Revisiting the “Content-Of-Laws” Enquiry in International Arbitration

Louisiana Law Review Volume 78 Number 3 Spring 2018 Article 7 4-9-2018 Revisiting the “Content-of-Laws” Enquiry in International Arbitration Soterios Loizou Follow this and additional works at: https://digitalcommons.law.lsu.edu/lalrev Part of the Law Commons Repository Citation Soterios Loizou, Revisiting the “Content-of-Laws” Enquiry in International Arbitration, 78 La. L. Rev. (2018) Available at: https://digitalcommons.law.lsu.edu/lalrev/vol78/iss3/7 This Article is brought to you for free and open access by the Law Reviews and Journals at LSU Law Digital Commons. It has been accepted for inclusion in Louisiana Law Review by an authorized editor of LSU Law Digital Commons. For more information, please contact [email protected]. Revisiting the “Content-of-Laws” Enquiry in International Arbitration Soterios Loizou* Establishing the content of the applicable law is one of the most important, albeit seldom examined, topics in the theory and practice of international arbitration. Setting as the point of departure the regulatory vacuum in nearly all national laws on international arbitration, this study examines in depth this “content-of-laws” enquiry in an attempt to foster doctrinal integrity, legal certainty, and predictability in arbitral proceedings. Specifically, this study encompasses a three level analysis of the topic. Firstly, it explores the theoretical underpinnings and the various approaches articulated in legal theory to the establishment of the content of the applicable law in international litigation and arbitration. Secondly, on the basis of an elaborate comparative review of the various legal regimes and jurisprudence in the most frequently selected venues of arbitration, namely England & Wales, France, Hong Kong, Singapore, Switzerland, the State Copyright 2018, by SOTERIOS LOIZOU. * Teaching Fellow in Commercial Law, King’s College London, School of Law; LL.M. mult. (UoA, NYU), PhD cand. (Cambridge), Esq. Earlier versions of this Article received the prestigious Colin B. Picker Prize of the American Society of Comparative Law (“ASCL”) in 2016 and the first prize at the international student writing competition, which was organized in conjunction with the University of Missouri-American Society of International Law Dispute Resolution Interest Group Works-in-Progress Conference in 2017. For helpful comments, conversations, and suggestions, I am deeply grateful to Professor Cindy Buys, Professor Dimitrios Ph. Christodoulou, Professor Nikolaos A. Davrados, Professor Richard G. Fentiman, Professor Franco Ferrari, Dr. Anastasios Gourgourinis, Professor Joshua Karton, Ms. Seo Hyung Kim, Ms. Michela Mancini, Dr. Louise Merrett, Professor William J. Moon, Ms. Maria Lucia Passador, and the participants at the inaugural Harvard Arbitration Discussion Series at Harvard Law School, the American Society of Comparative Law Fifth Annual YCC Global Conference at Tulane Law School, the Cambridge Private Law Centre Seminars at the University of Cambridge, Faculty of Law, and the MU Center for the Study of Dispute Resolution & the American Society of International Law Works-in-Progress Conference. I would also like to thank the librarians at the Harvard Law School Library, the Cambridge Squire Law Library, and the NYU Law Library for their perseverance and invaluable assistance in procuring the voluminous sources necessary for the preparation of this Article. Last, but not least, sincere thanks to the Louisiana Law Review at the Paul M. Hebert Law Center, Louisiana State University for the uniquely rigorous and insightful editing of the Article. All errors remain, of course, mine. 812 LOUISIANA LAW REVIEW [Vol. 78 of New York (USA), and Sweden, as well as in leading investment arbitration fora, it challenges conventional wisdom by showcasing the emerging trend toward the application of a “facultative” jura novit arbiter principle in international arbitral proceedings. Thirdly, it delineates a clear modus operandi for arbitral tribunals and national courts reviewing arbitral awards in annulment proceedings and offers model clauses, arbitration rules, and national law provisions on the content-of-laws enquiry. The study concludes with some final remarks and observations that amplify the importance of continuous governing law related consultations between the parties and the arbitrators throughout the arbitral proceedings and, certainly, before the tribunal has rendered its final award. TABLE OF CONTENTS Introduction .................................................................................. 813 I. Meeting the Latins: Jura Novit Curia, Lex Fori, and Lex Aliena ............................................................................. 816 II. International Commercial Litigation and Foreign Law ................ 817 III. International Arbitration: The Content-of-Laws Enquiry in Theory ........................................................................ 821 A. Setting the Scene .................................................................... 821 1. Party Autonomy .............................................................. 824 2. Lex Arbitri ....................................................................... 828 B. The “Fall-Back” Approach .................................................... 830 C. The Inquisitorial Approach .................................................... 833 D. The Adversarial Approach ..................................................... 837 E. The “Hybrid” Approach ........................................................ 839 IV. International Arbitration: The Content-of-Laws Enquiry in Practice ....................................................................... 839 A. The Civil Law Jurisdictions ................................................... 840 1. Sweden ............................................................................ 840 2. Switzerland ...................................................................... 843 3. France .............................................................................. 845 B. The Common Law Jurisdictions ............................................ 847 1. England and Wales .......................................................... 848 2. Hong Kong SAR ............................................................. 852 3. Singapore......................................................................... 854 4. New York ........................................................................ 856 2018] REVISITING THE “CONTENT-OF-LAWS” ENQUIRY 813 C. The Investment Arbitration Experience ................................. 861 D. Convergence of Laws? .......................................................... 864 V. De Lege Ferenda .......................................................................... 866 Conclusion .................................................................................... 874 Σύρος “ . ἐν παντὶ δεῖ καιρῷ τὸ δίκαιον ἐπικρατεῖν ἁπανταχοῦ, καὶ τὸν παρατυγχάνοντα τούτου τοῦ μέρους ἔχειν πρόνοιαν· κοινόν ἐστι τῷ βίῳ πάντων.” [Syriscus “ . At all times And in all regions Justice should prevail, And, in the common interest of mankind, ‘Tis the concern of all who pass to see Justice upheld.”]1 INTRODUCTION The method of establishing the content of the applicable law is one of the most important, albeit seldom examined, topics in the theory and practice of international arbitration. In stark contrast to the abundance of publications relating to international arbitration, only a handful of scholars have attempted to shed light on this dark corner of alternative dispute resolution and to systematize the plethora of different approaches to the ascertainment of the content of the applicable law in international arbitral proceedings.2 1. THE ARBITRATION: THE EPITREPONTES OF MENANDER 40 (Gilbert Murray trans., 1945). 2. As uniquely put by Professor Park, “Many trees have been felled to make paper for articles on how to find facts, [but] . [l]ess attention has been paid to the arbitrator’s truth-seeking function with respect to legal norms.” William W. Park, Arbitrators and Accuracy, 1 J. INT’L DISPUTE SETTLEMENT 25, 42 (2010). 814 LOUISIANA LAW REVIEW [Vol. 78 Notwithstanding the limited attention in legal scholarship, which has resulted, among other factors, from the fallacy that conflict-of-laws do not fit with international arbitration,3 the method of establishing the content of the applicable law could alter the legal basis and, as a consequence, determine the outcome of the dispute. The importance of this so-called “content-of-laws”4 enquiry is vividly illustrated in the following example: Party A and Party B entered into an international agreement for the distribution of heart rate monitors in Ruritania. The distribution agreement contained an arbitration clause for the resolution of all disputes arising from or in connection with the agreement. Following the unilateral termination of the contract by B, A filed a motion to initiate arbitral proceedings for breach of the distribution agreement. Both A and B made legal submissions on contract law grounds.5 This theoretical example raises a series of content-of-laws-related questions: who bears the burden of establishing the content of the applicable rules? Does it fall on the parties or the arbitral tribunal? Is the tribunal limited by the arguments of the parties? Should it look beyond the submissions of the latter? What should the tribunal do if the parties have overlooked any relevant rules? Particularly under this latter scenario, what is the effect of any overriding

Load more