Séverine Menétrey Reports on the Panel on Forum State Limitations to Choice of Law in International Contracts

Séverine Menétrey (Université de Nice) has sent in the following report on the Commercial Arbitration panel at the Conference:



Enhancing Party Autonomy and the Limits thereto: Choice of Forum and Choice of Law in International Contracts
Chair: Karl-Heinz Böckstiegel
Panelists: Alex Mills and Jiri Valdhans

The aim of the panel was to identify the extent and possible limitations of the freedom of parties to an international contract to select the law governing their transaction. How do choice of forum agreements interact with the choice of applicable law?


Alex Mill (Lecturer in International Law, University of Cambridge) addressed the question of choice of law and its limits in a transnational context. The justification for party autonomy is individual freedom, but freedom is not the same when parties chose arbitration within a given national jurisdiction. While the freedom of choice of law is progressively won in international commercial relations, in some jurisdictions limitations to party autonomy or freedom persist. The parties may under certain conditions choose the law governing their contract, but the law has to be the law of a state. In that case, party autonomy is a limited choice: no law beyond the state even if there is a (r)evolution with European contract law. 

The choice of a non-state forum for arbitration remains very important since in such arbitration, party autonomy is upheld (except sometimes when the public interest is at stake). Escaping state law is possible through arbitration where the choice of non-state regulation (example, lex mercatoria and the UNIDROIT principles) is permitted. Private regulations and private mechanisms of dispute resolution co-exist with national laws and jurisdictions.

As it concerns the issue of enforcement, we know that arbitral awards based on UNIDROIT principles or on lex mercatoria are recognised all around the world by national jurisdictions. Though courts refuse to apply non-state regulation, they recognise awards based on private regulations. According to Alex Mill, this makes sense for political reasons and it is a first step in the direction of the recognition of a legal pluralism beyond the state.


Jiri Valdhans (Assistant Professor of Law, Masaryk University Brno, Czech Republic) addressed the same question of choice of law and its limits from the perspective of national law. He raised the question whether the international element is a legal ground for choice of law by the parties. Looking at Czech law, he noted that there is no definition of the international element. This situation has lead to a clash between two theories pertaining to the law chosen by the parties:


- party reference
- incorporation : chosen law is of contractual character.

This constitutes a problem because a Czech judge might have to apply foreign law ex officio and might have to find out the content of foreign law ex officio. Concerning the international element, he noted that the parties’ choice of foreign law only creates an artificial international element, as parties cannot in the first place chose any foreign law if there is no international element. He felt, therefore, that a presumption of conflict of laws is necessary for a choice of law by the parties.

Karl-Heinz Böckstiegel (Former President, Iran/US Claims Tribunal and the London Court of International Arbitration) brought a different perspective to the debate by referring to the facilities provided by arbitration. He referred to Article 4 of the ICSID Convention, Article 28 of the UNCITRAL Model Law, Article 35 of the UNCITRAL Arbitration Rules (new version released July 2010) and Article 17 of the ICC Arbitration Rules. All these provisions use the terms “rules of law designated by the parties”, that is to say not only national laws. He added that in arbitration, from a practical perspective, the issue of applicable law is not really a question, or is a question that remains relevant only in very limited respects (for example as it relates to prescription). He concluded that forum selection is very important for the parties: the extent and scope as to the choice of law depending on the forum chosen by the parties.

Séverine Menétrey