GUJARAT NATIONAL LAW UNIVERSITY

SEMINAR PAPER I

INTERNATIONAL COMMERCIAL ARBITRATIONS

ISSUE OF SELECTION OF SEAT OF ARBITRATION

AND ITS IMPLICATIONS

Submitted by: Submitted to:

Pranay Govil Dr. Saira Gori
Semester IX Assistant Professor of Law
12B095
 Acknowledgement

I deem it to be my utmost privilege to present this dissertation on “Issue of Selection of Seat of

Arbitration and Its Implications”. At the outset, I would like to express my deepest gratitude to
the Respected Director, Mr. Bimal Patel, Gujarat National Law University, for granting this
wonderful opportunity to me to research for which I shall remain indebted forever. I would also
like to thank Dr. Saira Gori, Assistant Professor of Law, Gujarat National Law University, for her
guidance and mentorship which was immensely helpful. It is indeed impossible to mention the
names of everyone- friends, fellow students, resourceful bloggers and legal experts who have
helped me formulate the ideas through stimulating discussions.

Therefore, all in all, I take this opportunity to express my heartfelt gratitude to one and all under
whose valuable support my crude brainwave has finally materialized into this cogent and coherent
document.

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 Table of Contents

Page
Content Sub-Topics
Number

Synopsis 4

I. Introduction 10

II. What does “Seat

What is the difference between the seat of arbitration and
of Arbitration” 16
the venue of hearings?
mean?
What are the factors that should be considered while
17
choosing a seat of arbitration?
What Issues Arise Out of the Choice of Seat of
19
Arbitration?
III. Different Views
or Approaches On
Traditional View 26
the Seat Of
Arbitration

Delocalised View 27

International Relations Theory 29

Whether we see the delocalised view being substituted by

30
another approach?
IV. Analysis of
Decisions Of Courts
34
From Multiple
Jurisdictions
V. Substantive and
Procedural Rights of 41
the Parties
What is the applicable law where there is no choice of law
42
by the parties?

What will be the content of the applicable law? 44

VI. Conclusion 47

Bibliography 50

3
 SYNOPSIS

A. STATEMENT OF PROBLEM

International Commercial Arbitration is a process of resolving disputes arising out of

international commercial contracts, as an alternative to settling in court. Disputes are resolved by
a neutral arbitration tribunal whose decision is final and binding. There can be no arbitration
tribunal without an agreement from both parties to submit to arbitration, most commonly found in
an arbitration clause inserted in the contract.1
The New York Convention was drafted under the auspices of the United Nations and has
been ratified by more than 140 countries, including most major countries involved in significant
international trade and economic transactions.2 The New York Convention requires the states that
have ratified it to recognize and enforce international arbitration agreements and foreign arbitral
awards issued in other contracting states, subject to certain limited exceptions.3 These provisions
of the New York Convention, together with the large number of contracting states, have created
an international legal regime that significantly favors the enforcement of international arbitration
agreements and awards.
The principle motivation for parties involved in international contracts submitting to
arbitration is concerned with the issue of enforceability. Under ‘The Convention on the
Recognition and Enforcement of Foreign Arbitral Awards’ (commonly known as ‘The New York
Convention’), a convention party state must recognise and enforce foreign arbitration awards.
There are currently 149 signatory states to ‘The New York Convention’ meaning arbitration
decisions are practically globally enforceable. On the other hand, national court rulings are not
enforceable in the same way. Except where specific bilateral enforcement agreements exist, courts
are under no obligation to recognise or enforce decisions of foreign courts. Therefore, parties with
global business relations, wishing to be able to rely on a decision resulting out of a dispute, are
likely to prefer to use arbitration instead of going through the courts. This is especially true in
circumstances where the enforceability of their national court rulings in other jurisdictions is not
guaranteed.
The final main reason why global commercial parties might want to opt to resolve their
disputes through arbitration instead of going to court is because of the flexibility it entails. Party
autonomy is a general principle of arbitration, meaning the arbitration provisions are free to be
drafted as the parties wish, including the rules that govern the proceedings and the number of
arbitrators. It is worth noting that, even where parties have agreed to submit to institutional
arbitration, the institution’s specific rules will often give the parties a lot of freedom to choose
certain aspects of their own tribunal. Having the choice of arbitrator in the parties’ hands is
probably the most important attraction to arbitration for parties involved in international business.

1
Helen Morse, The Key Issues Surrounding International Commercial Arbitration (Keep Calm Talk Law Dec. 1,
2014), http://www.keepcalmtalklaw.co.uk/key-issues-surrounding-international-commercial-arbitration/.
2
Jason Fry, Recognition And Enforcement Of Foreign Arbitral Awards: A Global Commentary On The New York
Convention Foreword (Herbert Kronke, Patricia Nacimiento, Dirk Otto & Nicola Christine Port eds., 2010)
3
New York Convention, arts. II, III & V, June 10, 1958,
http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html

4
Firstly, parties can ensure their needs are understood and properly represented by appointing an
arbitrator who not only speaks the same language, but also has a similar cultural and legal
background as them. Secondly, parties can appoint individuals with expertise in the field their
dispute concerns, which will be especially appealing to parties with technical or industry specific
issues. However, it should be noted that due to this freedom, particularly where business relations
are strained, the formation of the arbitration tribunal is susceptible to delays before even getting
down to settling the dispute.4
Arbitration is now one of the most important methods of dispute resolution in international
commerce.5 Thus, in order to operate effectively in the field of international business and trade,
attorneys must understand how international arbitration works. An effective and credible method
of dispute resolution is an important, indeed critical, element in the negotiation of any international
commercial transaction. Therefore, the parties to such a transaction will best serve their interests
by arriving at a clear understanding of dispute resolution.
If one theme could accurately depict the unifying element of the current issues occupying
international arbitration theory and practice, that theme is this: international commercial arbitration
is an important feature of the globalization phenomenon. To phrase the theme another way, one
might observe that the process of international commercial arbitration has been affected by the
increasingly globalized nature of international commercial activity.6
Does the law chosen by the parties to an international contract govern the procedural rules
of arbitration, or is it limited to the substantive contract rights of the parties? Recent international
arbitral practice favours inclusion of an express choice of law clause that establishes the law
governing the parties' contractual agreement as a whole. However, when the parties interpret this
arbitration agreement differently, resort to judicial assistance may be necessary to resolve the pre-
arbitration dispute. If the parties have chosen a specific law to govern their contractual agreement,
a court is usually required to respect that decision.7 The main question that arises here is that
whether the choice of law provision extends only to “procedural” aspects of the issue or whether
they extend to the substantive rights of the parties under the contract. The following paper aims to
discuss this at length with the help of established case laws in various jurisdictions.
Coming to the issues of seat of arbitration, there are 2 primary facets that need
consideration.
• First of all, the physical location of the seat of arbitration is not necessarily the same
as the jurisdictional seat of arbitration. Choice of seat will usually dictate the
corresponding procedural law to govern the tribunal, but this is not an automatic
assumption. Therefore, it is advisable that parties are not only aware of this point,
but that they make very clear in their arbitration agreement any distinction between
the physical location of proceedings and the jurisdictional seat of arbitration which
will govern the applicable procedural law. This will go a long way in avoiding
future dispute over the validity of the arbitration award.

4
Helen Morse, The Key Issues Surrounding International Commercial Arbitration (Keep Calm Talk Law Dec. 1,
2014), http://www.keepcalmtalklaw.co.uk/key-issues-surrounding-international-commercial-arbitration/.
5
Gary B. Born, International Commercial Arbitration - Three-Volume Set (Kluwer Law International, 2d ed. 2014).
6
Michael P. Malloy, Current Issues in International Arbitration (Pacific McGeorge School of Law 2002).
7
Ibid note 6.

5
 • Secondly, in the context of arbitration agreements within arbitration clauses, whilst
parties will almost certainly agree on a choice of law for the contract, they rarely
specify the law to govern arbitration proceedings. Due to the separability doctrine
already discussed, the two are not necessarily the same. This is still an area of legal
contention and large variations exist from jurisdiction from jurisdiction. The
important point to be taken from this is that it would be in the parties’ favour to
expressly state the choice of law for the arbitration proceedings and not rely on the
assumption it is the same as the main contract.

B. RESEARCH METHODOLOGY
For the purposes of this paper, the author has adopted the ‘Doctrinal’ method for the research. The
word ‘doctrine’ derives its meaning form the Latin term ‘doctrina’ that essentially means
knowledge or learning. It will follow a theoretical approach by using published journals, decided
case laws and archives of public libraries. The method is concerned with formulating legal
doctrines through analysis of legal rules embodied in various statues and cases. This method is
suitable for the above mentioned research questions to leave the reader well-informed about the
said issues with respect to selection of seat of arbitration in International Commercial Arbitration
Disputes.
The author will use an analytical and comparative approach to give a more holistic view while
dealing with different legal systems and jurisdictions. The author will also cite case laws wherever
it is imperative.

C. RESEARCH QUESTIONS
Following are the broad research questions for the paper:
1. What is the “Seat of Arbitration”?
2. What are the factors that go into selecting a particular “Seat of Arbitration”?
3. What are the different approaches that are adopted while analyzing the “Seat of
Arbitration” Which is more relevant in today’s context?
4. How far does the “Seat of Arbitration” affect the procedural and substantive laws affecting
the rights of the parties in arbitration?
5. What are the implications with respect to the enforcement of the arbitral award due to the
“Seat of Arbitration”?
6. How have different jurisdictions dealt with this issue over the years?

D. AIMS AND OBJECTIVES OF THE STUDY

During the course of this paper, the author aims at determining the following:
• To critically analyse the concept of “Seat of Arbitration” and it’s implications on the rights
of the parties;
• To understand what factors must be kept in mind while deciding the “Seat of Arbitration”;
• To understand the different approaches used in analyzing the concept;

6
 • To compare and analyse different jurisdictions’ views on the topic using case laws.

E. SCOPE AND LIMITATION

The author aims to provide an analysis on the title to better explain the details and intricacies of
selection of the “Seat of Arbitration” and how it has been interpreted in different jurisdictions over
the years. The author also aims to provide a comparative analysis using case laws so express the
change in arbitration laws and practices to the best of his capability, as well as what it entails for
the future.
Further, the author will only be able to provide a comparative analysis using a few jurisdictions as
it will be virtually impossible to compare all that deal with commercial arbitration. For the same
purpose, only secondary information will be used as commercial arbitrations are usually private
and confidential, or at least the proceedings are.

F. TENTATIVE CHAPTERIZATION
1. Introduction.
2. What does the term “Seat of Arbitration” mean?
2.1 Party autonomy and the benefits of arbitration over court proceedings.
2.2 Factors affecting the choice of seat.
2.3 What are the two main issues that arise out of choosing a “Seat of Arbitration”?
3. Different approaches to analyse “Seat of Arbitration”.
3.1 What is the traditional approach behind analyzing “Seat of Arbitration”?
3.2 How is this approach changing with respect to new treaties and laws?
3.3 Whether the new trans-national approach will be superseded in the future by another
approach?
4. How are the rights of the parties affected by the “Seat of Arbitration”?
4.1 Are procedural or substantive rights of the parties affected?
4.2 How do we deal with the issue of arbitrability?
4.3 Can a third-party legal system be applied? What are its implications?
5. Comparative Analysis with various jurisdictions.
5.1 How have different jurisdictions ruled in this regard?
5.2 Comparing decisions from various tribunals which are relevant and analyzing the future
importance of “Seat of Arbitration”.
6. Conclusion.

G. LITERATURE REVIEW
Primary Sources:
• ‘The Convention on the Recognition and Enforcement of Foreign Arbitral Awards’
(commonly known as ‘The New York Convention’).
• Geneva Conventions of 1923 and 1927.
• The International Convention on Settlement of Investment Disputes, 1965.
• UNCITRAL Model Law on International Commercial Arbitration, 1985.

7
Secondary sources
ARTICLES:
• Michael P. Malloy, Current Issues in International Arbitration: This paper talks about all
the contemporary issues in theory as well as practice in international commercial arbitration.
Since the article was written in 2002, it offers an insight into how far we’ve come since then.
The article also briefly discusses the choice of seat of arbitration as well as its implications.
• Helen Morse, The Key Issues Surrounding International Commercial Arbitration: This
article talks about the various levels at which issues arise in international commercial
arbitration. It deals with issues such as the arbitration agreement itself, the type of arbitration
as well as what’s relevant to the author – the choice of seat of arbitration and what it means for
the rights of the parties, both procedurally and substantively.
• Loukas A. Mistelis, Arbitral Seats: Choices and Competition: This article is based around
the factors, choices and the benefits of various seats of arbitration all over the world. Using
primary survey data, it clearly lays down which factors respondent considered the most while
deciding their seat of arbitration. These include a long list which will be referred to in the main
section of the author’s submission.

BOOKS:
• Julian M. Lew, Loukas A. Mistelis and Stefan Michael Kröll, Comparative International
Commercial Arbitration: This book discusses modern international commercial arbitration
practices in different situations and jurisdictions all over the world. It provides an easy method
to understand the nuances associated with the seat of arbitration and discusses at length, all the
Conventions and their implications on arbitration these days.
• Gary B. Born, International Commercial Arbitration, 2nd Edition: It provides a
comprehensive discussion of international commercial arbitration agreements. It includes
chapters dealing with the legal framework for enforcing international arbitration agreements;
the separability presumption; choice of law; choice of seat, etc. It focuses on both international
instruments (particularly the New York Convention) and national law provisions in all leading
jurisdictions (including the UNCITRAL Model Law on International Commercial Arbitration).
• Fouchard, Gaillard and Goldman, International Commercial Arbitration: This exhaustive
treatise provides an in-depth analysis of the law and practice of international commercial
arbitration, highlighting the worldwide movement towards an autonomous legal regime, free
of the constraints of national law and of the law of the place of arbitration in particular. As well
as exploring the application and the influence of the first modem arbitration statutes, enacted
in France, the Netherlands and Switzerland in the 1980s, detailed consideration is given to the
1985 UNCITRAL Model Law, to recent arbitration legislation now in force in England,
Germany, Belgium and Sweden, and to the new arbitration rules of the AAA, ICC and LCIA.
• Giuditta Cordero-Moss, International Commercial Arbitration - Different Forms and their
Features: This book highlights the specific features of various forms of arbitration and more
importantly, explains the framework for arbitration, its relationship with national law, and the
features of the main arbitration institutions in Europe. The book also highlights new trends in

8
 other parts of the world that may have repercussions on the theory of international arbitration,
all topics that are relevant to the current study and questions to be answered.
• Peter Edward Nygh, Choice Of Forum And Laws In International Commercial Arbitration:
This paper raises the fundamental question of what gives the arbitrator his or her competence
- the will of the parties or the law of the seat of arbitration which the parties may, or may not,
have chosen? The paper also suggests an answer to the questions of which choice of law rules,
if any, should be applied by the arbitrators, to what extent arbitrators will apply mandatory
rules as well as which law governs the procedural aspects and whether it has to be the
procedural law of a national system

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 I. INTRODUCTION

What is International Arbitration?

International arbitration is essentially a private, comparative and international mechanism.

No two arbitrations are the same. There are barely any absolutes, nor are there any fixed rules or
procedures. Any factual variation will invariably result in a significant change in the context and
structure of the arbitration. The matrix which affects every arbitration varies depending upon the
arbitration agreement entered into by the parties, the procedure agreed by the parties, the
nationality of the parties, the composition of the tribunal, the arbitration rules applicable, the
substantive applicable law or rules, the subject-matter of the dispute, the mandatory law of the
place of arbitration and the permissive law where everything else is silent. All of these factors are
directly controlled by party autonomy i.e. the choice of arbitration by the parties and their decision
as to how, where and what the procedure should be is the decisive factor in every case. The simple
agreement of the parties to refer disputes to arbitration is a positive rejection of the national courts
and in many cases strict national law procedure. The right of parties to determine all aspects of the
arbitration is unquestioned. Accordingly, party autonomy has the greatest control on international
commercial arbitration.8
The main factor apart from party autonomy that has influenced international arbitration
practice and law has been the New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards 1958. It acts as the foundation and the backbone to international
arbitration and its acceptance by the business world. What it does, quite simply is that, it sets down
the obligation of states to recognize and give effect to the agreement of parties to refer their
disputes to arbitration in preference to a national court jurisdiction. If there are multiple suits
between the parties and one of the suits goes into arbitration on the basis of a valid arbitration
agreement, then the other parties must also follow suit and agree to arbitration proceedings. The
New York Convention also established the system to ensure the maximum possibility for the
simple enforceability of arbitration awards by different tribunals in different countries. Over 156
countries9 are presently party to the New York Convention. The most significant effect of the New
York Convention has been the harmonisation of the approach to enforcement of awards through
the application of the New York Convention principles in national laws and courts. Most countries
have signed the Convention and follow their obligations under it, however there are a few rare
exceptions. The primary advantage of the Convention is that the main arbitration awards made in
one country will be recognised and enforced in any other state party to the New York Convention.
International arbitration has become independent from national laws and courts in practice
and legally. Parties and arbitrators do, in the main, conduct proceedings in a rarefied non-national
or international legal environment in a bid to eliminate any type of bias and to provide a level
playing field. Whilst there may, in some cases, be influences from national law on the procedure,
this can be controlled by the parties, the arbitrators and international practice. Experienced

8
Julian D.M. Lew et al., Comparative International Commercial Arbitration 1–2 (Kluwer Law International 2003)
9
As of May 2015

10
arbitration lawyers and the major international arbitration institutions have recognised national
procedural laws are generally irrelevant and inapplicable since the dispute usually involves parties
from different nationalities. These international practices are acknowledged and upheld by
arbitration awards being recognised and enforced under the New York Convention.
There is a plethora of other international instruments that help with the recognition and
enforcement of arbitration as an autonomous process. Some examples are the Algiers Accords,
bilateral investment treaties, North American Free Trade Association and the Energy Charter
Treaty. The lex mercatoria, as evidenced in part in the UNIDROIT Principles of International
Commercial Contracts and the Vienna Convention on International Sale of Goods, is naturally
applicable by international arbitration tribunals. This again is testament to the autonomous nature
of the international arbitration process which aims at creating a universally-accepted harmonised
and uniform dispute resolution platform.
The UNCITRAL Model Law on International Commercial Arbitration has helped
condense legal practice as far as arbitration is concerned. It reflects a common denominator of
laws applicable to international arbitration. It is a compromise which has stripped out national
characteristics and contains provisions acceptable to most systems. This is a commendable task if
one is to consider the multitude of legal systems, cultures, practices and ethics that are prevalent
all over the world. By keeping most of its provisions general, it is left to arbitration tribunals and
national courts to interpret them. The Model Law has been adopted in many jurisdictions and
decisions of an international tribunal or national court concerning the terms of the Model Law will
influence how other tribunals or courts will interpret and apply the same provisions, thereby
developing the system further.

What are the features of arbitration?

We have already dealt with what arbitration is in the previous section and some of its
features, loosely. In the following section, the author aims to better explain some of the
fundamental features of arbitration which differentiate it from ordinary legal proceedings in courts.
As the Halsbury’s Laws of England puts it, ‘arbitration’ is “The process by which a dispute or
difference between two or more parties as to their mutual legal rights and liabilities is referred to
and determined judicially and with binding effect by the application of law by one or more
persons (the arbitral tribunal) instead of by a court of law”10. Enlisted below are some of the
fundamental features:
• An alternative to national courts: This is probably the most essential factor of
arbitration. Although courts are the most obvious for a for any type of legal dispute
and are the State’s responsibility and they ensure that they exist, have appropriately
qualified judges, have procedural rules etc., parties can forego all this by agreeing
to go to arbitration. This removes their relationships and disputes from the
jurisdiction of national courts.

10
Halsbury's Laws of England (4th ed, Butterworths 1991), para 601, 332.

11
 • Private mechanism for dispute resolution: Just as national courts are public,
arbitration is generally private. In the same way as every contract between parties
is a private matter between them, so too the arbitration agreement is private between
the parties. Accordingly, when a dispute arises it is to be resolved in the private
dispute resolution system agreed between the parties. Having selected arbitration,
the intention is for the arbitrators to determine the dispute and the entitlements and
obligations of the parties in respect of the issues raised, and is usually of a civil
matter since criminal matters tend to be violations against the State in most
jurisdictions.
• Selected and controlled by the parties: This is another principle characteristic of
the arbitration – that it is chosen by the parties. The parties have ultimate control
over their dispute and the resolution system that they choose. As mentioned above,
party autonomy is the ultimate power determining the form, structure, system and
other details of the arbitration. To supplement this, national arbitration laws do their
part by allowing parties to go to arbitration. These laws tend to be permissive and
aim t support and enforce the agreement to arbitrate, rather than intervene. This
helps the issues of pendency as well since matters don’t reach Courts. In case there
are some shortcomings in the arbitration process decided by the parties, the Court
will step into impose their provisions.
• Final and binding determination of parties’ rights and obligations: This feature
implies that the decision arising out of the arbitration is final and has to be accepted.
This means that they agree to not only the arbitration proceedings but also the award
that comes out of it. The decision or award is final and binding and usually not
appealable unless a few specific criteria are met. This makes it both a contractual
commitment of the parties and the effect of the applicable law.
• Confidentiality: Due to the private nature of arbitration, many consider that
arbitration is also a confidential process. As a result, what proceeds in the
arbitration will not only be kept private between the parties but will remain
absolutely confidential. This means that the existence of the arbitration, the subject
matter, the evidence, the documents that are prepared for and exchanged in the
arbitration, and the arbitrators' awards cannot be divulged to third parties. It also
means that only parties to the arbitration, their legal representatives and those who
are specifically authorised by each party, can attend the arbitration hearing. Each
of those individuals are considered to be subject to the duty of confidentiality on
behalf of the party they are representing.11
• Expedition: This is one of the main criteria in picking arbitration over going to
courts. Many beileive it will lead to an expedited process and justice will be served
earlier than if the matter went to courts. In theory and in many cases this is so. Due
to party autonomy, the fact that arbitrators can be selected, and as each case stands
on its own, there is no backlog of cases that has to be dealt with. All the time of the

11
Collins, Privacy and Confidentiality in Arbitration Proceedings, 11 Arb Int 321 (1995)

12
 arbitration is dealt with the issue at hand, rather than allocating only some time in
a day to a case. In countries like India, the national courts have such a long backlog
that it can be years before a hearing date can be obtained. If the parties are agreed,
they can seek the involvement of an arbitrator at very short notice; if they are able
to present their cases to the arbitrator within a short period, the whole matter can
be resolved with great expedition, which leads us to the next feature.
• Cost: Due to the inherent advantages discussed above, in principle arbitration
should be less expensive than national courts. Again, in theory, this may be the
case, but in practice it is not always so. Where arbitrations can be held quickly and
the awards issued with little or no delay, the costs may be significantly reduced in
contrast to those of a lengthy court procedure. However, for complicated
international arbitrations, particularly before three arbitrators, this may not always
be the case as in addition to the costs of the lawyers, the parties will also have to
pay the significant fees of the arbitrators.

The above mentioned features are only some of the reasons why parties opt for arbitration
but it is clear to see why. It has become an increasingly favoured means for dispute resolution in
recent years.

How is “International” “Commercial” Arbitration different?

In this section, we try to understand the individual meaning of “international” and

“commercial” in the term international commercial arbitration. This is important to note as these
terms differentiate the proceedings and nature from other types of arbitration. Also, with variable
meanings, it is hard to pinpoint exactly what “commercial” would mean all over the world.
Historically, the unqualified term “international arbitration” has been used for public
international law arbitration with the participation of one or more states. Public international law
arbitrations, due to participation of states and state sovereignty implications, are often subject to
different regulations and guidelines. Arbitrations involving investments by parties from one
country in another and disputes concerning energy-related issues frequently involve international
law issues such as trade and investment laws dealing with compensation, expropriation, etc. While
these types of arbitration possess characteristics of both commercial and public international
arbitration, in recent years the commercial arbitration elements have overshadowed the public
international law arbitration elements. Also, disputes which are labelled by American lawyers as
trade disputes in the context of the WTO (World Trade Organisation or NAFTA (North-Atlantic
Free Trade Association) and related to public law regulation of trade qualify as commercial
disputes.
It may be important to label an arbitration as “commercial” because commercial law is
often subject to a distinct set of flexible rules. For instance, disputes involving consumers may be
subject to stricter consumer protection rules12 concerning the negotiation, formation and validity

12
EC Directive 93/13 of 5 April 1993 on Unfair Contracts Terms in Consumer Contracts

13
of an arbitration agreement. While the added protection may be justified in consumer transactions,
with the rationale of protecting the allegedly weaker party, it is in most cases unjustified and
unwelcome in commercial transactions. It may be difficult to define a commercial dispute, as many
jurisdictions have their own definition of commercial law and commercial disputes. Some disputes
are deemed commercial due to the fact that commercial persons are involved whereas other
disputes are deemed commercial irrespective of the persons involved. In international commercial
arbitration, it is important to characterise the nature of the underlying transaction and whether or
not the relevant dispute is commercial; the involvement of commercial persons may be of
relevance but should not be the guiding principle. For instance, states, their ministries and agencies
may be involved in a commercial activity although they do not qualify, strictly speaking, as a
commercial person.13
The United Nations Model Law describes “commercial” in a footnote “The term
“commercial” should be given a wide interpretation so as to cover matters arising from all
relationships of a commercial nature, whether contractual or not. Relationships of a commercial
nature include, but are not limited to, the following transactions: any trade transaction for the
supply or exchange of goods or services; distribution agreement ; commercial representation or
agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment;
financing; banking; insurance; exploitation agreement or concession; joint venture and other
forms of industrial or business co-operation; carriage of goods or passengers by air, sea, rail or
road.”14. While some jurisdictions have incorporated the text of the footnote into a section of their
domestic law, others have simply reproduced the text in a schedule. India has opted for an
expressly Indian characterisation of commercial disputes which is given under Section 2(1)(f)15 of
the Arbitration Ordinance, which aims to classify only those legal disputes as commercial which
are considered as commercial under the law in force in India, along with certain other
requirements. This has held to it being interpreted narrowly by holding that it means “commercial
under a provision of Indian law in force.” Accordingly, Indian courts have held in the past that
neither the construction of a factory accompanied with transfer of technology nor a contract of
technical know-how to be of commercial nature. 16
The New York Convention allows for a distinction to be made between commercial and
non-commercial arbitration. This is reflected in Article 1(3), which contains what is known as the
commercial reservation. “When signing, ratifying or acceding to this Convention ..., any State may
... declare that it will apply the Convention only to differences arising out of legal relationships,

13
Julian D.M. Lew et al., Comparative International Commercial Arbitration 49-50 (Kluwer Law International
2003)
14
UNCITRAL Model Law on International Commercial Arbitration, p. 1
15
Article 2(1)(f): “International commercial arbitration” means an arbitration relating to disputes arising out of legal
relationships, whether contractual or not, considered as commercial under the law in force in India and where at
least one of the parties is
(i) An individual who is a national of, or habitually resident in, any country other than India; or
(ii) A body corporate which is in corporate in any country other than India; or
(iii) A company or an association or a body of individuals whose central management and control is
exercised in any country other than India; or
(iv) The Government of a foreign country;
16
RM Investment & Trading Co Pvt Limited (India) v Boeing Company and another (US), (1994) 1 Supreme Court
Journal 657

14
whether contractual or not, which are considered as commercial under the national law of the
State making such declaration.”

To determine whether the arbitration proceedings take on an “international” character, we

must consider some relevant criteria. These could be as simple as declaring an arbitration
international if:
• Its subject matter, procedure or organisation that is involved, is international
• The parties involved in the arbitration are from different jurisdictions
• There is a combination of the above listed factors.
The European Convention has attempted a definition of an international arbitration when
it was setting out its scope of application: It mentions,
“1. This Convention shall apply:
(a) to arbitration agreements concluded for the purpose of settling disputes arising from
international trade between physical or legal persons having, when concluding the
agreement, their habitual place of residence or their seat in different Contracting
States;...”
The New York Convention restricts its application to foreign awards and makes no attempt
to provide a definition of international arbitration. An undisputed significant role towards
unification and internationalisation of international commercial arbitration is ascribed to the
success of the Model Law. It appears that a unified regulatory model, which is often referred to as
monism, is the emerging trend.17 The internationalisation of international arbitration appears to be
well established and welcome.18 There is an element of the doctrinal monism- dualism debate, as
well as the apparent internationalisation of international commercial arbitration, which should be
recognised from the outset: there is a gradual convergence of national arbitration systems, greatly
enhanced by modern arbitration laws, the revised international and institutional arbitration rules
and the increased acceptance of party autonomy, which can be found in the vast majority of
international commercial contracts.

17
Klaus Peter P. Berger, International Economic Arbitration 746–48 (Kluwer Law International, BV 1993).
18
“Internationalization – the Answer to Unification”, Proceedings of the Fifth ICCA Conference (Kluwer 1976)

15
 II. WHAT DOES THE “SEAT OF ARBITRATION” MEAN?

The seat (or place) of arbitration is the jurisdiction in which an arbitration takes place
legally. This must be distinguished from the location of any physical hearings or meetings that are
held as part of the arbitration proceedings. The hearings or meetings do not necessarily have to be
held at the seat of arbitration. It is essential to appreciate the connection between arbitration
proceedings and the laws of the seat of arbitration. The different theories relating to this connection
arise from the delicate interplay between a state’s powers (particularly state judicial powers), an
arbitral tribunal’s powers and the freedom of parties to choose how their disputes are determined.
At times these interests may conflict and there is potential for the law and/or the courts of the seat
of arbitration to constrain the flexible and pragmatic qualities of arbitration.19 Article 20(2) of the
Model Law provides that regardless of the seat of arbitration ‘the arbitral tribunal may, unless
otherwise agreed by the parties, meet at any place it considers appropriate for consultation among
its members, for hearing witnesses, experts of the parties, or for inspection of goods, other property
or documents’.
As we know already, international commercial arbitration usually involves more than one
system of law or rules, unlike domestic legal disputes. Due to this, there are at least five different
systems of law which can be identified:
• The law governing the parties’ capacity to enter into an arbitration agreement;
• The law governing the arbitration agreement and the performance of that agreement;
• The law governing the existence and proceedings of the arbitral tribunal – the lex arbitri;
• The law, or the relevant legal rules, governing the substantive issues in dispute – generally
described as the “applicable law”, the “governing law”, “the proper law of the contract” or
“the substantive law”;
• The law governing recognition and enforcement of the award (which may, in practice prove
to be not one law, but two or more, if recognition and enforcement is sought in more than
one country in which the losing party has, or is thought to have, assets)20
It is important to point out at this stage that the arbitration law at the seat of arbitration (lex
arbitri) is not the same as the venue, location or place of hearings. It only implies that
arbitration law that is to be used for the arbitration process.

What is the difference between the seat of arbitration and the venue of hearings?

As noted above, the seat of place of arbitration is the primary legal jurisdiction to which
the arbitration is attached. It implies the legal location of an arbitration proceeding, which is
different from the physical location of any arbitration hearings and meetings.21 This detaches the
venue of the proceedings entirely which means that they can be held at convenient locations.
Theoretically, it is possible that neither party travels to the seat however this is rarely the case.

19
Simon Greenberg et al., International Commercial Arbitration: An Asia-Pacific Perspective 54–56 (Cambridge
University Press (Virtual Publishing) 2012)
20
Alan Redfern, Law and Practice of International Commercial Arbitration 77–78 (Sweet & Maxwell 2004).
21
American Diagnostica Inc. v. Gradipore, (1998) 44 NSWLR 312

16
Importantly, the fact that an arbitration hearing is held outside the seat of arbitration does not and
cannot of itself change the legal seat of arbitration. This was confirmed by the Singapore Court of
Appeal in PT Garuda Indonesia v Birgen Air22, The Court of Appeal observed, “It should be
apparent from art 20 [Model Law] there is a distinction between ‘place of arbitration’ and the
place where the arbitral tribunal carries on hearing witnesses, experts or the parties, namely the
‘venue of the hearing’. Where parties have agreed on the place of arbitration, it does not change
even though the tribunal may need to hear witnesses or do any other things in relation to the
arbitration in a different location.”
The author at this point finds it imperative to cite one of the most oft-referred to paragraphs
when dealing with this question, which was also referred to by the presiding judge in the above-
mentioned case of PT Garuda, which reads, “there is only one ‘place’ of arbitration. This will be
the place chosen by or on behalf of the parties; and it will be designated in the arbitration
agreement or the terms of reference or the minutes of proceedings or in some other way as the
place or ‘seat’ of the arbitration. This does not mean, however, that the arbitral tribunal must hold
all its meetings or hearings at the place of arbitration. International commercial arbitration often
involves people of many different nationalities, from many different countries. In these
circumstances, it is by no means unusual for an arbitral tribunal to hold meetings – or even
hearings – in a place other than the designated place of arbitration, either for its own convenience
or for the convenience of the parties or their witnesses . . . It may be more convenient for an
arbitral tribunal sitting in one country to conduct a hearing in another country – for instance, for
the purpose of taking evidence . . . In such circumstances, each move of the arbitral tribunal does
not of itself mean that the seat of the arbitration changes. The seat of the arbitration remains the
place initially agreed by or on behalf of the parties.”23
From the paragraph cited above, it becomes clear at the distinction between the two
concepts that may sound similar, but are extremely different in operation. It has already been
mentioned that the venue may be chosen for convenience purposes, however, more importantly,
the parties must under the implications of choosing a seat of arbitration before entering into an
arbitration agreement. This brings us to the next section to be discussed.

What are the factors that should be considered while choosing a seat of arbitration?

To best comprehend the factors that factors that may play a part in choosing a seat of
arbitration, we must consider the stakeholders in the arbitration proceedings. Apart from the
parties, there are also lawyers at play who represent the parties and do so in accordance with the
law of the seat of the arbitration. For this purpose, they may want to select a legal system they’re
familiar with. The parties themselves maybe more interested in the neutrality of the venue, cost of
holding proceedings there, travel etc. On the other hand, the arbitrator or the chief arbitrator would
also play a role in deciding the seat as not only would it imply higher costs to travel, but would
also ensure that he/she is comfortable with the local arbitration law.

22
[2002] 1 SLR 393, at 399
23
Nigel Blackaby et al., Redfern and Hunter on Law and Practice of International Commercial Arbitration 69
(Oxford University Press, 5th ed. 2009).

17
 Realistically, the presence of laws and courts that are favourable to international arbitration
are chosen as the seat of arbitration. However, for a more comprehensive understanding of the
same, we can classify the factors into three main types, as follows:
• First, the seat should be a party to the New York Convention, which is the most universally
accepted standard for enforcement of arbitral awards. This is important for enforcement of
any resulting award in other New York Convention countries because many jurisdictions
have adopted the New York Convention with reciprocity reservations, and could affect the
outcome of the arbitration.
• Second, the seat’s arbitration law should provide an ideal level of judicial interference and
control (that is, the desired level of delocalisation). The trend in modern international
arbitration laws such as Model Law jurisdictions suggests a very limited degree of judicial
control, or highly delocalised arbitration proceedings. Further, the quality of the judiciary
along with the court system should be factored, depending on things such as transparency,
pendency, average disposal times, etc. If it becomes necessary during arbitration
proceedings to approach a court for assistance, will that court be able to deal with the matter
quickly, efficiently and predictably to assure parties that their interests are in safe hands in
case the arbitration proceedings are not? Geographic and infrastructure convenience should
be the second main criteria after the quality of the legal system and courts. The seat of
arbitration should be convenient for most people who will be involved in an arbitration;
that is parties, witnesses, arbitrators and lawyers. An ideal seat would be one that is not
only close in terms of distance, but also the legal system. Also important is that there are
regular international flights and facilities like hotels and rooms for conducting the
arbitration hearings.
• The third consideration concerns the neutrality of the seat. Usually, to avoid any bias,
contracting parties will prefer a seat that is outside the jurisdictions of any contracting
party. The power to decide a totally neutral seat – that is a seat with no connection
whatsoever to the contracting parties or the dispute at hand – is one of the many advantages
of international arbitration over litigation, where it is rarely possible for parties simply to
select any court that they want to resolve their dispute. Depending on the rules of that
particular court, there usually has to be a connection between the court and the parties or
the dispute in order for the court to accept jurisdiction, which is not true for arbitration.
There is often no requirement that the chosen seat of arbitration be in any way linked to
one of the parties or the underlying transaction.
Generally, when both parties participate in the appointment of the tribunal and introduce their
respective claims and counterclaims without reservations, jurisdiction is not an issue. Where the
tribunal is concerned arbitration agreement’s scope, and where there is no jurisdictional challenge,
it may request the parties to confirm the jurisdiction of the tribunal over the issue beforehand,
which will give it jurisdiction if it did not exist before. Perhaps, most important of all, the law of
the seat of arbitration normally decides the legal standard for annulment of an award. Though this
may be comparable to forum shopping in litigation, where the law of the forum dictates the law of
appeal, in an international arbitration concerning a dispute between multi-national parties and

18
where multiples bodies of law may be applicable, the consequence of choosing one particular local
standard of annulment which may have no relation to the nationalities of the parties or even to the
agreed or applied substantive law cannot be overstated.

What issues arise out of the choice of seat of arbitration?

Lex arbitri, arbitral procedural law, and arbitration rules are all terms referring to
regulations and guideline that regulate the procedure of an international arbitration. We must look
into the definition of each of these terms to understand the complicated difference between them.
After having defined each of them, we will look into the difference between all of them.
LEX ARBITRI: This Latin phrase means the law of the arbitration, generally; lex loci arbitri
can be used once a specific arbitration and or seat has been identified, although lex arbitri is the
preferred term. The lex arbitri is not directly chosen by the parties. When the parties choose
country Y as the seat, the automatic consequence, without the need for express words, is that
aspects of country Y’s laws and legal framework become the lex arbitri.24 This point was clearly
made by the Singapore Court of Appeal in PT Garuda Indonesia v Birgen Air,25 referred to above.
In that circumstance the court had been called upon to determine the lex arbitri and whether the
parties had changed the seat of arbitration from Indonesia to Singapore. The Court of Appeal
stated: ‘Clearly, if it was established that the parties had agreed to change the “place of
arbitration” to Singapore, then it must follow that the curial law would be Singapore law’26
(emphasis added).
The lex arbitri legitimises and provides a general legal framework for inter-
national arbitration. The relevant law can be found in an independent statute on international
arbitration in some jurisdictions or it might be a chapter or schedule in another law, such as a civil
procedure code or a law also governing domestic arbitration. However, the lex arbitri of a given
jurisdiction 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. If the seat of arbitration is, for example, Singapore, then the lex arbitri constitutes
those provisions of Singapore’s laws which, among other things, permit the resolution of disputes
in Singapore by way of arbitration rather than by Singapore court litigation. Other general features
of the lex arbitri are that it gives (with certain exceptions) parties the freedom to choose the law
and rules to apply and it indicates what types of matters cannot be arbitrated.27 Thus, we can say
that lex arbitri to arbitration proceedings is somewhat what the lex fori is to a domestic national
court. But we must note that though they perform certain similar functions for arbitration and
domestic national courts, they are different and cannot be confused. One key difference is that
arbitration does not have a lex fori, but the term has been used wrongly multiple times in a string
of English cases when they were actually referring to lex arbitri.

24
A Redfern, M Hunter, N Blackaby and C Partasides, Law and Practice of International Commercial Arbitration,
4th edn, Sweet & Maxwell, 2004, at para 2–19
25
[2002] 1 SLR 393
26
ibid, p.402
27
Simon Greenberg et al., International Commercial Arbitration: An Asia-Pacific Perspective 96–143 (Cambridge
University Press (Virtual Publishing) 2012)

19
 Procedural Laws: These set of laws set out the parameters of the procedure and the support
for international arbitration by providing enabling legislations. It can provide things like
mandatory rules regarding how arbitration can be conducted, rules requiring equal treatment, due
process and independence of arbitrators. A simple differentiator between lex arbitri and procedural
laws is that the former deals with governing matters external to the arbitration and the latter deals
with matters internal to the arbitration procedure, but excluding substantive issues.28

Procedural Rules or Arbitration Rules: These are rules chosen by the parties that relate to
the mechanism and processes of arbitration. They typically regulate the conduct of the arbitration
from its initiation until a final award is rendered, and can be likened to the civil procedure rules of
a court. Arbitration rules comprise the rules of an arbitral institution, ad hoc arbitration rules such
as the UNCITRAL Arbitration Rules, and rules that are tailor-made and agreed to by the disputing
parties. Arbitration rules generally apply as a matter of contract – not law – although default
arbitration rules are usually found in procedural laws. Typical arbitration rules, such as those of
arbitration institutions, generally cover the practical aspects of how to commence an arbitration
and to see it through until the end. The subject matter of rules includes provisions on filing a
request for arbitration, answering the request for arbitration, appointing arbitrators, challenging
non-neutral arbitrators, removing non-performing arbitrators, the arbitral tribunal’s procedural
powers and basic rules relating to hearings and the taking of evidence.29

Having explained what each concept means individually, we can now deal with the issues
or the differences that arise when selecting a seat of arbitration. This can be done by comparing
each of the concepts and then finally drawing a chart to explain which set comes where, and to
decide which part of the dispute.
• Lex Arbitri v Arbitral Procedural Law: These two terms are barely ever separated
and many people use these terms as synonyms. While this approach is
understandable, it is nevertheless problematic and better avoided. Redfern and
Hunter observe that ‘the lex arbitri is much more than a purely procedural law’.30
As explained above the lex arbitri is the law that gives the arbitration its nationality
and legal validity. An example of a non-procedural issue that is determined under
the lex arbitri is objective arbitrability. The potential for confusion and need for a
clear distinction arise from the fact that arbitrating parties in some jurisdictions may
select an arbitral procedural law that is different from the lex arbitri. This means
that the parties may seat their arbitration in one jurisdiction and choose the
procedural law of a different jurisdiction. It is vital to remember that, as Born
explains, ‘the [foreign] procedural law will not ordinarily supplant, but rather
operate within the arbitration legislation of the arbitral seat’.31 While theoretically

28
Union of India v McDonnell Douglas [1993] 2 Lloyd’s Rep 48
29
Simon Greenberg et al., International Commercial Arbitration: An Asia-Pacific Perspective 59 (Cambridge
University Press (Virtual Publishing) 2012)
30
A Redfern, M Hunter, N Blackaby and C Partasides, Law and Practice of International Commercial Arbitration,
4th edn, Sweet & Maxwell, 2004, at para 2–19
31
G Born, International Commercial Arbitration, Kluwer, 2009, at p. 1315

20
 and legally possible,32 choosing a foreign procedural law can create many practical
problems. For example, to which courts would the parties have recourse to seek an
interim measure or to set aside an arbitral award? Assuming the proper courts in
which to bring these applications are identified, which jurisdiction’s procedural
laws would those courts apply? There is English authority on point that may be
instructive, at least for common law jurisdictions. Lord Justice Kerr clearly
recognised in Naviera Amazonica Peruana SA v Compania Internacional de
Seguros del Peru as early as 1988 that ‘there is equally no reason in theory which
precludes parties to agree that an arbitration shall be held at a place or in country X
but subject to the procedural laws of Y’.29 In Union of India v McDonnell Douglas
Corporation33 the Queen’s Bench Division of the Commercial Court was to
determine the lex arbitri where the arbitration clause had selected London as the
seat of arbitration but expressly wanted the Indian Arbitration Act 1940 to be
applicable. Justice Saville held that English law admitted the theoretical possibility
of parties choosing the procedural law notwithstanding a contradictory choice of
seat: “It is clear from the authorities cited above that English law does admit of at
least the theoretical possibility that the parties are free to choose to hold their
arbitration in one country but subject to the procedural laws of another, but against
this is the undoubted fact that such agreement is calculated to give rise to great
difficulties and complexities.” In the above case it was held that the parties must
have intended the Indian Act to only regulate the internal conduct of the arbitration,
and English law to govern the external supervision of the arbitration by the courts.
This means that if parties wish to have a foreign procedural law to govern their
arbitration, they should be lay that down clearly in their language as it would be
difficult to imagine why parties would want to choose foreign procedural law given
the risks and complexities that it entails. Nowadays, there is far less need to take
such risks because so many countries have modern arbitration legal systems,
whether based on the Model Law or something of the sort.
The question then arises as to why a foreign procedural law might be chosen. The
reasons are as follows: (a) The first is when the award will need to be enforced in a
specific and known non-New York Convention signatory country. Choosing that
jurisdiction’s procedural law to govern the conduct of a foreign arbitration might
(though with no guarantee) provide recourse to the enforcement procedures in
that law, without the need to seat the arbitration in that jurisdiction. (b) The second
is when the chosen arbitral seat has a less than modern arbitration legal system but
is chosen nevertheless to avoid award enforcement problems based on a ‘reciprocity
reservation’ that a state has made when concluding in the New York Convention.
Even in these scenarios, choosing a foreign procedural law would raise complex

32
A Redfern, M Hunter, N Blackaby and C Partasides, Law and Practice of International Commercial Arbitration,
4th edn, Sweet & Maxwell, 2004, at para 2–20
33
[1993] 2 Lloyd’s Rep 48

21
 legal issues and is ill-advised.34 When we are dealing with the application of a
different procedural law, Justice Burrell’s35 analysis helps provide a very useful
insight, and reads as follows: “From the wealth of authority cited by both counsel
on this issue can be gleaned the following starting point: ‘The curial law’ (lex
arbitri) is normally, but not necessarily, the law of the place where the arbitration
proceedings are held’ . . . ‘The place’ plainly refers to the legal seat of the
arbitration (here Geneva) not a random city of convenience for the arbitrators
(here Paris). For the normal situation not to apply there must be strong pointers to
the contrary. Such pointers as there may be in this case cannot, in my view, be
regarded as strong when put in context and balanced against the following factors.
(1) Had the parties wanted to, expressly, depart from the norm they could have said
so in the contracts but they did not. The contracts are specific as to the substantive
law (Indonesian) but silent as to the lex arbitri [procedural law].
(2) The drafters of the contracts were explicit on many matters such as the choice
of a neutral place (Geneva), the adoption of the UNCITRAL rules in the arbitration
and the choice of Indonesian law as the law of the contracts. It is not a difficult
inference to draw that had Pertamina insisted on an express provision stating that
the lex arbitri [procedural law] was to be Indonesian law, the contracts would not
have been signed. I find it irresistible that the choice of Geneva as the ‘place’ was
also a choice that it was the formal ‘seat’ in the legal sense. By the same token it is
plain that the choice of an independent neutral seat of arbitration carried with it
an intention to be bound by the lex arbitri of that place.
...
(4) Pertamina, as evidence of ‘strong pointers’ to rebut the presumption rely, inter
alia, on the fact that the contracts themselves are ‘replete with references to the
pro- visions of Indonesian law’. The expression ‘replete with’ somewhat overstates
the position but they point out that the contracts expressly provide for the
modification of, in particular, four Articles of the Indonesian Code of Civil
Procedure. Article 650.2 (appointment of arbitrators) and 620.1 (time limit on
arbitrations) have been modified, Article 631 (authority to arbitrators to decide on
‘amiables com- positeurs’) has been invoked and Article 641 (rights of appeal) has
been waived.

• Arbitral procedural law v arbitration rules

Usually, there is an overlap that is seen between the two, with the former providing
default procedural rules in case the parties have not agreed otherwise. But in case
parties have chosen specific arbitration rules, they will override those provided in
a procedural law, except to the extent that the procedural laws are mandatory.

34
Michael Hwang et al., Relevant Considerations in Choosing the Place of Arbitration, 4 Asian International
Arbitration Journal, 195–220 (Kluwer Law International 2008).
35
Karaha Bodas Co Llc v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (also known as Pertamina)
[2003] 380 HKCU 1, at p. 15

22
 Pryles36 explains the difference between procedural law and arbitration rules as
follows: “It is true that the arbitral procedural law may deal with many matters
concerning the conduct of an arbitration which can be addressed in procedural
rules selected by the parties to apply to the arbitration. In a sense, therefore, the
arbitral procedural law may deal with matters which the parties have failed to
address, either by not selecting any arbitration rules (institutional or otherwise) or
because those rules are deficient. Where the parties do select arbitral rules, they
are likely to prevail over the ‘fall-back’ [default] provisions made by the law
governing the arbitral procedure. This is because the latter will be regarded as
non-mandatory and liable to be displaced by the parties’ express provision to the
contrary. But, some provisions of the arbitral procedural law will be different in
nature to those contained in arbitral rules selected by the parties, be they
institutional or ad hoc. For example, the arbitral procedural law may prescribe the
degree of judicial supervision of the arbitration, including appeals and
applications to set-aside an award. The arbitral procedural law may also provide
for judicial assistance in aid of an arbitration, for example, the issue of a subpoena
requiring a witness to attend the hearing. Plainly, these are matters which cannot
be the subject of contractual rules agreed by the parties and incorporated into the
arbitration clause.”
There are plenty of cases which see this concept in effect wherein parties resort to
another set of rules to be applicable to the arbitration. One of such cases is
Australian Granites v Eisenwerk Hensel Beyreuth GmbH37 where the parties by
express choice, of ICC arbitration, demonstrated an intention to exclude the Model
Law under Section 2138 of the Australian International Arbitration Act. The
Singaporean laws have similar Model Law opt-out provisions and a similar decision
was subsequently made in the Singapore High Court – John Holland Ltd v Toyo
Engineering Ltd39 which essentially adopted the Queensland Court of Appeal
position. Following this case, the Singapore Govt. quickly amended Section 15 of
their arbitration legislation which read, “Section 15A:
(1) It is hereby declared for the avoidance of doubt that a provision of rules of
arbitration agreed to or adopted by the parties, whether before or after the
commencement of the arbitration, shall apply and be given effect to the extent that
such provision is not inconsistent with a provision of the Model Law or this Part
from which the parties cannot derogate.
(2) Without prejudice to subsection (1), subsections (3) to (6) shall apply for the
purposes of determining whether a provision of rules of arbitration is inconsistent
with the Model Law or this Part.

36
M Pryles, ‘Exclusion of the Model Law’, (2001) 4 (6) International Arbitration Law Review 175, at p.177
37
[2001] Qd R 461
38
At the time, Section 21 read: Settlement of dispute otherwise than in accordance with Model Law: If the parties to
an arbitration agreement have (whether in the agreement or in any other document in writing) agreed that any
dispute that has arisen or may arise between them is to be settled otherwise than in accordance with the Model Law,
the Model Law does not apply in relation to the settlement of that dispute.
39
[2001] 2 SLR 262

23
 (3) A provision of rules of arbitration is not inconsistent with the Model Law or this
Part merely because it provides for a matter on which the Model Law and this Part
is silent.
(4) Rules of arbitration are not inconsistent with the Model Law or this Part merely
because the rules are silent on a matter covered by any provision of the Model Law
or this Part.
(5) A provision of rules of arbitration is not inconsistent with the Model Law or this
Part merely because it provides for a matter which is covered by a provision of the
Model Law or this Part which allows the parties to make their own arrangements
by agreement but which applies in the absence of such agreement.
(6) The parties may make the arrangements referred to in sub-section (5) by
agreeing to the application or adoption of rules of arbitration or by providing any
other means by which a matter may be decided.
(7) In this section and section 15, ‘rules of arbitration’ means the rules of
arbitration agreed to or adopted by the parties including the rules of arbitration of
an institution or organisation.
What is clear from this Amendment to Singaporean legislation is that a choice of
arbitral rules is not tantamount to excluding the Model Law. The Australian Govt.,
also introduced an amendment to plug holes in their Section 21 which was
discussed earlier. With the revision, the parties are still advised to indicate that the
Model Law is still to apply despite the choice of institutional rules.

• The Procedural Pyramid

Now that we are clear with the definition as well as the distinction of the different
types of laws applicable to arbitration, we can come up with the following
observations. The lex arbitri is the foundation on which the arbitration is built and
based, followed by a layer of procedural laws on top, followed by the arbitration
rules at the topmost level. This forms a pyramid of rules, so to say. Though parties
are at liberty to expressly choose the applicable set of rules, thereby blurring the
boundaries of this so called pyramid, they cannot bypass the mandatory provisions
of the legislations that have to be complied with. We can depict this better with the
help of a diagram, which can be seen below:

24
 40

Thus we can now understand the so called hierarchy of applicable rules and laws
in an arbitration. As a final piece of the puzzle, we can try taking an example.
Assume that the lex arbitri’s own arbitral procedural law may provide for the
default appointment of arbitrators. Assuming that the parties choose a foreign
arbitral procedural law which contains different default procedures and the parties
also choose arbitration rules which have a third default method, it would be the
default mechanism in the chosen arbitration rules that will apply. However,
mandatory provisions of the lex arbitri or procedural law will supersede the chosen
arbitration rules if those arbitration rules conflict with the mandatory provisions.
Therefore, mandatory provisions reign supreme.

40
Simon Greenberg et al., International Commercial Arbitration: An Asia-Pacific Perspective 65 (Cambridge
University Press (Virtual Publishing) 2012)

25
 III. DIFFERENT VIEWS OR APPROACHES ON THE SEAT OF
ARBITRATION

There is a lot of debate that has developed over the extent to which arbitration proceedings are
linked to and constrained by the seat of arbitration’s laws and courts. They can mainly be divided
into the traditional and the delocalised theories. There is also a developing international relations
theory, which shall be mentioned later on in this chapter. After discussing each of the theories,
their legality, practicality and application, we will try to assess whether the transnational or
delocalised theory will be superseded by some other approach in the future. Let us begin with
understanding each of the theories in some detail:
• Traditional View
Simply put, this view suggests that every private, commercial arbitration must be
attached to a legal seat of arbitration. It says the arbitration must be attached to some
existing legal jurisdiction. This means that the seat of arbitration is the jurisdiction that
gives legitimacy and legality to the arbitration proceedings and the resulting award.
Consequently, without the international arbitration law of the seat (i.e. the lex arbitri),
which permits arbitration to take place, any arbitration proceeding would not exist
legally. This view is known as the traditional view since it has been based on legal
theories that date back to the early 17th century in Western cultures. Some have said that
these debates are even older in Eastern cultures, with some claiming that works on the
topic have been found, dating to the 3rd century BC. The Peace of Westphalia (1648) is
widely considered to represent the birth of the nation-state system that exists today.
Decades of religious conflict in Europe were put to an end by the signing of two peace
treaties that comprised the Peace of Westphalia. This divided Europe into various states
and emphasised the supreme power of the sovereign ruler over the territory of his or her
respective state. A consequence of this particular conception of sovereignty is that states
are 2.40 the highest authority regulating the lives and activities of private individuals
and companies. In other words, states are exclusively empowered to regulate anything
and everything that occurs within their boundaries. An extreme view on the topic was
presented by Francis Mann who claimed that there is no such thing as international
arbitration, since arbitration had to be connected to and controlled by a domestic legal
system. Some of his famous quotes on the topic are as follows41:
“It would be intolerable if the country of the seat could not override whatever
arrangements the parties may have made. The local sovereign does not yield to them
except as a result of the freedoms granted by himself.
Is not every activity occurring on the territory of a State necessarily subject to its
jurisdiction? Is it not for such State to say whether and in what manner arbitrators are
assimilated to judges and, like them, subject to the law? Various States may give various

41
FA Mann, ‘Lex Facit Arbitrum’ in P Sanders (ed), International Arbitration: Liber Amicorum for Martin Domke,
Martinus Nijhoff, 1967, pp. 161–162.

26
 answers to the question, but that each of them has the right to, and does, answer it
according to its own discretion cannot be doubted.” At first glance, this view may make
sense as it professes that the sovereign state is the highest authority and it has the
exclusive power to make and enforce laws relating to persons, property or events within
its territory. This means that it is only because of the domestic laws laid down by the
sovereign state does the arbitration agreement gain legal recognition. The power of the
domestic law also suggests to the arbitration award, he adds. According to the traditional
view, an arbitration agreement, like any contract, has no legal effect unless some
domestic law gives it effect. The lex arbitri thus regulates and limits the arbitration
proceedings in any way its lawmakers wish. Markham Ball explains this as follows:
“Arbitration is not a separate, free-standing system of justice. It is a system established
and regulated pursuant to law, and it necessarily bears a close relationship to a nation’s
courts and judicial system.”42

• Delocalised View
The delocalised or contractual conception of arbitration is that no link need exist
between the seat of arbitration and arbitration proceedings taking place in that
jurisdiction. Arbitration proceedings are said to gain their legitimacy and existence from
the parties’ contract. The principal consequence of this is that arbitration proceedings
should be free from any interference from local courts and local laws at the seat of
arbitration. The only domestic courts that can interfere are those asked to enforce a
resulting arbitral award. It is only these enforcement courts that need to give the arbitral
award state recognition because that is required before state-backed mechanisms can be
deployed to enforce and execute the award. Before an award is enforced, it exists simply
as an extension of the parties’ contract. Jan Paulsson, in 1983, wrote an article which
became the most oft-cited article on the delocalisation theory. He explained, “What this
critique misses is that the delocalised award is not thought to be independent of any
legal order. Rather, the point is that a delocalised award may be accepted by the legal
order of an enforcement jurisdiction although it is independent from the legal order of
its country of origin.”43 He clarified that delocalisation does not mean that arbitration
proceedings exist on their own and outside any domestic legal order. Instead, they are
attached to a domestic legal order but only to the jurisdiction (or jurisdictions) where
enforcement of the award is sought. They are not attached to the legal order of the seat
of arbitration and should not be subjected to its laws or courts. It is not difficult to see
why the traditional view was slowly pitched against the delocalised view. Before the
New York Convention and Model Law, there were several jurisdictions each with their
legal systems, vastly different in procedure and substance. Times changed and with the
introduction of the above aggregators, there is now much more consistency among

42
M Ball, ‘The Essential Judge: The Role of the Courts in a System of National and International Commercial
Arbitration’, (2006) 22 Arbitration International 73.
43
J Paulsson, ‘Delocalisation of International Commercial Arbitration: When and Why it Matters’, (1983) 32
International and Comparative Law Quarterly 53

27
 arbitration laws all over the world. Therefore, Jan Paulsson had started writing about the
changes that took place in international law in the 1980s.
The delocalisation theory also pays heed to the mandatory laws in different jurisdictions
which are not uniform but act as a catalyst for the development of the delocalisation
theory. They apply whenever there is a strong link between the facts of the case and the
jurisdiction in which the mandatory laws exist. Naturally the question arises that there
may be an issue when a certain mandatory law is present in the lex arbitri but not in the
jurisdiction of the law governing the contract. If we were to apply the traditional view,
the mandatory law of the seat would be applicable. However, from the delocalised
viewpoint, there would have to be a strong factual nexus between the potentially
applicable law and the underlying dispute itself. We will now look at some cases that
came about in the 1990s which got the ball rolling for the delocalisation theory.
Hilmarton v OTV44 is key to this discussion. In the case, Hilmarton sought recovery of
commissions it claimed to have earned by securing business for OTV in Algeria. The
seat of arbitration was in Switzerland. The arbitral tribunal ruling on the dispute found
the contract to be unenforceable because it contravened Algerian laws that related to
bribery and corruption. It therefore rejected Hilmarton’s claims. Upon Hilmarton’s
application, the Swiss Federal Supreme Court set aside the award, finding that the
arbitrators ought not to have considered Algerian law. But French courts – in decisions
ultimately appealed to and confirmed by France’s highest court – nonetheless
recognised the award. The Cour de Cassation controversially observed: “the award
made in Switzerland was an international award which was not integrated into the legal
system of that State, meaning that the award’s existence remained established despite
its having been set aside and that its recognition was not contrary to international public
policy”. The same Court later refused the enforcement of the subsequent awards which
were contradictory and had been rendered by the arbitrators as a consequence of their
first award having been set aside by the Swiss courts.
In Chromalloy v. Egypt45, courts in both France and the District of Columbia, USA,
enforced an international arbitral award that had been set aside by the courts of the seat
of arbitration, which was decided to be Cairo, Egypt. Chromalloy was successful in the
arbitration and thus sought to enforce the award in the District of Columbia. At the same
time the Government of Egypt, having lost the arbitration, managed to set aside the
award in Cairo on the basis that the arbitrators had applied Egyptian administrative law
rather than civil law. Courts in both the District of Columbia and France enforced the
award despite Egypt’s argument that the award no longer existed under Egyptian law.
The District of Columbia court noted that the parties had agreed to exclude all forms of
recourse against the arbitral tribunal’s awards and that error of law was not a basis to
refuse enforcement of a foreign arbitral award.

44
1994 Revue de L’Arbitrage 327
45
939 F Supp 907 (DDC 1996)

28
 Both these decisions were based on the notion whenever an award contravenes the seat’s
public policy but not the enforcement county’s policy, the award is still enforceable.
These are some of the cases that started coming up in the 1990s and show the tendency
of law to move towards the delocalised approach of international approach. This wasn’t
true for all countries however, as French law continues to support the Hilmarton
approach and some US Courts as well have retraced their decisions back to the
traditional approach.
Delocalisation theorists argue that the only role courts at the seat of arbitration should
have is to assist the arbitration with the tasks of a procedural nature that arbitrators
cannot undertake. These include, for example:
• issuing urgent interim protection orders,
• subpoenas for witnesses or discovery orders in respect of third parties,
• appointing arbitrators where the parties have not done so,
• or removing non- performing arbitrators.

International Relations Theory:

Theories of international relations try to explain and predict the way people and society
interact on an international level. The main aim of most of the different theories is the
actions of states, however the relative importance with respect to each other of nation
states differs according to different theories. International relations theory emerged as a
discipline in its own right in the latter half of the 20th century. The study of modern
international arbitration began in earnest at about the same time – although both
international relations and international arbitration can claim histories spanning
hundreds of years. In a very general sense the various theories of international relations
can be divided into multiple categories. This discussion will only examine two: Realism
and Liberal Internationalism.
Realism: The essential premise of Realism is that nation states exist in an anarchical
system with no guarantees of survival and hence must do their bit to survive. As a result,
the pursuit of power is inevitable and crucial to international relations. Originally this
was done by a quest for military might and thus we saw the World Wars. However, with
the spread of capitalism it has also come to mean the attainment of economic power and
to become economic superpowers. Realism seeks to draw its strength from looking at
what is actually happening; its focus is on reality or at least a reflection of it, rather than
painting a pretty picture. Partly as a consequence of basing itself on ‘reality’, Realism
completely embraces the notion that states are sovereign. Sovereign states are also
accepted by the majority of the other significant theories of international relations such
that it can safely be said that traditional international relations theory confirms the theory
of state sovereignty. A consequence of pure sovereignty is the absence of an overarching
authority to control the actions or interactions of states. Because each state is sovereign,
none has the right to interfere with the domestic laws and policies of another. Domestic
laws and policies are made by the state and followed by those within it. Therefore,

29
 citizens of a state can do only what is either expressly permitted by the laws of the state
or not otherwise prohibited by those laws. Realism’s emphasis on sovereignty therefore
supports the traditional or jurisdictional view. Thus when delocalisation advocates argue
against the traditional view that international arbitration is attached to the seat of
arbitration, they are not just arguing against it in the context of arbitration, but also
against the Realism school’s understanding of how the world interacts. To battle with
any level of success, the delocalised view must itself have an equally developed
theoretical analogy. That analogy can be found in the international relations theory of
Liberal Internationalism. Liberal internationalism is a term used to encompass a wide
variety of thought within the field of international relations theory. However,
fundamental to all brands of liberal thought is the primacy of the individual. Nation
states exist and have power, but they do so because that is the collective will of the
individuals who band together to form that state. Characterisation of the delocalisation
view strongly reflects a liberal inter- nationalist perspective. The legitimacy of the
parties’ decision to resolve their dispute by arbitration comes from their agreement to
do so. They as individuals have the power to make that decision. Whether a state –
embodying the view of the collective society – subsequently decides to enforce the
outcome of the arbitration is a different matter. It may be that the subject matter of the
dispute is considered illegal or immoral in the enforcing state, and thus the award should
not be enforced. However, that is a different issue; the main point is that the contracting
parties should not be required to integrate their arbitration and resulting award into a
state’s legal system until such time as they want to use a legal system to assist them by
enforcing a resulting award. Liberal internationalist theories therefore support the
delocalisation view.46 Today, as the world moves to a more globalised and cohesive
world order, a decline in the socio-political acceptance of sovereignty is likely to lead a
greater willingness to accept the idea of delocalised arbitration.

Whether we see the delocalised view being substituted by another approach?

From the above explanations we can see that delocalisation means independence and
disassociation of international arbitration proceedings from the jurisdiction and control of courts
completely, at least till the time the award has to be enforced. Apart from probably the ICSID
arbitrations, pure delocalisation does not exist because international laws are inconsistent and
therefore the legal framework for international arbitration is not uniform. But the delocalisation
debate has definitely influenced aspects of international arbitration practice. It has added
momentum to a movement away from control by the courts at the seat of arbitration, away from
the application of peculiar mandatory substantive laws of the seat, and away from overly strict or
rigid arbitration laws that constrain party autonomy and the flexibility of the arbitral process. A
good example of delocalisation’s influence on the enactment of laws is the Model Law, which as

46
Simon Greenberg et al., International Commercial Arbitration: An Asia-Pacific Perspective 72 (Cambridge
University Press (Virtual Publishing) 2012)

30
explained above and elsewhere throughout this book, provides for very limited court interference
and a very high degree of party autonomy. It may therefore be concluded that while pure
delocalisation does not exist, a more diluted and pragmatic form does. In this diluted form,
domestic laws and courts have bowed to legislative and/or practitioner pressure to take a more
hands-off approach to arbitrations seated in their jurisdiction. The effect is that delocalised (or
nearly delocalised) arbitration can be practised in certain jurisdictions, but only if the law and
courts of those jurisdictions so permit. Taking an example of the former Malaysian arbitration law,
which expressly permitted purely delocalised arbitration. It is sometimes argued that this amounts
to a combination of the delocalised and traditionalist conception of arbitration or a ‘hybrid’
approach because the law of the seat effectively permits delocalisation.47 In this diluted or hybrid
form, delocalisation is still dependent on the level of interference permitted by the domestic laws
and courts of the seat of arbitration. It may thus be said that the control over delocalisation by the
laws of the seat of arbitration is in line with the traditionalist or jurisdictional reasoning but
fundamentally inconsistent with delocalisation. As long as there is a provision in the lex arbitri
which permits something, then that provision is itself a form of attachment to the seat of arbitration
and displaces truly delocalised arbitration.
In other words, when analysing the hybrid approach from a theoretical perspective, a
fundamental problem emerges that questions the very logic of the delocalised approach. The
hybrid approach is not hybrid at all but rather a more or less modified restatement of the traditional
view! Even the basis of the so-called hybrid is based on an essential link to the seat of the
arbitration. We can conclude from a traditional line of reasoning that delocalisation is not a
phenomenon in its own right, but rather permitted by the state by virtue of its domestic legal
system.
There has been talk of a transnational theory as well. This theory holds that validity of the
arbitral award derives from a distinct arbitral legal order. The father of this theory is Emmanuel
Gaillard who maintains an adherence to state positivism. However, rather than anchoring the
validity of the arbitral award in one more or states, Gaillard argues that the ‘normative activity of
states’ supports the existence of a distinct arbitral legal order.48 He also says that by signing the
Convention and passing legislations based on the Model Law, arbitrators have been given the
authority to adjudicate international commercial disputes without the threat of review on merits.
This could be interpreted as greater autonomy for the arbitrators. This can be seen in their actions
which are for the collective benefit of the international community rather than just on behalf of
one particular state. This would mean that the validity of the arbitral award is anchored in a distinct
arbitral legal order. There is another non-positivist view as well which claims that there has been
a gradual movement away from what the states call law and towards a more inclusive
understanding that embraces the rules, principles, and norms produced by non-state communities.
The fact that we have the IBA Rules on the Taking of Evidence in International Arbitration, the
Principles of Transnational Civil Procedure, and the UNCITRAL Arbitration Rules suggest that
these rules and principles have acquired a normative force which furthers the argument for the

47
A Barraclough and J Waincymer, ‘Mandatory Rules of Law in International Commercial Arbitration’, (2005) 6
Melbourne Journal of International Law 205, at p. 210.
48
Julian D. M. Lew, Achieving the Dream: Autonomous Arbitration, 22 (2) Arb. Int’l 179 (2006).

31
normative autonomy of international arbitration. It cannot be said that international arbitration is
a truly distinct legal order, however. National legal orders still retain the power in international
arbitration to review arbitral awards. The implications of the transnational theory for the role of
the seat are clear: an arbitral award does not depend on the legal order of the seat, or indeed any
national legal order, for its validity. Hence, an enforcement court can safely disregard the decisions
of courts at the seat of arbitration.49
Whatever said and done, the delocalisation debate has had a very positive effect on the
success of international arbitration by decreasing the level of court interference at the seat of
arbitration as well as reducing the use of irrelevant local mandatory laws altogether. To think that
we have seen two views evolve in just the past 30 years can suggest that we may see an evolution
of an entirely new view sometime in the future. For the time being, the so-called hybrid system
also turns out to be just a modified or updated traditional view. The only logical step from the
traditional view was to move to a coherent and unified legal system that would be applicable world
over. With that said, the rise of the polar opposite, delocalised view came about. It was fairly
idealistic to have thought that notwithstanding all the different legal system, provisions, laws,
courts, etc. present all over the world, there would be just one system that would be applicable
world over. We have now somewhat settled in the middle with the hybrid approach also sitting
closer to the traditional view than the delocalised view. One could perhaps even suggest that we
have come full circle in this debate. But with growing world economies, emerging superpowers
like India, China and other such nations, the international investment being poured into these
countries is beyond imagination. With such an increase in the investments, it is only logical that
disputes will also increase which will have to be settled by way of such international arbitration.
While we may think that it would be best to just have one legal system applicable to ensure easy
redressal of disputes, the more ‘realistic’ view would be one to acknowledge States’ sovereign
powers to legislate on such matters and just aim for a more harmonised set of rules, while at the
same time considering different facts and circumstances prevalent in each State. The pyramid that
was depicted above aptly described this as having a base of incorruptible domestic mandatory laws
that can be layered with express choices of the parties. The freedom to derogate from the lex arbitri
is only achievable to the extent that the lex arbitri itself permits it. Redfern and Hunter50 put the
point nicely: “[T]he procedural law is that of the place of arbitration and, to the extent that it
contains mandatory provisions, is binding on the parties whether they like it or not. It may well be
that the lex arbitri will govern with a very free rein, but it will govern nonetheless.”
Though the Model Law and similar arbitral laws have seen an increase in their use in the
past few years, the debate is like to continue. These approaches have been shaped by international
conventions such as the New York Convention, treaties and a host of decisions on the topics. Most
importantly, it also matters how different jurisdictions see the validity of the arbitration agreement.

49
Barry, Matthew. ‘The Role of the Seat in International Arbitration: Theory, Practice, and Implications for
Australian Courts’. Journal of International Arbitration 32, no. 3 (2015): 289–324.
50
Nigel Blackaby et al, Redfern & Hunter on International Arbitration (Oxford University Press, 5th Ed, 2009) at
para 3.50.

32
 The analysis demonstrates that, in relation to the role of the seat, the Convention is
ambiguous. It ‘breathes hot and cold.’51 On the one hand, the Convention clearly sought to reduce
the influence of the law and courts of the seat by eliminating double exequatur and expanding the
procedural autonomy of the parties. On the other hand, the Convention preserves the concept of a
‘foreign’ (as opposed to ‘international’) award and identifies a decision to set aside the award at
the seat as a ground for refusing enforcement. It is therefore not surprising that enforcement courts
have taken different views on whether the Convention requires deference to decisions at the seat
of arbitration. These will be discussed in the next chapter.

51
Jan Paulsson, Enforcing Arbitral Awards Notwithstanding Local Standard Annulments, 6 Asia Pacific L. Rev. 1, 9
(1998)

33
IV. ANALYSIS OF DECISIONS OF COURTS FROM MULTIPLE
JURISDICTIONS

Proponents of delocalisation have found merit in a number of decisions from international

tribunals that favoured the detachment of arbitral proceedings from domestic regulation, and in
judgments from French and other courts to similar effect. The following comments from the
Supreme Court of Canada are representative of these views, “Arbitration is an institution without
a forum and without a geographic basis. Arbitration is part of no state's judicial system. The
arbitrator has no allegiance or connection to any single country. Arbitration is a creature that
owes its existence to the will of the parties alone.”52
However, common law courts have usually taken a firmly traditionalist view as was seen
in Bank Mellat v Helliniki Techniki SA53, Kerr LJ where the English Court of Appeal had no doubt
that, “... in the absence of any contractual provision to the contrary, the procedural (or curial)
law governing arbitrations is that of the forum of the arbitration ... Despite suggestions to the
contrary by some learned writers under other systems, our jurisprudence does not recognise the
concept of arbitral procedures floating in the transnational firmament, unconnected with any
municipal system of law...”. Similarly, it was in SA Copep & Lavalin NV v Ken-Ren Chemicals
and Fertilizers Ltd54, that Lord Mustill in the House of Lords expressed his "doubt whether in its
purest sense the doctrine [transnationalism] now commands widespread support ... At all events
it cannot be the law of England". The English Court of Appeal expressed the point thus: “[T]he
relevant rules of such bodies are incorporated by reference into the contract between the parties,
and their binding effect will be respected and enforced by the Courts of the forum except in so far
as they may conflict with the public policy or any mandatory provisions of the lex fori.”55 There is
clear judicial recognition of the conceptual validity of such an arrangement; that is, for parties to
choose to subject their arbitration to the procedural laws of a country other than the seat. However,
this is typically coupled with cautionary words about the complexities that would result and thus
a strong reluctance to find that such a dichotomy exists except in the clearest cases. For example,
the English Court of Appeal has said that. “There is equally no reason in theory which precludes
parties to agree that an arbitration shall be held at a place or in country X but subject to the
procedural laws of Y. The limits and implications of any such agreement have been much discussed
in the literature but apart from the decision in the instant case there appears to be no reported
case where this has happened. This is not surprising when one considers the complexities and
inconveniences which such an agreement would involve.”56 The English House of Lords
encapsulated both the permissive and the disapproving aspects of the matter in Channel Tunnel
Group Ltd v Balfour Beatty Construction Ltd57 where it held, “Certainly there may sometimes be
an express choice of a curial law which is not the law of the place where the arbitration is to be
held: but in the absence of an explicit choice of this kind, or at least some very strong pointer in

52
Dell Computer Corp. v. Union des consommateurs (2007) SCC 34, at p. 51
53
[1984] 1 QB 291, at p. 301
54
[1995] 1 AC 38, at p. 52
55
Naviera Amazonica Peruana v Comapania Internacional De Seguros Del Peru [1988] 1 Lloyd’s Rep 116
56
Ibid
57
[1993] 1 AC 334

34
the agreement to show that such a choice was intended, the inference that the parties when
contracting to arbitrate in a particular place consented to having the arbitral process governed
by the law of that place is irresistible.” Where the seat is not clearly stated and the parties cannot
reach an agreement, it may be necessary to carry out an exercise of contract interpretation under
the proper law of the arbitration agreement. The case of Braes of Doune Wind Farm (Scotland)
Ltd v Alfred McAlpine Business Services Ltd58 provides an example. The English court was
required to interpret a contract which provided (with a striking degree of confusion) that it was
"governed by and construed in accordance with the laws of England and Wales"; that "subject to
Clause 20.2 [Dispute Resolution], the courts of England and Wales have exclusive jurisdiction to
settle any dispute arising out of or in connection with the Contract"; that "any dispute or difference
between the Parties to this Agreement arising out of or in connection with this Agreement shall be
referred to arbitration"; that "[t]his arbitration agreement is subject to English Law and the seat
of the arbitration shall be Glasgow, Scotland"; and finally that "[a]ny such reference to arbitration
shall be deemed to be a reference to arbitration within the meaning of the Arbitration Act 1996 or
any statutory re-enactment". Notwithstanding the statement that "the seat of the arbitration shall
be Glasgow, Scotland", the court held as a matter of contractual interpretation that the remaining
provisions cumulatively indicated an intention to seat the arbitration in England under the
supervision of English courts (the reference to the Arbitration Act 1996 would otherwise be
meaningless), with Glasgow being merely the intended venue for hearings. Though one might
disagree with the outcome, it illustrates the contractual interpretation approach to clauses that are
unclear as to the choice of seat.
In Singapore, too, there seems to be no room for delocalised arbitration. Singapore seems
to have had tough learning curve, as the following few lines seem to suggest. Speaking in
Parliament at the second reading of the Arbitration Bill in October 2001, the Minister of State for
Law noted59 that: “... the Bill adopts the territorial criterion recommended by the Model Law and
affirms the position that every arbitration held in Singapore must be governed by an applicable
law of arbitration either under the International Arbitration Act or under this Bill. The concept of
a 'delocalised' arbitration unconnected with any system of municipal laws would not be recognised
under Singapore law.” Likewise, the Singapore Court of Appeal held that “the significance of the
place of arbitration lies in the fact that for legal reasons the arbitration is to be regarded as
situated in that state or territory. It identifies a state or territory whose laws will govern the arbitral
process"60 Singapore courts have grappled less successfully in the past with the relationship
between and coexistence of the law of the seat and the parties' chosen rules. In the case of John
Holland Pty Ltd v Toyo EngineeringCorp (Japan),61 the Singapore court held that the parties'
adoption of ICC rules had the unexpected effect of excluding the application of the Model Law
altogether. In the subsequent case of Dermajaya Properties Sdn Bhd v Premium Properties Sdn
Bhd,62 the court held instead that while the Model Law and Pt II of the IAA were not excluded by
the parties' choice of UNCITRAL rules, on the other hand those rules were not entirely compatible

58
[2008] EWHC 426
59
Singapore Parliamentary Debates, Official Report (5 October 2001) vol. 73 at col 2215
60
PT Garuda Indonesia v Birgen Air [2002] 1 SLR(R) 401
61
[2001] 1 SLR(R) 443.
62
[2002] 1 SLR(R) 492.

35
with the law of the seat (Singapore) and therefore the rules should not apply in their entirety and
should only be given effect on an ad hoc basis in so far as they filled any gaps in the structure of
the law of the seat. The determination of the seat is generally not entrusted to national courts,
although the issue may sometimes emerge in court as a threshold for some other purpose, for
example where one party seeks to invoke the supportive or supervisory powers of the court under
national arbitration laws and the court must first decide whether it has jurisdiction under such laws
by identifying the seat of arbitration. For example, in PT Garuda Indonesia discussed above, the
Singapore court declined jurisdiction to set aside an award on the basis of its initial finding that
the seat of the arbitration was in Indonesia. Similarly in the earlier case of Woh Hup (Pte)Ltd v
Property Development Ltd63, the court was required to determine the seat of arbitration and the
applicable

Whatever the attractions of the trans-nationalist conception in theory may be, in practice
the traditionalist view is now the norm in most modern arbitration laws, as was discussed above,
which aim to regulate only those arbitrations that are conducted within the territory of the State
but also apply to all arbitrations in that State, subject to permitted rights of derogation. It was noted
earlier that this is the approach of the Model Law and all statutes derived from it, and it is notable
that national laws which went furthest in detaching international arbitration in those States from
municipal regulation and control - for example, Pt. VI of Belgium's Judicial Code (1985 revision)
and Malaysia's Arbitration Act 1952 - have subsequently been amended in favour of an approach
that restores greater local oversight, thereby affirming the view in the conclusion of the previous
chapter wherein the view seems to have come a full circle.
The Canadian case of Noble China Inc v Lei Kat Cheong64 illustrates the approach to
statutory interpretation in practice, even though the decision is controversial. The court was
considering a contractual term which stated: "No matter which is to be arbitrated is to be the
subject matter of any court proceeding other than a proceeding to enforce the arbitration award'"
It was common ground that this purported to be a waiver or denial of the right to apply to set aside
an award under Art 34 of the Model Law, which had force of law in Ontario, but the parties
disagreed as to whether Art 34 was mandatory and therefore non-excludable. The court noted that
each of the Model Law articles considered mandatory by the Analytical Commentary "contains
the familiar mandatory language of 'shall', whereas other provisions in the Model Law contain the
familiar permissive language of 'may"'. Article 34 did not contain "shall" language in any material
respect; for this and other textual reasons the court concluded that Art 34 was not mandatory and
that the exclusion was valid. It should be noted that there is a continuing international debate as to
the legitimacy of exclusion agreements which purport to deny the annulment powers of the court
at the seat of arbitration.
The US Court of Appeals for the 5th Circuit has also commented colourfully: “Authorities
on international arbitration describe an agreement providing that one country will be the site of
the arbitration but the proceedings will be held under the arbitration law of another country by

63
[1991] 1 SLR(R) 473
64
[1998] CanLIl 14708

36
terms such as 'exceptional'; 'almost unknown'; a 'purely academic invention'; 'almost never used
in practice'; a possibility 'more theoretical than real'; and a 'once-in-a-blue-moon set of
circumstances'. Commentators note that such an agreement would be complex, inconvenient, and
inconsistent with the selection of a neutral forum as the arbitral forum.”65 Unlike English courts,
U.S. courts have sometimes adopted a "wait and see" approach66, even if the FAA allows judicial
intervention before an award is rendered. In Pacificare v. Book67, the plaintiffs, a group of
physicians, filed a suit against managed-health-care organizations, alleging the defendants
unlawfully failed to reimburse them for healthcare services they had provided to patients covered
by defendants' health plans. They brought causes of action under Racketeer Influenced and Corrupt
Organizations Act (RICO) that allows inter alia award of treble damages. Nevertheless, the
physicians had signed arbitration agreements to resolve disputes with the health care providers;
some of these agreements prevented arbitrators from awarding punitive damages. The District
Court refused to compel arbitration of the RICO claims on the basis that the arbitration clauses in
the parties' agreements prohibited awards of "punitive damages," and hence an arbitrator lacked
authority to award treble damages under RICO. The Supreme Court, reversing the lower court's
decision, stated: “Since we do not know how the arbitrator will construe the remedial limitations,
the questions whether they render the parties' agreements unenforceable and whether it is for
courts or arbitrators to decide enforceability in the first instance are unusually abstract. As in
Vimar, the proper course is to compel arbitration.”. In another landmark pronouncement, First
Options of Chicago v. Kaplans68, the Supreme Court recognised the rights of the parties to give
arbitrators the final world on some aspects of arbitral power. In this case, an award was rendered
against both an investment company (MK Investments) and its owners (Mr and Mrs Kaplan) in
relation to debts owed to a firm clearing stock trades (First Options of Chicago). The Kaplans,
however, who had not personally signed the document containing the arbitration clause, denied
that their disagreement with First Options was arbitrable. The Supreme Court affirmed that the
Kaplans were not bound by the arbitration agreement but went further, suggesting "the court should
give considerable leeway to the arbitrator, setting aside his or her decision only in certain narrow
circumstances."69 The famous case of TermoRio70 must also be mentioned her that established that
a US Court won’t defer to a decision at the seat of arbitration which violates basic notions of
justice. This standard was met in the recent decision of the Southern District of New York in
Pemex71. In this case, following an ICC arbitration in Mexico, an award was rendered in favour of
Commisa against Pemex. Pemex, an instrumentality of the Mexican state, challenged the award in
the Mexican courts. It argued that the parties’ dispute was non-arbitrable under a Mexican law that
had entered into force after the commencement of the arbitral proceedings. The Mexican court set
aside the award, finding that the dispute was non-arbitrable under the ‘guiding principle’ of the
new law. Commisa nevertheless sought enforcement of the award in the Southern District of New

65
Karaha Bodas Co LLC v Perusahan Pertambangan Minyak Dan Gas Buni Negara 364 F 3d 291 (5th Cir, 2004)
66
William W. Park, The Arbitrator's Jurisdiction to Determine Jurisdiction, KLUWER LAW INT'L 59 (2007)
67
538 U.S. 401 (2003)
68
514 U.S. 938, 943 (1995)
69
Giulia Carbone, The Interference of the Court of the Seat with International Arbitration, 217 Journal of Dispute
Resolution 223 (LexisNexis 2012).
70
Termorio S.A. E.S.P. v. Electranta S.P. (D.C. Cir. 05/25/2007)
71
Corporación Mexicana de Mantenimiento Integral v. Pemex-Exploración y Producción, 962 F.Supp.2d 642
(S.D.N.Y. 2013)

37
York and was successful. There were three reasons for the Court’s decision not to defer to the
Mexican judgment. First, the Mexican courts set aside the award by applying the law
retrospectively. This violated Commisa’s legitimate expectation at the time of contracting that the
dispute would be arbitrable under Mexican law. Second, the party that benefited from this
retrospective application of the law, Pemex, was an instrumentality of the Mexican state. The court
described this aspect of the Mexican judgment as ‘troubling’ and a violation of the parties’ right
to equal treatment. Third, once the award was set aside, Commisa was time-barred under Mexican
legislation from litigating the merits of its claim in the Mexican courts. As the dispute was also
non-arbitrable, Commisa was left without a forum to pursue the claim in which it was originally
successful. These reasons, taken together, supported the court’s conclusion that the Mexican
judgment ‘violated basic notions of justice.’
In Yukos v. Rosneft72, the Amsterdam Court of Appeal refused to defer to a decision at the
seat of arbitration because the decision was ‘highly likely’ to be ‘partial and dependent’ and was
therefore ‘not entitled to recognition in the Netherlands.’ Following an arbitration seated in Russia,
four awards were rendered in favour of Yukos Capital against Yuganskneftegaz (YNG). Shortly
after the arbitration, YNG merged with Rosneft, a company owned by the Russian state. On
application by Rosneft, the Russian courts set aside the awards on the basis that the contracts
between Yukos Capital and YNG formed part of an ‘unlawful tax avoidance scheme’. The
Amsterdam Court of Appeal nevertheless enforced the awards, relying on adverse assessments of
the Russian judiciary by journalists and international anti-corruption bodies, as well as evidence
of the persecution of Yukos executives by the Russian state. While there was no direct evidence
of partiality and dependence on the part of the individual judges that set aside the awards, the
Amsterdam Court of Appeal reasoned that ‘partiality and dependence, by their nature, take place
behind the scenes.’ Yukos Capital brought further enforcement proceedings in England73, arguing
(as it did in the Netherlands) that the Russian decision setting aside the awards was partial and
dependent and therefore should not be recognized by the English courts. However, in these
proceedings Rosneft raised the novel argument that the act of state doctrine precluded the English
courts from investigating Yukos’ allegations of Russian state interference in the judiciary. At first
instance, Hamblen, J. held that the act of state doctrine did not preclude the English courts from
considering such allegations. The English Court of Appeal agreed, observing that ‘judicial acts of
state are not acts of state for the purposes of the act of state doctrine’ and that an English court can
examine the conduct of a foreign judiciary against ‘proper judicial standards mandated by the rule
of law.’ Nevertheless, the English Court of Appeal cautioned that, consistent with principles of
international comity ,‘cogent evidence is required before it is possible to call a foreign decision
partial and dependent.
In Saipem v. Petrobangla74, the interference of the local court was even more explicit. The
dispute concerned a contract for the construction of a gas pipeline in Bangladesh entered into

72
Yukos Capital SARL v. OAO Rosneft (Amsterdam Court of Appeal, 28 Apr. 2009) in Yearbook
Commercial Arbitration 2009, 703
73
Yukos Capital SARL v. OJSC Rosneft Oil Co., [2011] EWHC 1461 (Comm); Yukos Capital SARL v.
OJSC Rosneft Oil Co., [2012] EWCA Civ 855
74
Saipem S.P.A. v. The Bangladesh Oil Gas & Mineral Corp. (Petrobangla), No. 7934/CK, ASA BULLETIN 18, 6
(2000).

38
between Saipem S.p.A., an Italian contractor, and the Bangladesh Oil Gas and Mineral Corporation
(Petrobangla), a State entity. The contract was governed by the law of Bangladesh and contained
an ICC arbitration clause indicating Dhaka as the seat of arbitration. During the arbitral
proceedings, the tribunal denied several procedural requests submitted by Petrobangla, which,
following these adverse decisions, filed several claims before the local courts seeking to revoke
the tribunal's mandate for an alleged miscarriage of justice and to stay of the arbitration. Unlike
the preceding case, where the State party brought the challenge to the arbitrators to the ICC Court
before resorting to the national courts, Petrobangla brought such an action directly to the Dhaka
Court, in violation of Article 11 of ICC Rules75. A week later, the Supreme Court of Bangladesh
issued an injunction restraining Saipem from proceeding with the ICC arbitration. After few
months, the same court issued a decision revoking the authority of the three arbitrators for
miscarriage of justice. Nevertheless, the tribunal decided to continue its proceedings "on the
ground that the challenge or replacement of the arbitrators in an ICC arbitration falls within the
exclusive jurisdiction of the ICC Court and not of the courts of Bangladesh" and that "the
revocation of the authority of the ICC Arbitral Tribunal by the Bangladeshi courts was contrary
to the general principles governing international arbitration." Several other claims and injunctions
followed this decision and when the arbitral panel issued a final award, it was considered as non-
existent by the Supreme Court of Bangladesh.
The recent case of Gao Haiyan v. Keeneye Holdings Ltd.76 exemplifies the deferential
approach to confirming decisions at the seat. Following an arbitration seated in China, the award
debtor challenged the award in the X’ian Intermediate Court on the ground that the arbitral tribunal
was biased. However, the Chinese court found no evidence of bias and confirmed the award. In
enforcement proceedings in Hong Kong, the award debtor resisted enforcement on the basis that
the arbitral tribunal was biased. At first instance, Reyes, J. found that the tribunal was biased and
refused to enforce the award. However, the Court of Appeal overturned this decision, reasoning
that Reyes, J. ‘should have given more weight to the decision of the Xi’an Court.’ The Court of
Appeal observed that the Xi’an Court was in a ‘much better position to ascertain the facts and to
decide whether those facts established a case of . . . bias.’ The decision in Gao Haiyan is therefore
consistent with the monolocal theory, which holds that seat courts have a better ‘title’ to judge the
validity of the arbitral procedure and the award than enforcement courts.77
In contrast, French courts, consistent with the multilocal and transnational theories of
international arbitration, have disregarded decisions at the seat confirming arbitral awards. In
Unichips v. Gesnouin78, the award debtor challenged an award made in Switzerland in the Swiss
courts on the ground that it was not given a reasonable opportunity to be heard. The Swiss courts
dismissed the challenge and confirmed the award. In enforcement proceedings in France, the award
debtor sought to resist enforcement by arguing (as it did at the seat) that it was not given a
reasonable opportunity to be heard. In response to the award creditor’s argument that this ground

75
Saipem S.P.A. v. The People's Republic of Bangladesh, ICSID Case No. ARB/05/7, Final Award, PP 24-25 (June
30, 2009), available at http://www.lcil.cam.ac.uk/Media/lectures/SaipemvBangladeshICSIDAward.pdf.
76
[2012] 1 H.K.L.R.D. 627
77
Barry, Matthew. ‘The Role of the Seat in International Arbitration:Theory, Practice, and Implications for
Australian Courts’. Journal of International Arbitration 32, no. 3 (2015): 289–324
78
Yearbook Commercial Arbitration 1994, 658

39
could not be re-examined in France, the Paris Court of Appeal said: “[The Swiss decision] cannot
bar the control by the French courts of the international efficacy of the award . . . [A] French
judge, when checking in concreto whether the parties’ right to be heard was respected, is not
bound by the decision of the Swiss courts”.

In summary, it is noticeable that enforcement courts have taken very different approaches
to decisions at the seat of arbitration. This can be attributed not only to the ambiguity of the
Convention on the role of the seat, but also to the influence of particular theories of international
arbitration. Some have argued that the fundamental purpose of the New York Convention is to
serve as a ‘control system’ which is fulfilled by empowering seat courts to set aside arbitral awards
with universal effect79, which leads to the favouring of the US Courts’ distinction between
‘primary’ and ‘secondary’ jurisdiction. There are others who oppose this and argue that such a
distinction has no basis in the Convention’s text.80 The Convention requires enforcement courts to
focus on the ‘raw product constituted by the award’, not on judicial decisions surrounding the
award at the seat.81 This view falls in line with the view adopted by the French courts.

79
W. Michael Reisman, Systems of Control in International Adjudication and Arbitration ch. 4 (Duke University
Press 1992)
80
Emmanuel Gaillard, International Arbitration as Transnational System of Justice, in Arbitration: The next Fifty
Years, ICCA Congress Series volume 16, 66, 70 (Albert Jan van den Berg ed., Kluwer Law International 2012)
81
Emmanuel Gaillard, Legal Theory of International Arbitration (Matrinus Nijhoff 2010)

40
 IV. SUBSTANTIVE AND PROCEDURAL RIGHTS OF THE
PARTIES

This chapter concerns the identification of the law that applies in an international
arbitration. Various laws may apply to different aspects of the dispute. International arbitration
proceedings have no lex fori because they are not connected to the seat of arbitration in the same
way that domestic court proceedings are connected to the forum. In particular, although the lex
arbitri provides the legal backbone of the arbitration it does not provide a system of conflict of
laws rules. So when an arbitral tribunal has to decide a question of applicable law, it does not have
a fixed conflict of laws regime at its disposal. Moreover, any and all elements which may precede
or be a necessary part of resolving conflict of laws questions in domestic courts are undefined in
international arbitration. In international litigation, there are primarily two types of conflict of laws
questions: First, which law governs the procedure? Second, which law governs the parties’
substantive rights?
The law that governs the procedure in international litigation is that of the forum, i.e. the
law of the jurisdiction where the court is situated or the lex fori; and the rules of procedure to be
applied are those of the court hearing the case. Basically, once a litigant brings court proceedings,
the litigant generally has no say as to the applicable procedural law or rules.
As to the law governing the parties’ substantive rights, the judge will apply the substantive
law of the lex fori unless there is a foreign element in the case and the conflict of laws rules of the
lex fori otherwise direct the judge. Domestic conflict of laws rules are definitive in the manner that
they determine the law applicable to any given situation. They may allow the litigating parties to
choose the governing law, in which case the judge would apply the parties’ chosen law. The
conflict of laws rules might also include international, regional or bilateral conventions on
applicable law. Several international conventions on applicable law have been prepared by the
Hague Conference on Private International Law but no Asia- Pacific states are parties to any such
convention relevant in civil and commercial matters. There are also various regional conventions
on applicable law, notably in Europe, but again there are none in the Asia-Pacific. Whether their
source is from an international or regional convention or purely domestic, conflict of laws rules
are essentially part of the lex fori and will be applied accordingly. Any and all other conflict of
laws questions that may arise in international litigation – to determine for example which law
governs the parties’ capacity to contract – are resolved definitively by those same conflict of laws
rules.82
Even despite there being a choice of law clause in the contract providing for the application
of a specified law, the tribunal might find it unnecessary to refer expressly to the law because the
case can be decided directly by reading the contract clauses, perhaps supplemented by ‘trade
usages’ of the particular industry. Nonetheless, even if the law is not specifically referred to, every
contract has to be governed by some law or rules. The question is which one? Article 2883 of the

82
Simon Greenberg et al., International Commercial Arbitration: An Asia-Pacific Perspective 98 (Cambridge
University Press (Virtual Publishing) 2012)
83
Article 28. Rules applicable to substance of dispute:

41
Model Law is illustrative of provisions which address this question of substantive law in
international arbitration. We can see that there are two situations that arise out of this scenarios:
one where parties have chosen an applicable law as given under Article 28(1) of the Model Law,
and where they have not chosen the same, as given under Article 28(2) of the Model Law.
Parties can choose their own law as is given under Article 28(1) of the Model Law and can
be done even after the contract is made. In 2009, parties had chosen the law in 88% of the
arbitrations before the ICC International Court of Arbitration.84 The parties can choose their own
set of laws and need not be connected to either parties or the dispute, however in China the choice
of law is restricted by Article 7 of the Chinese Arbitration Law along with other applicable laws
which limit the types of contracts for which parties can choose the law, even if there is a foreign
element in the case. Domestic arbitration laws also sometimes contain restrictions. For example,
Section 28(1)(a) of the Indian Conciliation and Arbitration Act 1996 provides that where the
arbitration is ‘other than an international commercial arbitration’ Indian law will be the substantive
law irrespective of party choice

What is the applicable law where there is no choice of law by the parties?

An arbitral tribunal’s power to decide the law where the parties have not agreed on it is recognised
in almost all arbitration rules and laws. There are several categories of approaches that can be
applied and they are as follows:
• ‘Conflict of laws rules’ and ‘direct’ approaches: As we have seen above, Article 28(2)
empowers the tribunal to select the ‘conflict of laws rules it considers appropriate’ Another
common approach is one where the arbitral tribunal chooses an ‘appropriate law’. The
latter is often referred to as the ‘direct’ approach because it does not require the arbitral
tribunal to apply a set of conflict of laws rules. Arbitral tribunals that apply the direct
approach will definitely have conscious or unconscious recourse to their knowledge and
experience of private international law.85 The direct approach in no way means that the
arbitral tribunal can apply any law of its choice as some have suggested. It will require an
analysis to see which set of laws are applicable and to make the decision after due
consideration and with a valid justification. In practice, provided that an arbitral tribunal
applying the direct approach 3.32 justifies its decision, there is unlikely to be a practical
difference between it and an approach that uses a set of conflict of laws rules. This usually

(1) Thearbitraltribunalshalldecidethedisputeinaccordancewithsuchrulesoflaw as are chosen by the parties as
applicable to the substance of the dispute. Any designation of the law or legal system of a given State shall
be construed, unless otherwise expressed, as directly referring to the substantive law of that State and not to
its conflict of laws rules.
(2) Failing any designation by the parties, the arbitral tribunal shall apply the law determined by the
conflict of laws rules which it considers applicable.
(3) Thearbitraltribunalshalldecideexaequoetbonoorasamiablecompositeuronly if the parties have expressly
authorized it to do so.
(4) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take
into account the usages of the trade applicable to the transaction.
84
‘2009 Statistical Report’, (2010) 21 ICC International Court of Arbitration Bulletin 1
85
E Gaillard and J Savage (eds), Fouchard Gaillard and Goldman on International Commercial Arbitration, Kluwer
Law International, 1999, n. 21, p. 322

42
 means that the direct approach is applied regardless since the outcome is going to be the
same anyway.
• Applying the substantive law of the seat of arbitration: This approach has been seen in
Indonesian and Sri Lankan laws where they require their domestic laws to be applicable
in case the parties have not chosen an applicable law. Both these states have fall-back law
options in case the parties did not choose an applicable law. This is a very outdated
approach. This solution is simple and predictable. However, parties choose the seat of 3.43
arbitration for a variety of reasons, such as its international arbitration (procedural) laws,
its neutrality, the quality of its courts, geographic convenience, and relevant infrastructure.
The seat of arbitration often has no further connection whatsoever with the underlying
transaction. It would therefore be artificial to presume either
(i) that the parties implicitly wanted the seat’s law to be the substantive law or
(ii) that it would be an appropriate law to apply by virtue only
• of the fact that it is the law of the seat of arbitration. Finally, this method is even less
relevant when an arbitral institution, or the arbitral tribunal, has decided the seat of
arbitration rather than it having been agreed by the parties. In such circumstances, there is
no compelling basis for assuming any implicit choice by the parties in favour of that law.
• Applying the conflict of law rules of the seat of arbitration: This approach is similar to the
one listed above and simply require the conflict of law rules of the seat of arbitration to
apply. China and Malaysia follow this approach. From a practical perspective, using the
seat of arbitration’s conflict of laws rules is convenient. It not only provides a solution to
establishing the law applicable to the contract, but also provides a comprehensive set of
rules to resolve any other conflict of laws question that may arise. The approach is out of
touch with the truly transnational character of international arbitration, ignores the fact
that domestic conflict of laws rules may not be well suited or adapted to international
arbitrations, limits the flexibility that is such a commendable feature of international
arbitration, and fails to address the situation where the parties have failed to agree on the
seat of arbitration (meaning that the seat would have to be determined by the lex arbitri,
arbitral rules or arbitral institution).
• Applying the law with the closest connection: This approach is followed by South Korea
and Japan and such laws do not leave international arbitrators the usual freedom to select
the applicable law by any method they wish. This rule is often found in domestic legal
systems for determining the law applicable to contracts and is one of the few general
principles of private international law. It has also been adopted by international
conventions such as the Rome Convention. Although this method may seem
straightforward, it is not always easy to 3.59 determine which law has the closest
connection to a dispute. In fact, it is precisely this question which conflict of laws rules
generally seek to answer. They purport to direct judges to the law with the closest
connection. An arbitral tribunal that decides to apply (or is required to apply) the law with
the closest connection to the dispute might well have to refer to general principles of

43
 private international law in any event, in order to apply the closest connection rule. If so,
this effectively means going back to square one – i.e. the relevant conflict of laws rule.86
• Implied intent: Some consider that international arbitrators should attempt to discern the
parties’ implicit choice of law It is indeed difficult to see any difference between applying
an objective criterion, such as connecting factors, and searching for a virtually hypothetical
implied intent. It would seem that the same factors are applied either way. From a
theoretical perspective, if genuine evidence of contractual intent can be found, it should
be applied. Otherwise, however, the theories of implied intent seem to be superficial if the
same connecting factors would be used for a more objective method anyway.
• Cumulative method: The cumulative method, if it works, is the most rigorous and
acceptable approach. It should satisfy the parties, it is theoretically justified because it is
international, and it increases the enforceability of the resulting arbitral award by
respecting the interests of the states connected to the dispute. The disadvantage of this
method is that it can be complex and does not always result in convergence. This would
be especially useful for arbitrators who do not have expertise in the specialised discipline
of the conflict of laws. Rather than attempting an international convention, however, a set
of soft guidelines would be preferable. These could provide guidance without being
proscriptive to the detriment of flexibility.

What will be the content of the applicable law?

Once the tribunal has decided which law is to be applicable to a dispute, it then has to decide the
content of the law. Since there are several laws, the arbitrators must be able to decide which content
is to be applicable. this issue differs in international arbitration in contrast with domestic litigation.
A domestic court will have a well-established body of rules relating to the manner in which foreign
law is established and dealt with. There are no such rules in international arbitration, once again
because there is no fall-back lex fori. After considering numerous questions and issues relating to
how an inter- national arbitral tribunal should determine the content of the applicable law, a special
task force on this topic, appointed by the International Law Association’s International
Commercial Arbitration Committee, summarised them in the following four ‘overarching and
thematic questions’:87
i. How should arbitrators acquire information about the contents of the applicable law?
ii. How should arbitrators interact with the parties about the contents of the applicable law?
iii. How should arbitrators make use of the information they receive about the contents of
the applicable law?
iv. How should arbitrators address situations that may call for special treatment regarding
the contents of the applicable law?

86
Simon Greenberg et al., International Commercial Arbitration: An Asia-Pacific Perspective 111 (Cambridge
University Press (Virtual Publishing) 2012)
87
Ascertaining the Contents of the Applicable Law in International Commercial Arbitration, International
Commercial Arbitration Committee of the International Law Association, October 2008, available at www. ila-
hq.org/en/committees/index.cfm/cid/19, at p. 7.

44
The Task Force eventually came up with answers, and among other things, noted, “a balanced
approach is the most acceptable general approach to the determination of the contents of the
applicable law in international commercial arbitration. Arbitrators should primarily rely on the
parties to articulate legal issues and to present the law, and disputed legal issues. They should
give parties appropriate directions in relation thereto and should give appropriate weight to
information so obtained.” While arbitral tribunals may be permitted some limited scope to apply
provisions of the governing law that have not been specifically plead by a party (the ‘jura novit
curia’ principle, well known in civil law countries), they cannot stray too far from the pleadings
and apply statutes, cases or principles of law that the parties would not reasonably have expected
them to apply. The task force then came up with a list of recommendations for arbitrators that
faced the problem of determining the content of the applicable law. They are as follows:
(i) Arbitrators should identify the potentially applicable laws and rules and ascertain their
contents insofar as it is necessary.
(ii) In ascertaining the contents of the applicable law and rules, arbitrators should respect
due process and public policy and avoid bias or appearance of bias.
(iii) When it appears to the arbitrators that the contents of the applicable law might be
significant, they should promptly raise that topic with the parties and establish appropriate
procedures as to how the contents of the law will be ascertained.
(iv) Rules governing the ascertainment of the contents of law by national courts are not
necessarily suitable for arbitration given the fundamental differences between
international arbitration and litigation before national courts.
(v) Arbitrators should primarily receive information about the contents of the applicable
law from the parties.
(vi) Arbitrators should not introduce legal issues – propositions of law that may bear on
the outcome of the dispute – that the parties have not raised.
(vii) Arbitrators are not confined to the parties’ submissions about the contents of the
applicable law but may question the parties about legal issues and about their submissions
and evidence on the contents of the applicable law. They may also review sources not
invoked by the parties relating to those legal issues and may, in a transparent manner, rely
on their own knowledge as to the applicable law.
(viii) Before rendering a decision or an award, arbitrators should give parties a reasonable
opportunity to be heard on all legal issues. They should not give decisions that might
reasonably be expected to surprise the parties, or that are based on legal issues not raised
by or with the parties.
(ix) In ascertaining the contents of a potentially applicable law or rule, arbitrators may
consider and give appropriate weight to any reliable source, including statutes, case law,
submissions of the parties’ advocates, opinions and cross-examination of experts,
scholarly writings and the like.
(x) If arbitrators intend to rely on sources not invoked by the parties, they should bring
those sources to the attention of the parties and invite their comments.

45
 (xi) If in the course of deliberations arbitrators consider that further information about the
contents of the applicable law is necessary to the disposition of the case, they should
consider reopening the proceedings to enable the parties to make further submissions.
(xii) In disputes implicating rules of public policy or other mandatory rules, arbitrators
may be justified in taking measures appropriate to determine the applicability and contents
of such rules, including by independent research.88

Usually, such issues are rarely dealt with by arbitrators since the choice of law is usually
chosen beforehand. In practice, most disputes are sorted by applying the facts of the dispute to the
contract established between them. Express referral to law isn’t always necessary but is preferable
to avoid such confusion.

88
‘Ascertaining the Contents of the Applicable Law in International Commercial Arbitration’, International
Commercial Arbitration Committee of the International Law Association, October 2008, available at www. ila-
hq.org/en/committees/index.cfm/cid/19

46
 V. CONCLUSION

In the great majority of international arbitrations, the parties have usually decided a seat of
arbitration in their arbitration agreement which means it is understood and assumed that the law
of that seat is the law applicable to their arbitration. Typically, they also include rules of arbitration
which replace the governing arbitral law on detailed matters of procedure. The tribunal handles
contested issues of arbitral procedure and the courts of the seat of arbitration are available for
supportive and supervisory action if the parties require while staying in the confines of the lex
arbitri. There is no overt attention given to the potential conflicts of laws and rules discussed above.
Nevertheless, there are cases where these matters are more controversial and convoluted. The
parties may:
• fail to agree on a seat and must argue their positions before the entity entrusted with making
a determination.
• Careless or imprecise drafting may give rise to arguments as to which procedural law
applies to the arbitration, and whether a foreign procedural law has been applied.
• The parties or the tribunal may purport to arrange or conduct their arbitration in a way that
conflict (allegedly) with basic mandatory requirements of the applicable law.
• Discussions around the topic can be rendered more complicated than necessary by the
proliferation of terminology (lex arbitri, lex loci arbitri, lex fori, procedural law, curial law,
"place" and "seat" of arbitration) and occasional imprecise usage
The references to court judgments in this dissertation are cold hard evidence that these
issues give rise to real conflicts in practice, which require consideration and are developed over
time by judgments and opinions of judges, arbitrators and theorists alike. When the terms are
clearly understood and properly applied, it is easier to depict and properly apply the matrix of laws,
rules and other standards that apply to the arbitration process.
It has been decided that the word ‘seat’ may mean juridical seat, even in the face of a choice
of the procedural law of another country (Union of India), or may be interpreted to mean no more
than the physical location of an arbitration on the basis that the parties really intended that the seat
should be a country on whose courts they had purported to confer exclusive jurisdiction (Braes of
Doune). In cases where the parties have expressly chosen the ‘seat’ or ‘place’ of arbitration, a
clause conferring exclusive jurisdiction on the courts of another country may be thought to be
wholly irrelevant (U&M Mining) or the clause may be conclusive (in terms of designating the seat)
and override the parties’ express choice (Braes of Doune). Choice of the curial law may have the
effect of impliedly selecting the seat (Peruvian Insurance, The Bay Hotel) or such a choice may be
regarded as being of less significance than the parties’ choice of ‘venue’ (Enercon).
From the content of the above paper we have learned not only the basics of arbitration, but
also from the ground up, what seat of arbitration means. The author hopes to have clearly
established not only what the seat of arbitration is but the terms that are closely related to it. The
rights of parties are greatly affected by the seat of arbitration and hence they choose it very
carefully. The factors that go into the choice have also been mentioned in detail. There have been
different approaches that have been used to interpret the seat of arbitration, as was seen in the

47
traditional theory, then the delocalised theory, which some say has been morphed into a new form
with the introduction of international relations. The transnational theory was also discussed to lend
credence to the argument that it is an entirely separate set of laws that exists on its own, but it was
found that it is not clearly the case in international commercial arbitration, but maybe so in
international investment arbitration where ICSID is so pervasive.
The following sections then dealt with how different jurisdictions have decided on various
issues. The author tried to include as many cases and jurisdictions as possible, without trying to
overwhelm the reader. Decisions have changed not only with time, but with other circumstances
as well such as different legal systems, approaches, etc. These issues have been wide-ranging from
the powers of the arbitrator, to their removal and much more.
Then the focus was shifted to the rights of the parties. Although most parties choose their
applicable laws, the question arises when some don’t. In this situation, an analysis was done on
the different approaches that may be adopted, and those that are actually adopted by some
jurisdictions around the world. The question of the substantive and procedural rights arises from
this debate and it becomes necessary to not only decide which law will be applicable, but what the
content will be in them which will apply. Luckily, in practice we either see that most cases have
an applicable law chosen expressly or that the facts of the dispute can simply be applied to the
provisions of the contract between the parties, to help settle the dispute.
The author hopes to have exhausted almost all possibilities and avenues of debate in this
dissertation but this only depicts how large, although new, this subject is. With the development
of different views and approaches to interpreting the term seat of arbitration, and almost seeing a
full circle in a short span of 30-40 years, we see the ever-changing and constantly evolving nature
of this subject. At first it may have seemed ideal to rush towards a harmonised system where all
laws are equally applicable to all parties, but we have seen a roll back as far as some jurisdictions
are concerned and they are reverting somewhat to what was called the traditional approach wherein
they possess the say on applicability of their domestic arbitration legislations. Each of these topics
are worthy of a dissertation within themselves however the nuances chosen by the author, were
hopefully well discussed.
It is tough to say what the future holds with regard to the further development of this subject
as we have seen a tendency to go back to the traditional approach. But we must appreciate that this
forms only a small part of the debate as there are numerous other aspects that can be discussed
such as the arbitrators themselves, their powers, the award, the tribunal, the enforcement of the
award passed by such tribunal etc.
This debate on the seat of arbitration also arose with the evolution of better technology and
communication. Earlier disputes were solved in local courts by the local laws of the vicinity. Now,
with easy access to information, international investments, treaties, etc. parties are open to
choosing not only where they want to resolve the dispute, but also by which law. It may seem like
the author’s splitting hairs but in case different substantive and procedural laws are chosen, then
the permutations of the different scenarios are endless. It is no longer difficult to travel to any part
of the world, take advantage of instantaneous communication, world-class facilities fighting to be
more pro-arbitration, which results in even more choice for the parties.

48
 The future may hold something that we can’t even foresee right now. Telecommunication
has already negated the need to actually travel to far away destinations for arbitration, thereby
cutting costs hugely. In the near future, in case parties are brought even closer by technological
advancements of something, the law will again have to adapt accordingly.
India, with its increasing international involvement and investments, will see a rise in the
arbitrations in all types of fields and it is important that our laws stay in line with internationally
accepted standards so as to become a favoured destination for arbitration. Though this paper did
not discuss the history and cases of arbitration in India, there is still a lot that is left to be desired.
At the same time, complying with international standards does not mean that there is not room for
evolution or introduction of a new concept altogether. Since parties, laws and public policy are
ever-changing, the laws will keep playing catch up and keep evolving.

49
 BIBLIOGRAPHY

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• Julian D.M. Lew et al., Comparative International Commercial Arbitration (Kluwer Law
International 2003)
• Klaus Peter P. Berger, International Economic Arbitration (Kluwer Law International,
BV 1993)
• Nigel Blackaby et al., Redfern and Hunter on Law and Practice of International
Commercial Arbitration (Oxford University Press, 5th ed. 2009).
• Simon Greenberg et al., International Commercial Arbitration: An Asia-Pacific
Perspective (Cambridge University Press (Virtual Publishing) 2012)

LEGISLATIONS/TREATIES/CONVENTIONS REFERRED TO:

• UNCITRAL Model Law on International Commercial Arbitration
• ‘2009 Statistical Report’, (2010) 21 ICC International Court of Arbitration Bulletin 1
• New York Convention, arts. II, III & V, June 10, 1958,
http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html
• EC Directive 93/13 of 5 April 1993 on Unfair Contracts Terms in Consumer Contracts
• Singapore Parliamentary Debates, Official Report (5 October 2001) vol. 73

CASES CITED:
• American Diagnostica Inc. v. Gradipore, (1998) 44 NSWLR 312
• Australian Granites v Eisenwerk Hensel Beyreuth GmbH, [2001] Qd R 461
• Bank Mellat v Helliniki Techniki SA, [1984] 1 QB 291
• Braes of Doune Wind Farm (Scotland) Ltd v Alfred McAlpine Business Services Ltd,
[2008] EWHC 426
• Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd, [1993] 1 AC 334
• Chromalloy v. Egypt, 939 F Supp 907 (DDC 1996)
• Corporación Mexicana de Mantenimiento Integral v. Pemex-Exploración y Producción,
962 F.Supp.2d 642 (S.D.N.Y. 2013)
• Dell Computer Corp. v. Union des consommateurs (2007) SCC 34
• Dermajaya Properties Sdn Bhd v Premium Properties Sdn Bhd, [2002] 1 SLR(R) 492
• First Options of Chicago v. Kaplans, 514 U.S. 938, 943 (1995)
• Gao Haiyan v. Keeneye Holdings Ltd, [2012] 1 H.K.L.R.D. 627
• Hilmarton v OTV, 1994 Revue de L’Arbitrage 327

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 • John Holland Ltd v Toyo Engineering Ltd, [2001] 2 SLR 262
• Karaha Bodas Co Llc v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (also
known as Pertamina) [2003] 380 HKCU 1
• Naviera Amazonica Peruana v Comapania Internacional De Seguros Del Peru [1988] 1
Lloyd’s Rep 116
• Noble China Inc v Lei Kat Cheong, [1998] CanLIl 14708
• Pacificare v. Book, 538 U.S. 401 (2003)
• PT Garuda Indonesia v Birgen Air, [2002] 1 SLR 393
• RM Investment & Trading Co Pvt Limited (India) v Boeing Company and another (US),
(1994) 1 Supreme Court Journal 657
• SA Copep & Lavalin NV v Ken-Ren Chemicals and Fertilizers Ltd., [1995] 1 AC 38
• Saipem S.P.A. v. The Bangladesh Oil Gas & Mineral Corp. (Petrobangla), No. 7934/CK,
ASA BULLETIN 18, 6 (2000).
• Termorio S.A. E.S.P. v. Electranta S.P. (D.C. Cir. 05/25/2007)
• Union of India v McDonnell Douglas [1993] 2 Lloyd’s Rep 48
• Woh Hup (Pte)Ltd v Property Development Ltd, [1991] 1 SLR(R) 473
• Yukos Capital SARL v. OAO Rosneft (Amsterdam Court of Appeal, 28 Apr. 2009) in
Yearbook Commercial Arbitration 2009, 703
• Yukos Capital SARL v. OJSC Rosneft Oil Co., [2011] EWHC 1461 (Comm)
• Yukos Capital SARL v. OJSC Rosneft Oil Co., [2012] EWCA Civ 855

ARTICLES/JOURNALS CITED:
• A Barraclough and J Waincymer, ‘Mandatory Rules of Law in International Commercial
Arbitration’, (2005) 6 Melbourne Journal of International Law 205
• Barry, Matthew. ‘The Role of the Seat in International Arbitration: Theory, Practice, and
Implications for Australian Courts’. Journal of International Arbitration 32, no. 3 (2015)
• Collins, Privacy and Confidentiality in Arbitration Proceedings, 11 Arb Int 321 (1995)
• E Gaillard and J Savage (eds), Fouchard Gaillard and Goldman on International
Commercial Arbitration, Kluwer Law International, 1999, n. 21
• Emmanuel Gaillard, International Arbitration as Transnational System of Justice, in
Arbitration: The next Fifty Years, ICCA Congress Series volume (Albert Jan van den
Berg ed., Kluwer Law International 2012)
• Emmanuel Gaillard, Legal Theory of International Arbitration (Matrinus Nijhoff 2010)
• FA Mann, ‘Lex Facit Arbitrum’ in P Sanders (ed), International Arbitration: Liber
Amicorum for Martin Domke, Martinus Nijhoff, 1967
• Giulia Carbone, The Interference of the Court of the Seat with International Arbitration,
217 Journal of Dispute Resolution 223 (LexisNexis 2012).
• Internationalization – the Answer to Unification, Proceedings of the Fifth ICCA
Conference (Kluwer 1976)
• J Paulsson, ‘Delocalisation of International Commercial Arbitration: When and Why it
Matters’, (1983) 32 International and Comparative Law Quarterly 53

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 • Jan Paulsson, Enforcing Arbitral Awards Notwithstanding Local Standard Annulments, 6
Asia Pacific L. Rev. 1, 9 (1998)
• Jason Fry, Recognition And Enforcement Of Foreign Arbitral Awards: A Global
Commentary On The New York Convention Foreword (Herbert Kronke, Patricia
Nacimiento, Dirk Otto & Nicola Christine Port eds., 2010)
• Julian D. M. Lew, Achieving the Dream: Autonomous Arbitration, 22 (2) Arb. Int’l 179
(2006).
• M Ball, ‘The Essential Judge: The Role of the Courts in a System of National and
International Commercial Arbitration’, (2006) 22 Arbitration International 73
• M Pryles, ‘Exclusion of the Model Law’, (2001) 4 (6) International Arbitration Law
Review 175
• Michael Hwang et al., Relevant Considerations in Choosing the Place of Arbitration, 4
Asian International Arbitration Journal, (Kluwer Law International 2008).
• Michael P. Malloy, Current Issues in International Arbitration (Pacific McGeorge School
of Law 2002).
• W. Michael Reisman, Systems of Control in International Adjudication and Arbitration
ch. 4 (Duke University Press 1992)
• William W. Park, The Arbitrator's Jurisdiction to Determine Jurisdiction, KLUWER
LAW INT'L 59 (2007)
• Yearbook Commercial Arbitration 1994

WEBSITES REFERRED:
• Ascertaining the Contents of the Applicable Law in International Commercial
Arbitration, International Commercial Arbitration Committee of the International Law
Association, October 2008, available at www. ila-
hq.org/en/committees/index.cfm/cid/19.
• Helen Morse, The Key Issues Surrounding International Commercial Arbitration (Keep
Calm Talk Law Dec. 1, 2014), http://www.keepcalmtalklaw.co.uk/key-issues-
surrounding-international-commercial-arbitration/.
• Saipem S.P.A. v. The People's Republic of Bangladesh, ICSID Case No. ARB/05/7, Final
Award, PP 24-25 (June 30, 2009), available at
http://www.lcil.cam.ac.uk/Media/lectures/SaipemvBangladeshICSIDAward.pdf.

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