International Commercial Arbitration

Lec5: The Arbitration Proceedings: Laws to Apply

Readings Zhao, Xiu-wen International Commercial Arbitration Law,

2004, Chapter 9

Redfern & Hunter, Law & Practice of International Commercial

Arbitration, 2005, Chapter 2

Law Which May Impact An Arbitration Law governing the parties’ capacity to enter into

an arbitration agreement (“personal law”)

Law governing the arbitration agreement

Law governing the procedure of the arbitration - the curial law of the arbitration or the “lex arbitri”

Law governing the underlying commercial contract (Dicey & Morris: “proper law”)

Law governing the supportive and enforcement measures

Basis of Determination of Issues in Dispute Orion Compania Espanola de Seguros v Belfort

Maatschappij voor Algemene Verzekgringeen [1962] 2 Lloyd’s Rep 257

“arbitrators must in general apply a fixed and recognisable system of law, which primarily and normally would be the law of England…they cannot be allowed to apply some different criterion such as the view of the individual arbitrator or umpire on abstract justice or equitable principles.”

Basis of Determination of Issues in Dispute Faubert & Watts v Temagami Mining Co. Ltd

(1959) 17 DLR (2d) 246 at 156

“it is the duty of an arbitrator, in the absence of express provision in the submission to the contrary, to decide the question submitted to him according to the legal rights of the parties, and not according to what he may consider fair and reasonable under the circumstances.”

Substantive Law in Arbitration Conflict of law rules

Dicey and Morris, The Conflict of Laws (13th ed), recommends the following rules:   “Rule 145 - The term ‘proper law of a contract’ means the system

of law by which the parties intended the contract to be governed, or, where their intention is neither expressed nor to be inferred from the circumstances, the system of law with which the transaction has its closest and most real connection.

  Sub-rule 1. - When the intention of the parties to a

contract, as to the law governing the contract, is expressed in words, this expressed intention, in general, determines the proper law of the contract.

  Sub-rule 2. - When the intention of the parties to a

contract with regard to the law governing the contract is not expressed in words, their intention is to be inferred from the terms and nature of the contract, and from the general circumstances of the case, and such inferred intention determines the proper law of the contract.

  Sub-rule 3. - When the intention of the parties to a

contract with regard to the law governing it is not expressed and cannot be inferred from the circumstances, the contract is governed by the system of law with which the transaction has its closest and most real connection.”

Substantive Law in Arbitration If agreed in the contract, or chosen by

parties, generally decisive.

Vita Food Products Inc v Unus Shipping Co Ltd [1939] AC 277

If no choice made, to be determined by tribunal in accordance with conflict of law principles.

DST v Rakoil [1987] 2 LLR 246

Substantive Law in Arbitration ‘closest and most real connection’ : Choice of

place of arbitration - a factor in determining choice of proper law.

Compagnie d’Armement Maritime SA v Compagnie Tunisienne de Navigation SA [1971] AC 572

Application of international law or lex mercatoria ‘international accepted principles of law

governing contractual relations’

DST v Rakoil[1987] 2 LLR 246

English Court of Appeal Decision was reversed on garnishee issue in favour of Shell as intervenors. Principles of jurisdiction not affected.

Equity Clauses Orion Compania Espanola de Seguros v Belfort

Maatschappij voor Algemene Verzekgringeen [1962] 2 Lloyd’s Rep 257

“The Arbitrators and Umpire are relieved from all judicial formalities and may abstain from following the strict rules of law. They shall settle any dispute under this Agreement according to an equitable rather than a strictly legal interpretation of its terms and their decision shall be final and not subject to appeal.”

Equity Clauses “not be bound by the strict rules of law” Eagle Star Insurance Co. Ltd v Yuval Insurance

Co. Ltd [1978] 1 Lloyd’s Rep 357

Arbitration agreement provided: “If any question or dispute shall arise…the same

shall…be referred to …Arbitration…The Arbitrators and Umpire shall not be bound by the strict rules of law but shall settle any difference referred to them according to an equitable rather than a strictly legal interpretation of the provisions of this Agreement.”

Equity Clauses “not be bound by the strict rules of law” Eagle Star Insurance Co. Ltd v Yuval Insurance Co. Ltd

[1978] 1 Lloyd’s Rep 357

The Court held:

“the arbitration clause seemed to be entirely reasonable in that it did not oust the jurisdiction of the Courts but only the technicalities and strict construction; and the arbitration clause in all its provisions was valid and of full effect including the requirement that the arbitrators should decide on equitable grounds rather than strict legal interpretation”

Equity Clauses treating agreement as ‘contract of honour; not legal

obligation’ Home Insurance Co. and St. Paul Fire and Marine

Insurance Co. v Administratia Asigurarilor de Stat [1983] 2 Lloyd’s Rep 674

Arbitration agreement provided: “Art.14 Arbitration…The award of the Arbitrators or the

Umpire…shall be final and binding upon all parties without appeal. This treaty shall be interpreted as an honourable engagement rather than as a legal obligation and the award shall be made with a view to effecting the general purpose of this treaty rather than in accordance with a literal interpretation of its language.”

Equity Clauses treating agreement as ‘contract of honour; not legal obligation’ Home Insurance Co. and St. Paul Fire and Marine Insurance Co. v

Mentor Insurance Co. (UK) Ltd (in liq) [1989] 1 LLR 473

The Court held:   “It is plain that it was the common intention that there should be

an enforceable obligation to arbitrate and to abide by the award. All that was intended was to free the arbitrators to some extent from strict rules and this, on the authority of the Eagle Star case, is permissible .…

  Had I reached the conclusion that art.14 goes further than is

permissible, I should also have concluded that the contention failed. The intention that the agreement should be legally binding appears to me so clear that if and insofar as the arbitration clause is to be construed as going further than the law permits in freeing the arbitrators from the strict rules of law I should either have struck it out altogether or excised the offending parts of it.”

Equity Clauses treating agreement as ‘contract of honour; not

legal obligation’ Home Insurance Co. and St. Paul Fire and Marine

Insurance Co. v Mentor Insurance Co. (UK) Ltd (in liq) [1989] 1 LLR 473

Arbitration agreement provided: “The Arbitrators and the Umpire shall interpret this

Reinsurance as an honourable engagement and they shall make their award with a view to effecting the general purpose of this Reinsurance in a reasonable manner rather than in accordance with a literal interpretation of the language”

Equity Clauses treating agreement as ‘contract of honour; not legal

obligation’ Home Insurance Co. and St. Paul Fire and Marine

Insurance Co. v Administratia Asigurarilor de Stat [1983] 2 Lloyd’s Rep 674

The Court of Appeal held:   “an arbitration clause which purported to free the

arbitrators to decide without regard to the law and according to, for example, their own notions of what would be fair would not be a valid arbitration clause; the clause did not do any such thing; the clause did no more than give the arbitrators liberty to depart from the ordinary or literal meaning of the words used in the clause”

友好仲裁条款 《中华人民共和国仲裁法》第七条：

“ 仲裁应当根据事实，符合法律规定，公平合理地解决纠纷。”

Amiable compositeur and awards made ex aequo et bono Article 28 Model Law: Tribunal may decide as

amiable compositeur if parties agree.

《中华人民共和国仲裁法》第四十九条： “ 当事人申请仲裁后，可以自行和解。达成和解协议

的，可以请求仲裁庭根据和解协议作出裁决书，也可以撤回仲裁申请。”

Law Governing Arbitration 宋连斌： 《比照适用抑或特别规定 : 从国际商事仲裁的法律适

用谈起 -- 兼及中国国际私法立法及研究的 " 诉讼中心主义“》

冲突法方式：仲裁地冲突规则 冲突法方式：适当的冲突规则 径直适用最密切联系原则 直接适用合适的实体法

Law Governing Arbitration 《中华人民共和国仲裁法》第七条：

“ 仲裁应当根据事实，符合法律规定，公平合理地解决纠纷。”

《中华人民共和国民事诉讼法》第七条：

“ 人民法院审理民事案件，必须以事实为根据，以法律为准绳”。

Law Governing Arbitration 《中华人民共和国刑法修正案（六）》第二十条： 在刑法第三百九十九条后增加一条，作为第三百九十九条之一：“依法承担仲

裁职责的人员，在仲裁活动中故意违背事实和法律作枉法裁决，情节严重的，处三年以下有期徒刑或者拘役；情节特别严重的，处三年以上七年以下有期徒刑。”

《中华人民共和国刑法》第三百九十九条（渎职罪）： 司法工作人员徇私枉法、徇情枉法，对明知是无罪的人而使他受追诉、对明知

是有罪的人而故意包庇不使他受追诉，或者在刑事审判活动中故意违背事实和法律作枉法裁判的，处五年以下有期徒刑或者拘役；情节严重的，处五年以上十年以下有期徒刑；情节特别严重的，处十年以上有期徒刑。

在民事、行政审判活动中故意违背事实和法律作枉法裁判，情节严重的，处五年以下有期徒刑或者拘役；情节特别严重的，处五年以上十年以下有期徒刑。

司法工作人员贪赃枉法，有前两款行为的，同时又构成本法第三百八十五条规定之罪的，依照处罚较重的规定定罪处罚。