The relevance of this subject matter is predicated on the existence of the doctrine of separability or autonomy of the arbitration clause. The submission agreement being a separate contract, both physically and legally, clearly makes the concept of its own governing law easy to grasp unlike the arbitration clause, which raises the (legitimate) question of why one clause in a contract should be governed by a separate law from all other clauses in the same contract.
The law applicable to the arbitration agreement refers to the proper law of the arbitration agreement. This may be a national law or set of legal rules. The legal nature of this agreement is contractual, so that, just as in any other contract, it must have a law by which the obligations and rights of the parties to it shall be regulated.
It is therefore important to determine what law applies to the arbitration agreement. A party can challenge the validity of the arbitration agreement at any time before it is performed, upon commencement of its performance and when challenging an arbitral award made on the basis of the arbitration agreement.
Jurisdictional Challenge
A jurisdictional challenge will be pursued before a national court (or arbitration institution) when one party seeks to enforce the arbitration agreement (before the commencement of an arbitral proceeding). Upon commencement of the arbitral reference, jurisdictional challenges will be pursued before the arbitral tribunal in the first instance with the opportunity of challenging the decision of the arbitral tribunal before a national court.
At the stage where recognition and enforcement of the resulting award based on the arbitration agreement is sought, a jurisdictional challenge can still be raised before a national court.
Considerations to determine the law applicable to the arbitration agreement
- Where parties have expressly chosen a law or set of legal rules to govern the interpretation and regulation of the arbitration agreement. In such situations the choice made by the parties (by virtue of the principle of party autonomy) will apply whether the arbitration agreement is a clause or a self-standing agreement. It is more probable for parties to agree on such a proper law in a submission agreement.
- Where the parties have not made any choice, the law governing the subject matter of the dispute, in particular the main contract will be taken into consideration.
- Another option will be to apply conflict of law rules. This may be the conflict of law rules of the place with the closest connection to the arbitration agreement. This test implicates analysing various connectors to identify that (or those) which are closest to the arbitration agreement. There are various connectors that may influence the determination of the law applicable to the arbitration agreement are as follows;
- The place where the agreement to arbitrate was made or concluded.
- Where the parties have made an express choice of a substantive law to govern the main contract. The assumption is that it is reasonable and safe to assume that the choice of a substantive law in the main contract also applies to govern the arbitration agreement which is one clause in the main contract.
- The seat of arbitration.
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