Leila Vafaeian

Public Policy VS. Party Autonomy
By Leila Vafaeian

The purpose of this presentation is to examine the theory of public policy vs. the theory of party autonomy in international arbitration as private modes of dispute settlement. It examines the foundation and legitimation of international commercial arbitration under party autonomy   which in turn is based on contractual theory and freedom of contract. In reality, different national courts apply different theories in respect to international commercial arbitration, which in turn affects the attitude of each jurisdiction towards the operation of international commercial arbitration. Accordingly, this study deals with four different theories for the purpose of examining how each theory defines the nature of international commercial arbitration as a mode of private dispute settlement in reality when the parties are uncertain about the enforcement of an international commercial arbitration award, the arbitration decision in favor of a winning party is an ineffective and shallow triumph on paper. Therefore, the disputing parties in international commercial arbitration need to solve their disputes in a more flexible and confidential way. This study illustrates the extent to which party autonomy and contractual theory play roles in international commercial arbitration by giving the right to disputing parties in arbitration in order to create their own rules and laws applicable on their arbitration process according to their own desires and needs. In fact, this study highlights the contractual theory as being that theory which is designed to give an extensive power in the name of the parties’ autonomy to the commercial parties. However, party autonomy is not unlimited in respect to choosing or creating applicable laws on arbitration; furthermore, enforcement and recognition of international arbitration awards generally is subject to an examination of public policy. Thus, this presentation examines to what extent public policy may influence the validity of selecting both the applicable law on arbitration and which arbitration awards should be enforced.