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Applicable Law and Rules

International Commercial Arbitration. Applicable Law and Rules. Example 1. Buyer A from Israel concluded a purchase contract with seller B from Czech Republic. The Czech seller did not deliver on time . The Israel buyer wants to sue him . Problems ?. Example 1.

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Applicable Law and Rules

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  1. International CommercialArbitration ApplicableLaw and Rules

  2. Example 1 • Buyer A fromIsraelconcluded a purchasecontractwithseller B from Czech Republic. • The Czech sellerdid not deliver on time. TheIsraelbuyerwants to suehim. • Problems? JUDr. Tereza Kyselovská, Ph.D.

  3. Example 1 • In everycross-borderrelationship… • …there are two (three) mainquestions. • Whichcourtshavejurisdiction? • Whatisthelawapplicable? • (Whatabouttherecognition and enforcementofthecourt‘sdecision?) JUDr. Tereza Kyselovská, Ph.D.

  4. International commercialarbitration • Cross-borderdisputesinvolving more thanonelegalorder • Privateinternationallaw • Commerciallaw • Civil law • Familylaw • Labourlaw Withinternational element ->internationalcommerciallaw JUDr. Tereza Kyselovská, Ph.D.

  5. Privateinternationallaw • Privateinternationallawresolvesconflictsbetweennationallaws and nationaljurisdictions. • Swedishlaw vs. Israellaw vs. Czech law JUDr. Tereza Kyselovská, Ph.D.

  6. Privateinternationallaw • EveryState has itsownprivateinternationallaw – too many ofthem… • ->needforunificationorharmonization • Unificationof PIL rulesis done usuallythroughinternationalconventions, model laws, EU lawetc. JUDr. Tereza Kyselovská, Ph.D.

  7. Privateinternationallaw • Sources • International conventions • The UN Convention on Contractsforthe International SaleofGoods • Nationallaws • The EU law (regulations and directives) • REGULATION OF THE EUROPEAN PARLIAMENT AND THE COUNCILon the law applicable to contractual obligations (Rome I) • REGULATION OF THE EUROPEAN PARLIAMENT AND THE COUNCILON THE LAW APPLICABLE TO NON-CONTRACTUAL OBLIGATIONS(“ROME II”) JUDr. Tereza Kyselovská, Ph.D.

  8. Privateinternationallaw • Twomainmethods/rules to determinelawapplicable • Direct norms • „Younger“ method, lessused • Direct normdirectlyregulatesrights and obligationsoftheparties • Conflictoflawsrules • Older, 12th to 13thcentrury • These rules (just) resolveconflictsbetweenpotentiallyapplicablenationallaws, withoutdirectlyregulatingrights and obligations JUDr. Tereza Kyselovská, Ph.D.

  9. Privateinternationallaw • Direct norms • The seller must deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention. • The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention. JUDr. Tereza Kyselovská, Ph.D.

  10. Privateinternationallaw • Conflictoflawrules • A contract shall be governed by the law chosen by the parties. The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or to part only of the contract. JUDr. Tereza Kyselovská, Ph.D.

  11. Privateinternationallaw • To the extent that the law applicable to the contract has not been chosen in accordance with Article 3 and without prejudice to Articles 5 to 8, the law governing the contract shall be determined as follows: (a) a contract for the sale of goods shall be governed by the law of the country where the seller has his habitual residence JUDr. Tereza Kyselovská, Ph.D.

  12. Example 2 • Buyer A fromIsraelconcluded a purchasecontractwithseller B from Czech Republic. Partiesagreed on followinarbitrationclause: • „Anydisputearisingoutofor in connetionwiththisContractshallbesettled by bindingarbitration. Each party willappointonearbitrator, thetwoarbitratorswillappointthirdarbitratorfromthird country. Seat ofarbitrationis in Israel, lawapplicableis UN Convention on Contractsforthe International SaleofGoods.“ JUDr. Tereza Kyselovská, Ph.D.

  13. Example • Party A (Israel) • Party B (Czech Republic) • Arbitrator 1 (Israel) • Arbitrator 2 (Czech Republic) • Presidingarbitrator (Sweden) • Problem? JUDr. Tereza Kyselovská, Ph.D.

  14. Example • Conflictoflaws • Conflictofjurisdictions • ->Privateinternationallaw (ConflictsofLaws) • (International procedurallaw) • Whichlawisapplicable? • Whichcourtshavejurisdiction to recognize and enforcethearbitralaward? JUDr. Tereza Kyselovská, Ph.D.

  15. ApplicableLaw • Importanceofthelawapplicable • Autonomy oftheparties • ArbitrationAgremment • ->arbitrationdoes not exist in legalvacuum • Importanceoftheseatofarbitration (LEX ARBITRI) • How to choose? • Legal and non-legalfactors JUDr. Tereza Kyselovská, Ph.D.

  16. Lex arbitri • Determinesthenatureofarbitration – nationalorinternational->consequencesforarbitralaward • Determines (influences) thelawapplicable to theproceedings and themerits (privateinternationallaw, lex mercatoria) • Determinesapplicationof public laws, mandatoryrules (lex fori, lex causae, thirdstates) • Determinesapplicationofthe EU law JUDr. Tereza Kyselovská, Ph.D.

  17. Doctrinesofarbitration • Jurisdictional • territoriality • Contractual • Mixed • Autonomous • Delocalization, denationalization JUDr. Tereza Kyselovská, Ph.D.

  18. Lawapplicable • Lawapplicable to thearbitrationproceedings (proceduralrules) • Lawapplicable to themerits JUDr. Tereza Kyselovská, Ph.D.

  19. Proceduralrules • Mainprinciple – lex fori(lex arbitri) • Relationshipbetweentheseatofarbitration and itsrules • FromtheterritoryoftheStatederivesthe autonomy ofparties and arbitrators, itlaysdownthe basic principlesforarbitration • TheStateexercisescertainfunctions to thearbitration • Parties are usually not allowed to choosetheproceduralrules as whole JUDr. Tereza Kyselovská, Ph.D.

  20. Proceduralrules • Fortheproceedingsitself, forthearbitrationprocedure • Fortherecognition and enforcementofarbitralaward JUDr. Tereza Kyselovská, Ph.D.

  21. Proceduralrulesfortheproceedings • Proceduralruleschosen by theParties • Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules [including the Optional Rules for Emergency Measures of Protection], and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. JUDr. Tereza Kyselovská, Ph.D.

  22. Proceduralrulesfortheproceedings • Proceduralruleschosen by theParties • … Parties have agreed that disputes between them inrespectof a defined legal relationship, whether contractual or not,shall be referred to arbitration under the UNCITRALArbitrationRules. • Partieshaveagreedthatdisputesbetween them inrespectof a defined legal relationship, whether contractual or not,shall be referred to arbitration under the ICCArbitrationRules, seatofarbitrationbeing in Paris, France. JUDr. Tereza Kyselovská, Ph.D.

  23. Proceduralrulesfortheproceedings • Partiesagreedthatthearbitrationshallbegovernedby theirownproceduralrules. • Limits to thischoice – practical, nationallaw • Partiesagreedthatthearbitrationshallbegoverned by Czech procedurallaw.“ • Seat ofarbitrationis in the Czech Republic • Seat ofarbitrationis in Sweden JUDr. Tereza Kyselovská, Ph.D.

  24. Proceduralrulesfortheproceedings • Ifparties do not chooseortheirchoiceis limited: • International conventions • EuropeanConvention on International CommercialArbitration • Nationallaws • Usually limited autonomy ofparties • Partiesmayregulatesomeaspectsoftheproceedings by choosinginstitutionalrules, createtheirownrulesetc. • Usually not – taking evidence, servingdocuments JUDr. Tereza Kyselovská, Ph.D.

  25. Proceduralrulesforrecognition and enforcement • No party autonomy • International conventions • New York Convention on recognition and enforcementofforeignarbitralawards • Groundsforrefusalofrecognition and enforcement • Art. VII – most favourablelaw • Nationallaws • Recognition and enforcementofawards • Domestic vs. foreignarbitralawards JUDr. Tereza Kyselovská, Ph.D.

  26. Procedurallaw - summary • Partieshave limited auonomy in choosingtheproceduralrules • Lex arbitri (nationalproceduralrules) havegreatsignificance • Ifarbitrators do not complywiththeruleschosen by thepartiesor/and do not complywiththenationallawrequirements: • Refusalofenforcement – proceduralrights, public policy JUDr. Tereza Kyselovská, Ph.D.

  27. Lawapplicableforthemerits • LEX ARBITRI • Mandatory (imperative) rulesof lex arbitri • Contractbetweenparties, ArbitrationAgreement (choiceoflaw) • Tradeusages and practices • International conventions (direct norms) • Lex mercatoria, soft law • Nationallaws (conflictoflawsnorms) • Public policy JUDr. Tereza Kyselovská, Ph.D.

  28. Lawapplicableforthemerits • Direct choiceoflaw by theparties • Determinationofthelawapplicableaccording to theprivateinternationallaw JUDr. Tereza Kyselovská, Ph.D.

  29. Choiceoflaw • „Thiscontractshallbegoverned by Israellaw.“ • „Thelawapplicable to thiscontractisSwedishlaw.“ • „Thisarbitrationshallbegoverned by the Czech Law.“ • The most importantconnectingfactor in conflictoflawrules • Depecage • Problemofrenvoi • Limits on thepartieschoiceoflaw • Mandatoryrules • Protectionofweaker party JUDr. Tereza Kyselovská, Ph.D.

  30. Lawapplicable in the absence of direct choiceoflaw • Conflictoflawrules • Connectingfactors • Place ofperfomance, place ofhabitual residence/domicil oftheselleretc. • a contract for the provision of services shall be governed by the law of the country where the service provider has his habitual residencea • distribution contract shall be governed by the law of the country where the distributor has his habitual residence JUDr. Tereza Kyselovská, Ph.D.

  31. Choiceofrules • Not thesame as choiceoflaw • Itmeanschoiceofrules = soft lawinstruments • „Thiscontractshallbegoverned by the lex mercatoria.“ • Soft lawinstruments: • Lex mercatoria • UNIDRIOTPrinciplesof International CommercialContracts • INCOTERMS • FIDIC • Guides, commercialterms and conditions JUDr. Tereza Kyselovská, Ph.D.

  32. Lawapplicableforthemerits • International conventions • CISG and internationalcommercialarbitration • The most important and influentialconvention • www.uncitral.org • International contract on thesaleofgoods • Widelyused in theinternationalcommerce JUDr. Tereza Kyselovská, Ph.D.

  33. Lex mercatoria • Lawofmerchants • Based on tradeusages and practicesbetweenparties • Legalprinciples, standards, transnationalrules, customarycommerciallaw… • UNIDROITPrinciplesof International CommercialContracts • PrinciplesofEuropeanContractLaw (PECL) JUDr. Tereza Kyselovská, Ph.D.

  34. Other „rules“ applicable • Soft law, rulesoflaw • Equity, amiablecompositeur, tronccommun • ->seeking justice, just result, not necessarilylegalone JUDr. Tereza Kyselovská, Ph.D.

  35. Public law in arbitration • Public law and internationalcommercialarbitration • Direct applicationof public lawrules • Regardingtheeffectsof public law on privatelawrelationships • Connected to arbitrability JUDr. Tereza Kyselovská, Ph.D.

  36. Public law in arbitration • Imperative norms (mandatoryrules) • Imperative normslegisfori • Imperative normslegiscausae • Imperative normsofthirdstate • International ordre public • -> consequences for the recognition and enforcement of arbitral award JUDr. Tereza Kyselovská, Ph.D.

  37. EU law in arbitration • Important of the seat of arbitration is within any MemberStateofthe EU • Mainlycompetitionrules (EcoSwiss) • Anti-suit injunctions • Preliminaryquestion to theCourtof Justice ofthe EU JUDr. Tereza Kyselovská, Ph.D.

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