Implementation of the Principle of Party Autonomy in Determining the Law Applicable to the Substance of Dispute in International Commercial Arbitration

Abstract

The article examines the essence and significance of the principle of party autonomy in international commercial arbitration when choosing the law applicable to the substance of the dispute. Terminological issues of the content of the concepts «essence of the dispute» and «applicable law» are considered separately. It is suggested that the substance of the dispute, to which the substantive law chosen by the parties or established by the arbitral tribunal applies, should cover a wide range of issues related to the rights and obligations of the parties arising from the conclusion, interpretation, enforcement, violation, termination or invalidity of the relevant foreign trade contract. It is summarized that the implementation of the party autonomy to choose the applicable substantive law by including in the foreign trade agreement the relevant provision is based on the normative permission enshrined in the lex fori, under whose jurisdiction arbitration takes place, and has its consequences in recognizing and enforcing arbitral awards. The author points out that the arbitrators have no obligation to apply the substantive law of the state of the place of arbitration to the substance of the dispute, which corresponds to the right of the parties to determine such a right independently, without imperative binding to a particular legal system. It is concluded that the delineation of the choices of substantive law before the parties is not regulated by law, leaving these issues to the discretion of the parties and the arbitration, for the analysis of which one should turn to science, arbitration and court case law. It is also necessary to consider options for establishing the substantive law applicable to the substance of the dispute: on the basis of direct or indirect choice made by the parties, or, in the absence or defect, the impossibility of realization of such a choice, the establishment of applicable law by an arbitration tribunal according to conflict of laws it considers appropriate. This logic is enshrined in all of the national arbitration laws which are analysed and is traced in the rules of arbitration institutions. The article argues that today the parties are free to choose not only national legal systems, but also non-national legal regulators (transnational principles of law, business practices, etc.), can subject various aspects of the dispute to different legal instruments with different degrees of binding power, and also to withdraw from them altogether and agree to settle the case in accordance with the equity principles or to give the arbitrator the mandate of an «amiable compositeur».