Towards a Harmonized Theory of the Law Governing the Arbitration Agreement

Abstract

The agreement to arbitrate is foundational to the arbitral process. At the gateway to arbitral proceedings, a myriad of questions can arise as to the arbitration agreement’s validity, scope and effects. These questions must be answered based on the law(s) governing the arbitration agreement. For decades, the question how those laws should be determined has engaged courts and scholars around the world. It continues to do so. World-wide, four main approaches have developed, whereby the arbitration agreement may be governed by: (i) an “a-national” rule of substantive law that is solely based on the parties’ intent; (ii) any relevant law that confirms the validity of the arbitration agreement; (iii) the law governing the merits of the dispute; or (iv) the law of the seat of the arbitration. Globally, the latter two approaches appear to dominate. Although, by and large, they are based on the same legal principles across jurisdictions, results diverge. Taking the Indian approach as an example, this editorial reviews where and why such divergence occurs, including whether the parties’ choice of law for the main contract applies to the arbitration agreement and to which law the arbitration agreement is most closely connected. It is submitted that a stronger focus on objective criteria in answering these questions increases legal certainty and promotes a more harmonised approach across jurisdictions.