It is common for international commercial agreements to include arbitration clauses by which the parties agree that their disputes will be resolved by way of arbitration, sometimes according to a particular set of institutional rules, such as ICC, LCIA or SIAC. As well as stating which (if any) institutional rules will apply, such clauses also commonly specify a place of the arbitration.
The choice of the place of the arbitration should not be considered a purely logistical matter. It has important consequences in terms of both the applicable procedural law and enforcement of any award.
Applicable procedural law
The applicable procedural law will govern issues such as the constitution of the tribunal, challenges to arbitrators, and the requirements of due process. Save in exceptional circumstances, these matters will be dealt with by the courts and according to the governing law of the place of the arbitration. In other words, in agreeing the place of the arbitration, the parties are agreeing that the procedural law of that place shall apply to the arbitration.
This principle is reflected both in the wording of various international conventions and in the drafting of arbitration law itself in certain countries. For example, the 1923 Geneva Protocol states that “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”. Equally, the English Arbitration Act 1996 is drafted so that certain of its provisions apply only where the seat of the arbitration is in England, Wales or Northern Ireland.
The procedural law of the place of the arbitration applies even where the parties have chosen to arbitrate according to a particular set of institutional rules. The choice of a particular set of rules does not do away with the need for a governing procedural law. The precise relationship between the chosen set of arbitration rules and the governing procedural law will vary.
Generally, at least in major centres of arbitration, the approach to arbitration law is not unduly prescriptive or interventionist. For example, the English Arbitration Act 1996 enshrines the principles of party autonomy and limited court intervention. However, by the same token, even where the local arbitration law gives the parties relatively free rein, it is unlikely that any of the main sets of institutional rules will cater for every possible procedural eventuality which may arise (this is, after all, not the function of such rules) so it is likely that there will be scope for both the chosen rules and local arbitration law to operate.
While there are broad similarities between arbitration law in developed legal systems, some differences do exist, for example as to the extent of the court’s supportive powers. Less developed legal systems may have very unusual arbitration laws, or none at all. Equally, just as the content of arbitration law will differ between jurisdictions, so will the approach of the courts in interpreting it. Ideally, the parties should seek to agree a place of arbitration with a modern, well-developed arbitration law and a supportive court system.
The second major significance of the place of the arbitration is in determining the “nationality” of an arbitration award, which may be relevant in relation to enforcement. This is because when ratifying the New York Convention (which provides a regime for the enforcement and recognition of arbitral awards within contracting states), many states chose to make a reciprocity reservation, meaning that they will enforce awards only if the place of the arbitration was within another ratifying state. Although a high number of states – more than 150 – are parties to the New York Convention, this should be checked before agreeing a place of the arbitration.
Further, article V(1)(a) of the New York Convention requires that an award complies with “the law of the country where the award was made”. This means that it will only be possible to enforce the award in a country other than the place of the arbitration, if it can be shown that the award complies with the law of the place of the arbitration.
Perhaps somewhat counter-intuitively, the place of the arbitration does not conclusively determine where the proceedings will take place. Although the choice of a place of arbitration indicates a geographical choice as regards the location for hearings etc, this does not mean as a matter of international arbitration law that the parties have limited themselves to that place. There may be practical reasons why it is more convenient and/or efficient to hold hearings somewhere else. This is reflected in, for example, both the ICC and LCIA rules, which allow the tribunal to determine where hearings will take place, unless the parties have gone further than specifying the place of the arbitration and have also agreed a particular hearing venue. However, even where hearings take place elsewhere, the parties’ choice of the legal place of the arbitration retains its significance in the ways discussed above.
Rather than being simply a logistical matter of the geographical location of the proceedings, the choice of the place of an international arbitration is important both in terms of applicable procedural law and enforcement. This is the case even where the tribunal rules that, for practical reasons, hearings should in fact take place somewhere else. Parties negotiating international contracts containing arbitration clauses should take these factors into account when agreeing a place of arbitration. In particular, parties should be seeking to agree a place with a modern, well-developed arbitration law and a supportive court system, in respect of which no issues of enforcement under the New York Convention are likely to arise.