I. To the Arbitration Agreement

Even though the parties generally may determine the law applicable to the arbitration agreement, they rarely do so. It happens far more often that the parties agree on the laws applicable to the proceedings and to the merits of their case than that the parties (additionally) agree on a specific law to govern their arbitration agreement. Concerning questions of the formal validity of the arbitration agreement,[1] this is less of a problem since the law governing the arbitral proceedings usually also deals with the questions of the formal validity of arbitration proceedings.[2] If however questions arise with respect to the substantive validity[3] of the arbitration agreement, there are a number of different laws, which could be applied. This may remain without consequences, if the arbitration agreement is valid under all laws in question. If, however, the arbitration agreement does not meet the requirements of one of the laws in question, the arbitral tribunal needs to make a decision.

In such situations, different arbitral tribunals have followed different approaches. Since according to Art. 34 Section II lit. (a) (i) UNCITRAL Model Law, an award may be set aside if “[the arbitration agreement] is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State” (meaning the forum state), a good argument is to be made that if the country of the seat of the arbitration has adopted the UNCITRAL Model Law, the arbitral tribunal should dedicate the validity of the arbitration agreement to the law of the seat of the arbitration. Likewise, Art. V Section 1 lit. (a) New York Convention subjects the determination of the validity of the arbitration agreement to the law of the country where the award was made, i.e. the country of the seat of the arbitration, in the lack of any specific choice of law by the parties. Therefore, even if the country of the seat of the arbitration has not adopted the UNCITRAL Model Law, it might be advisable to subject the questions of the arbitration agreement’s validity to the law of the country of the seat of the arbitration.

There are other good arguments, however, which contrast the aforementioned arguments according to which the law of the seat of the arbitration should be applied. One particularly strong argument is that it might come as a surprise to the parties that the law they designated to govern their contract should govern the contract but not the arbitration clause concluded within the very same contract. If it is the parties’ expectation that the arbitration clause is part of the underlying contract, it seems likely that they would express their wish to have the arbitration clause governed by the same law as the underlying contract merely by stipulating the law applicable to the contract without a specific reference to the arbitration clause. Therefore, in such cases, a mere determination by the parties of the law applicable to the contract could be seen as including a determination of the parties of the law applicable to the arbitration agreement in terms of Art. 34 Section II lit. (a) (i) UNCITRAL Model Law and Art. V Section 1 lit. (a) New York Convention.

Yet, while these are maybe the most commonly chosen laws by arbitral tribunals, they are not the only solutions that arbitral tribunals have found to this difficult question. As a consequence, there is no clear answer to the question which law is applicable to the arbitration agreement unless the parties have expressed a specific choice.



[1] E.g. if the arbitration agreement needs to be concluded in writing, see above.

[2] For the determination of the lex arbitri see below.

[3] Such as the question whether there is consent between the parties.

Last modified: Sunday, 30 August 2015, 9:43 PM