The Exercise of Contract Freedom in the Making of Arbitration Agreements

01 Jan 2003

A universal principle of contemporary arbitration law is that contract plays a vital role in the governance of arbitration. The vitality of that role can vary by legal system, court,statute, or treaty. Nonetheless, party agreement often provides the most significant rules for regulating arbitrations and conducting arbitral proceedings. This is especially true in international commercial arbitration. There, the lack of a functional transborder legislativeand adjudicatory process made contract the principal source of law for internationalcommercial transactions and arbitrations. Although law-making is more possible withinindividual national legal systems, the rule of contract freedom is also firmly established inmatters of domestic arbitration. Within legal systems, contract's empire is founded upon a different rationale: in court doctrine, it serves to legitimate the privatization of adjudication by underscoring arbitration's ostensibly voluntary character. Freedom of contract,therefore, is at the very core of how the law regulates arbitration. What the contractingparties provide in their agreement generally becomes the controlling law.

A modern arbitration agreement should make clear the parties' intent to arbitrate disputes,but it should also reflect an appreciation of the development of the law. Educating clientson these matters is necessary. Custom fitting arbitration to the parties and the transaction,while maintaining the functionality of the process, is the cardinal objective.