ABSTRACT

There are several different laws that are applicable to an international

arbitration. Such laws include the law governing the arbitration, the law

applicable to the merits of the dispute, the law applicable to the

arbitration agreement, the law governing the parties’ capacity to arbitrate

and the law(s) of the place(s) of the enforcement of an arbitral award. In

international arbitration, it is possible for each of these laws to be that of

a different State. This paper will explore what is the general trend of

Arbitral Tribunals to apply a certain procedural law in governing an

International Commercial Arbitration dispute.

QUESTION of LAW (Research question)-

Q) What are the rules of procedure adopted in an International Arbitration

in the absence of governing law?

 When the parties have not expressly provided for any law to

determine the substantive validity of the arbitration agreement itself,

then the law of the seat of the Arbitral Tribunal must apply for the

same. The primary rationale behind adopting such a position is

because the law of the seat of the Tribunal has the “real and close”
 connection with arbitration1.

RULE

1) ICA ARBITRATION RULES- ARTICLE 19

Rules Governing the Proceedings-

The proceedings before the arbitral tribunal shall be governed by the

Rules and, where the Rules are silent, by any rules which the parties or,

failing them, the arbitral tribunal may settle on, whether or not reference

is thereby made to the rules of procedure of a national law to be applied

to the arbitration.

2) UNCITRAL Model Law on International Commercial

Arbitration-

Article 19. Determination of rules of procedure

(1) Subject to the provisions of this Law, the parties are free to agree on

the procedure to be followed by the arbitral tribunal in conducting the

proceedings.

(2) Failing such agreement, the arbitral tribunal may, subject to the

1
Alan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration,
op. cit., fn. 9, Nos. 2-90.
provisions of this Law, conduct the arbitration in such manner as it

considers appropriate. The power conferred upon the arbitral tribunal

includes the power to determine the admissibility, relevance, materiality

and weight of any evidence.

3) INDIAN COUNCIL for ARBITRATION- 25. Applicable Law:

(1) The Tribunal shall apply the Rules of Law designated by the parties as

applicable to the substance of the dispute. Failing such designation by the

parties, the Tribunal shall apply the law which it determines to be

appropriate.

ISSUE

In practice, parties usually do not specify the law applicable to their

arbitration agreement. This law governs the existence, validity, and

interpretation of the arbitration agreement.

Where the seat of arbitration is in a different jurisdiction from the law

governing the contract, a failure to specify the law applicable to the

arbitration agreement may lead to inconsistent outcomes before domestic

courts. For instance, in Kabab-Ji SAL (Lebanon) v Kout Food Group

(Kuwait)2, the English court (applying English law as the law governing

2
[2020] EWCA Civ 6
the arbitration agreement) found that a party had not become an

additional party to an arbitration agreement and refused recognition and

enforcement of an arbitral award, whereas a French court ruling upon the

same legal question refused to set aside the award after applying French

law to the arbitration agreement.

The two positions broadly taken are: (a) the law governing the main

contract governs the arbitration agreement; and (b) the law of the seat of

the Arbitral Tribunal governs the arbitration agreement3.

This issue arises as it is almost undisputed today that the arbitration

clause is a separate agreement from the main contract in which it is

contained (the so-called principle of autonomy or separability of the

arbitration clause). This means that, in the absence of a choice by the

parties, the law applicable to the arbitration agreement need not

necessarily be the law governing the main contract, yet such a law is an

option usually considered, along with the law of the seat.

CASES

- SEAT of ARBITRATION

3
Berger, Klaus Peter: Re-examining the Arbitration Agreement, Applicable Law Consensus or
Confusion? in: van den Berg (ed.) ICCA Congress Ser No.13; International Arbitration 2006:
Back to Basics?
 There are some early arbitral awards where, lacking a selection of the

applicable law by the parties, the arbitrator applied the conflict of laws

rule of the seat of arbitration. This view was adopted in article 11 of the

1957 Amsterdam Resolution4. For example, in a dispute over a sale of

goods between a German and a Belgian settled under the auspices of the

International Chamber of Commerce, the French arbitrator held:

“It follows from the general principles governing the case that not only the rules

of procedure, but also the rules of private international law to be applied by the

arbitrator must be drawn from French law. This doctrine has been advocated in

particular by the Resolution of the Institut de Droit International of September

16, 1957 the arbitration on private international law, Article I5”.

 In another case between an Italian and a German, the arbitral panel

sitting in Switzerland, when faced with the issue of the applicable law

stated: “There where concrete rules of conflict of laws have to be

observed, it is advisable to apply the standards of the legal system

valid at the place where the arbitration tribunal sits. In the present

case, it is thus on the basis of the rules and the practice of Swiss

private international law that decisions have to be taken6”.

4
ANNUAIRE DE L'INSTITUT DE DROIT INTERNATIONAL, 496 (1957-I1).
5
ICC award, No. 1446, Doc. No. 410/1435, July 4, 1966.
6
ICC award, No. 1592, Doc. No. 410/1914, November 18, 1970.
 Finally, the following opinion is noteworthy because of its clarity.

This opinion supports an arbitral award rendered in Paris by a French

arbitrator in a dispute between a Canadian corporation and an East

German partnership:

“This is an agency contract. Where there is no provision in such a contract the

law of the country where the agent or the distributor had his seat normally

prevails. This is, however, only a presumption. The parties may decide

otherwise, and even if the parties have not provided for this question, there

may be special circumstances which give precedence to the law of the country

of the manufacturer. This is the point of view of French private international

law which this arbitrator sitting in France in a French procedure is obliged to

follow7.”

- LAW of CONTRACT

 It has also been held by courts from most of the countries that

regardless of where the seat of arbitration is, the law governing the

underlying contract will extend to the arbitration agreement in the

absence of an express choice, since it acts as a tacit choice 8.

7
ICC award, No. 1505, Doc. No. 410/1940, January 13, 1971.
8
Paul Smith Ltd. v. H & S International Holding Inc., (1991) 2 Lloyd’s Rep 127. See also,
Shell International Petroleum Co. Ltd. v. Coral Oil Co. Ltd., (1992) 1 Lloyd’s Rep 72.
 In the absence of a governing law clause, arbitrators (and courts) will

be called to determine the most appropriate law to be applied, which

will normally be the law with which the dispute has the closest

connection. The initial understanding was in favour of adopting the

law of the seat of the Tribunal as the law of the arbitration agreement

as well based on the understanding of “real and close connection”

test9.

 This was, however, changed in Sulamérica Cia Nacional de Seguros

SA v. Enesa Engelharia SA10 that gave primacy to the law of the

contract and held that to be the proper law of the arbitration

agreement as well. The same was upheld later by subsequent cases

because the same was taken as an “implied” choice of law11.

THE INDIAN POSTION

India initially recognised the principle of extending the law of the

underlying contract to the law of the arbitration agreement 12. The line of

reasoning adopted by the courts in these cases were similar that argued

9
Black Clawson International Ltd. v. Papierwerke Waldhof-Aschaffenburg AG, (1981) 2
Lloyd’s Rep 446; Naviera Amazonica Peruanna SA v. Compania Internacional De Seguros
Del Peru, (1988) 1 Lloyd’s Rep 116 (CA).
10
(2013) 1 WLR 102 : 2012 EWCA (Civ) 638 (Sulamérica).
11
C v. D, (2008) 1 Lloyd’s Rep 239 : 2007 EWCA (Civ) 1282.
12
NTPC v. Singer Co., (1992) 3 SCC 551 ; Shin-Etsu Chemical Co. Ltd. v. Aksh Optifiber Ltd., (2005) 7 SCC 234
(recognised that the closest and real connection would make the seat of the tribunal to be made applicable);
Videocon Industries Ltd. v. Union of India, (2011) 6 SCC 161 and Yograj Infrastructure Ltd. v. Ssang Yong Engg.
& Construction Co Ltd., (2011) 9 SCC 735.
that the contract must be seen as a whole; choice of law of contract

creates a “strong indication of parties’ intention of implied choice; it is

rare and exceptional to have it any other way, etc. However, just along

with this model of argument developed its counter that the law of the seat

determines the law applicable to arbitration agreement 13. They adopted

the arguments of severability of the main contract from the arbitration

agreement and the real and close connection to the arbitration test in

essence. In this context, Bhatia International v. Bulk Trading SA14 created

more confusion by making Part 1 applicable to almost all international

commercial contracts with some connection to India unless specifically

excluded. While Bharat Aluminium Co. v. Kaiser Aluminium Technical

Services Inc.15 came in to rectify Bhatia16, it referred to the New York

Convention and turned down the position to a “seat-centric” from

“contract-centric” approach, which has remained somewhat constant

since then17. So, even though India roughly follows a seat-centric

approach as of now, the position regarding the same is still undecided and

uncertain.

13
Sumitomo Heavy Industries Ltd. v. ONGC, (1998) 1 SCC 305; Union of India v. Reliance Industries Ltd.,
(2015) 10 SCC 213; Eitzen Bulk A/S v. Ashapura Minechem Ltd., (2016) 11 SCC 508 ; Roger Shashoua v.
Mukesh Sharma, (2017) 14 SCC 722.
14
(2002) 4 SCC 105
15
(2012) 9 SCC 552
16
Supra note 14
17
Supra note 13
 ANALYSIS

ROLE of ARBITRAL TRIBUNAL and the concept of RECIPROCITY

In the author’s opinion, by imposing due process of other countries onto

foreign arbitral tribunals, foreign countries might justifiably reciprocate

and impose their own due process standards onto those countries’

tribunals. This may create technical difficulties for the arbitral tribunals

because they cannot apply the local procedural rules, they are familiar

with. Instead, they will have to learn foreign procedural laws to ensure

that their awards will be enforceable in a foreign country.

The English Arbitration Act "contemplates that once matters are referred

to arbitration, it is the arbitral tribunal that will generally deal with

issues of their jurisdiction and the procedure in the arbitration up to an

award”18.

This holding may force arbitral tribunals to take into consideration

unfamiliar foreign procedural laws throughout the arbitral process to

ensure that the arbitral award can be enforced in a particular foreign

country. This will certainly decrease the efficiency of arbitration, and yet

efficiency is one of the main hallmarks of arbitration. Applying the

procedural law of the seat of the arbitration and the rules of the chosen

arbitral institution will lead to predictability because the parties know in

advance what procedural laws will be adopted and they can prepare for

18
Elektrim SA v. Vivendi Universal SA [2007] 2 Lloyd's Rep. 8, 70 (Comm.) (Eng.).
any differences in legal standards should disputes arise. Under this

system, the parties are also given sufficient time prior to disputes to

research and negotiate which laws should govern the arbitration. The

efficiency of arbitration will not be sacrificed because the arbitral tribunal

is familiar with the set of procedural laws that will be applied to the

arbitration proceedings.
CONCLUSION-

“Unless a mode of conducting the proceedings has been prescribed by

the arbitration agreement or submission, or regulated by statute,

arbitrators have a general discretion as to the mode of conducting the

proceedings and are not bound by formal rules of procedure and

evidence, and the standard of review of arbitration procedures is merely

whether a party to an arbitration has been denied a fundamentally fair

hearing”19.

19
In re Turnkey Arbitration, 577 So. 2d 1 131, 1135 (1991).