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transnational law transnational law (lex mercatoria or international business law) and "Law applicable to international arbitration agreements" 2016-03-01 13:58:16

No. XV.1 - Law applicable to international arbitration agreements

(a) The substantive validity of an international arbitration agreement is to be determined according to the law chosen by the parties of said agreement, or failing any indication thereof, according to the law in force at the place (seat) of the arbitration.

(b) The formal validity of an international arbitration agreement is to be determined according to the formal validity rules of the arbitration law of the country in whose territory the arbitration has its seat.


1 The validity of the arbitration agreement is primarily governed by the law chosen by the parties. Typically, international business contracts do not contain specific choice of law clauses for the arbitration agreement contained in such contracts. The general choice of law clause contained in the contract and specifying the proper law of the contract does not necessarily extend to the arbitration agreement which is a separate contract.

2 Absent a choice of law by the parties, the law of the seat of the arbitration plays a dominant role in determining the law applicable to the arbitration agreement. It governs the following issues, three of which relate to the validity of the arbitration agreement:

 1. The substantive validity of the arbitration agreement absent a choice of law;

 2. The formal validity of the arbitration agreement if it is to be determined by the tribunal;

 3. The objective arbitrability of the subject matter of the dispute;

 4. The arbitral procedure.

3 This significance of the law of the seat has an important harmonizing effect on the determination of the law applicable to the validity of the arbitration agreement. It serves to avoid frictions and contradictions that might arise if different laws apply to these issues. Decisional harmony created by the seat is important because the arbitration agreement constitutes the very basis of the tribunal's jurisdiction. This requires hard, fast, workable and generally accepted conflict rules in order to avoid further complications if the jurisdiction of the tribunal is contested by one side. This is also in line with the notion of party autonomy as one of the principal maxims of international commercial arbitration. The seat is typically chosen by the parties or by the tribunal or by the arbitral institution on their behalf. The choice of the seat thus becomes a direct or indirect choice of law by the parties with respect to the issues listed above.

4 If the issue at stake relates to the personal status of a party or to the protection of the other party, the significance of the seat is overridden by other connecting factors which are better able to do justice to these policy considerations. This applies to:

          - The parties" capacity to arbitrate ("subjective arbitrability"), which is governed by the law of the country where the party has its residence, domicile or seat, and

          - The issue of whether a party was duly represented when concluding the arbitration agreement, which is governed by the law of the state where the agent has concluded the arbitration agreement

5 Thus, there are only three different connecting factors, the seat reigning most prominently among them, with respect to the determination of the law governing all aspects of the validity of international arbitration agreements for six (see marginal No. 2 and 4) different legal issues.

Please cite as: "Commentary to Trans-Lex Principle , "
Arbitral Awards
Court Decisions
International Legislation
Contract Clauses
1. Contractual Choice of Arbitration Law
Sales & Purchase Contract

All disputes, controversies, or differences which may arise between the parties, out of, or in relation to, or in connection with the contract, or for the breach thereof, shall be finally settled by arbitration in Seoul, Korea in accordance with the Commercial Arbitration Rules of the Korean Commercial Arbitration Board and under the Laws of Korea. The award rendered by the arbitrator(s) shall be final and binding upon both parties concerned.


Any and all Disputes (including, but not limited to, the validity of this agreement to arbitrate) that are not otherwise resolved pursuant to, or that may be immediately escalated as set forth in, Section X, will be resolved solely and exclusively by final, binding and confidential arbitration to be held and the decision rendered in New York, New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA"), including the Procedures for Large, Complex Commercial Disputes and, with respect to any claim for interim, injunctive or other emergency relief, the Optional Rules for Emergency Measures of Protection and such other rules as the parties may agree in writing. At the request of either party any individual hearing will be held in San Francisco, California (...)

Choice of Law; Jurisdiction, Venue and Waiver

This arbitration provision (including the validity and applicability of the agreement to arbitrate, the conduct of any arbitration of a Dispute, the enforcement of any arbitration award made hereunder and any other questions of arbitration law or procedure arising hereunder) and its interpretation, and any Dispute, shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of laws of any jurisdictions other than those of the State of New York. The parties specifically exclude from application to this Agreement the United Nations Convention on Contracts for the International Sale of Goods and, to the extent not adopted by New York, the Uniform Computer Information Transactions Act. The parties further agree that any claim, cause of action or proceeding relating to any arbitration sought, compelled or performed hereunder will be brought and pursued only in the U.S. District Court for the Southern District of New York or, solely in the case that such federal court does not have jurisdiction, in any New York State court sitting in New York City (collectively, the "New York Courts"). X and Y each submit to the exclusive jurisdiction and venue of the New York Courts for such purposes, except that any confirmed arbitration award may be enforced in any court having jurisdiction over a party or, to the extent of any in rem action, any of its assets. The parties further irrevocably waive any objection to the laying of the venue of any such proceeding in the New York Courts, any claim that any such proceeding has been brought in an inconvenient or inappropriate forum and any right to a jury trial with regard to any such proceeding.


(...) This arbitration clause shall be governed by the laws of the Federal Republic of Germany.

Loan Contract
Choice of Law, Venue and Jury Trial Waiver

(...) The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure Paragraphs 638 through 645.1, inclusive (...)

Arbitration Agreement
Settlement of Disputes

Any disputes arising from the execution of, or in connection with, the Amended and Restated Agreement, shall be settled through friendly consultations between both Parties. In case no settlement can be reached through consultations, the disputes shall be submitted to the International Arbitration Center in Singapore for arbitration in accordance with its rules of procedure. The arbitral award is final and binding upon both parties.

Joint Venture

Any unresolved dispute, question, disagreement, controversy or claim arising from or relating to this Agreement or breach thereof that is to be settled by arbitration shall be settled by arbitration in New York, New York, administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules including the Emergency Interim Relief Procedures, and judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof (...)

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