Limitations on the principle of private international law party autonomy

In accordance with the principle of party autonomy of international private law parties to an international transaction are entitled to select applicable substantive law or rules of law. The rationale behind this principle is to provide an opportunity to select a legal framework, which shall apply, among others, in a case of any disagreements or disputes arising from the transaction between the parties. The principle of party autonomy is not borderless, it is subject to certain limitations. These limitations mainly are non-violation of public order, imperativeness of application of arbitration rules by a chosen institution of parties and time limits.

Firstly, in most cases, national legislations limit the application of the principle of party autonomy. The main objective of this limitation is to ensure that a public order is not to violated. This limitation is justified by a number of scholars. For instance, Maniruzzaman argued that “Although the parties’ freedom of choice is a general principle of private international law and is to be respected in principle, it should operate within the limits imposed by such equally important general principles of law or subject to any restraint of public policy [1]”.

The other limitation, perhaps the most apparent one, is a direct application of its own arbitration rules by a particular institution. In other words, when the parties agree to submit their disputes to a permanent arbitral institution, then they could not agree on conducting those arbitral proceedings according to the rules of another arbitral institution (e.g. the ICAC – International Commercial Arbitration Court at the UCCI – Ukrainian Chamber of Commerce and Industry arbitration according to ICC – International Chamber of Commerce rules). This principle is set forth in respective institutional rules, and also in Article 4 (1) (a) of European Convention on International Commercial Arbitration, Geneva, 1961. The institutional rules related to the functions thereof, are predominantly mandatory and could not be modified or waived by the parties [2].

Additionally, the realization of the parties’ discretion with regard to some of the mandatory rules defined by the certain institution, is subject to certain time limits. The latter is closely connected with commencement and further progress of respective arbitral proceedings. If parties have agreed on three arbitrators’ tribunal, they may re-agree on a sole arbitrator only before the arbitral tribunal is fixed.

With regard to the Republic of Azerbaijan, certain limitations applied on the principle of party autonomy as it shall not go against the overriding rules of national legislation. Article 4 of the Law on Private International Law of Azerbaijan reads as following “The provisions of a foreign legal system those are not in conformity with the Constitution of the Republic of Azerbaijan and acts adopted by referendum, shall not be applied in Azerbaijan [3]”.

Azerbaijan has acceded European Convention on International Commercial Arbitration of 1961 on 17 January 2005. According to the Convention, in the case where the parties failed to indicate the applicable law, [t]he arbitrators shall apply the proper law under the rule of conflict that the arbitrators deem applicable [4].  This provision shall be interpreted that the arbitrators are granted to select the rule, which is going to apply to the conflict.

As the Constitution of Azerbaijan provides that international agreements wherein the Azerbaijan is one of the parties constitute an integral part of legislative system of the Azerbaijan, and if a contradiction reveals between normative legal acts within legislative system of the state (except Constitution and acts accepted by referendum) and international agreements that the Azerbaijan is party, provisions of international agreements shall prevail [5].

Pursuant to Article 7 of the above-mentioned Convention which gives right to the arbitrators to apply a relevant applicable rule of law when the parties have not selected one before, in that case, the chosen rules may include provisions that contradict the Constitution of Azerbaijan. And in this event, collision appears between the Convention and Azerbaijani law.

Taking also into account that Azerbaijan is not party to the international instruments that regulate the this matter, such as the UNICITRAL Arbitration Rules of 1976, International Chamber of Commerce Arbitration Rules of 1975 and 1998, the Washington Convention of 1965, as well as these international instruments do not preclude harmonized rules concerning conflict of law, the question on the matters still remains open.

 

Deep notes:

[1] A.F.Maniruzzaman, ‘International Arbitrator and Mandatory Public Law Rules in the Context of State Contracts: An Overview’, 10090 7(3), Journal of International Arbitration 53, 54

[2] http://www.sk.ua/publications/party-autonomy-vs-mandatory-rules-in-international-arbitration

[3] The Law on Private International Law of the Republic of Azerbaijan, Article 4, June 6, 2000

[4] European Convention on International Commercial Arbitration, Article 7, para.1.

[5] Constitution of the Republic of Azerbaijan, Article 151

 

Author: Vugar Ibrahimov

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