The Role of the Arbitrator in Determining the Applicable Law - Chapter 10

Emmanuel Gaillard is Head of Shearman & Sterling’s international arbitration practice. He has represented major corporations, States and State-owned entities in over 250 international arbitration cases. He has acted as sole arbitrator, party-appointed arbitrator or Chairman in more than 50 international arbitrations. He is also frequently called upon to appear as expert witness on arbitration law issues in international arbitration proceedings or enforcement actions before domestic courts. Professor Gaillard has written extensively on all aspects of arbitration law, in French and in English. He teaches International Arbitration and Private International Law at the University of Paris XII. He lectured at The Hague Academy of International Law in the Summer 2007 on the Theory of International Arbitration. Professor Gaillard is recognized as one of the few worldwide experts on ICSID and international investment arbitration. He is a member, appointed by France, of the ICSID Panel of Arbitrators and Conciliators. He advises the French Government on investment treaty issues. He also appears as an expert on OECD investment panels, and participates as an observer in the works of UNCITRAL on the drafting of the new UNCITRAL Arbitration Rules.

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Originally from Leading Arbitrators' Guide to International Arbitration - 2nd Edition

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I. INTRODUCTION

It should hardly be necessary to preface a discussion of the applicable law in international arbitration by stressing its importance to the outcome of the dispute. Yet despite the particularly obvious relationship between the content of the law applicable to the merits and the result of an arbitration, it appears to be fashionable in certain circles to dismiss as devoid of any practical relevance the complex issues of private international law that may arise in this regard. According to these skeptics, rather than wasting their time on such purely academic questions, arbitrators should focus on adopting pragmatic solutions to determining what law to apply to a given dispute.

In reality, the seemingly abstract questions of comparative law and conflict of laws, or even quasi-philosophical issues such as the interrelation between private and public international law or the hierarchy of norms in international commercial matters, frequently have significant practical ramifications and far-reaching financial repercussions. For example, in the second half of the 20th century a highly academic debate was waged in legal literature over the validity of stabilization clauses in international contracts, with numerous commentators arguing that the autonomy of the parties allows the applicable law to be frozen at any given time for the purposes of their contract, and that private parties should have the right to protect themselves from the legislative power of the State-party to the contract, where that State’s law is the governing law of the contract. Other authors, noting that the stabilization of a law could result in the application of a law that no longer exists, argued that allowing parties to provide for a stabilized law to govern their contract would effectively place the parties above the law in an unacceptable manner. Such an abdication of legislative power, they contend, would be incompatible with the principles governing State sovereignty and with the need for all contracts to be rooted in a given legal order.