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CS Professional · Arbitration, Mediation and Conciliation · Conceptual Framework of International Commercial Arbitration

Bharat Turbines Ltd (incorporated in India) and Kessler GmbH (incorporated in Germany) agree to arbitrate in Mumbai. Their contract designates 'the law of Germany' as governing the substance of the dispute and says nothing more about conflict of laws rules. Under Section 28, how must the tribunal treat this designation?

The tribunal must treat the designation as referring directly to German substantive law. Unless the parties express otherwise, a designation of a country's law in an international commercial arbitration seated in India excludes that country's conflict of laws rules.

  1. AAs referring directly to German substantive law, not to its conflict of laws rulesCorrect
  2. BAs referring to German conflict of laws rules, which then decide the governing law
  3. CAs requiring application of Indian substantive law since the seat is Mumbai
  4. DAs leaving the tribunal free to choose any law it considers appropriate

Explanation

Where the place of arbitration is in India and the arbitration is international commercial, a designation of the law of a given country is construed, unless otherwise expressed, as directly referring to its substantive law and not its conflict of laws rules. The parties did not express otherwise, so German substantive law applies. Option 2 reverses this rule.

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