Party autonomy is one of the core pillars of arbitration. It entails flexibility which is one of the main reasons why arbitration has become such a popular form of international dispute resolution.
Party autonomy, however, is not absolute and may be subject to limits imposed by mandatory rules of law. For the purpose of the present paper, mandatory rules of law shall be defined as the procedural or substantive laws that cannot be derogated from by agreement.
Mandatory law may encompass various concepts including the French “lois de police,” English “mandatory rules,” German “zwingende Vorschriften” or Italian “norme imperative.”
Instead of focusing on these sources of domestic law, the present article will examine to what extent mandatory European law sets limits to party autonomy in international arbitration. It will be shown that mandatory European law sets limits to party autonomy in two regards: on the one hand, mandatory European law may limit party autonomy regarding the applicable substantive law (see I.). On the other hand, it may limit party autonomy regarding the arbitral procedure (see II.). In practice, these limits to party autonomy are of significant importance. They have to be considered by arbitrators, counsel and arbitral institutions (see III.).