Can an Arbitral Tribunal Disregard the Choice of Law Made by the Parties? - SIAR 2005-1

Giuditta Cordero Moss, PhD (Moscow), Dr. Juris (Oslo). The author is a professor at the University of Oslo, in charge of international commercial law, comparative law and private international law, and a part-time principal research fellow and honorary lecturer at the Centre for Energy, Petroleum and Mineral Law and Policy, University of Dundee. She is admitted to practice law in Italy and Norway, and has been practicing in the field of international business transactions, financing, international litigation and Russian law for ca. 20 years.

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Originally from: Stockholm International Arbitration Review

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CAN AN ARBITRAL TRIBUNAL DISREGARD THE CHOICE OF LAW MADE BY THE PARTIES?*

By Giuditta Cordero Moss**

Introduction

This article analyses whether disregard by the arbitral tribunal of the choice of law made by the parties may be considered an excess of power or a procedural irregularity, thus leading to the invalidity or unenforceability of an award.

Arbitration is, as known, an out-of-court method of dispute resolution that is mostly based on the will of the parties. The arbitral tribunal is bound to follow the parties' instructions because it does not have any powers outside the scope of the parties' agreement. Tribunals are therefore, and correctly, very reluctant to deviate from the instructions of the parties. Nevertheless, there might be situations where a tribunal is faced with the necessity or the opportunity to disregard the parties' instructions in respect of the applicable law. As an example, following the parties' choice might result in a violation of applicable fundamental principles (ordre public) if the parties have made a conscious choice of law in order to avoid the application of certain rules of the otherwise applicable law; for instance, the rules on export, taxes, and competition regulation. Or, following the parties' choice might result in a contradiction with the contractual regulation made by the parties themselves--if they have made a not so conscious choice of law (or no choice at all) and have not noticed that the contractual regulation contradicts the governing law.