The law applicable to arbitration agreements in international contracts

In the same way parties choose a law to apply to their contract and a procedural law to apply to any future arbitration, parties to international contracts should expressly choose a law to govern an arbitration agreement contained in a contract.

This law will govern the validity of the arbitration agreement, including questions as to who is a party to the agreement, the scope of the agreement and whether certain disputes can be submitted to arbitration.

The decision in Sulamerica Cia Nacional De Seguros v Enese Engenharia1 (Sulamerica) is a useful example of why it is now important to expressly provide for a law governing the arbitration agreement, even if the main contract already has a governing law clause.

Sulamerica in context

Arbitrations raise a range of conflicts of laws issues. First, there is the law governing the substantive dispute before the arbitrator (usually, the governing law of the contract). Secondly, there is the law governing the arbitration itself (usually the law of the seat of arbitration). Thirdly, there is the law governing the arbitration agreement, as an arbitration agreement is treated in most jurisdictions as being a separate contract, even if contained within a larger contract.

In the past, it was usually accepted that the law of the main contract would apply to the arbitration agreement within that contract. However, the decision in Sulamerica suggests that this is not automatic and that the seat chosen by the parties for arbitration may be a persuasive factor in determining the proper law of an arbitration agreement.

The...