Mandatory Rules of Law in International Business Arbitration

Abstract

Of all mankind’s adventures in search of peace and justice, arbitration is amongst the earliest. Long before law was established, or courts were organised, or judges had formulated principles of law, man had resorted to arbitration for the resolution of discord, the adjustment of differences and the settlement of disputes. One of the recurring themes in International Business Arbitration is the tension between the will of the parties and the ability of states of regulate the conduct of arbitration proceedings. The general trend in international commercial arbitration is to respect, within limits, the will of the parties regarding the choice of law and the procedure for carrying out their arbitration. Thus, party autonomy is recognised as one of the cardinal elements of international business arbitration. The past decade has witnessed an expansion in the scope of arbitrable matters. Such expansion is exemplified by Mitsubishi Motors Corp. V. Solar 1 Chryster-Ohlymoutt1 in which the United States Supreme Court held that antitrust disputes arising from international contracts are arbitrable. The court reached this conclusion against the background of a number of U.S. cases which considered antitrust law fundamental to the ideological and economic integrity of the United States.2 Underlying the Supreme Court’s decision in Mitsubishi was the presumption that the arbitrators in the case would respect the imperative provisions of the U.S. Sherman Act (which embodies U.S. antitrust principles), despite the fact that the applicable law in the case was Swiss Law. It thus seems that the increasing acceptance of international arbitration as a respectable alternative to litigation implies an expectation on the part of States that arbitrators will, like judges, respect the basic notions of justice, and in appropriate cases apply the mandatory provisions of relevant laws. It is one thing to grant parties the power to organise their objectives, but it is a different matter to suggest that parties to an international arbitration are entirely free from the demands of public policy and other fundamental provisions of the relevant laws.3 The integrity of international arbitration and its endurance as a viable alternative to litigation would seem to rest on the arbitrator’s continual respect for the public policy of States whose legitimate interests are implicated in arbitration disputes. Arbitrators therefore have to balance their respect for the autonomy of the parties’ will with the need to apply mandatory provision of laws which are relevant to the dispute. Here, I will examine the impact of mandatory rules in resolving the merits of a dispute before international arbitrators. The problem posed by mandatory rules in international arbitration will be put in perspective by contrasting the position of international arbitrators with those of national judges called upon to enforce imperative laws. Therefore, the discussion will focus on the discernible trends in the application of mandatory rules in international arbitration. This is done by examining the treatment of mandatory rules of the lex contractus and mandatory rules of laws external to the lex contractus. The research concludes with an examination of the role of transnational public policy (which, in a sense, is the mandatory rule of the international legal order) on the determination of the merits of a dispute.