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National law: is most commonly used in practice for applicable law and is often “neutral” .
Public international law: Where the parties of commercial contract are states or state entities, e.g. Channel Tunnel project , the legal framework was an international treaty.
Concurrent laws: That where one party of the contract is a state or state entity, the state’s law is recognized and the principles of international law is introduced at the same time is adopted by the Washington Convention.
Combined laws: That is to choose the common parts of both parties’ national laws, perfectly practiced in Channel Tunnel project.
The Shari’ah: Where the parties are all Muslim, the Shari’ah law will be automatically the governing law.
Trans-national law: It includes the general principle of law, international development law, the lex mercatoria, codified terms and practices and trade usages.
Equity and good conscience: It is effective when parties agree and the applicable law permits.
Although the parties have the right to choose the applicable law, ignoring the choice of law occasionally exists in the contractual activities. If the parties have not expressed that choice, the arbitration tribunal may then have a task to establish the applicable law by means of inferring such a tacit choice that is “demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case”. If neither express nor tacit choice exists, the traditional approach is that the arbitrators should determine the applicable conflict rules first and then follow the rules to reach the proper law. This approach was established in some early international conventions. It was realised that the traditional way might cause the proper law unforeseeable because the conflict rules in one state might refer the proper law to another state and the choice of law might be time consuming. The new trend has moved to conferring the arbitrators the right to determine the proper law directly rather than follow conflict rules. Many west European states have accepted the new approach.
There also exist compulsory restrictions to ‘party autonomy’ in relation to the choice of proper law. It is probably these restrictions are closest to the national public policy, for instance, Article 126 of Chinese Contract Law provides: ‘the contracts for Chinese-foreign equity joint ventures, for Chinese-foreign contractual joint ventures and for Chinese-foreign cooperative exploration and development of natural resources to be performed within the territory of the P. R. China shall apply the laws of the P. R. China.’ However, the first sentence of this Article respects the party autonomy as ‘the parties to a contract involving foreign interests may choose the law applicable to the settlement of their contract disputes.’
According to party autonomy, in context of international transactions, choice of national law might cause some disadvantages such as restriction of public interests, unfair treatment, and changing of the law. It could be imagined that an identical dispute might get different results attributing different choices of law. Can these disadvantages be avoided? The answer should be ‘yes’ because the parties have opportunities to choose trans-national laws, or even they have opportunities to refuse choosing any law at all. These opportunities are either available or practicable. First, there exist some developed uniform commercial custom or codified terms and practices in particular area of international trade, e.g. Uniform Custom and Practice for Documentary Credits. These customs were made by the international trade community and tailored for the certain activities, so they are welcomed throughout the worldwide traders. Why not use them to resolve disputes? Secondly, the Model Law, the Conventions, the national laws and even the arbitral rules have accepted the ‘rules of law’ as applicable law in case of the parties agreed. Thirdly, the national courts are reluctant to use the public interests to refuse the recognition of ‘rules of law’ unless the compulsory applicable law involved. All these reasons have left rooms to the choice of trans-national laws. It seems to that the rare choice of trans-national law is due to the limitation of those laws themselves. It was suggest that the trans-national laws are fragments of particular rules rather than a uniform legal system. It may be competent to deal with particular activities but less competent to deal with the whole matters consisting in the course of international trade. Anyway, provided the parties could make a perfect contract, which covered most predictable issues, the choice of trans-national law in conjunction with the contract as reference to the arbitral tribunal should be more practicable. The modern national arbitration laws should set down provisions to leave a room open for accepting the trans-national laws. Providing the contract was good rule per se and the parties appointed trade experts or technical experts as arbitrators, the parties appeared to trust their own rules and the expertise more than trust any other laws or rules. In this event, the parties would prefer reference of ‘equity and conscience’ to law or rules of law, so the national laws should by no means erect any barriers to reject such a choice.
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