The Presumption of Validity: A novel approach to determining the law which governs the arbitration agreement in the absence of party choice

Abstract

Courts and tribunals have struggled with how to determine what law governs the arbitration agreement in the absence of party choice. The arbitration agreement, as a separable agreement, is not necessarily governed by the law of the substantive contract. The issue is complicated by the fact that arbitration agreements refer disputes to a particular seat of arbitration. Courts and tribunals have either applied a presumption that the agreement is governed by the law of the seat or the law of the substantive contract. This paper argues that there is a stronger case for applying a presumption of validity. The policy behind the New York Convention and the governing principle of international arbitration, the doctrine of separability, both support a view that the parties should be taken to have selected a choice of law which would give effect to their arbitration agreement. This approach would also be more in line with the intention of parties who enter agreements to arbitrate and would bring certainty to an area of law which is incoherent and in a state of flux.