Originally from The Impact of EU Law on Commercial Arbitration

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INTRODUCTION

Over time, there have been competing paradigms as to which private international law rules should govern the choice of the law applicable to the merits in international arbitration proceedings.  In the mid-20th century the prevailing approach was still to consider arbitral tribunals as being bound by the rules of conflict applicable in the legal order of the seat. However, this seat theory could not persist. Instead, separate choice-of-law provisions that are not a priori linked to the rules of conflict applicable in the legal order of the seat were created (see I.). Since then, this autonomous framework to determine the applicable law has proven to be a flexible instrument that is suitable for the needs of the business community in international arbitration proceedings (see II.).  
Within the European Union, this regime has recently been put into question.  A number of commentators and scholars argue that international arbitral tribunals seated in the European Union are bound by Regulation (EC) No 593/2009 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (the “Rome I Regulation”) as well as by Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (the “Rome II Regulation”).  These two instruments are European regulations that were created to promote the compatibility of conflict-of-law rules across Europe.  While the Rome Regulations respect party autonomy, they remain less flexible and libertarian than the autonomous framework to determine the substantive law in international arbitration (see III.). 
Are arbitral tribunals seated in the European hence bound by the Rome regime? Are we experiencing a shift back to the seat theory? This paper will present the view that there are – to put it in the words of Robert Frost  – “two diverging roads” for applying the Rome regime. One approach consists of directly applying the Rome regime based on its normative origin in directly applicable regulations. This is “the road not taken”  for the purposes of the present article since it will be argued that the Rome Regulations are merely addressed at State courts and not at arbitral tribunals. The other approach consists of indirectly applying the Rome regime, i.e., via the autonomous conflict provisions contained in the arbitration framework. This approach leaves arbitral tribunals with sufficient flexibility to seek guidance from the Rome Regulations where this is appropriate and to refrain from doing so where this would raise concerns of parochialism and unequal treatment (see IV.).
The paper concludes with an assessment of the current regime to determine the law applicable to the merits in international arbitration proceedings. The option of applying the rule-based Rome regime with its appeal of providing legal certainty will be weighed against the benefit of retaining the standard-based autonomous conflict norms with their appeal of providing fairness and justice for international proceedings that transcend European borders.