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I. CHOICE OF LAW BY THE PARTIES
(a) Express Choice of Law
Today many contracts contain clauses which expressly submit them to the law of a certain country or rules of laws. The principle of the autonomy of the parties, the parties’ freedom to choose the law applicable to their contract, is a generally accepted principle of law in national and international arbitration. It can be found in international conventions and the UNCITRAL Model Law on international commercial arbitration. The Washington Convention provides: “The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties.” Amongst the rules of arbitral institutions, the ICC Rules provide: “The parties shall be free to agree upon the rules of law to be applied by the arbitral tribunal to the merits of the dispute… ”. The Model Law required the arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute. In practice, parties may make an agreed choice of law where a dispute has arisen (or indeed when the dispute is being heard) even if this differs from their previous choice of law. The Rome Convention makes provision for this: “… a choice of law, or a variation of a choice, can be made at any time after the conclusion of the contract by agreement between the parties.”
The principle of party autonomy is basically recognized in both common law and civil law systems. Arbitral tribunal should make determination in accordance with the law that parties choose to govern their contract, otherwise it will not have carried out the task entrusted to it by the parties and there is a risk that its awards may be set aside, or refused recognition and enforcement.
One important reason to choose arbitration in an international commercial contract is that neither party wishes to bring action before the court in the other party’s country. Accordingly, parties want to refer their dispute to an international arbitration institution or an arbitration institution of a neutral third country, and search for ‘neutral’ rules of law to govern their disputes. The types of law parties may choose to govern the substance of their dispute include,
(1) National law (including the law of a state or province within a federal nation); in most of international commercial contracts, parties choose an autonomous system of law as the applicable law, which will provide a known (or at least, determinable) legal standard, against which the rights and responsibilities of the parties can be measured. There are some common reasons to choose a particular national law (including the law of a state or province within a federal nation), originally, it has the close connection with the contract; secondly, it owns well-developed and modern commercial law codes which is well suited to govern modern international commercial relations.
(2) Public international law; although public international law primarily concerned with relations between states, it maybe applicable to commercial contracts, particularly where one of parties to the contracts is itself a state or state entity.
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