THE LAW GOVERNING THE ARBITRATION AGREEMENT

THE LAW GOVERNING THE ARBITRATION AGREEMENT

The Governing Law

The law governing the arbitration agreement can be truly different, if the parties chooses to conclude a separate arbitration agreement instead of arbitration clause included in the substantive contract.

In the case of separate arbitration agreements, parties are free to choose the law governing the arbitration agreement. This can lead to situation where the proper law of the arbitration agreement can be different from the law governing the dispute, because the arbitration agreement and the contract from which the dispute arises are separate entities and are governed by different laws.

But on the other hand, in the case of arbitration clauses, finding the governing law can be a bit more difficult. Firstly, the proper law of the arbitration agreement will normally be the law applicable to the substantive contract as a whole. So if the contract contains an express choice of law made by parties, the chosen law also governs the arbitration clause. Secondly, in the case where the parties have failed to express their choice of law, the law governing the contract (and arbitration agreement) is normally implied from the seat of arbitration. And thirdly, if parties have failed to express their choice of law and they have not designated the seat of arbitration, the proper law of the arbitration clause is the law of the country with which it is most closely connected.

Refusal of the Recognition of the Arbitration Agreement

The national court can refuse the recognition of the arbitration

n agreement, if under the law of the country the dispute is not capable of settlement by arbitration. Usually this type of issues are related to status and family law matters, and of course criminal law matters, in which the parties have restricted ability to enter into agreement over the matters. In some countries, also consumers are protected by setting additional requirements for the arbitration agreements.

Validity of the Arbitration Agreement

The validity of the arbitration agreement is considered under the choice of law governing the arbitration agreement. But if there is no choice of law made by the parties, the validity of the arbitration agreement is considered on the basis of the law of the country in which the award is to be made. In some cases it can be hard to say in which country the award is to be made. In these cases, where there is no choice of law and the country in which the award will be made cannot yet be determined, the validity is considered in accordance with the law of the country in which the court is considering the validity.