State courts are traditionally recognized as having two sorts of powers: the power to pronounce the law, or jurisdictional powers, derived from the Roman jurisdictio, and the power to command, derived from the Roman imperium. Like State courts, arbitrators have jurisdictional powers, but no powers of commandment. They cannot directly cause the police to intervene to uphold their decisions. An illustration of this fundamental difference between the powers of State courts and those of arbitrators is the exequatur procedure, the purpose of which is to combine the arbitrator's jurisdictional powers with the State court's powers of commandment so as make an arbitral award enforceable.

State courts administer justice in the name of the State from which they derive their powers. Arbitrators, on the other hand, are entrusted with their jurisdictional duties by the parties. This is why they have only the first of the two sorts of powers characteristic of State courts. But this explanation allows the arbitrator's lack of the power of commandment to be relativized, for what is involved here is the power of commandment attached to State prerogatives. In performing their duties, arbitrators have the power to issue instructions to the parties. They thus deliver procedural orders which the parties are obliged to respect. They may summon witnesses and demand that documents be produced. In some legal systems, arbitrators even have the power to impose fines for delay in performance and to take preventive steps. What they lack is the power of coersion.

The difference in the origins of the respective powers of State courts and arbitrators affects not only the scope of such powers but also the way in which State courts and arbitrators perform their duties in international affairs (I), and means that arbitration case law cannot be likened to that of State courts (II).

I. Exercise of jurisdictional powers by State courts and arbitrators in international affairs

As arbitrators do not administer justice in the name of a State, they do not adopt the same approach as State courts in dealing with the problems linked to the determination of the applicable law (A), its content (B) and compliance with international public policy (C). [Page28:]

A. Determination of the applicable law

State courts determine the law applicable to a legal relationship involving a foreign element in accordance with the rules of private international law of the State in whose name they administer justice. These may be conflict of laws rules or substantive rules, or private international law rules providing a substantive solution, international conventions or mandatory rules of law. Whatever set of rules is applied at the outcome is regarded as the competent law insofar as it is that which must be applied under the court's lex fori. It is State-made, whether at the national or international level. This is so even with respect to contracts, although the notion of a contract without law does not meet with the same reservations as in the past.1 The conditions under which the competent law is applied differ, furthermore, according to whether it is the law of the State to which the court belongs or that of another State. The application of a foreign law raises special problems for the courts, to which the various national systems respond in different ways: automatic application or otherwise of the foreign law, evidence and verification of its content, application of foreign mandatory rules, etc.

The sole limit upon the freedom of arbitrators to determine the applicable law is the will of the parties. If the parties have provided that the dispute will be settled according to specified rules of law, arbitrators must apply them. The idea adopted in the 1957 Amsterdam resolution of the Institute of International Law that international arbitrators should apply the rules of the lex fori of the State where the arbitral tribunal sits is now well and truly forgotten. As early as 1961, Article VII of the Geneva Convention stated that 'failing any indication by the parties as to the applicable law, the arbitrators shall apply the proper law under the rule of conflict that the arbitrators deem applicable'. This solution was reflected in Article 13(3) of the 1975 Rules of Arbitration of the International Chamber of Commerce (ICC), which remained in force until the 1998 revision. It was taken up by the United Nations Commission on International Trade Law in its 1985 Model Law, with the result that it is to be found in the various national legislations which took their lead from the Model Law. However, the apparent constraint arising from the obligation laid upon arbitrators to apply a conflict of laws rule was quickly shown to be unfounded, as arbitrators rightly considered that a conflict of laws rule was not the same thing as a State's conflict of laws system. As pointed out in an arbitral award in 1971, 'international arbitrators do not have a lex fori from which they may take conflict of laws rules'.2 As a result, arbitrators freed themselves from national conflict of laws systems, adopting original approaches3 based above all on the wish to meet the legitimate expectations of the parties in this field.4

Although, like State courts, international arbitrators more often than not apply State-made rules, there are also times when they decide to apply transnational rules: 'international trade usages',5 'general principles adopted by international arbitration case law',6 or 'general principles of law belonging to lex mercatoriai'.7 These transnational rules, which, to avoid futile terminological discussion, it is practical and customary to call lex mercatoriai, may be applied as the main rules governing all of the parties' relations. This is rather rare, however. It is more common for them to be used to supplement or indeed partly replace the State law otherwise applicable.8

Hence it is not surprising that modern international arbitration rules no longer refer to arbitrators' being under any obligation to determine the applicable law [Page29:] by means of a conflict of laws rule and to apply a State-made law in all circumstances, be it a national law or an international convention. The example was set by France's international arbitration law in 1981, with the introduction of Article 1496 of the New Code of Civil Procedure, the first paragraph of which provides that 'the arbitrator shall settle the dispute in accordance with the rules of law which the parties have chosen; if no such choice has been made, in accordance with those which he or she considers appropriate'.9 In 1989, at Saint-Jacques-de-Compostelle, the Institute of International Law sounded the death knell of its Amsterdam resolution by declaring that 'the parties have full autonomy to determine the rules and principles [...] of substantive law which are to be applied by the arbitrators'.10 The consequence of this development is reflected in Article 17(1) of the 1998 revised ICC Rules of Arbitration: 'The parties shall be free to agree upon the rules of law to be applied by the Arbitral Tribunal to the merits of the dispute. In the absence of any such agreement, the Arbitral Tribunal shall apply the rules of law which it determines to be appropriate.'

For international arbitrators, therefore, there is no competent law. Compliance with the parties' choice of the rules of law to be applied, irrespective of whether they have chosen a national law or transnational rules, may appear to be an exception to this principle, but it would be incorrect to liken this to the notion of competent law binding upon State courts. The fact that an arbitrator must apply the law chosen by the parties is not the result of any lex fori but of a rule peculiar to international arbitration. Likewise, there is no foreign law for an international arbitrator.11 This is a direct result of the absence of any lex fori. As far as the determination of the applicable law is concerned, the only real effect of this peculiarity characterizing the arbitrator's position as compared with that of a State court concerns the problem of the application of foreign mandatory laws. This is a problem which does not exist as such for international arbitrators, for whom all legal systems are in theory on an equal footing. It is a problem of a different kind with which they are faced: that of knowing whether they should or may apply a foreign mandatory law to the legal system primarily applicable to the merits of the dispute, be it a system chosen by the parties or determined by the arbitrators themselves. It is a complex question which has been the subject of analyses12 which cannot be gone into here. What is certain is that the notion of foreign law has no part to play here and that arbitrators are guided above all by the wish to meet to the legitimate expectations of the parties.

B. The content of the law applied

The relationship of State courts to the content of the law they apply varies depending upon whether it is their own national law or a foreign law. A court is familiar with the domestic law of the State to which it belongs and interprets such law, often in a creative way, subject to review by the higher courts of such State.13 Although the traditional view according to which a foreign law is not law but fact is now strongly challenged by scholarly opinion14 and explicitly refuted in certain legal systems,15 State courts nonetheless apply a foreign law 'as an observed fact'.16 As the saying 'jura novit curia' does not cover the content of a foreign law, such content is established according to rules of evidence, which vary from one legal system to another.17 State courts obviously do not contribute to the development of a foreign law and even less so to its creation. If the content of a foreign law cannot be established, it is always possible for State [Page30:] courts to fall back on their national law, which becomes competent in its place, to settle the dispute.

For international arbitrators there is no such thing as a foreign law, because they are not connected to any one national legal system in particular. Hence, the content of the law applied raises the same problems for them as for State courts when applying a foreign law. However, they do not necessarily solve them in the same way.

To begin with, there is no State law upon which arbitrators may fall back in the same way as a State court falls back on its national law. For international arbitrators only lex mercatoriai can offer such support.18 Thus, an award delivered in 1992 under the auspices of the ICSID states that gaps in the State law applicable could have been filled by using supranational rules.19 Such an approach is certainly preferable to that of arbitrators using the principles of their own national law on the pretext that it embodies universal principles,20 for this is very often an overreaching assumption and there is even less reason for taking this law into consideration than the law of the place of arbitration.

Besides this, whenever they are faced with a problem of interpreting the content of the applicable law, whatever law it may be, arbitrators find themselves in a similar situation to courts required to interpret a foreign law. This is the case when the applicable law does not contain any statute or case law relating to the problem posed, which, given the special nature of international economic relations, arises more frequently in arbitral than in State court proceedings. Like a State court with regard to a foreign law, it is not the arbitrators' role to create law within the legal system whose rules they are called upon to apply, apart from the very special case of lex mercatoriai.21 This is the reason - quite logically from a domestic viewpoint, but ill-befitting the requirements of international arbitration - why in 1979 English law ruled out the possibility of excluding judicial review of arbitral awards in three areas in which the frequent application of English law justified maintaining the possibility for English courts to intervene and thereby ensure its development. Should it be inferred from the fact that international arbitrators are outside the legal system whose rules they are called upon to apply that such system should be implemented as it exists when an award is made, even if the solutions it offers are not adapted to the special nature of the problem laid before them? Although at one time thought to be so, this cannot be the case, just as it is not acceptable for a State court to apply a foreign law as it exists if the content of such law does not allow a solution to be found to the dispute. It is thought that in such a case a court should try to reason as would the foreign court in interpreting its own law and, if unsuccessful, consider that the content of the foreign law is not established and fall back on its own national law.22Mutatis mutandis, international arbitrators should adopt the same approach. However, it will be noted in relation thereto that it will often be easier for international arbitrators to penetrate the methods of interpretation, and thus of creating new solutions, in the legal system whose rules they apply than it is for State courts faced with a foreign law. This legal system may be the arbitrator's national law, for arbitrators are often chosen according to the applicable law. If this factual coincidence does not suffice to conceal the arbitrator's position external to the applicable law, there remains the possibility that the arbitrator, if legally trained, is familiar with this law and its interpretative principles. It is therefore easier for arbitrators than for a State court to try to apply such law in the same way as would a State court in the foreign legal system in question. Even if international arbitrators do not apply [Page31:] their own national law, which is common, they are often chosen for their knowledge of languages or even of comparative law, which helps them understand the interpretative principles of the applicable law. Finally, should an arbitrator consider himself or herself unable to elicit the solution resulting from the applicable law, he or she may treat the content of this law as not having been established or needing to be filled out. Having no lex fori on which to fall back, the arbitrator's only prop is lex mercatoriai.

C. International public policy

The public policy objection is the safety valve allowing national courts to avoid applying the provisions of the foreign law competent pursuant to their conflict of laws rules, on account of the content of such provisions. By means of this objection courts may react against a law which goes against universally recognized principles, a nation's political and social foundations, or national policies regarded as fundamental.23 The courts react by refusing to apply the foreign law, replacing it by the lex fori. The public policy objection is a feature of private international law which smacks strongly of sectarianism. This is quite clearly the case as far as its consequences are concerned: falling back on the law of the court in which the case is being heard. It is also the case as far as its use is concerned, the purpose of which is to protect national values. This is so even when the values to be protected are declared to be universal. This universality is entirely relative, as it is measured according to the yardstick of national opinion, as stated by the French Court of Cassation in its famous Lautour judgement,24 where reference is made to 'principles of universal justice considered by French opinion as endowed with absolute international value'. The public policy objection as understood in private international law is an arm enabling State courts to apply to international relations their natural role as guardians of national public policy which they commonly perform in domestic affairs.

Is the public policy objection of relevance to international arbitrators? It is tempting to say no, as they are the guardians of no national public policy. Should it not after all be considered that arbitrators fulfil the role given to them by the parties in applying the law the latter have chosen or, failing such choice, which they themselves have declared applicable? In the name of what higher rule can an international arbitrator set aside solutions offered by such law? This line of argument ignores the fact that arbitrators have a duty to deliver an award which has every chance of being made enforceable by a State court. However, the enforcement of an award contrary to international public policy could be refused on the basis of the provisions of Article V(2)(b) of the New York Convention. As has wisely been pointed out, 'arbitrators cannot be criticized for delivering awards contrary to international public policy if they are not given the possibility of setting aside the provisions of the law chosen by the parties which to them appear precisely to be contrary to international public policy'.25 Moreover, at its aforementioned Saint-Jacques-de-Compostelle session,26 the Institute of International Law stressed that 'under no circumstances should an arbitrator ignore the principles of international public policy over which there is wide consensus in the international community'. This means, however, that for the international arbitrator, the public policy objection does not protect national policy or values but transnational principles. As pointed out by B. Goldman, despite his being in support of this solution, such principles are hard to [Page32:] establish.27 Some of them are nevertheless undeniable, like the condemnation of corruption, drug trafficking and racial discrimination.28

II. Arbitration case law

In his introduction to the Institute of International World Business Law publication entitled 'L'apport de la jurisprudence arbitrale,'29 Professor Pierre Lalive remarks as follows: 'to speak of arbitration case law will be thought by some to be uncommonly daring, a direct contradiction of the consensual and ad hoc nature of all arbitration as well as of its confidential character. For others, this will be a truism, notably those conversant with the most widespread international arbitration, that of the ICC...'

It is true that there has been no problem reconciling the confidential nature of arbitration with the annual publication of excerpts from arbitral awards in the Journal du Droit International, whose example has been followed by other periodicals.30 Furthermore, three volumes of a Collection of ICC Arbitral Awards, covering the years 1974 to 1995, are now available to the public.31

These publications have revealed the existence of an arbitration case law, which in 1982 in the famous Dow Chemical case gave the arbitrators grounds for claiming that the decisions of arbitral tribunals 'are gradually forming case law which should be taken into account, for it draws inferences from economic reality and matches the requirements of international trade which the special rules of international arbitration, which are themselves gradually being drawn up, must satisfy'.32

However, arbitration case law cannot be likened to that of State courts. The difference lies not so much in the lack of any systematic publication of the awards. In many countries there is no such publication of State court decisions, rendering any knowledge of case law, if not indeed its formation, particularly difficult. Two features characterize arbitration case law.

The first is the absence of any supreme authority responsible for unifying the often contradictory tendencies of the various courts. Such tendencies co-exist in the field of arbitration and it can only be said that some are greater than others. Secondly, arbitration case law may develop only when arbitrators do not apply a national law, as for example in connection with procedure, the analysis of the scope of arbitration clauses and applicable law. As far as substantive law is concerned, arbitrators fulfil a creative role only when they apply lex mercatoriai, either as the main rules or to replace or partially replace the law otherwise applicable.

Conclusion

It has been seen that there are considerable differences between the way in which the jurisdictional power vested in State courts and that vested in [Page33:] international arbitrators is exercised. They should not be exaggerated, however, for there is a tendency for some arbitrators to tackle problems as would a State court, while some State courts employ methods familiar to international arbitrators.

The example is given of the famous Orri case, for which an ICC award was delivered in Paris in 1988,33 followed by a Paris Appeal Court judgement on 11 January 1990,34 subsequently confirmed by the French Court of Cassation on 11 June 1991.35 In giving an arbitration clause effect with respect to a natural person who had not signed it, the arbitral tribunal had applied French law to the clause, declining to invoke the autonomy of the arbitration agreement in relation to the main contract as a means of inferring that the arbitration agreement was valid independently of any State law. On the contrary, it stated that 'true to the traditional conception of arbitration, even international, this tribunal considers that the arbitration agreement, in order to be effective, must derive its force from its connection with a legal system...' This traditionalist view led it to apply the law of the place of arbitration, referring amongst other things to the Institute of International Law's 1957 Amsterdam resolution. In rejecting the appeal for the award to be set aside, the Paris Appeal Court, on the other hand, took a position far more characteristic of recent developments in international commercial arbitration by declaring that 'according to the customs of international trade, an arbitration clause inserted in an international contract has a validity and effectiveness of its own, which requires its application to be extended to the parties directly involved in the performance of the contract and the disputes which may arise therefrom, once it is established that their contractual situation, their activities and the customary trading relations between the parties suggest that they have accepted the arbitration clause and know of its existence and scope, even though they have not signed the contract in which it was stipulated'.

It must be said that the relations between State courts and arbitrators are not without surprises and that advances in arbitration law are not always to be ascribed to the latter.

1
See B. Audit, Droit international privé, No 798, p. 660; P. Mayer, Droit international privé, No 702, p. 458.

2
ICC award delivered in 1971 in case No 1512, Journal du droit international, 1974, p. 904, commentary Y.D.

3
See P. Lalive, 'Les règles de conflits de lois appliquées au fond du litige par l'arbitre international siégant en Suisse,' Rev. arb. 1976, p. 155; Y. Derains, 'Possible conflict of laws and the rules applicable to the substance of the dispute,' ICCA Congress Series No 2, p. 169.

4
See Y. Derains, 'Attente légitime des parties et droit applicable au fond en matière d'arbitrage international,' Travaux du Comité français de droit international privé, 1985.

5
See award delivered in 1984 in case No 4338: Journal du droit international, 1985, p. 982.

6
See award delivered in 1981 in case No 3344: Journal du droit international, 1982, p. 978.

7
See award delivered in 1981 in case No 3327: Journal du droit international, 1982, p. 971.

8
See E. Loquin, 'L'application de règles anationales dans l'arbitrage commercial international,' in L'apport de la jurisprudence arbitrale, ICC publication No 440/1, 1986, pp. 67 et seq.

9
Similar provisions are now found in the legal systems of several nations: see, for example, Article 813 of the Lebanese New Code of Civil Procedure of 16 September 1983, Rev. arb., 1993, p. 543, esp. p. 759; Article 1504, paragraph 2 of the Dutch Code of Civil Procedure, 1986 version; Article 458bis 14 of the Algerian Legislative Order of 25 April 1993, Rev. arb., 1993, p. 478, esp. p. 482; Article 73 of the Tunisian Code of Arbitration of 26 April 1993, Rev. arb., 1993, p. 721, esp. p. 742.

10
Rev. arb., 1990, p. 931.

11
See B. Goldman, 'Les conflits de lois dans l'arbitrage international de droit privé,' Cours de La Haye [Collected Courses of The Hague Academy of International Law, French version], Vol. CIX, 1963, II, p. 443.

12
See Y. Derains, 'Les normes d'application immédiate dans la jurisprudence arbitrale,' Études offertes à Berthold Goldman, 1982, p. 29; P. Mayer, 'Mandatory Rules of Law in International Arbitration,' Arbitration International 1986, p. 264.

13
See B. Audit, op. cit., No 253, p. 224.

14
See P. Mayer, Droit international privé, No 179, p. 121; B. Audit, op. cit., No 261, p. 235.

15
A decision by the French Court of Cassation states that 'a foreign law is a rule of law' (1st civil division, 13 January 1993, Revue critique de droit international privé, 1994, p. 78, commentary B. Ancel).

16
H. Batiffol & P. Lagarde, Droit international privé, No 328, p. 529.

17
In some twenty countries, State courts may use the system set forth in the European Convention on Information on Foreign Law, signed in London on 7 June 1968.

18
See E. Loquin, loc. cit.

19
Award dated 20 May 1992, Journal du droit international, 1994, p. 229, commentary E. Gaillard.

20
See the award delivered by Lord Asquith of Bishopstone on 28 August 1951, International & Comparative Law Quarterly, 1952, p. 247.

21
This is obviously not the moment to consider the debate over whether or not lex mercatoriai constitutes a legal system.

22
See P. Mayer, Droit international privé, No 192, p. 129.

23
See B. Audit, Droit international privé, No 303 ff., pp. 269 et seq.; P. Mayer, Droit international privé, No 200, p. 133; H. Battifol & P. Lagarde, Droit international privé, No 354, p. 567.

24
Civil division, 25 May 1948, Revue critique de droit international privé, 1949, p. 89, commentary H. Batiffol.

25
See P. Fouchard, E. Gaillard, B. Goldman, Traité de l'arbitrage commercial international, No 1153, p. 874.

26
See note 10.

27
See B. Goldman, 'L'action complémentaire des juges et des arbitres en vue d'assurer l'efficacité de l'arbitrage commercial international,' in L'Arbitrage international 60 ans après, Regard sur l'avenir, p. 271.

28
On this subject, see P. Lalive, 'Ordre public transnational (ou réellement international) et arbitrage international,' Rev. arb., 1986, p. 329.

29
ICC publication No 440/1.

30
See Yearbook Commercial Arbitration, for example.

31
Collection of ICC Arbitral Awards, 19741985 by S. Jarvin & Y. Derains, 1986-1990 by S. Jarvin, Y. Derains & J.J. Arnaldez; 1991-1995 by J.-J. Arnaldez, Y. Derains & D. Hascher.

32
ICC case No 4131, Journal du Droit International, 1983, p. 899, commentary Y. D.

33
Collection of ICC Arbitral Awards, case No 5730, 19861990, p. 410.

34
Court of Cassation, civil division, 11 January 1990, Rev. arb., 1992, p. 95, commentary Cohen.

35
Court of Cassation, 1st civil division, 11 June 1991, Rev. arb., 1992, p. 73, commentary Cohen.