«ПЕРСПЕКТИВЫ РАЗВИТИЯ МЕЖДУНАРОДНОГО КОММЕРЧЕСКОГО
АРБИТРАЖА В УЗБЕКИСТАНЕ»
Сборник международной научно-практической конференции
85
Mekhriniso Djumanazarova
https://doi.org/10.47689/978-9943-7818-6-3/iss1-pp85-88
THE LAW APPLICABLE TO THE ARBITRATION AGREEMENT
Abstract:
The article delves into the complexities of determining the
applicable law in international arbitration agreements. It discusses the growing
role of arbitration in international trade and highlights the challenges of identifying
governing laws, especially when parties have not specified them. The article also
explores common law and civil law approaches to this issue and mentions
Uzbekistan’s recent legislative efforts to become an arbitration-friendly jurisdiction.
The text is particularly relevant for legal professionals and scholars interested in
international arbitration and its evolving legal frameworks.
Key words:
International Arbitration, Applicable Law, Arbitration
Agreements, Common Law, Civil Law, International Trade, Jurisdiction, Legislative
Initiatives, Governing Laws.
Аннотация:
Статья детально анализирует сложности, связанные с
определением применимого закона в контексте международных
арбитражных соглашений. Она акцентирует внимание на растущей
значимости арбитража в международной коммерции и освещает вопросы
идентификации применимых законов. Автором рассмотрены подходы как
общего, так и гражданского права к данной проблематике, а также
упомянуты недавние законодательные инициативы Узбекистана в
направлении создания арбитражно-дружественной юрисдикции. Статья
представляет особый интерес для юридических специалистов и
исследователей, занимающихся международным арбитражем и его
текущими правовыми рамками.
Ключевые слова:
Международный арбитраж, применимый закон,
арбитражные соглашения, общее право, гражданское право, международная
торговля, юрисдикция, законодательные инициативы, регулирующие
законы.
Arbitration as a dispute resolution mechanism is becoming popular in light
of the recent expansion of economic, trade, and investment relationships among
legal entities and the states. It is very notable that the more popular arbitration
becomes, the more intrinsic the problem appears. Arbitration is the preferred
dispute resolution mechanism of international business. Even though prevalence
rates of around 90%, which are derived from the limited empirical data on
corporate preferences, are likely to be limited to large corporations and certain
business circles, arbitration also plays an important role in the field of
international trade.
«ПЕРСПЕКТИВЫ РАЗВИТИЯ МЕЖДУНАРОДНОГО КОММЕРЧЕСКОГО
АРБИТРАЖА В УЗБЕКИСТАНЕ»
Сборник международной научно-практической конференции
86
Arbitration sets up a peculiar framework of applicable laws governing various
parts of arbitration. Unlike court proceedings, arbitration is always a matter of
consent between the parties and even purports the derogation of established laws and
rules should the parties agree on the matter. Arbitration goes beyond existing legal
standards, and state-controlled legal vacuums, and establishes its own set of laws,
which applies to a particular case. Therefore, the issue of applicable laws is
complicated indeed, as the parties come from various legal systems, they may choose
another set of rules separately for procedural and substantive parts of the contract,
and consider the application of soft law instrument. Very often, parties fail to
indicate the law applicable to their arbitration agreement and, therefore, the
Arbitral Tribunal should identify the law applicable to the arbitration agreement.
The international practice of determining the law governing the arbitration
agreement contemplates two approaches, in particular common law and civil law
approaches. The first is potentially founded on the precedents (similar case laws)
and the second on an implied provision of the choice-of-law rule contained in Art.
V (1) (a) of the New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards.
In order to identify which approaches currently exist with respect to
determining the law applicable to the arbitration agreement, a number of scholars
have surveyed how courts in over 80 jurisdictions address the most prevalent
situation in international commercial contracts: the parties have chosen the law
applicable to their main contract and have selected a seat of the arbitration, but
have not expressly provided for the law governing the arbitration agreement.
Many scholars, arbitrators, and practitioners emphasize the existing dilemma
between applying the law of the contract containing the arbitration agreement and
the law of the seat. Surprisingly, this alternative appeared to be not exclusive: the
other potential options in validation principle and a national approach.
While the four approaches will thus often lead to different conclusions,
there appears to be some consensus about the rough design of the conflict of laws
rule governing arbitration agreements in the majority of jurisdictions. This work
will, therefore, dive into the possible options of determining the applicable law to
the arbitration agreement and, further by analysis conclude, the best option.
On 16 February 2021, Uzbekistan adopted the Law “On International
Commercial Arbitration”, which follows the UNCITRAL Model Law. The Law also
introduces novelties related to the immunity of arbitrators, experts, arbitration
institutions, and their employees; prohibition from reviewing the award on the
merits; representation by foreign organizations and citizens; and confidentiality
of arbitration proceedings. The Law was drafted with the assistance of Asian
Development Bank (ADB) experts
[1] and aims to integrate Uzbekistan into the
global arbitration map. More activities are considered in this context, including
the capacity building of judges and local legal practitioners. The new Law follows
the UNCITRAL Model Law, with some additions, provisions, and structure
«ПЕРСПЕКТИВЫ РАЗВИТИЯ МЕЖДУНАРОДНОГО КОММЕРЧЕСКОГО
АРБИТРАЖА В УЗБЕКИСТАНЕ»
Сборник международной научно-практической конференции
87
required by national legislation [2]. It marks a step towards the development of
international commercial arbitration in Uzbekistan, towards making the country
an arbitration-friendly jurisdiction.
It is important to choose a neutral law to ensure the imperiality resolution
of the dispute. The law of the seat unlike the law of the arbitration agreement that
governs the existence, effectiveness, and validity of the arbitration agreement,
regulates the arbitral procedure along with the applicable arbitration Rules.
The issue of identifying the law governing an arbitration agreement is of
crucial importance. The rationale behind this is not only purely academic
relevance but also practical considerations together with ethical implications. The
point is that there are various situations in practice where it is necessary to
construe the meaning and effect of the arbitration agreement and where the
choice of the governing law of the arbitration agreement can be determinative.
For example:
a.
It is quite often necessary to determine the scope, interpretation, and
effect of the arbitration agreement. This issue can arise
inter alia
where the
arbitration agreement is invoked as a bar to court proceedings, where a challenge
is made to the arbitral tribunal's jurisdiction, where a challenge is made to the
arbitral award, or where enforcement proceedings are contested.
b.
Sometimes questions arise concerning the identity of the parties to the
arbitration agreement, and (depending on the specific circumstances) this is also an
issue that can be determined by the governing law of the arbitration agreement.
c.
The choice of governing law is also particularly important if the
arbitration agreement would be invalid under one law but not another.
d.
One unusual situation, which nevertheless features rather often in some
of the cases in this area, is where the parties have chosen two different forms of
dispute resolution – e.g., arbitration in Sweden and litigation in England – and
where it is necessary to determine the meaning and effect of the parties' choice in
the particular circumstances of the case at hand.
e.
The governing law of the arbitration agreement can also be of importance
in circumstances where the governing law includes an implied term – for example,
an implied term of confidentiality.
Obviously, the above-mentioned problems may be avoided by a mere
designation of the law governing the arbitration agreement. Although not
entirely, the arbitration is trying to uniform arbitration procedures globally, the
distinction could be within the different jurisdictions and adopted approaches of
the countries. Therefore, it is important when determining the law of the seat to
be aware of the existing public policy in the designated country. Despite the
variety of approaches, fortunately, the content of the determination test of law
governing the arbitration agreement is still being preserved, i.e., an established
three-stage inquiry, the only complex dilemma is the choice between applying the
law of the main contract or the law of the seat.
«ПЕРСПЕКТИВЫ РАЗВИТИЯ МЕЖДУНАРОДНОГО КОММЕРЧЕСКОГО
АРБИТРАЖА В УЗБЕКИСТАНЕ»
Сборник международной научно-практической конференции
88
It should be admitted that the differences are present, the question is how
they can be harmonized to achieve more international uniformity though notable
exceptions remain, the majority of jurisdictions today provide for similar conflict
of laws rules to determine the law governing the arbitration agreement: in the
absence of an express or implied choice of law by the parties, an objective
connecting factor is decisive. It is at the micro level – when assessing whether
there has been an implied choice of law, and which law is most closely connected
to the arbitration agreement – where results nevertheless, continue to diverge.
The author suggests that a more uniform approach can be achieved by
dispensing with presumptions and hypotheticals and focusing on objective
circumstances instead (emphasis added)
. If the parties have not included an
express choice of law regarding the arbitration agreement, second-guessing the
parties’ hypothetical intent with regard to their implied choice of law is often a
vain exercise. Rather, courts and arbitral tribunals should accept that the parties
simply have not dealt with the question of the applicable law to their arbitration
agreement and, therefore, should apply an objective connecting factor. This
objective connecting factor should be the law of the seat-either directly because
Article V(1)(a) of the New York Convention applies or indirectly as the system of
national default rule law that is most closely connected to the arbitration
agreement.
Should there be a necessity to provide expressly for the default application
of the law applicable to the arbitration agreement in the Law? On the one hand,
the answer is no, since this would contradict the consensual nature of arbitration
as well as would prevent the tribunal from signifying the initial intent of the
parties. Therefore, the law may only impliedly suggest a potentially applicable
law. On the other hand, yes. Considering the worldwide statistics and a default
provision of the majority of Model Law jurisdiction including Uzbekistan,
establishing a strict application of the law of the seat to the arbitration agreement
would be convincing, but still would be in conflict with general principles of
arbitration.
In any case, it has to be said that, from the parties’ point of view, attempts
should be made to avoid the more difficult issues that can arise in these situations.
Parties should always include a governing law clause in their contract, and
although it is unusual to do so, potential difficulties could easily be avoided if the
governing law clause makes clear that it also relates to the arbitration agreement
itself. In such circumstances, under both the common law approach and the civil
law approach, the party’s choice of law would generally be upheld.
References:
https://www.adb.org/projects/53296-001/main#project-overview
2. National legislation requires including articles relating to the aim of the
Law (Art. 1), related legislation (Art. 2), bringing legislation into conformity with
the Law (Art. 55) and entry into force of the Law (Art. 56)
