An international arbitration usually takes place in a country/location that is neutral to the parties. Although the seat is defined as a location, it is in fact a legal construct, with a limited geographical relevance. It is important to distinguish the seat of arbitration from the place of the hearing1: whereas the first one is a purely legal notion, with its own set of consequences (see below), the latter is an operational (and geographical) choice. Practically, the parties may choose one country and its arbitration laws as the procedural law of the arbitration, but hold hearings and all other remaining activities in a different country without ever setting foot in the country chosen as the seat.
Methanex Corporation v. United States of America, Reasons for the Tribunal's Decision on the Place of Arbitration, 31 December 2001, para. 2 (“Article 1130(b) of NAFTA provides: ‘Unless the disputing parties agree otherwise, a Tribunal shall hold an arbitration in the territory of a Party that is a party to the New York Convention, selected in accordance with:... (b) the UNCITRAL Arbitration Rules if the arbitration is under those Rules.’ Article 16(1) of the UNCITRAL Arbitration Rules provides: ‘Unless the parties have agreed upon the place where the arbitration is to be held, such place shall be determined by the arbitral tribunal, having regard to the circumstances of the arbitration.’ This latter provision refers to the legal place or ‘seat’ of the arbitration as distinct from the geographical place of the arbitration’s hearing or hearings and deliberations by the Tribunal, a distinction to which the Tribunal returns below.”); Cases Regarding the Border Closure due to BSE Concerns v. United States of America, Procedural Order No. 2 Regarding the Place of the Hearing on the Preliminary Issue, para. 3.1 (“As recorded in section 3.4. of PO No.1 of October 20, 2006, the Parties have agreed that Washington D.C. is the place of arbitration according to Art. 16 UNCITRAL Rule in this case. To hold hearings in places other than the official place of arbitration is on one hand possible under the UNCITRAL Rules, but, in the view of the Tribunal, would require compelling arguments for such a choice.”); Merrill & Ring Forestry L.P. v. The Government of Canada, ICSID Case No. UNCT/07/1, Decision on the Place of Arbitration, 13 December 2007, 7 November 2006, para. 17 (“The Tribunal also believes that most of these services are necessary in respect of the place of a hearing, but as this place is different from the place of arbitration, as argued by the Respondent, neither does this factor offer determinative guidelines for the Tribunal to choose one over the other. The Tribunal notes that the Respondent accepts that the hearings take place in Washington, D.C.”).
III. Party Autonomy in Choice of Seat
The parties are generally free to agree on the seat of arbitration.2 Under some rare arbitration rules, the choice of the parties is limited.3 Failing an agreement between the parties, the seat may be determined by the arbitral tribunal or the administering arbitral institution, in accordance with and subject to the arbitration rules chosen by the parties.4 ICSID Additional Facility Rules limit the choice of place of arbitration to the States parties to the New York Convention.5 Arbitrations under the ICSID Convention are self-contained.6 The choice of the seat of the arbitration is a matter of pure convenience and carries no legal consequences as in non-ICSID arbitrations7. However, the ICSID Arbitration Rules provide that the Tribunal shall meet at the seat of ICSID, Washington, D.C., failing agreement between the parties to the contrary.8
UNCITRAL Model Law, 2006, Art. 20.1 (“The parties are free to agree on the place of arbitration.”).
LCIA Rules of Arbitration, 2014, Art. 16(1) (“The parties may agree in writing the seat (or legal place) of their arbitration at any time before the formation of the Arbitral Tribunal and, after such formation, with the prior written consent of the Arbitral Tribunal.”).
ICSID Additional Facility Rules, 1978, Art. 20(1) (“Subject to Article 19 of these Rules the place of arbitration shall be determined by the Arbitral Tribunal after consultation with the parties and the Secretariat.”).
LCIA Rules of Arbitration, 2014, Art. 16.2 (“In default of any such agreement, the seat of the arbitration shall be London (England), unless and until the Arbitral Tribunal orders, in view of the circumstances and after having given the parties a reasonable opportunity to make written comments to the Arbitral Tribunal, that another arbitral seat is more appropriate. …”); ICDR Rules of Arbitration, 2014, Art. 17(1) (“If the parties do not agree on the place of arbitration by a date established by the Administrator, the Administrator may initially determine the place of arbitration, subject to the power of the arbitral tribunal to determine finally the place of arbitration within 45 days after its constitution.”); ICC Arbitration Rules, 2017, Art. 18(1) (“The place of the arbitration shall be fixed by the Court, unless agreed upon by the parties.”); SCC Rules of Arbitration, 2017, Art. 25(1) (“Unless agreed upon by the parties, the Board shall decide the seat of arbitration.”); UNCITRAL Rules, 2010, Art. 18(1) (“If the parties have not previously agreed on the place of arbitration, the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case.”); UNCITRAL Model Law, 2006, Art. 20.1 (“Failing such agreement, the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.”).
ICSID Additional Facility Rules, 1978, Art. 19 (“Arbitration proceedings shall be held only in States that are parties to the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards.”); Frauke Nitschke and Kamel Aït-El-Hadj, “Determining the Place of Arbitration in ICSID Additional Facility Proceedings”, ICSID Review - Foreign Investment Law Journal, Volume 30, Issue 1, Winter 2015, pp. 243–59.
Noble Energy, Inc. and Machalapower Cia. Ltda. v. The Republic of Ecuador and Consejo Nacional de -Electricidad, ICSID Case No. ARB/05/12, Decision on Jurisdiction, 5 March 2008, para. 228.; Watkins Holdings S.à r.l. and others v. Kingdom of Spain, ICSID Case No. ARB/15/44, Award, 21 January 2020, para. 192 ("This is all the more the case given that this Tribunal is an ICSID tribunal. As clarified in the Electrabel award: [T]his Tribunal is placed in a public international law context and not a national or regional context. Moreover, this ICSID arbitration does not have its seat or legal place of arbitration in Hungary or elsewhere in the European Union. Such an arbitral seat could trigger the application of the lex loci arbitri and give rise to the jurisdiction of the local courts in regard to the arbitral process, including challenges to the award. This ICSID arbitration is a dispute resolution mechanism governed exclusively by international law."")
ICSID Arbitration Rules, 1968, Rule 13(3) (“The Tribunal shall meet at the seat of the Centre or at such other place as may have been agreed by the parties in accordance with Article 63 of the Convention. If the parties agree that the proceeding shall be held at a place other than the Centre or an institution with which the Centre has made the necessary arrangements, they shall consult with the Secretary-General and request the approval of the Tribunal. Failing such approval, the Tribunal shall meet at the seat of the Centre.”); ICSID Convention, 1966, Arts. 62 (“Conciliation and arbitration proceedings shall be held at the seat of the Centre except as hereinafter provided.”), 63 (“Conciliation and arbitration proceedings may be held, if the parties so agree, (a) at the seat of the Permanent Court of Arbitration or of any other appropriate institution, whether private or public, with which the Centre may make arrangements for that purpose; or (b) at any other place approved by the Commission or Tribunal after consultation with the Secretary-General.”).
The procedural law of the arbitration (lex arbitri) is an outer framework of the arbitration proceedings. Lex arbitri deals with a range of issues, but there are opinions that it mostly provides a “gap-filling” mechanism, absent parties’ agreement or specific provisions in the applicable arbitration rules. Seeing that the choice of the seat may ultimately determine whether the award is enforceable or not, the importance of a proper choice of lex arbitri is imperative, as it deals with the following:
V. Choice of the Seat of Arbitration
Apart from the legal aspects of the choice of seat, certain practical aspects should be taken into consideration when choosing a seat of arbitration, such as: the role and attitude of the local courts in terms of supervision and assistance, implementation of the New York Convention to maximise enforceability, geographical location, ease of transport and suitable facilities.
For example, many bilateral investment treaties (BITs) have a provision which indirectly determines the place of arbitration, by stating that it should be in a State that is a party to the New York Convention.9 Other BITs specifically provide that the place of arbitration shall be a specific place, such as Paris10, Stockholm11, The Hague12 etc.
Treaty Between the Government of the United States of America and the Government of the Republic of Estonia for the Encouragement and Reciprocal Protection of Investment, adopted the 19 April 1994, Art. VI(5); Kuwait - Portugal BIT (2007), adopted the 23 July 2007, Art. 9.6(b); Sweden - Ukraine BIT (1995), adopted the 15 August 1995, Art. 8.4.