How is the law applicable to the substance determined? Is there a specific set of choice of law rules in your country?

International Arbitration (3rd edition)

Egypt Small Flag Egypt

Primarily through the agreement of the Parties as reflected in the applicable contract. If the contract is silent, then the rules of conflicts of law are applied to determine the law with the closest connection. In practice, where the contract is silent, but is being implemented in Egypt, Egyptian law would be deemed to be the law governing the substance of the dispute. The Egyptian Arbitration Law (Article 39) includes choice of law rules.

France Small Flag France

French law provides that, in domestic arbitration, the arbitral tribunal has to decide disputes in accordance with the law, unless the parties have empowered it to rule as amiable compositeur (Article 1478, CCP). The principle of party autonomy is recognized under French law, and arbitral tribunals should abide by the provisions agreed upon by the parties, even if they do not accord with French law, unless they infringe upon mandatory rules or rules of public policy in France. Where no law is chosen, normal conflicts of law rules are generally applied.

In international arbitration, French law provides that arbitrators have to decide the dispute in accordance with the rules of law chosen by the parties. If the parties have not chosen the applicable law in relation to a particular issue, arbitrators have the right to choose whatever rules of law they consider appropriate, regardless of conflict of laws rules. In any event, arbitrators have to take trade usages into account (Article 1511, CCP).

If the parties empower the arbitral tribunal to rule as amiable compositeur, then it has to rule as such (Article 1512, CCP).

Cyprus Small Flag Cyprus

The applicable law is determined by the parties to the arbitration agreement.

If the parties have not included a choice of law clause in the contract or do not otherwise agree on the applicable substantive law, the arbitral tribunal decides on the question of applicable law according to the terms of the contract and considers the commercial customs pertaining to the transaction.

Czech Republic Small Flag Czech Republic

Section 25 (3) of the Arbitration Act states the arbitrators shall decide based on the substantive law applicable to the particular case.

According to Section 119 of the PIL Act and also according to the Rome I Regulation, the applicable law is determined by the parties to the arbitral agreement. Absent such choice, the law applicable to a legal relationship is determined on the basis of the relevant conflict of laws rules.

There is also the possibility for the arbitrators to decide a case according to the principles of equity, if the parties expressly authorize such approach.

However, the admissibility of an arbitration agreement must be always decided under Czech law (Section 117 of the PIL Act).

Romania Small Flag Romania

Pursuant to the Romanian legal framework, the arbitral tribunal shall apply the law chosen by the parties (lex voluntatis), and, to the extent that the parties failed to choose such, the arbitral tribunal shall apply the law it deems appropriate, by taking into consideration, in all cases, the applicable trade usages and professional rules.

The arbitral tribunal may also render an award following the ex aequo et bono principle, provided that the parties expressly convened such a manner of resolving the dispute.

Serbia Small Flag Serbia

The law prescribes that the arbitral tribunal shall decide the dispute in accordance with the law or legal rules chosen by the parties. Therefore, if the parties designate law of a particular state such designation of the law shall be construed as directly referring to the substantive law of that state, and not to its conflict of laws rules, unless the parties explicitly agree otherwise.

Failing any designation by the parties, the tribunal shall determine the applicable law or rules on the basis of conflict of laws rules which it considers applicable. Nonetheless, the tribunal shall always take into account the terms of the contract and usages.

The dispute may also be decided ex aequo et bono if the parties have expressly agreed so.

China Small Flag China

The application of law in foreign-related civil relations shall be determined in accordance with the Law of the People’s Republic of China on the Application of Laws to Foreign-Related Civil Relations. If no provision with respect to the application of law is provided in this Law or other laws of PRC, the law most closely associated with the foreign-related civil relation shall apply.

Denmark Small Flag Denmark

a. According to the Danish Arbitration Act 2005, the arbitral tribunal shall decide the dispute in accordance with the rules of law chosen by the parties as applicable to the merits of the dispute.

The DIA Rules states if the parties have failed to choose the law, the tribunal shall apply the rules that it considers appropriate after having invited the parties file their observations on this matter.

Poland Small Flag Poland

The arbitration law provides that the arbitral tribunal resolves the dispute under the law applicable to the underlying legal relationship, leaving the method of determining the applicable law to the tribunal.

In determining the applicable law, the tribunal should take into account the provisions of the contract and the established customs applicable to a given legal relationship.

It is generally recognized that the tribunal should always respect the parties’ choice of law, especially in light of Article VII of the European Convention of 1961. The choice of law is deemed to refer to substantive law only, and not conflict of law regulations.

The parties may also authorize the tribunal to resolve the dispute on the basis of general principles of law or equity, but in the case of consumer contracts the consumer must not be deprived of the protections afforded the consumer under mandatory rules of law.

In the absence of the parties’ choice of law, the arbitrators may decide to either apply conflict of law rules or determine the applicable substantive law independently, and consequently base their decision on the substantive legal rule they deem appropriate.

If the arbitrators decide to apply conflict of law rules, they may choose the conflict of law rules of lex fori, cumulative application of different conflict of law rules, application of general conflict of law rules, or the conflict of law rules which have the closest connection with the subject of the dispute or which they deem the most appropriate.

Switzerland Small Flag Switzerland

According to art. 187 para 1 PILA the law applicable to the substance in international arbitration is primarily determined by the parties' explicit or implicit choice of law. In the absence of such choice, the arbitral tribunal applies the rules of law with which the underlying agreement has its closest connection.

In domestic arbitration, art. 381 CPC provides for the arbitral tribunal to decide either according to the rules of law chosen by the parties or based on equity if authorised by the parties. In a subsidiary manner, the arbitral tribunal "shall decide according to the law that an ordinary court would apply".

UAE Small Flag UAE

The applicable law is normally stated within the underlying contract.

Where the parties have failed to agree, however, the following applies:

UAE - Federal

Article 38 of the UAE Arbitration Law, requires the Arbitral Tribunal to apply those ‘substantive rules of law, which it considers to have the closest connection with the substance of the dispute’.

The merits of the dispute shall be decided by the Arbitral Tribunal, taking into consideration the ‘terms of contract, which is the subject of the dispute and any relevant usages applicable to the transaction and between the Parties’.

The DIAC Rules (Article 33) provide for an Arbitral Tribunal to decide on the rule of law which the Arbitral Tribunal considers as most appropriate to be applied. Any designation of the law of a given state shall be construed (unless expressly stated otherwise) as the applicable law.

UAE - Free-zone Jurisdictions

DIFC

The DIFC Arbitration Law (Article 35) provides that ‘Any designation of the law or legal system of a given State or jurisdiction shall be construed, unless otherwise expressed, as directly referring to the substantive law of that State or jurisdiction and not to its conflict of laws rules’.

In the absence of such designation, the Arbitral Tribunal shall apply the law as determined by the conflict of law rules which the Arbitral Tribunal considers applicable, ‘provided that the parties shall be free to agree in writing that the Arbitral Tribunal may apply the law or rules of law which it considers to be most appropriate in the facts and circumstances of the dispute’.

In all cases, the Arbitral Tribunal will apply the principles of equity and good conscience, only if the parties have authorised the Arbitral Tribunal to do so.

The Arbitral Tribunal will take into account the terms of the contract and the trade usages applicable.

ADGM

The ADGM Regulations (Regulation 44) have adopted a similar approach to that of the DIFC Arbitration Law. The ADGM Regulations provides that:

‘In the absence of any designation by the parties, the arbitral tribunal shall decide the dispute in accordance with the rules of law it considers appropriate’ (Regulation 44(2)).

The ADGM Regulations further confirm that ‘the arbitral tribunal shall take trade usages into account’ (Regulation 44(3)).

United Kingdom Small Flag United Kingdom

The arbitral tribunal will decide the dispute either (a) in accordance with the law chosen by the parties as applicable to the substance of the dispute, or (b) if the parties so agree, in accordance with such other considerations as are agreed by them or determined by the tribunal. A choice of law is understood to refer to the substantive laws of a country and not its conflict of law rules. In the absence of the parties’ agreement, there is no specific set of choice of law rules that an arbitral tribunal must apply. Instead, the tribunal shall apply the law determined by the conflict of laws rules which it considers applicable (s.46 of the 1996 Act).

Saudi Arabia Small Flag Saudi Arabia

Article 5 of the Law of Arbitration provides that if both parties to arbitration agree to subject the dispute to the provisions of any document (model contract, international convention, etc.), then these provisions shall apply, provided that they are not in conflict with the provisions of Sharia.

Article 38 of the Law of Arbitration details the rules relating to the law applicable to the subject matter of the dispute, which includes when the parties have not agreed to apply any specific law. This article provides:

1. Subject to provisions of Sharia and public policy in the Kingdom, the arbitration tribunal shall, when deciding a dispute, consider the following:

a. Apply to the subject matter of the dispute rules agreed upon by the arbitration parties. If they agree on applying the law of a given country, then the substantive rules of that country shall apply, excluding rules relating to conflict of laws, unless agreed otherwise.

b. If the arbitration parties fail to agree on the statutory rules applicable to the subject matter of the dispute, the arbitration tribunal shall apply the substantive rules of the law it deems most connected to the subject matter of the dispute.

c. When deciding the dispute, the arbitration tribunal shall take into account the terms of the contract subject of the dispute, prevailing customs and practices applicable to the transaction as well as previous dealings between the two parties.

2. If the two parties to arbitration expressly agree to authorize the arbitration tribunal to settle the dispute amicably, it may rule on the dispute in accordance with the rules of equity and justice.

For SCCA arbitrations, Article 31 of the SCCA Arbitration Rules provides that the applicable law shall be as follows:

1) Without prejudice to the rules of Sharia, the Tribunal shall apply the rules of law designated by the parties as applicable to the substance of the dispute. Failing such designation by the parties, the Tribunal shall apply the law it determines to be appropriate.

2) If the two parties to arbitration expressly agree to authorize the Tribunal to decide the dispute equitably, it may rule on the dispute in accordance with the principles of equity and justice.

3) In all cases, the Tribunal shall decide in accordance with the terms of the contract, if any, and shall take into account any usage of trade applicable to the transaction.

4) This set of Rules will apply without prejudice to the rules of Sharia, and any international convention(s) to which the Kingdom is a party.

United States Small Flag United States

The FAA and state law do not provide guidelines regarding the choice of substantive law. Tribunals will apply the law designated by the parties in an agreement. If the parties’ agreement is silent, U.S. courts have held that tribunals have authority to determine the applicable choice of law rules.

Austria Small Flag Austria

Section 603 of the Austrian Code of Civil Procedure stipulates that the parties are free to choose the law applicable to the substance of the dispute. Unless otherwise agreed by the parties, the choice of a specific domestic law only refers to the substantive law (voie directe) and does not include the conflict of law rules (voie indirecte). In the absence of an agreement by the parties, the arbitral tribunal may choose the law it deems appropriate. Although the tribunal is not bound to apply any conflict of laws rule, it must choose the applicable law based on objective criteria. The tribunal may only decide on the dispute ex aequo et bono subject to an explicit authorisation by the parties.

Nigeria Small Flag Nigeria

Article 33 of the Arbitration Rules in the First Schedule to the ACA provides that the substantive law of the dispute is determined by the parties’ agreement. Where there is no express agreement, Nigerian law will apply in cases of domestic arbitration. In cases of international arbitration, the conflict of law rules applied by the tribunal will determine the law to be applied. Under such circumstances generally, the arbitral tribunal is to decide the substantive law, in accordance with the terms of the contract in all cases, taking into account the usage of the trade applicable to the transaction. There is no specific set of choice law rules in Nigeria apart from those established by the case law.

Portugal Small Flag Portugal

As a rule, the arbitral tribunal shall decide the dispute in accordance with the law, unless the parties agree that it shall decide ex aequo et bono.

In international arbitration, the parties may choose the rules of law to be applied by the arbitrators, if they have not authorised them to rule ex aequo et bono. Any choice of the law or legal system of a given State shall be construed, unless otherwise expressly agreed, as directly referring to the substantive law of that State and not to its rules on conflict of laws. In the absence of choice by the parties, the arbitral tribunal shall apply the law of the State to which the subject matter of the dispute has the closest connection. In both cases, the arbitral tribunal shall take into consideration the contractual terms agreed by the parties and the relevant trade usages. (art. 52 LAV)

Russia Small Flag Russia

A tribunal shall apply the substantive law chosen by the parties and in the absence of their agreement — the law it deems applicable in accordance with the conflict of laws rules. A reference to the law of a state shall be construed as not implying its conflict of laws rules. For domestic arbitration Russian law is the default governing law, and the tribunal can apply foreign law only to the extent it is permitted under Russian conflict of laws rules enshrined in the third part of the Russian Civil Code.

Ireland Small Flag Ireland

In accordance with Article 28 of the Model Law, the applicable law is that decided by the parties and may be found in the choice of law provisions in the contract. In the absence of a choice of law by the parties, the arbitral tribunal shall apply such conflict of laws rules as it considers applicable.

Norway Small Flag Norway

In contractual disputes, the parties normally indicate the law applicable to the substance in the agreement, and this law shall be applied by the arbitral tribunal. Accordingly, the Arbitration Act states that the arbitral tribunal shall apply the rules of law that have been chosen by the parties as applicable to the material issues of the case. A reference in the arbitration agreement to the law or legal system of a country shall, unless otherwise indicated, by construed as a reference to the substantive law of that country and not to its rules on choice of law.

The most common choice of law rule in Norwegian law is that the parties are free to determine which law is to be applied. In the absence of such an agreement, Norwegian law contains certain more specific default rules, but there is not a general set of choice of law rules applicable to all disputes.

If the parties have not chosen a law in the arbitration agreement, the arbitral tribunal shall apply the rules of law as designated by applying Norwegian choice of law rules. The arbitral tribunal shall only decide a case on the basis of fairness if the parties have expressly authorized it to do so.

Germany Small Flag Germany

Section 1051 ZPO sets forth the rules which substantive law applies to the merits of a dispute:

  1. The arbitral tribunal shall use the law chosen by the parties;
  2. Failing any such designation of the parties, the arbitral tribunal shall apply the law of the State to which the subject matter is most closely connected;
  3. The arbitral tribunal may decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorized it to do so;

In any event, 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.

Croatia Small Flag Croatia

The Croatian Arbitration Act prescribes that the arbitral tribunal will decide according to the legal rules as chosen by the parties as being relevant to the substance of the dispute. Any referral to the law or legal system of a particular state shall be interpreted, unless the parties expressly agree otherwise, as a direct reference to the substantive law of that state, and not to its rules on the determination of the applicable law.

If the parties do not chose the applicable law, the arbitral tribunal shall decide according to the legal rules which the arbitral tribunal considers to be in a close connection to the dispute.

Updated: November 14, 2018