Answer ... The Arbitration Act does not regulate this question explicitly. In general, the parties may choose the law applicable to the arbitration agreement. The law governing the arbitration agreement need not coincide with the law applicable to the underlying main contract; however, if the parties have agreed a governing law for the entire agreement, which contains an arbitration clause, it could be reasonably argued that there is a presumption that the law governing the main contract will also govern the arbitration clause.

If the parties have not agreed (expressly or implicitly) on a law applicable to the arbitration agreement, such law may be established implicitly through provisions on setting aside and grounds for refusing recognition of an award. Given that an award may be set aside or refused recognition if the arbitration agreement was not valid under the law of the place where the award was made (Articles 48(1)(1) and 52(1)(1)), it follows that the law of the place of arbitration should govern the arbitration agreement in the absence of the parties’ agreement to that effect.

Answer ... The Arbitration Act states that the arbitral tribunal shall decide the dispute in accordance with the rules of law chosen by the parties as applicable to the substance of the dispute (Article 40(1)).

Unless the parties have agreed otherwise, any choice of a law or legal system of a given state is construed as a direct choice of that state’s substantive law, to the exclusion of its conflict of laws rules (Article 40(2)).

In the absence of the parties’ agreement, the arbitral tribunal should apply the law determined by the conflict of laws rules which it considers applicable (Article 40(3)). A decision ex aequo et bono may be made only if the parties have expressly authorised the tribunal to do so (Article 40(4)).

When making a decision, the arbitral tribunal shall decide in accordance with the provisions of the arbitration agreement and shall take into account customary practices in the trade applicable to the transaction underlying the dispute (Article 40(5)).