Party Autonomy and Implied Choice in International Commercial Arbitration* – Vol. 14 No. 4

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Author: Paul Michell**

Published: December 2004

Commercial Disputes
Dispute Resolution and Litigation



Genuflection to the principle of party autonomy is common in international commercial arbitration. But the principle is abstract, and its practical operation may generate controversy. In The Bay Hotel and Resort Limited v. Cavalier Construction Co. Limited,1 an appeal from the Turks and Caicos Islands arising from a construction arbitration under American Arbitration Association (“AAA”) rules, the Judicial Committee of the Privy Council (the “Board”) addressed three key applications of the autonomy principle. The first is the determination of the applicable procedural law for an arbitration. Specifically, does agreement to a set of institutional arbitration rules imply a selection of substantive law or procedural law to govern the arbitration? The second is the arbitral tribunal’s obligation to produce a reasoned award, the parties’ ability to modify this requirement, and the enforceability of an award where there is a dispute as to whether it is a “reasoned award.” The third is the law governing joinder of non-signatories to an arbitration. All three issues are common features in international commercial arbitrations.

On each point, the Board appealed to the autonomy principle, and the choices the parties had made. The applicable arbitral procedural law was that chosen by the parties. The Board confirmed that the parties may determine the form the arbitral award should take. On the facts, the Board held that the parties had agreed that the award could be something less than what English law would consider a reasoned award, and that the award satisfied that lower standard. Finally, the Board confirmed that arbitration, as a creature of the parties’ consent, cannot be forced upon a party who did not consent to arbitrate with a nonsignatory. The arbitral tribunal thus had no power to add a non-signatory to the arbitration without the parties’ consent. Put this way, the case appears uncontroversial. But determining exactly what the parties had agreed to was where the parties were at odds.

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*Arbitral & Judicial Decisions
**Lax O’Sullivan Scott LLP, Toronto.