Applicable Law - Chapter 7 - Practical Guide to International Arbitration
Originally from Practical Guide to International Arbitration
By definition, an international dispute is connected with different jurisdictions, so there usually is not only one choice of governing law for a given dispute. It often happens that the nationality of the parties differs from the applicable substantive law or the law of the seat of the arbitration. Beyond domestic law, international treaties, principles and usages also may apply or be taken into account. Arbitral tribunals may even decide a dispute based on equitable principles, if the parties so agree.
In international arbitration, it is important to distinguish among: the law applicable to the formation, validity and interpretation of an arbitration agreement itself; the law applicable to the arbitral proceedings; the law applicable to the merits of the dispute; and, finally, the law applicable to determining the validity or enforcement of the arbitral award. Specific questions also arise in the context of investment arbitration due to the sovereign nature of the State parties and the tribunal’s desire to reach a balance of powers between state and investor.
For in-house counsel still at the contractual drafting phase, the way to avoid future ambiguities is to make it clear in the agreement which law will apply to any dispute falling under the arbitration agreement. For counsel finding themselves already at the dispute stage and without a clear roadmap to applicable law, things are a bit more complicated. Ultimately, this matter will be left to the discretion of the arbitral tribunal to decide and apply.
As a practical tip, counsel should always begin this inquiry by looking at the relevant contractual framework first to see whether it includes a law applicable to the merits of dispute and to the arbitration agreement. In the absence of a separate choice-of-law clause in the contract, one can look to see whether relevant language has been incorporated into the arbitration clause, a choice-of-forum clause, or any other part of the contract.