Delocalization of International Commercial Arbitration: Its Relevance in the New Millennium – Vol. 10 No. 2

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AuthorPippa Read

Published: June 1999

Commercial Disputes
Applicable Law
Law Applicable to Procedure
Arbitral Process
Choice of Forum/Place of Proceedings

Description: The delocalization of international commercial arbitration has been a topic that has sparked imaginations and fueled debate for over 20 years. In its most simplistic form, delocalization involves freeing an international arbitration from the constraints of the lex loci arbitri (procedural law of the place of arbitration), thereby leaving it to “float” free of national jurisdiction, irrespective of where the arbitration takes place. Whilst delocalization was initially rejected by traditionalists, and even branded by some as a “dangerous heresy,” over time the concept has drawn considerable support from commentators. In practice, though there were few judicial decisions that could be clearly seen as supporting the notion of delocalization, a trickle of judgments has provided the proponents of delocalization with sufficient ammunition to continue the debate. In the last few years, however, stronger support for delocalization, particularly in the context of enforcing locally annulled awards, has been evident in a number of jurisdictions.

The delocalization theory is an attractive one from the perspective of both arbitrators and parties to an arbitration. Very often the place of arbitration is selected for reasons of convenience or neutrality, with neither party desiring to submit the arbitration to the procedural norms of that forum, especially those that permit the intervention of the local court system. In addition, failure to comply with the local procedural law could result in the final award being set aside by a local court, which may jeopardize any chances of enforcement elsewhere. Delocalization of the arbitral process and the final award would mean that parties remain unaffected by unforeseen and undesired local procedural law, and do not face the risk that non-compliance with such law would render their award unenforceable.

The arguments for delocalization begin to wane, however, as national arbitration laws become more liberal in a desire to attract international arbitration. The growing acceptance of the UNCITRAL Model Law for Arbitration and the amendment of many other national arbitration laws has meant that the risk of parties being subjected to procedural laws peculiar to the place of arbitration has lessened.

This article examines the rationale behind the delocalization theory and assesses its practical relevance to international commercial arbitration today and in the future, particularly in light of the current trend to unify and liberalize national arbitration laws.

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