Originally from World Arbitration and Mediation Review

The Application of Mandatory Law and Public Policy in International
Commercial Arbitration
by
Jennifer Young∗
Party autonomy is the hallmark of international commercial
arbitration. In civil law jurisdictions, this contract principle is known as
“the will of the parties”; in common law jurisdictions, it is expressed as
“freedom of contract.” Party autonomy allows parties to an arbitration
agreement to select the substantive law that will govern their contract.
Accordingly, if a dispute arises, arbitrators will generally resolve disputes
according to the law chosen by the parties. In some matters, the parties
are absolutely dominant; arbitrators must give effect to party choice.
Choice-of-law rules, however, can sometimes conflict. In effect, party
autonomy can clash with mandatory law.
Mandatory law can be defined as “an imperative provision of law
which must be applied to an international relationship irrespective of the
law that governs the relationship.” Whether arbitral tribunals should apply
the mandatory rules of a legal system instead of the chosen law of contract
is controversial. Some commentators argue that such mandatory rules
interfere with the formation and performance of international contracts,
and others contend that an arbitrator may consider “mandatory public law
rules in an effort to guarantee that his [or her] award is ultimately
enforceable and also to safeguard the credibility of arbitration as an
effective mechanism for the settlement of disputes arising from
commercial contracts.”