This conference on international arbitration and substantive applicable law aims at covering a variety of issues which need to be considered by international arbitrators when applying the rules of a national legal system.

Since we decided to focus on the problems arising when applying a national law, the conference does not deal with the issue of the choice of the applicable law, except for a general introduction by Bernard Audit (“Choice of the applicable law by the parties”).

Actually, the greatest part of the issues regarding the application of rules of law by arbitrators must be considered as well in a domestic arbitration and litigation. However, in the context of international commercial arbitration they appear far more critical for a number of reasons.

The first rather obvious consideration is that arbitrators will almost always need to decide the dispute on the basis of a law which is not their own law.

Most arbitral tribunals are composed of arbitrators of different nationalities and different legal backgrounds: consequently, at least some of them will be confronted with rules which are not familiar to them. This implies first of all, unlike a state judge or domestic arbitrator applying his own law, international arbitrators must gather the necessary information about the contents of the applicable law.

Thus, we need to deal with a number of questions on how the applicable law should be proven and on the arbitrators’ right to inquire autonomously about its contents (application of the principle iura novit curia) and the right of the parties to be heard in this context. These two issues are treated in the presentations of Phillip Capper (“Proving the contents of the applicable substantive law(s)”) and Antonias Dimolitsa (“The raising ex officio of new issues of law: a challenge for both arbitrators and courts”).

Issues of this kind are less frequent in disputes before national courts and, in any case, when they arise in the domestic context, the judge will find in his legal system well-established rules concerning the way to deal with the problem.

Once it is established which rules of the applicable law are to be applied, further questions arise due to the much looser relationship that exists between the applicable law and the arbitrators.

A state judge who applies his own law to a domestic dispute will in principle follow the existing case law in interpreting such law. Even in countries where precedents are not binding, he will normally conform to the existing jurisprudence in order to minimize the risk that his judgment may be reversed by a higher court.

Arbitrators enjoy a much greater freedom, as shown in the presentations of Klaus-Peter Berger (“To what extent should arbitrators respect domestic case law?”) and François Perret (“Resolving conflicts between contractual clauses and specific rules of the governing law: strict application of the law or flexible approach”).

Furthermore, international arbitrators are aware that they are to apply a domestic law to a dispute which is situated in a different environment (international trade vs domestic trade) and are inclined to look at such law from a more detached perspective, especially when interpreting its rules.

This aspect acquires an even greater relevance when the governing law is not the law of one of the parties but the law of a third country, chosen by the parties mainly with the aim of finding a neutral solution in order not to favour any of the two parties.

We know by experience that the parties, when choosing the law of a third country as the governing law, rarely have an in-depth knowledge of its contents.

They may have a general idea about some basic principles, but they will not — except in very special cases — be aware of the subtleties of that law, particularly as regards the meaning acquired by its rules through case law, which may be surprising for a foreign party.

Now, parties expect on one side arbitrators to apply the law they have chosen (and such law cannot be detached from the current interpretation of its rules developed by the judiciary of such country). But, on the other side, they expect that arbitrators keep in mind the international character of the dispute and avoid, as far as possible, solutions which might not be appropriate outside the purely domestic framework.

This aspect becomes even more critical when the rules as such (and not only their current interpretation) appear to be in contradiction with the needs and expectations of parties engaged in international trade.

This may happen in particular: (i) when the domestic rule contradicts the needs of international commerce (because it has been made for domestic matters and it does not consider a possible application to an international transaction), or (ii) when the rule is so particular to that specific legal system that it appears unforeseeable to parties not belonging to that country (this may happen especially where they choose the law of a third country).

This brings us to the main issue which comes up throughout the various themes of the conference: the role of the arbitrators and the expectations of the parties in case of contradiction between the applicable law and the needs of international commerce.

When speaking about the expectations of the parties, we should of course not consider their respective position once a dispute has arisen: in this case each party will expect a rigorous or, on the contrary, a flexible application of the applicable law according to the possible outcome of the dispute.

But even leaving aside this aspect, it must be said that the expectations of the “users” are contradictory.

There is certainly the idea that arbitrators should have understanding for the commercial reality, the needs of international commerce etc., and thus show a certain flexibility in applying the law. But at the same time, parties expect the foreseeability and certainty of the law they have chosen.

What should the role of arbitrators be in such a context? A flexible approach based on commercial practice, usage and reasonable expectations of parties involved in the particular type of commerce at stake, or a rigorous application of the rules of law?

If we listen to the objections frequently raised by the “users” of arbitration, we find on one side those who think that arbitrators are too flexible and tend to disregard the rules of the governing law by introducing additional criteria like good faith, fair dealing etc., while others criticize arbitrators who apply the law without giving enough consideration to the international and commercial framework of the actual dispute.

These contradictory positions clearly show that an answer in general terms is not appropriate nor possible.

International arbitrators must be aware of the international context of the dispute when applying a domestic law, but at the same time they cannot disregard this law simply because it does not correspond to what they consider to be the right solution of the dispute.

The right balance between these conflicting needs can only be found case by case, taking into account all the relevant circumstances.

How to reach an acceptable compromise between these conflicting needs is one of the main issues for international arbitrators. This is clearly evidenced in the panel discussion chaired by Pierre Mayer, with the participation of Antonio Crivellaro, Tarek Riad, Matthieu de Boissesson and Mohanadass Kanasagabai, which concluded the conference.