The Scope of Autonomy in International Contracts and its Relation to Economic Regulation and Development
50 Pages Posted: 4 Jan 2001
Date Written: December 2000
This article argues that the extension to public law of autonomy in international contracts to privately arbitrate disputes and designate applicable law is detrimental to international commerce when undertaken by a developed nation, but beneficial to international commerce and to economic development when undertaken by a developing nation. The difference lies in the alternative to autonomy: effective and reasonably fair public sector regulatory and judicial institutions in developed nations, incapacitated and frequently unfair public sector regulatory and judicial institutions in developing nations. In developed nations, the extension permits transnational commercial actors to opt out of protective regulatory law - thus increasing the risk of precisely the public harm the regulatory law intended to prevent. Further, the arbitrability of public law either reduces the probability of correct applications of public law and thereby contributes to under-regulation, or increases the risk of arbitral procedural reforms that threaten the continued utility of international arbitration for non-Western parties. Finally, because the exercise of autonomy with respect to public law matters invites greater judicial supervision than exercises of autonomy with respect to matters governed by private law, the extension decreases rather than increases predictability in international commerce. The opposite is true of the extension when undertaken by developing nations. The extension of contractual autonomy to public law by developing nations can help these nations provide the public law regulatory and judicial mechanisms that the extension enables private parties to avoid when made by a developed nation. Autonomy to designate applicable public law can serve in developing nations as a means of supplying otherwise unavailable or incomplete protective standards for commercial activity. In addition, autonomy to privately arbitrate public law disputes can serve as a means of enforcing the standards. A developing nation's sovereignty can remain intact by legislating the parameters of autonomy. Although the efficacy of this regulatory scheme hardly matches that of a developed nation, the near-term potential of private autonomy for facilitating commerce and promoting the rule of law is significant.
Suggested Citation: Suggested Citation