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The Law Governing International Arbitration Agreements: An International Perspective

Gary B Born

(2014) 26 SAcLJ 814

The article analyses the choice of law governing the substantive validity of international arbitration agreements from an international perspective. It examines the evolution in approach of judicial and arbitral decisions rendered over the last century on the issue in chronological order – by looking at the past and the present of the choice-of-law analysis first, before addressing its future. The article reviews the various existing approaches to the choice of law governing the substantive validity of international arbitration agreements, including the historical application of the law of the judicial enforcement forum; the law of the arbitral seat; the law applicable to the parties’ underlying contract; and more recently, the law with the “closest connection” or “most significant relationship” to the parties’ arbitration agreement. The article discusses the deficiencies in these traditional choice-of-law analyses, which led to inconsistent and unpredictable results. The article proposes to remedy these insufficiencies by a proper application of the principles set out in the New York Convention and the UNCITRAL Model Law, which provide for the application of uniform international principles mandating the presumptive validity of international commercial arbitration agreements and a validation principle applicable to the choice of the law governing such agreements. The article concludes that the future of this choice-of-law analysis is the application of an international two-part rule comprising: (a) a uniform international rule prohibiting discrimination against arbitration agreements; and (b) a validation principle, selecting that national law which will give effect to the parties’ agreement to arbitrate. This approach is not merely sound choice-of-law policy; it also effectuates the parties’ intentions and objectives in selecting a neutral, efficient means of resolving their commercial disputes, and is mandated by the New York Convention’s text and pro-arbitration purposes, as well as the text and purposes of the UNCITRAL Model Law.