The Arbitral Tribunal’s Power in respect of the Parties’ Pleadings as a Limit to Party Autonomy, On Jura Novit Curia and Related Issues - Chapter 8 - Limits to Party Autonomy in International Commercial Arbitration
Originally from Limits to Party Autonomy in International Commercial Arbitration
The relationship between the arbitration agreement and the parties’ pleadings on one hand and, on the other hand, the powers of the arbitral tribunal, reveals mutual limitations. These, in turn, reflect the tension between the centrality of the will of the parties in arbitration, and the necessity to act within the framework set by national laws and international conventions, if the enforceability of the arbitral award is to be preserved. The parties may have chosen a certain law in the contract, may have made a certain legal argument or invoked a certain fact in their pleadings, and yet the award may end up being based on another law, another legal theory, another fact. This is not only interesting from a theoretical point of view, but also has significance in practice, as the anecdotal experience mentioned below may illustrate.
When I started acting as an arbitrator, back at the beginning of the millennium, I sometimes had to act in disputes where the respondent did not appear. I was well aware of the central role that party autonomy plays in arbitration: the parties’ pleadings set the foundation and the limits for the arbitral powers. The arbitrator has to follow the parties’ instructions and may not exceed the scope of power granted to it by the parties. Excess of power exposes the risk of the award being set aside by the courts of origin or refused enforcement by the courts of enforcement. However, the respondent’s failure to participate deprived the proceeding of that party’s point of view, and I did not have the benefit of counterarguments regarding the facts or the legal arguments invoked by the claimant. This raised a question: if the will of the parties is the only foundation upon which an arbitrator may act, does it mean that the arbitrator’s role is to choose between the claimant’s and the respondent’s arguments? Does this in turn mean that, when no counterarguments are submitted, the arbitrator has to accept the claimant’s arguments? Arbitration laws or arbitration rules often specify that failure by a party to participate does not imply admission of the other party’s submissions. Therefore, the arbitral tribunal may independently evaluate the submissions of the appearing party. Also, the arbitral tribunal has the possibility to ask for clarification and additional material. But how far may the arbitrator go in his or her independent evaluation of the parties’ pleadings, without running the risk of stepping out of the scope of power that was granted by the parties or of breaching another important principle of arbitration: the adversarial principle, according to which each party must be given the possibility to be heard?
Another recurring situation was when the disputed contract contained the choice of a certain law, thus seemingly excluding application of other laws. During the pleadings, however, one of the parties invoked certain rules of laws different from the law chosen in the contract. Again, I was well aware of the role of the parties’ will in arbitration: the arbitration agreement (including a choice of law-clause) constitutes the basis for the tribunal’s jurisdiction and the arbitral tribunal cannot render a decision that exceeds that power, lest the award be deemed invalid or unenforceable. But does this principle go so far as to force an arbitral tribunal to render an award that violates fundamental principles of a closely connected law, of the law of the place of arbitration, or of the law of the place of enforcement? This would expose the award to the risk of being set aside or refused enforcement for breach of public policy. Does the legal system provide any tools to permit rendering an award that does not exceed the tribunal’s power, but does not violate fundamental principles that the contract had intended to disregard?