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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
by Benjamin Hayward
Published by Oxford University Press, 2017; lx, 319 pages; ISBN 978-0-19-878744-0
Conflicts of laws often arise in international commercial arbitration, and the task of identifying the applicable substantive law falls to the arbitrators. They have wide discretion when undertaking this exercise, which can significantly affect the outcomes of cases insofar as the governing law impacts upon party rights and obligations, contract performance, the presentation and arguing of a case, and the possibility of settlement. Such wide discretion provides no framework in which to predict the law that will be applied to the parties' relationship, or the manner in which that law will ultimately be identified. Thus, the current regime for resolving conflict of laws questions should be reformed through the adoption of a bright-line test based on the concept of the closest connection, taking its cue from Article 4 of the 1980 Rome Convention on the Law Applicable to Contractual Obligations. This is the thrust of the argument put forward by Dr Benjamin Hayward in his excellent book, Conflict of Laws and Arbitral Discretion: The Closest Connection Test.
Dr Hayward is well placed to write this book: he is a lecturer at Deakin Law School and his PhD thesis, done at the Monash University Faculty of Law under the supervision of Professor Jeffrey Waincymer, was entitled 'Arbitral Discretion in Resolving Conflict of Laws-The Case for a Bright-Line Closest Connection Test in International Commercial Arbitration'. His book is a fully updated adaptation of his PhD thesis.
Dr Hayward's book provides a detailed analysis of present problems and possible solutions based on an extensive array of authorities and comparative research, underpinned with theoretical and practical references. He examines 134 arbitration statutes and sets of arbitration rules drawn from around the world, including the laws of Switzerland, France (both the 2011 and 1981 versions), and the United Kingdom, which are recognized as leading countries for international commercial arbitration. Unlike the treatises of Savigny and Dicey, Morris & Collins, Dr Hayward's book does not retrace the entire historical development of international commercial arbitration and conflict of laws. Rather, positioning itself in the post-UNCITRAL Model Law world, it aims to identify the substantive law governing contractual claims (lex contractus), not tortious claims.
Dr Hayward develops his arguments over seven chapters. After a brief introduction and setting the background in Chapter 1, he examines in Chapter 2 the current regulation of conflict of laws in international commercial arbitration through domestic laws, arbitration rules, international rules, and international conventions. He presents 'a novel fourfold scheme of classification for private international law provisions' as a tool 'useful in understanding the very particular, and quite different, ways in which private international law provisions operate in international commercial arbitration'. This scheme consists of four approaches: the pure voie indirecte, the restricted voie indirecte, the pure voie directe, and the guided voie directe. A pure voie indirecte approach is 'one requiring arbitrators to apply a conflict of laws rule, but not identifying the particular rule to be applied, or the source from which it should be drawn'. The book identifies thirty-three provisions in arbitral laws and rules that make use of the pure voie indirecte approach. A restricted voie indirecte approach 'require[s] arbitrators to apply a conflicts rule, and also specifically identify the rule to be applied'. A pure voie directe approach, on the other hand, does 'not require arbitrators to apply conflicts rules, and instead authorize[s] a direct choice of the governing law'. Finally, a guided voie directe approach does 'not require arbitrators to apply a conflicts rule, and authorize[s] a direct choice of the governing law' by identifying 'objective factors' that arbitrators should take into account. The essential distinctions between the four approaches are conveyed in the following diagram on page 59 of the book:
Dr Hayward argues that within these four categories of private international law provisions arbitrators enjoy wide discretion as they have several specific conflicts rules on which to draw (Dr Hayward identifies at least ten). While the restricted voie indirecte provisions specify the rule to be applied, the pure voie indirecte provisions give arbitrators a wide choice of rules. The two voie directe approaches leave room for arbitrators to apply conflicts rules at their discretion. The result is a diversity of approaches adopted by arbitrators in resolving conflicts of law in international commercial arbitration, which Dr Hayward calls a 'conflict of conflicts of law'.
In Chapter 3 Dr Hayward presents a critique of current regulations, and makes a case for reform based on a bright-line test. He argues that discretion is the key feature of the current regulatory regime and questions the justifications given for arbitral discretion in resolving conflicts of laws. He concludes that, on both theoretical and practical grounds, this broad discretion has caused the regime to be 'broken' and, therefore, it is in need of a 'fix'. Specifically, Dr Hayward's theoretical critique posits that 'arbitrators' broad conflicts discretions are too wide. These discretions' excessive width, and their attendant unfairness, is demonstrated by the scope for arbitrators to make objectively inappropriate choices of law, for which there is no effective means of redress.', His practical critique points to 'the evidenced importance of substantive certainty in international commercial arbitration and the current regulatory regime's demonstrated deficiency in achieving this object'.
In Chapter 4, Dr Hayward puts forward the idea of a bright-line test as a framework for identifying the governing substantive law in international commercial arbitration. In chapter 5, after assessing thirteen conflict rules and methodologies, Dr Hayward concludes that the closest connection is the optimal bright-line test. He argues that the 'most distinctive feature' of the closest connection test is its ability to relate a tribunal's conflicts analysis to the parties' substantive dispute. It is also 'most compatible' with the commerciality norm because it results in the identification of the law that is most appropriate or best suited to the parties' contract.
The book's final chapters assess six variations of that test before concluding that a modified version of the Rome Convention's Article 4 should be adopted for conflicts of laws in international commercial arbitration and discussing how it might be implemented. Dr Hayward argues that this modified rule might best be implemented by revising arbitration rules and arbitration laws, amending the New York Convention, and possibly through initiatives taken by parties and arbitrators.
Overall, Dr Hayward's book is an original, thoughtful, well-argued and thoroughly-researched exposition of the need to reform the current regime for resolving conflicts of law through a rule inspired by Article 4 of the Rome Convention.