INTRODUCTION

1 The matter of the law applicable to international contracts is a long-standing subject. It was traditionally discussed in the general context of conflict of laws. There, the principle of ‘party autonomy’ came to be embodied during the 20th century in a number of national Private International Law (PIL) statutes and in international conventions on specific contracts1 or contracts in general.2 In recent decades, the principle of party autonomy has also been enacted in national statutes addressing international arbitration, including the law to be applied on the merits by the arbitrators. However, these two types of statutes do not always share the same notion of party autonomy. Under the traditional and still prevailing conflict-of-laws approach to party autonomy, the parties may designate the applicable national law to their contract. For instance, the Rome I regulation on the applicable law to contractual obligations, which applies in almost 30 European countries, provides that a contract ‘shall be governed by the law chosen by the parties’.3 A statement in the Preamble confirms that the reference is to a national law: the Regulation does not preclude the parties from ‘incorporating by reference into their contract a non-State body of law’; the verb ‘incorporate’ is understood as meaning that the contract shall remain governed by the applicable State law. In contrast, many national laws on international arbitration state that the arbitrators shall apply the ‘rules of law’ chosen by the parties. The UNCITRAL Model Law of 1985 on which a number of national arbitration laws have been patterned, notably includes such a provision;4 it was already found in French law under a 1981 decree on international arbitration,5 and has been since enacted, for instance, in the Swiss PIL statute of 1987.6 It is understood that the phrase ‘rules of law’ encompasses a wider range of provisions than national laws: it extends to rules of various origins or types, notably transnational rules such as lex mercatoria, and thereby offers a wider choice to the parties. The distinct possibilities offered by the two kinds of statutes may be referred to respectively as ‘conflicts autonomy’, to designate the traditional approach, and ‘substantive party autonomy’ to characterize the one adopted in many arbitration laws. One notes that the two types of approaches may coexist in a given national system, as they do in French law;7 they may coexist within a single instrument, as in the Swiss PIL statute.8 More surprisingly, the two kinds of approaches are endorsed in a single provision, in the case of Article 28 of the UNCITRAL Model Law: while, under paragraph 1, the arbitrators are instructed to apply the rules of law chosen by the parties, paragraph 2 adds: ‘Failing any designation by the parties, the arbitral tribunal shall apply <i>the law determined by the conflict of laws rules</i>which it considers applicable.’ (emphasis added)

2 Those findings raise an issue of accommodation of the different types of provisions where they happen to simultaneously come into play. As just seen, that may occur within a single legal system, and the contrast is particularly acute in those countries which have not yet fully endorsed the principle of party autonomy in their PIL rules but which have nevertheless enacted arbitration laws inspired by the UNCITRAL Model Law.9 It is for those jurisdictions to decide whether the prohibition of party autonomy under PIL may be circumvented when the parties’ choice-of-law (be it in favour of national law or of ‘rules’), is coupled with an arbitration agreement; one may suggest, though, that the more specific rule concerning arbitration should prevail over the more general one. A more common situation will be that where the lex arbitri — understood as the law of the seat or the law under which the parties submitted themselves for the arbitration — endorses substantive party autonomy, while the law of a State court that is called to rule on the validity or enforcement of an award only allows the choice of a national law. The statutes on arbitration are in principle applicable where they belong to the lex arbitri, most often the law of the seat; thus, a statute patterned after the UNCITRAL Model Law will state that its provisions apply if the place of arbitration is in the territory of the State enacting the statute.10 It is submitted that a court of a State where enforcement is sought, even if it only endorses the more restrictive type of party autonomy, should not allow the validity of the award to be questioned on the ground that the arbitrators applied rules of law of a non-State origin to render their decision, as they had been invited to do by the parties and as the lex arbitri allowed.

3 Whatever the formulation of the principle of party autonomy, its endorsement is far from exhausting the matter of the rules that the parties to an international transaction may choose. Obviously, the possibilities offered to the parties exercising their ‘autonomy’ are more or less extended depending on whether the lex arbitri resulting from the arbitration clause adopts the substantive approach or maintains the conflicts approach. Under a system of substantive autonomy, the principle may apply to a variety of rules: national laws, international conventions, trade usages or lex mercatoria, or international law as such. Under a system of conflicts autonomy, while the parties’ choice is in principle limited to national laws, we shall see that the possibilities offered to the parties are nevertheless wider than what one might expect.

I. SUBSTANTIVE AUTONOMY

4 Where the parties may elect ‘rules of law’ under the lex arbitri, the basic choice is between a body of State law or rules of non-State origin. Between these two possibilities, however, stands the possibility to elect the rules of an international convention that is not applicable by virtue of its own terms concerning its scope of application, but that the parties may wish to have applied.

a. Choice of a State Law

5 One should not forget, to begin with, that the expression ‘rules of law’ encompasses the designation of a national legal system: qui peut le plus peut le moins (the greater encompasses the lesser). The parties may be perfectly content with the designation a national law or, perhaps more realistically, one of them will be in a position to impose its national law on the other.11

6 The fact that under the applicable method the parties are deemed to have chosen ‘rules of law’ rather than a national law proper may entail specific consequences. If the law of State X, designated by the parties, is regarded simply as ‘rules’, that may allow a more flexible interpretation of the mandatory rules of X. For instance, if the parties inserted a clause deviating from such a mandatory rule, the arbitrators might hold that the clause itself is a ‘rule of law’ that should be enforced rather than the State rule. In any event, the arbitrator’s decision to that effect will be subject to the scrutiny of the award, particularly in the State enacting the mandatory law. Another situation involving a large number of international transactions, namely sales contracts, should be mentioned. It is not infrequent in a sales contract that the parties have designated the law of a State that is a signatory to the Vienna Convention on the International Sale of Goods (CISG)12 and the CISG is applicable under its own rules.13 Should the arbitrator apply the national law of X or the CISG? Before State courts, the prevailing solution today is that the applicable rules should be those of the CISG, on the ground that by ratifying the Convention, the State adopted it as its law for international sales. In a system of substantive autonomy, such as is embraced in many arbitration statutes, the argument is perhaps stronger in favour of the application of the domestic law of X: the domestic law on sale of the State designated is itself a set of rules, that the parties may have preferred to the CISG.14 There being no general solution to the question, the parties are strongly encouraged to lift the ambiguity by drafting the clause appropriately.

b. Choice of an International Convention Not Applicable as Such

7 Another situation involving the possible application of an international convention — almost converse to the previous one — is by express choice of the parties where the convention is not applicable under its own terms. A host of international conventions deal with various categories of international contracts. Their application to a particular transaction, however, is normally subject to certain contacts with at least one jurisdiction where the convention is in force. For instance, as just seen, the CISG applies if the parties’ respective places of business are in Contracting States.15 In a particular situation where the condition is not met, the parties to a contract of sale may nevertheless wish to refer to the rules of the Convention: it is a sophisticated instrument, specially tailored for international transactions and a ‘neutral’ one with respect to the parties. Its rules are optional, so that the specific provisions of the contract will always prevail over the default rules; but absent a specific provision, those rules, which were based on the most common practices observed in international trade and extensive survey of comparative law, will be understandable and agreeable to both parties. The choice of the CISG should be all the less questionable because the Convention includes an express provision whereby it ‘is not concerned with (a) the validity of the contract or of any of its provisions’.16 Therefore, the choice of the CISG does not purport to affect the possible interference of national mandatory rules. The example of the CISG and the suggested conclusion may be extended to a number of international conventions in the field of trade.

c. Choice of Non-State Rules

8 There is little doubt that what the drafters of texts on commercial arbitration using the words ‘rules of law’ had in mind was a reference to what is commonly characterized today as lex mercatoria. This notion itself encompasses a number of other expressions such as ‘trade usages’ or ‘international business law’ or the ‘general principles of commercial law’ or ‘generally accepted principles of international contract law’, to name a few.17 However, the ICC Court of Arbitration reports that such references in choice-of-law clauses are rare, found in no more that from 1 to 3% of cases. Two reasons may explain the reluctance of contract drafters to insert this type of reference, even should they be inclined to: one is the uncertainty on the precise rules that the arbitrators will apply if a dispute actually arises; the other is the reception of the clause upon a petition for annulment or a request for enforcement of the award to come. Those reasons, however, barely withstand scrutiny today.

9 The alleged uncertainty on the content of ‘transnational’ rules no longer is a valid argument, given the existence of such instruments as the Unidroit Principles18 and the European Principles of Contract Law19 to which the parties may refer specifically.20 The Unidroit Principles, in particular, were drafted with the express purpose of offering an extensive and detailed set of default rules for international contracts, allowing the parties to concentrate of the specific stipulations.21 The Principles are as complete as any national law can be.22 They were drafted by a group of scholars from various legal systems who were selected for their expertise in contract law; but they do not constitute an academic exercise and make proper room for usages and commercial practices.23 They are, therefore, arguably better conceived and more appropriate than most, if not all, national laws, which contain archaisms or idiosyncrasies and were shaped in the context of domestic transactions. All the parties need to do is refer to the Principles on all matters not covered by an express provision in the contract. It should also be noted that, like the CISG, the Unidroit Principles do not purport to prevail over potentially applicable mandatory rules of the States to which the contract is connected; they expressly provide that ‘nothing in [the] Principles shall restrict the application’ of such rules and go as far as detailing their possible origin: national, international or supra national.24

10 Regarding the reception of the award rendered on the basis of transnational rules of non-State origin rather than a domestic law, the question is whether it could incur annulment on that ground. One may expect that even in the most conservative jurisdictions, the mere fact that the arbitral tribunal professed to apply transnational rules of law could not justify its rejection if that was the parties’ will, sanctioned by the lex arbitri.25 What could be discussed would be that in doing so the arbitral tribunal failed to heed a mandatory provision of a State to which the contract is more or less closely connected. In such a case, the award could be attacked on the ground that it is somehow in violation of the public policy of the forum26 or, more specifically, on the ground that the matter was not arbitrable.27 But in regard to this type of scrutiny, there is nothing specific in the fact that the arbitrators were instructed by the parties to apply ‘rules of law’. The only legitimate matter of concern is whether the award actually contains something that could be found in violation of the public policy of a given State. As in any case, it is for the arbitrators to sufficiently heed the public policy of the seat of the arbitration or of a State where the award is likely to need enforcement. As mentioned above, the UNIDROIT Principles themselves do not purport to free the parties from this concern; the same goes for the arbitral tribunal. But the fact that the case will have been decided on the ground of transnational rules should by no means make the award per se more vulnerable to annulment or non-recognition than if the case was decided under a national law.

11 Three practical conclusions may be drawn on substantive autonomy in the context of arbitration. One is that if the parties wish to place their transaction under the rules of lex mercatoria, they must be careful to place themselves under a lex arbitri which instructs the arbitrator to apply the ‘rules of law’ adopted by the parties; another is that it is that the fear of ‘uncertainty’ can be conjured up by the election of a body of written transnational rules, including those of an international convention that would not be applicable under its own rules; a third conclusion is that, conversely, if the parties place themselves under a system of ‘substantive autonomy’ by way of the lex arbitri, they should not be inhibited from referring to transnational rules, knowing that they remain subject to the national mandatory rules that may purport to apply.

II. CONFLICTS AUTONOMY

12 Turning to the situation where the lex arbitri maintains a traditional pattern of choice-of-law, the parties’ options are clearly more restricted. This is not only as to the sets of rules that may be elected, which is limited to national laws; it also has to do with the means of implementing the parties’ choice and of interpreting the stipulations of the contract. Under the European regulation (Rome I), notably, where the parties have used their right to designate the applicable law, the contract is said to be ‘governed’ by the chosen law.28 The formula evokes a number of traditional limitations on party autonomy under national systems of PIL, such as ordre public, fraus legis and lois de police. In arbitration laws, the notion of ordre public, in particular, is generally mentioned as a ground for annulling an award or denying it recognition of enforcement and this will easily encompass the other two restrictions mentioned.29 Nevertheless, several features of modern choice-of-law theory offer a measure of freedom vis-à-vis national laws that should not be ignored as they have been recognized in many jurisdictions.

a. The Widening of the Parties’ Choice of National Laws

13 For a long time, ‘party autonomy’ was understood to mean that in a contract connected to two or more jurisdictions, the parties could only designate the law of one of those jurisdictions; some national systems had an express rule to that effect and some of them may still maintain it. The underlying idea most probably was that choosing a third law could only be inspired by a desire to evade those laws to which the contract is connected. This is no longer the prevailing attitude, however, as experience has long demonstrated that other and legitimate factors may lead the parties to designate a third law as applicable: its ‘neutrality’ with respect to the parties,30 or the fact that it is particularly tailored to the nature of the transaction (carriage of goods, insurance, financial loans).31 The change in attitude is recognized in the Rome I regulation, even if in the most inconspicuous way: the rule whereby a contract is governed ‘by the law chosen by the parties’ does not formulate any restriction regarding the ambit of the offered choice. In the United States, the UCC is explicit on the matter, allowing the parties to an interstate or international contract to choose the applicable law ‘whether or not the transaction bears a relation to the State or country designated’.32

14 The import of this new approach is quite significant, because it involves a fundamental change in the meaning of party autonomy. Where the parties’ choice is restricted to those laws to which the contract is connected, the choice is, so to speak, a geographical one: the parties decide to locate their transaction in one jurisdiction rather than the other. As to the justification for allowing them the choice, the implied idea is that neither of the competing laws has an exclusive title to apply, so that it is best to let the parties themselves decide which will prevail, if only to avoid litigation on the matter should a difficulty arise regarding the substance of the contract. But the context remains one of close supervision of the parties’ choice. In contrast, once the parties are allowed to designate any national law of their choice, the choice ceases to be ‘geographical’ and becomes purely functional: the parties are free to choose the set of national rules that they deem most suitable for their transaction. A significant measure of substantive autonomy is thereby injected into the system of ‘conflicts autonomy’. Meanwhile, modern PIL statutes offer other possibilities to the parties receiving expert advice on the choice of law.

b. Dépeçage

15 One such possibility is known as dépeçage, meaning the possibility of designating different laws for different parts of a contract. Like the choice of a ‘third’ law, dépeçage was regarded unfavourably until 30 years ago or so, again out of fear of evasion of law by the parties. It was legitimized by the Rome Convention of 1980, the antecedent to the Rome I regulation which confirmed its validity.33 The faculty of dépeçage enlarges the possibilities offered to the parties. Although it does not seem widely used, it allows them to refine their choice of law, theoretically to draw up a law à la carte by referring to more than one national law depending on the issue. But in the case of the Rome I regulation, there is more than that. The letter of the text allows more than the combination of two or more national laws. The provision reads: ‘By their choice, the parties may select the law applicable to the whole or part only of the contract’. If the parties simply exclude part of the contract from the application of the otherwise designated law, what rules will ‘govern’ that part? A conservative answer will invite the interpreter to look to the conflict rule that applies where the parties have not chosen the applicable law; under the regulation, that would be the law of the State to which the contract is most closely connected.34 But if that is what the parties had in mind when stipulating that the chosen law shall not apply to Clause or Part X of the contract, one may wonder why they did not themselves designate the law with the closest connection. A more convincing answer, therefore, is that what governs is what the parties stipulated in that part of the contract that they singled out for exemption from the application of the designated law. Here again, a measure of substantive autonomy is injected into a system of conflicts autonomy.

16 Because it is a State court that will be called to rule upon the award, and therefore on the validity of the stipulation exempting a particular clause from the otherwise designated law, one must refer to the case law of the jurisdictions involved. In the case of France, there does not seem to be a single decision having dealt with an express dépeçage; but the two most authoritative decisions of the Cour de Cassation on international contracts, do support the view that the parties may exclude a specific clause of the contract from the otherwise applicable law.35 One is the very decision that proclaimed the principle of party autonomy in international contracts.36 There, the contract was a charter party for the carriage of goods from New York to the French Antilles. The charter party was expressly subject to American law but it contained a disclaimer clause, the validity of which was challenged by the charterer under the Harter Act. The Court upheld the lower court reasoning that ‘while the parties agreed that their agreement would be governed by the Act of the United States Congress, it [followed] from the letter and spirit of their agreement that, in their common intention, they intended to submit to American law only for that which was not expressly provided in the charter part’. A similar finding emerges from another fundamental case, known as Messageries Maritimes.37 While the Court proclaimed that ‘all contracts are necessarily connected to the law of a given State’ (tout contrat est nécessairement rattaché à la loi d’un Etat), the decision actually did not apply the principle. There, a French firm issued a loan in Canadian dollars in Canada and in the Netherlands. The loan included a gold clause and allowed repayment in Canada or in the Netherlands at the option of the borrower. The stipulation or enforcement of gold clauses was later prohibited or suspended in Canada and France. When the debtor declined to make payments according to the gold clause, the Cour de Cassation enforced it. In order to justify disregard of Canadian law, the Court referred to ‘international public policy’ as supporting the validity of gold clauses in international contracts and stated that the parties to international contract could agree on a gold clause ‘even in contradiction to the mandatory rules of the domestic law governing the contract’. Such decisions certainly are an encouragement to the parties who wish to designate a given national law while deviating from it on a specific point. Nevertheless, it remains difficult to predict whether a court, particularly one of the State enacting the mandatory (domestic) provision, will uphold their choice. Some commentators will probably be of the opinion that the suggested approach is overly liberal. But this is a question of how to decide on the application or non-application of national mandatory rules in international contracts, which is not specific to the context of arbitration.

c. Stabilization of the Designated Law

17 Another possibility of adjusting the choice of a national law to the needs of the parties consists in stipulating that the chosen law shall apply as in force on the date of execution of the contract: in other words, in ‘freezing’ that law as between the parties. It is well known that this stipulation is regularly inserted in State contracts, because the investor is anxious to protect itself against the use by the State of its regulatory power against the interest of the investor. It would go far beyond the scope of this presentation to discuss its validity in that context. What about the validity of the stabilization clause in a purely commercial contract? The question will arise if the designated law had indeed been modified in a way that would impact the contract in force, prompting the party favoured by the change to challenge the freezing clause and to claim application of the new legislative enactment. One could support the argument on the ground that the parties should not be allowed to ‘contractualize’ the designated law, which is what they actually do by freezing it. But the matter requires taking a closer look. Arbitrators, in particular, should first assess whether the modifying statute purports to apply to contracts already in force; if not, the validity of the freezing clause will not be in question. If the new law is found to apply to existing contracts, the arbitrators should wonder whether the legislative will extends to international contracts.38 Should that possibly be the case, the arbitrators may also ponder the propriety of enforcing a statute that disrupts the balance of the contract as agreed between the parties, thereby raising an issue of public policy. The Rome Convention of 1980, which embodied the strict notion of ‘conflicts autonomy’ and addressed State judges, when dealing with national mandatory rules, stated that effect ‘may be given’ to such rules and that, in considering whether to do so or not, ‘regard shall be had to their nature and purpose and to the consequences of their application or non-application’. A statute purporting to apply to contracts in force to the detriment of one party may be questioned on the ground of public policy.

CONCLUSIONS

18 The options regarding the choice of the applicable law by the parties to an international contract including an arbitration clause varies from one situation to another. The opportunity to designate an applicable law to the contract, recognized by the great majority of national systems of PIL under the principle of ‘party autonomy’, is traditionally understood as referring to a national system of law. Where the contract includes an arbitration clause, the ambit of the parties’ choice may more extended; it will be so where the lex arbitri, also chosen by the parties directly or indirectly, instructs the arbitrators to apply the ‘rules of law’ chosen by the parties as is more and more often the case. There, the parties may submit their contract by express choice, for all matters not expressly agreed upon in the contract, to rules of non-State origin, so that in the case of a dispute the arbitrators should do as instructed and the award should not be challenged on that ground. ‘Rules of law’ do include national laws; but they also encompass the wide variety of rules often referred to as lex mercatoria. Those rules primarily evoke usages of international trade. However, the parties may be well-advised to refer to a more precise set of rules such as the Unidroit Principles of International Commercial Contracts, which — in addition to traditional rules of contract law — expressly incorporate practices between the parties, agreed usages and other applicable usages. Even where the parties’ choice is restricted to national laws, their freedom may be more extended than what is generally perceived: the parties are generally allowed to elect whatever national law they feel best adapted to the particular transaction, they may be allowed to designate different laws for different parts of the contract and they may venture to freeze the chosen national law in its state at the time of the contract. What allows the recognition of extensive freedom to the parties is that under no system is that freedom unfettered: party autonomy is always subject to the intervention of national ‘mandatory rules’ when scrutinized by a national court upon review or petition for enforcement.

19 A subtitle to this presentation in the programme of this meeting asked: to what extent can the parties ‘manipulate’ the law chosen? The original quotation marks suggest that there may be a fine line between what is acceptable and what is not. Indeed, the ‘law of the parties’ can be carefully crafted given the wide range of rules offered in the context of transnational contracts; but not all combinations of substantive rules available will survive the review of national courts over a future award. The art of counsel at the drafting stage, as well as of arbitrators enforcing the parties’ choice, is to determine how far they can go, giving due consideration to the connections of the case to national legal systems and the potentially applicable mandatory rules.

1
Hague Convention on the Law Applicable to International Sales (15 June 1955), article 2; Hague Convention on the Law Applicable to Agency (14 March 1978), Article 5.

2
In Europe, EC Rome Convention on the Law Applicable to Contractual Obligations (replaced, with the same title, by Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 (Rome I), Article 3.

3
Rome I Regulation, Preamble, clause (13). This came after the proposal for the new regulation took a more flexible approach.

4
Article 28(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.

5
Today, Code of Civil Procedure, Article 1511.

6
Federal State on Private International Law of 18 December 1987, Article 187 (see fn 8 below).

7
Rome I Regulation, Article 3, on the one hand; Code of Civil Procedure, Article 1511, on the other.

8
Article 116 is a provision similar to that of the Rome I Regulation, while Article 187, in the chapter dedicated to international arbitration, states that ‘The arbitral Tribunal shall decide according to the rules chosen by the parties (…).” A slight difference is that the EU regulation refers to the designation of a ‘loi’ and the Swiss statute of a ‘droit’; the difference is insignificant for the present discussion.

9
In Latin America particularly, see J. A. Moreno Rodríguez, Derecho aplicable y arbitraje internacional, Prólogo de D. P. Fernández Arroyo, Asunción, 2013, pp. 54 ff.

10
UNCITRAL Model Law, Article 1(2): ‘The provisions of this Law, except articles 8, 9, 35 and 36, apply only if the place of arbitration is in the territory of this State.’ Some national statutes on arbitration are also declared applicable where the parties have chosen the law of the enacting State as governing the arbitration, irrespective of the seat; see also New York Convention on the recognition of arbitral awards, allowing a Contracting State to deny recognition of an award if it has been set aside by a competent authority ‘of the country in which, or under the law of which, that award was made’ (Article V.1.e).

11
Choice of a national law does not rule out the application of trade usages, to which many national laws will refer inasmuch as they may be applicable.

12
United Nations Convention on Contracts for the International Sale of Goods (1980), adopted under the aegis of UNCITRAL.

13
The CISG notably applies where the parties have their respective place of business in Contracting States (Article 1(1)(a).

14
In practice, the designation of a national law will often stem from the “General Conditions” of one party (having its place of business in X), which is unaware of the existence of the CISG and had its national law in mind.

15
CISG, Article 1(1).

16
CISG, Article 4.

17
The phrase ‘rules of law’ was already found in the 1965 Washington Convention on the Settlement of Disputes Between States and Nationals of Other States (the ‘ICSID Convention’), Article 42(1): ‘The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed between the parties (…)’. But the idea was different in view of the concurrence of municipal laws and international law.

18
UNIDROIT Principles of International Commercial Contracts 2010.

19
European Union, The Principles of European Contract Law 2002 (Parts I and II, revised 1998, Part III, 2002).

20
On the various uses that can be made of the Unidroit Principles besides choosing them as the rules of law governing the contract (e. g. to supplement a chosen domestic law, to be incorporated as terms of the contract, to interpret and supplement the CISG..), see Unidroit, Model Clauses for the Use of the Unidroit Principles of International Commercial Contracts, 2013.

21
UNIDROIT Principles, Article 1.

22
The Principles naturally do not purport to be exhaustive: for matters within the scope of the Principles but not expressly settled by them, they invite to look to their underlying principles (Article 1.6); they also suggest that the parties may agree on a particular national law for the supplementation of the Principles (ibid. Comment 4).

23
UNIDROIT Principles 2010, Article 1.9.

24
UNIDROIT Principles 2010, Article 1.4.

25
The matter is different where the arbitrators, absent a choice-of-law by the parties, decided on their own initiative to apply transnational principles or lex mercatoria rather than a domestic law (something the Model Law does not seem to allow, under Article 28(2)). The matter was raised before the French courts in situations where the arbitration agreement provided that the arbitrators should decide the dispute according to the law (‘en droit’); petitions for annulment arguing that by professing applying transnational rules, the arbitrators ‘did not conform to the terms of [their] reference’ or substituted equity for law were rejected (Cass. Civ. 22 October 1991, Valenciana, Revue de l’arbitrage 1992, p. 547). In another case where the arbitrators, sitting in Vienna had similarly acted, the award was annulled by Austrian courts on the ground that the arbitral tribunal had abstained from determining the applicable law, as they should have; the annulled award was nevertheless recognized in France (Cass. Civ. 9 October 1984, Norsolor, Revue de l’arbitrage 1985, p. 551).

26
Under the New York Convention of 1958, recognition or enforcement of an arbitral award may be refused if they ‘would be contrary to the public policy of that country’ (Article V, 2, b).

27
New York Convention, Article V, 2 a.

28
Rome I Regulation, Article 3.1.

29
Ordre public may be called into play at the initial stage of the validity of the arbitration clause itself in order to invalidate it: some matters of disputes are deemed inarbitrable in many jurisdictions because they involve the kind of public interest that underlies the notions of ordre public and lois de police.

30
Neither party to an international contract is normally anxious to have the other party’s national law designated; that leads them to agree on a neutral one, and one that possibly may be more easily accessible in terms of statutes, reported cases and treatises than the law of either party.

31
See notably Vita Food Products Inc. v. Unus Shipping Co. Ltd [1939] AC 277, [1939] 2 DLR 1 (Privy Council).

32
U.C.C. § 1-301.

33
Rome I Regulation, Article 3.1 in fine.

34
Rome I Regulation, Article 4.

35
Another example might found in Dutch law as reported by expert evidence (brought by one party) before English courts in Sayers v. International Drilling Co. N. V. [1971] 1 W. L. R. 1176 (CA), 3 All. E. R. 163 : there, a mandatory provision of Dutch law was argued to be applicable only in domestic contracts and therefore superseded by an express clause in an international contract the proper law of which was Dutch law.

36
Cass. civ. 5 December 1910, American Trading, Sirey 1911.1.129, Grands arrêts de la jurisprudence de droit international privé n° 11. The court, however, noted that when the charterer agreed to the disclaimer clause, it was fully aware that the clause was to be enforced on French territory (the port of destination) where it was valid.

37
Cass. civ. I, 1 January 1950, Etat français c. Comité de la Bourse d’Amsterdam, Grands arrêts n° 22.

38
In Messageries Maritimes (fn 37), the supervening prohibition of gold clauses was held inapplicable to cross-border loans.