Contemporary Challenges and Continuing Relevance
Edited by Franco Ferrari and Diego P. Fernández Arroyo
Chapter 3: Foundation, limits and scope of party autonomy
Starting from party autonomy’s generally recognized importance in international commerce, this chapter argues that the parties’ ability to choose the applicable law is not an absolute universal principle. It is a conflict rule deriving from state private international laws. This implies various restrictions. Recognizing the limits of party autonomy, however, is more friendly to international commercial contract practice and arbitration than assuming that party autonomy is absolute. It allows for the applicable law to be predicted and for valid and enforceable arbitral awards to be rendered. Furthermore, it prevents an erosion of trust in the institution of arbitration, which in turn may result in restricted arbitrability. The chapter discusses the scope and object of party autonomy in courts and in arbitration. In arbitration, parties may choose non-state law (‘rules of law’). Considered to be party autonomy’s apotheosis, paradoxically, choosing these sources may end up limiting contract freedom.
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