Originally from American Review of International Arbitration - ARIA

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If the articles in this volume are any guide, the role of mandatory rules in international arbitration remains a persistent source of debate.  The basic problem is a straightforward one:  contractual arbitration arises as a matter of the parties’ consent, but the resolution of contractual disputes can implicate mandatory rules of law that are not waivable and are typically designed to protect broader public rights.  Since national legal systems began ceding the application of mandatory rules to party-appointed arbitrators, scholars of international arbitration have struggled to come to grips with the implications of this reality for the resolution of cross-border disputes in which the public policy of several states is at stake.

The literature on mandatory rules has often presented the issue in stark terms, as posing a fundamental “conflict between the will of the State having promulgated the mandatory rules of law, on the one hand, and, on the other hand, the will of the parties—from which [the arbitrator’s] own authority is derived.”   Asserting an independent public duty to protect national mandatory laws as well as the enforceability of arbitral awards, a number of writers have further urged arbitrators to apply a so-called “mandatory rules method” to determine, regardless of what the parties have agreed, which particular mandatory rules to apply in a particular dispute.  Although the details of the method differ from author to author, the basic proposition is that arbitrators should apply a stand-alone balancing test that considers, based on the nature of the rule and the connection to the parties’ transaction, the strength of a particular state’s interest in having its mandatory rules enforced.

In these remarks, I take a skeptical view of the mandatory rules literature and argue that arbitration of mandatory rules is readily handled within the standard, contractual view of arbitration.  In particular, I argue that the alleged conflict between mandatory rules and party autonomy reflects a mistaken view of national arbitrability doctrines that, once corrected, deprives the case for a special mandatory rules method of much of its force.  At the same time, however, the consequences of this insight are more limited than might be supposed because modern arbitration agreements generally give arbitrators far more authority to consider and apply mandatory rules than advocates of the mandatory rules method have assumed.  Indeed, because arbitrators can typically claim contractual authority to apply all applicable mandatory rules, the actual effect of relying on a separate mandatory rules method will be to narrow rather than to expand the number of mandatory rues within the arbitrator’s cognizance.  There may be reasons why this narrowing is prudent, but that is not a question to which the existing literature has thus far paid much attention.  Future discussion of mandatory rules arbitration should therefore take better account both of national arbitrability laws and the full range of options typically facing the international arbitrator.