Arbitration is increasingly becoming an effective method of dispute resolution. Selecting the applicable law and resolving issues of determining the applicable law is an important step in the entire process of settling international commercial disputes by arbitration (dispute resolution involving foreign elements). The law applied in the process of dispute settlement by international commercial arbitration includes two main areas:

• The law of procedure, including the applicable law for the arbitration agreement and the applicable law for the arbitral proceedings. 
• The law of content is the law that applies to the content of the dispute to be resolved.

Our company will provide the following analysis of applicable law issues: 

Law of Procedure 

The applicable law to the arbitration agreement 

The arbitration agreement determines the arbitrator’s jurisdiction over the dispute, so the arbitrator must rely on the content of the arbitration agreement to resolve issues related to the arbitration agreement. If it is not possible, the arbitrator relies on the applicable law to the arbitration agreement. Usually, the determination of the applicable law to the arbitration agreement becomes necessary in the following cases: 

(i) there is an objection to the arbitrator’s jurisdiction brought before the arbitral tribunal; and 

(ii) there is a request for recognition and enforcement of an arbitral award. 

• Determining the jurisdiction of the arbitrator and the issue of self-determination of jurisdiction 

A basic principle in the arbitration laws of countries around the world is that the arbitral tribunal can decide its own competence (competence – competence). This means if a party claims that the dispute or any aspect of the dispute is not within the jurisdiction of the arbitral tribunal or the arbitration agreement is invalid, this will first be decided by the arbitral tribunal. 

• Determine the validity of the arbitration agreement 

The arbitration agreement is considered a “red thread” throughout the entire arbitration activities, from the beginning of the arbitration procedure to the recognition and enforcement of the arbitral award. 

Issues of law governing the validity of the arbitration agreement: The arbitration agreement must comply with the law of the country applied to the arbitration agreement. The validity of the arbitration agreement is considered in the following two cases: 

• When an objection (complaint) about the arbitrator’s jurisdiction is brought before the arbitral tribunal that is dealing with the case but has not yet issued a final award. The law chosen by the parties to govern the arbitration agreement is the basis for determining the legality of the arbitration agreement. If the parties have not come to any such choice of law agreement, there are three main resources: 

(1) the arbitration agreement shall be governed by the law of the country where the arbitration is to be conducted (place of arbitration); 

(2) The arbitration agreement is governed by the law applicable to the subject matter in dispute; 

(3) the arbitration rules of the arbitral institution that the parties have chosen to settle the dispute apply. 

• When there is a request for recognition and enforcement of an arbitral award: The law chosen by the parties including the law governing the content of the contract or other separate law governing the arbitration clause will apply to examine the validity of the arbitration agreement. 

Law applicable to arbitration proceedings 

The applicable law to arbitration proceedings stipulates the procedures for the establishment of the arbitral tribunal, the replacement of the arbitrator, the appeal of the arbitral award, etc, and the specific order of the arbitration process such as: applying interim urgent measures, a notice of arbitration, a dispute settlement meeting, conciliation, suspending the dispute settlement, issuance of an arbitral award, preserving dossiers, enforcement of the arbitral award, cancellation of the arbitral awards … The principle recognized in the UNCITRAL Model Law on International Trade Center 1985 (Article 19) is respecting the agreement of the disputing parties (party autonomy), as following:

“(1) Subject to the provisions of this Law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. 

(2) Failing such agreement, the arbitral tribunal may, subject to the provisions of this Law, conduct the arbitration in such manner as it considers appropriate. The power conferred upon the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence.”

Law of content: Law applicable to the content of the dispute to be resolved 

The substantive law is the legal basis for the arbitrator to consider, evaluate and issue the award on the content of the dispute. Disputes involving foreign elements often involve different countries; therefore, the possibility of legal conflicts in dispute settlement is easy to occur as the following aspects: 

• Conflict of countries’ laws of disputing parties: This is a case where the laws of two or more countries are likely to be selected as the basis for dispute settlement. The choice of applicable law will be followed by agreement of the parties, if there is no such agreement, the Arbitral Tribunal will determine the applicable law according to certain rules. 
• Conflict between the disputing parties’ agreement and the law: In a commercial dispute involving a foreign element, the disputing parties’ agreement may be contrary to the law of one of the parties’ countries or contrary to the law. with the laws of the parties or contrary to all applicable legal systems. 

The Model Law on International Commercial Arbitration of the United Nations Commission on International Commercial Law (UNCITRAL) 1985 (hereinafter abbreviated as the UNCITRAL Model Law 1985) applies to international commercial arbitration, according to any any applicable agreement between one country and another or States. Article 28 of this Law prescribes the rules applicable to substance of the dispute as follows: 

(1) The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute. Any designation of the law or legal system of a given State shall be construed, unless otherwise expressed, as directly referring to the substantive law of that State and not to its conflict of laws rules.

(2) Failing any designation by the parties, the arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers applicable.

(3) The arbitral tribunal shall decide ex aequo et bono or as amiable com- positeur only if the parties have expressly authorized it to do so.

(4) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.”

On the principle of respecting the agreement of the parties, only when the disputing parties do not have an agreement on the choice of law, the arbitral tribunal may then decide to apply an appropriate legal system or based on some principles of the conflicts of law, or based on custom or commercial practice. 

There are a number of points to note about determining the applicable law to the content of the dispute in international commercial arbitration, as follows: 

• First, exception of the principle “party autonomy” 

In certain cases, the arbitral tribunal may resolve a dispute over substantive matters on an “equal basis” (ex aequo et bono) or as an “amiable compositueu” if the parties agree to fully give this right to the arbitral tribunal. In that case, the arbitral tribunal is not to fully comply with the provisions of the law as determined by the parties if such compliance leads to an unfair outcome. Unlike the case of “equal basis”, as a “mediator”, the Arbitral Tribunal cannot exclude the application of mandatory provisions to protect public order or national sovereignty. 

• Second, in the event that the disputing parties do not use their right to agree to choose the applicable law 

If the disputing parties do not exercise their right to agree on the applicable law to the matter of the contract, the Arbitrator or the arbitral tribunal shall determine the applicable law on its own. The Model Law on International Trade Centers of UNCITRAL 1985 (Article 28) stipulates: “2. If the parties do not choose a law, the arbitral tribunal shall apply the law determined by the conflict of law principles as it deems appropriate”. 

In summary, when it is necessary to consider the substantive law governing the case, the following groups of laws should be specifically identified: 

• Law governing the arbitration agreement and its implementation; 

• The law governing the existence and proceedings of arbitral tribunals (lex arbitri);

• The law, or related legal rules, governing the subject matter of the dispute (commonly referred to as “applicable law”, “governing law”, “contract law”, or “internal law”. NS”); 

• The applicable rules and other guidelines and recommendations are not binding;

• Laws governing the recognition and enforcement of arbitral awards 

If you need more detailed advice and answers as well as how to access this service, please contact directly the Deputy Director of Sales: Lawyer Nhat Nam via hotline: 0912.35.65.75, 0912.35.53.53 or call the toll free legal consultation hotline 1900.6575 or send a service request via email: lienheluathongbang@gmail.com

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