Author: Johannes LANDBRECHT
N0:1 of 2017
Party autonomy is not anarchy. While it is widely accepted that party autonomy is at the core of contract law, often used with great dexterity in transnational commercial transactions, it is not unregulated. In a purely domestic context, mandatory provisions of substantive law limit party autonomy. In a transnational context, although parties may be able to escape specific domestic constraints: (1) by choosing a foreign substantive law; (2) by selecting a foreign court; (3) by opting out of the state court system altogether and agreeing on arbitration proceedings, such ‘escape strategies’ are not unrestricted or unregulated. A domestic system may allow the parties to choose a foreign law, to select a foreign court, or to opt for arbitration. Such domestic system also regulates, however, whether and to what extent it will accept such choices, and whether it will, eventually, recognize the outcome of such proceedings, eg, in the context of enforcement of foreign judgments or awards. And each domestic system may do this in its own way. The challenge for transnational commerce is that no corresponding regulation exists on a transnational level. As for arbitration, for instance, a near to universal framework for the exercise of party autonomy has been set up in the New York Convention, regulating the recognition and enforcement of foreign arbitral awards, but also establishing a framework for the exercise of the parties’ autonomy to agree on arbitration proceedings in the first place. Party autonomy in this context is thus not unregulated; but it is regulated, as far as the basic principles are concerned, in a fairly similar fashion in the vast majority of domestic systems worldwide, which makes the respective regulation predictable for potential users, and largely compatible across domestic systems. In contrast, with regard to choice of law and choice of court agreements, transnational commerce faces the challenge of the coexistence of widely differing regulations. Parties may enjoy considerable flexibility in some systems, but such flexibility may come at the expense of compatibility of the outcome across domestic systems if other systems are more restrictive. Mindful of the described challenge, the Hague Conference on Private International Law has recently developed two instruments: the Choice of Court Convention, in force since October 2015 and the Choice of Law Principles of March 2015. Both instruments contribute to a standardisation of the rules regulating party autonomy in a transnational context, albeit to a different extent.