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Hayward, Benjamin, Conflict of Laws and Arbitral Discretion - The Closest Connection Test, Oxford 2017

Hayward, Benjamin, Conflict of Laws and Arbitral Discretion - The Closest Connection Test, Oxford 2017
Table of Contents


5.03 Chapter 2 compared ten individual conflicts rules potentially applicable in international commercial arbitration. The closest connection test features among these conflicts rules already applied in arbitration. It is sometimes applied by arbitrators pursuant to their existing, broad, discretions.2 The closest connection test is a theme running throughout the literature on arbitral conflicts of laws.3 It is the test invariably applied through the restricted voie indirecte. It is even considered to constitute part of the 189procedural lex mercatoria,4 reflected in Art XIV.2(b)-(d) Trans-Lex Principles, though Art XIII.4.1(b) Trans-Lex Principles does adopt the pure voie indirecte with specific reference to arbitration.

5.04 The closest connection test is, however, only one rule among many that may be applied pursuant to the current regulatory regime's prevailing (and broad) discretions. Identifying the optimal arbitral conflicts rule requires a rigorous evaluation of the available rules' merits, rather than a quantitative estimation of their current application.



[...] 285[...]

7.05 Like Born's analysis,11 this book takes substantive certainty as its touchstone. However, it has an important point of departure. Born's ideal conflicts methodology includes the presumptive application of the seat's conflicts rules, in order to secure predictability in the absence of an appropriate international conflicts rule.12 This book seeks to secure that same substantive certainty by instead proposing the optimal international conflicts rule which Bom identifies as currently lacking. To that end, in contrast to the broad arbitral discretions prevailing under the current regulatory regime, this book proposes a (modified) Art 4 Rome Convention rule for arbitral conflicts of laws. As set out in Chapter 6, that rule (marking up the original Art 4 Rome Convention text for the purposes of clarity and explanation) reads as follows:

Article 4: Applicable Law in the Absence of Choice

(1) To the extent that the law applicable to the contract has not been chosen in accordance with Article 3, the contract shall be governed by the rules of law law of the country with which the case it is most closely connected. Nevertheless, a severable part of the contract which has a closer connection with other rules of law another country may by way of exception be governed by those rules of law the law of that other country.

(2) Subject to the provisions of paragraph 5 of this Article, it shall be presumed that the case  contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence, or, in the case of a body corporate or unincorporate, its central administration. However, if the contract is entered into in the course of that party's trade or profession, that country shall be the country in which the principal place of business is situated or, where under the terms of the contract the performance is to be effected through a place of business other than the principal place of business, the country in which that other place of business is situated ...

(5) Paragraph 2 shall not apply if the characteristic performance cannot be determined, and the presumptions in paragraph[...] 2[...] shall be disregarded if it appears from the circumstances as a whole that the case contract is clearly more closely connected with another country.

7.06 The world's move towards the pure voie directe is understandable, in a sense, given the 'dismal swamp'13 which represents the current state of arbitral conflicts of laws, and the distinct lack of uniformity across jurisdictions. Without a more certain rule, applied consistently across 286jurisdictions, the pure voie directe might very well be thought better than the alternative - resorting to the existing mass of different rules potentially applicable in international commercial arbitration, and otherwise reflected in (domestic) private international law systems. How then can this book's recommendation be implemented, in a way that displaces the current regulatory regime, but which also overcomes the problems which have led to the current regulatory regime's existence?


2See, eg, ICC Case No 11754/2003 (2010) 21 ICC Bull Supp 20, 26 [32(4)]-decided under Art 17(1) ICC Rules 1998. See also ICC Case No 5717/1988 (1990) 1(2) ICC Bull22, 22; ICC Case No 5865/1989 (1990) 1(2) ICC Bull23, 23.
3See, eg, Nigel Blackaby and others, Redfern and Hunter on International Arbitration (6th edn, Oxford University Press 2015) 220 [3.203]; Klaus Peter Berger, International Economic Arbitration (Kluwer 1993) 503 (hereafter Berger, IEA); Peter Nygh, 'Choice of Forum and Law in International Commercial Arbitration' (1997) 24 Forum Internationale 1, 21; Marc Blessing, 'Choice of Substantive Law in International Arbitration' (1997) 14(2) Journal of International Arbitration 39, 54.
4Klaus Peter Berger, The Creeping Codification of the Lex Mercatoria (1st edn, Kluwer 1999) 289 [26].

11Born (n 1) 2656-58 [Gary Born, International Commercial Arbitration (2nd edn, Kluwer 2014)].
12ibid, 2659-61.
13William Prosser, 'Interstate Publication', (1952-53) 51 Michigan Law Review 959, 971.

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