arbitral practice. Some have said that international arbitration is pushing countries towards a worldwide system of choice of law where party autonomy is paramount as a result of these cases. Due to the various interests and influences that influence both international arbitration and national court proceedings, this day is unlikely to come. More respect for party autonomy is probably going to be shown by arbitrators than by national legislatures or courts. The choice of law procedure used in international arbitration is examined, along with how it varies from national court procedures, with a focus on party autonomy. In Part II, it is suggested why national courts and international arbitral tribunals have viewed party autonomy differently and why this unequal treatment is likely to persist. The final section offers some advice on how national courts and international arbitral tribunals may benefit from one another.
International arbitral tribunals lack a national choice of law system or an intrinsic lex fori, which means that they are not biased towards any one national law. Rather than starting the choice of law procedure from the perspective of any national legal system, they do so from the expectations of the parties. The tribunal will honour the choice of law if there is a clear one in the contract. The lex fori concept is a relatively new idea that gives parties to arbitrations the flexibility to select the substantive law that will govern their arbitration. However, it used to be thought that by agreeing to hold the arbitration in a certain nation, the parties implicitly agreed that the nation's legal system would handle the dispute's merits. The majority of arbitral rules now in place provide the tribunal the authority to decide which choice of law rule is most suitable and then use that rule to ascertain which law will apply. This authority is often used, and it won't make the award unenforceable in domestic courts. In actuality, voie directe affords an arbitral panel nearly unrestricted discretion when selecting substantive law norms.
Boilerplate provisions are frequently used in the drafting of international contracts to standardize the contract's interpretation and operation. The goal of standardized contract terms is to make the contract self-sufficient by dispensing with national law. Examples of these terms include boilerplate legal frameworks and arbitration provisions. This assumption might not hold in other circumstances, though, such as when there are disagreements between the parties, when there are interests of third parties, or when outside counsel is required. It is vital to examine the circumstances that might lead to interference with the closed circuit to determine the boundaries of party autonomy. With the parties' permission, international arbitration can be used to settle contractual disputes. If parties consent to have their conflicts arbitrated, regular courts will not have the authority to hear the matter; instead, the arbitrator will be the sole means of resolution. The parties decide on the arbitral tribunal's makeup, operating procedures, areas of expertise, and authority. The arbitral tribunal is obligated to carry out the parties' instructions; if it goes beyond what is permitted, the parties' agreement does not support either the tribunal's jurisdiction or its decision.
Despite the notion that contracts are self-sufficient and that arbitration establishes a closed circuit that excludes national law, party sovereignty in international arbitration is restricted. Significant autonomy is ensured by the legislative structure for arbitration; but, if the losing party chooses not to abide by the arbitral ruling, judicial control may be used. Unlike national legislatures or judges, arbitrators are inclined to uphold a greater degree of deference to party autonomy in choosing the law. The parties' commitment to arbitrate conflicts under a certain set of rules serves as justification for preserving more party autonomy in the choice of law.
References
[1] Cordero-Moss, Giuditta. "Limits to Party Autonomy in International Commercial Arbitration." Oslo Law Review 1.1 (2014): 47-66.
[2] Cordero-Moss, Giuditta. "Limits on party autonomy in international commercial arbitration." Penn St. JL & Int'l Aff. 4 (2015): 186.
[3] Dursun, ?eyda. "A critical examination of the role of party autonomy in international commercial arbitration and an assessment of its role and extent." Yalova Üniversitesi Hukuk Fakültesi Dergisi 1.1 (2012): 174-175.
[4] Carlquist, Helena. "Party Autonomy and the Choice of Substantive Law in International Commercial Arbitration." rapport 2006 (2007).
- International arbitration upholds party autonomy in choosing applicable laws, diverging from constraints imposed by national courts.
- Arbitral tribunals prioritize parties' contractual intentions over any inherent lex fori, providing flexibility in selecting governing laws.
- Despite the concept of contracts as self-sufficient, party sovereignty in international arbitration is tempered by potential judicial oversight and enforcement mechanisms.
