By: Cindy G. Buys
Arbitration is all about choice. The parties choose
whether to arbitrate their disputes, whom the decision-makers will
be, where the arbitration will take place, and what procedures will
be applied. One of arbitration’s defining characteristics is party
autonomy, which is sometimes used specifically to refer to the
parties’ ability to choose the law that will govern their dispute.
As noted by one scholar, “The right of parties to themselves
identify the law to apply and the obligation on arbitrators to
respect that choice is the one overwhelming and truly international
conflict of laws rule which has developed in international
commercial arbitration.” By contrast, in domestic commercial
arbitration, outdated parochial rules sometimes still apply to
invalidate the parties’ choice of applicable law. In such
cases, arbitrators and reviewing courts will not honor the parties’
choice of law unless the law chosen bears a reasonable or
substantial relationship to the parties or the underlying
transaction. The purpose of this article is to demonstrate
that there is no valid reason to disregard the mutually agreed-upon
choice of law made by the parties to an arbitration agreement
arising out of a commercial transaction, provided that there are no
extenuating circumstances.
This article contends that domestic commercial arbitration is
more similar to international commercial arbitration than to
domestic litigation, such that the conflict of laws rules that
apply in international commercial arbitration should apply to
domestic commercial arbitration as well. The corollary to
this theory is that there are significant differences between
commercial arbitration and commercial litigation, such that
different conflict of laws rules ought to apply. Thus,
arbitrators and reviewing courts should respect the choice of law
made by the parties to a domestic commercial arbitration agreement
regardless of whether there is any connection between the
underlying transaction and the law chosen, just as is done in
international commercial arbitration.