Determing the Substantive Law Applicable to Contractual Disputes in International Arbitration: A Conflict of Laws Roadmap for Arbitral Tribunals

Abstract

Frustrating as it is to those working in international arbitration, parties to a contract often fail to designate a law applicable to that contract, or, worse, do designate a law believing their designation to be valid but do so in such a way that the choice is defective. When a failure of this kind occurs, arbitral tribunals need to engage conflicts of laws rules to determine the law applicable to the substance of the dispute. But the existing conflict of laws regime in international commercial arbitration is rife with uncertainty. At present, there is no uniform approach as to when conflicts rules should be applied, no uniform approach to which conflicts rules to apply, and no uniform approach as to the way in which mandatory laws should be taken into account. The sources of rules are many, and while some institutional rules and national arbitration laws make specific provision there is a growing trend toward granting arbitrators greater discretion. With this increase discretion comes greater uncertainty. This paper seeks to inject some certainty back into the conflict of laws area, at least in the field of contractual disputes before arbitral tribunals. It does so in three stages. First, by examining the situations in which an arbitral tribunal will be required to decide on the law applicable to a contract. Second, by setting out the mechanisms available to tribunals to assist with arriving at that decision. Third, by identifying the methods through which a tribunal should assess the application of mandatory laws that fall outside the substantive law the tribunal determined to be applicable. In an effort to engender a principled and coherent approach going forward, the paper provides recommendations for tribunals approaching each conflicts question and sets out a preferred approach. Keywords Private International Law; Conflict of Laws; International Arbitration