LEX ARBITRI, PROCEDURAL LAW AND THE SEAT OF ARBITRATION
|01 December 2014
|Alastair Henderson MA (Oxford); FSIArb, MCIArb; Solicitor (England & Wales); Partner, Head of International Arbitration Practice in Southeast Asia, Herbert Smith Freehills LLP, Singapore.
|01 December 2014
Unravelling the Laws of the Arbitration Process
Distinct from the substantive laws that guide a tribunal's decision on the merits, the procedural laws of arbitration regulate the “internal” processes of the arbitration and the “external” relationship (supportive and supervisory) between the arbitration and the courts. This article discusses the meaning, scope and sources of procedural law and lex arbitri; the rights of parties to opt out and create their own procedural framework, and the limits on that freedom; and the process for determining the seat of arbitration (as the primary source of the lex arbitri) in the absence of agreement by the parties.
1 This article discusses the laws that regulate and support the procedural aspects of arbitration, as opposed to the laws that govern the substantive rights of the parties in dispute. Principally, these are the laws which regulate the “internal” processes of the arbitration and the “external” relationship (supportive and supervisory) between the arbitration and the courts. This matrix of procedural and other laws is clearly distinct from the law which the tribunal must apply in order to reach its decision on the merits.
2 The article begins with a short discussion of the meaning and scope of lex arbitri and procedural law. Having clarified terms, we look at the source of the lex arbitri, principally in the national laws of the seat of arbitration but with a diversion into an alternative vision of arbitration as a delocalised process that floats free from the parochial restraints of national laws. This is followed by comments on the rights of parties to opt out of the lex arbitri and create their own proceduralframework, and the limits on this freedom. We look at a more extreme form of derogation from the lex arbitri, where parties agree that an arbitration should be subject to the procedural laws of another State, possibly even subject to the oversight of courts in another State. Finally, there is a discussion about the process for determining the seat of arbitration in the absence of agreement by the parties, as a necessary first step towards identifying the applicable lex arbitri.
3 It has been noted that there is a clear distinction between the substantive and procedural laws of arbitration. However, although “procedural law” is often used as a convenient shorthand term for the non-substantive laws applicable to arbitration, it would be wrong to depict those laws as only concerned with procedural matters. Jan Paulsson distinguishes the law applicable in arbitration (ie, the substantive law) from the law applicable to arbitration,1 with the breadth of the latter term providing a good indication that it extends beyond matters of procedure alone. The law applicable to arbitration certainly includes procedural law but it also regulates non-procedural matters such as, for example, arbitrability, decisions on jurisdiction, national court intervention in support of arbitration, and the grounds on which awards may be challenged and set aside.
4 In short, we are concerned with the totality of national law provisions that apply generally to arbitrations in each country. Greenberg, Kee and Weeramantry describe this as a body of law which:2
… legitimises and provides a general legal framework for international arbitration. The relevant law might itself be found in an independent statute on international arbitration or it might be a chapter in another law, such as a civil procedure code or a law also governing domestic arbitration. [It] can also include other statutes and codes (even those not specifically dealing with arbitration), and case law which relates to the basic legal framework of international arbitrations seated there.
5 This basic framework for arbitration is properly called the lex arbitri, which translates from Latin as the law of the arbitration. The precise content of the lex arbitri will vary from country to country but in modern arbitral jurisdictions it will typically include provisions which regulate:
(a) matters internal to the arbitration, such as the composition and appointment of the tribunal, requirements for arbitral procedure and due process, and formal requirements for an award;
(b) the external relationship between the arbitration and the courts, whose powers may be both supportive and supervisory, such as the grant of interim relief, procuring evidence from third parties and securing the attendance of witnesses, the removal of arbitrators and the setting aside of awards; and
(c) the broader external relationship between arbitrations and the public policies of that place, which includes matters such as arbitrability and possibly also — more controversially — the impact on arbitration of social, religious and other fundamental values in each State.
6 The first of these categories represents the true procedural law of arbitration: a subset of the lex arbitri which focuses on internal matters of arbitral procedure. Most national laws include within the lex arbitri a default set of procedures for the conduct of arbitration in that territory, available to assist the orderly progress of a case if the parties have not made other arrangements through the adoption of standard (or other) arbitral rules. Dicey and Morris3 describe this as the “directory” function of the lex arbitri (with the second and third functions above being “supportive” and “mandatory”) but one could also view it as facilitative, a safety net that offers a basic procedural framework and minimum necessary safeguards of due process, applicable to the extent that the parties have made no other provision.
7 In practice, parties do frequently make alternative provision for matters of procedure, though they may not conceptualise this as a conscious choice to opt out of the lex arbitri. They do so by specifying rules of arbitration to apply to their dispute, which has the effect of displacing the default provisions in the applicable law, to the extent that the law and rules are inconsistent and in so far as the law is not of mandatory application.4 Whether the adopted rules are institutional (for example, International Chamber of Commerce (“ICC”), Singapore International Arbitration Centre (“SIAC”), London Court of International Arbitration (“LCIA”), Grain and Feed Trade Association (“GAFTA”), etc) or ad hoc (most typically, United Nations Commission on International Trade Law (“UNCITRAL”)), the parties are in effect choosing to conduct their arbitration according to a more detailedprocedural code laid out in those rules, supplementing or supplanting the procedural portions of the lex arbitri.
8 Due compliance with arbitral rules is of the greatest importance in practice,5 also observance of any “soft law” instruments that are binding in the proceedings by decision of the parties or the tribunal,6 but nonetheless these rules and guidelines do not form part of the lex arbitri (they coexist with national law but are not part of it) and thus they lie beyond the focus of this article.
9 If the law of the arbitration (the lex arbitri) is found within the national laws of each State (although it will be seen below that this proposition is not without opponents), the question arises: which national laws provide the lex arbitri in any particular case?
10 The identification of applicable arbitral law is usually not complex or controversial. Indeed, it is often not addressed at all as a specific, discrete issue in cases in practice; the parties and the tribunal proceed on a common unspoken assumption as to the laws which regulate the proceedings. Yet there is a wealth of academic writing that considers complicated scenarios and possibilities for conflicting claims to be the lex arbitri. Another strand of debate considers whether it is right to anchor arbitrations to national laws at all, or whether they should be set free to exist in a delocalised space governed only by transnational principles. In deference to those debates and in recognition of issues that are occasionally confronted in practice, it is appropriate to investigate in more detail the source of the procedural law that applies to each arbitration; how one identifies the lex arbitri for each case.
A. The law of the seat
11 The Geneva Protocol on Arbitration Clauses 1923 illustrated an early international view that the law applicable to the arbitration should be that of the arbitral seat: “The arbitral procedure, including the constitution of the arbitral tribunal, shall be governed by the will of the parties and by the law of the country in whose territory the arbitration takes place” [emphasis added] (Art 2).
12 The same approach is seen in modern international instruments. Most notably, it is seen in the self-restraining stipulation in the UNCITRAL Model Law on International Commercial Arbitration 1985 (“Model Law”) that most of its provisions will apply “only if the place of arbitration is in the territory of this State”.7 The basic approach of the Model Law (and all national laws derived from it) is thus that the law applicable to each arbitration (the lex arbitri) will be the law of the place where that arbitration takes place (the lex loci arbitri),8 and the selection of a particular place (seat) of arbitration ordinarily results in the arbitration being conducted in accordance with that jurisdiction's legal framework, with such derogation or variation as may be permitted.9
13 For example, where Singapore is selected as the seat of arbitration, it follows automatically that the Singapore Arbitration Act10 (“AA”) or International Arbitration Act11 (“IAA”) (as the case may be) will apply to that arbitration:
If Singapore is the place of arbitration, the curial law of Singapore applies … I would add that the curial law, or the lex arbitri as it is sometimes called, is not...
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