Author: Audley W. Sheppard*
Published: April 2008
Dispute Resolution and Litigation
The application of mandatory rules has been described as one of the most difficult issues in international commercial arbitration. By “mandatory rule,” I mean an imperative rule of law that cannot be excluded by agreement of the parties. This article does not seek to provide a comprehensive analysis of the topic. It has the more modest objective of explaining from an English law perspective why arbitral tribunals need to be aware of the issue and to suggest an approach that tribunals might follow to satisfy themselves – as best they can – that the procedure they adopt and the award(s) they issue do not violate any applicable mandatory rules that could render the award unenforceable.
Mandatory rules might be found in various legal systems potentially applicable in an international arbitration (e.g. the law of the seat, the governing substantive law, the law governing the arbitration agreement, the law of the parties’ domicile or place of business, the law of the place of performance, the law of a supra-national legal system, and international law) and might apply to both the procedural and substantive aspects of the arbitration.
Some commentators contend that mandatory rules have no application in international arbitration, because their application is inconsistent with the doctrine of party autonomy and the right of the parties to select the procedural and substantive rules that should apply to their relationship. An argument sometimes advanced is that the arbitrator is a service provider whose role is to determine a dispute according to the rules selected by the parties and only those rules, and…
*Partner, International Commercial Arbitration Group, Clifford Chance LLP, London; Visiting professor, School of International Arbitration, Queen Mary, University of London. I am grateful for the assistance of colleagues Lukasz Rozdeiczer and Michael Lightfoot in preparing this article. Any and all errors are the author’s alone.