Choice of Law by the Parties in Interstate Arbitration - Chapter 2 - Essays on International Arbitration

Kaj Hobér is a Partner of Mannheimer Swartling, resident Stockholm office and Professor of East European Commercial Law at Uppsala University, Uppsala. His practice areas include: international arbitration, East European law, international investment and trade, international business transactions. He has been heavily involved in the legal aspects of doing business in Eastern Europe and the former Soviet Union for the last 20 years. His arbitration experience includes representing both eastern and western European, American and Russian parties as well as parties from developing countries in international arbitrations taking place in Stockholm, Moscow, London, Paris, New York, Vienna and elsewhere. Mr. Hobér has also been involved in numerous oil arbitrations, relating primarily to northern Africa, the Middle East and the former Soviet Union and has acted as arbitrator in more than 150 international arbitrations (including chairmanships) and as counsel in approximately 150 international arbitrations.

Professional memberships include: member of the Swedish Bar Association; member of the American Bar Association; member of the Board of the Swedish Scientific Institute of Arbitration Law, the Board of the Arbitration Institute of the Stockholm Chamber of Commerce, the International Arbitration Club (London) and member of the ICC Institute of International Business and Law (corresponding member). He has been listed as arbitrator on the panels of the Austrian Federal Chamber of Commerce, Vienna, the Chamber of Commerce and Industry of the Russian Federation, Moscow, the Ukrainian Chamber of Commerce, Kiev, the American Arbitration Association and of the ICSID Arbitration Center, Washington DC. He is also a Commissioner at the United Nations Compensation Commission in Geneva.

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Originally from Essays on International Arbitration

The principle of party autonomy plays a pivotal role in international commercial arbitration. Indeed, it is a cornerstone in this context, proceeding as it does from the consensual nature of arbitration. The arbitration agreement is a most fundamental document which bestows upon the arbitrators the authority to decide the dispute entrusted to them by the parties. It is the constitution for the arbitrators. As a natural consequence of this, the arbitrators are under an obligation to follow the (joint) instructions of the parties. This also applies to questions of applicable law. Should the arbitrators refuse, or fail, to apply the law chosen by the parties, the resulting award may be set aside at the request of one of the parties.

Proceeding from the voluntary nature of international arbitration, commercial as well as interstate, it is only natural that states when agreeing to arbitration are free to agree on what principles of law and/or rules the arbitral tribunal is to apply. This follows from the general rule of public international law that states are in general free to contract out of such law. By the same token, states are free, it is submitted, to provide how particular rules and principles are to be interpreted and applied and also to exclude rules and principles from application which would otherwise have been applicable.

Table of Contents:

2. Choice of Law by the Parties in Interstate Arbitration

2.1 Party Autonomy in interstate arbitration

2.2 Party Autonomy and the International Court of Justice

2.3 Unfettered party autonomy criticised

2.4 The rationale of party autonomy

2.5 The obligation to respect party autonomy

2.6 Restrictions on party autonomy