Originally from: Stockholm International Arbitration Review

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COMPARATIVE ANALYSIS OF THE NEW ESTONIAN ARBITRATION LAW PROVISIONS ON THE CHOICE OF LAW APPLICABLE TO THE INTERNATIONAL COMMERCIAL ARBITRATION DISPUTE

By Kirill Lezheiko

1. Introduction

"We cannot have trade and commerce in world markets and international waters exclusively on our terms, governed by our laws, and resolved in our courts."1 The U.S. Supreme Court in The Bremen case made this far-reaching observation in 1972. Notably, this statement comes from the nation whose business activities have long been dominating the world markets, creating an impression that American courts might feel free not to bother themselves with application of foreign laws. And yet, the Supreme Court of one of the world’s leading economies acknowledged the principle that a question of law applicable to the merits of the international dispute is indeed of paramount practical importance and must, therefore, receive the most careful and well-rounded attention.

Some thirty years later, Estonia has passed new arbitration legislation providing that absent the parties’ agreement the arbitral tribunal must apply Estonian law to the merits of the dispute. And this is where one may be left slightly puzzled about a possible rationale underlying such an approach. Is this a revolutionary new solution or, rather, a regressive step back from what has, for quite a while, been considered an established choice-of-law arbitral practice? Or is it simply a mistake?

This article analyses the issue which is raised by the choice-of-law provision of the new Estonian arbitration law, namely the first two paragraphs of Section 742, entitled "Applicable Law," which is part of the newly enacted Estonian Code of Civil Procedure2--entered into force on January 1, 2006.