The first question from Module A asks:

​A major natural resources company from France operating through a Canadian subsidiary has been in negotiation with a Russian regional government concerning a mining concession contract for the exploration of natural resources in Siberia. In 2003 the Canadian subsidiary, acting on behalf of the French parent company, entered into a memorandum of understanding with the Russian regional government, and subsequently, in 2006 into the main mining concession contract. Both the memorandum of understanding and the concession contract contain an arbitration clause providing for arbitration under the ICC Rules of Arbitration and the seat in Stockholm. However, while the memorandum of understanding contains a choice-of-law clause providing that Swiss law will govern the merits of any dispute between the two parties, the concession contract contains no choice-of-law clause. In 2013, a dispute arose out of the concession contract between the two parties. What law should arbitrators apply to determine the dispute?  

​ Applicable Law in International Commercial Arbitration

​The core issue is determining the substantive law (or lex causae) that the arbitrators, seated in Stockholm under ICC Rules, should apply to resolve a dispute arising from the 2006 mining concession contract.  

​1. The Starting Point: The Parties’ Choice

​In international commercial arbitration, the principle of party autonomy is paramount. The arbitrators must first look for a valid choice-of-law clause agreed upon by the parties in the relevant contract.  

​The Concession Contract (2006): The dispute arises from the 2006 concession contract. Crucially, this contract contains no choice-of-law clause.  

​The Memorandum of Understanding (2003): The earlier Memorandum of Understanding (MOU) did contain a choice-of-law clause, specifying Swiss law would govern the merits of any dispute.  

​Since the dispute arises from the concession contract and not the MOU, and the concession contract is silent on the applicable law, the arbitrators cannot simply apply Swiss law unless they determine that the choice-of-law clause in the MOU was intended to survive and govern the subsequent main contract. Given the absence of a choice-of-law clause in the later, more detailed agreement (the concession contract), it is likely the arbitrators will have to resort to conflict-of-law rules.

​2. Determining the Applicable Law in the Absence of a Choice

​When the parties have not chosen the applicable law, the arbitrators must determine it using conflict-of-law rules as mandated by the relevant institutional rules—in this case, the ICC Rules of Arbitration.  

​A. The ICC Rules of Arbitration

​Under the ICC Rules of Arbitration, the arbitrators are typically instructed on how to proceed when the parties have made no choice. Generally, the rules state that the tribunal shall apply the rules of law which it determines to be appropriate. This grants arbitrators broad discretion.

​The tribunal will apply the rules of law (as opposed to a single national law) that it determines to be appropriate.  

​The tribunal does not have to follow the conflict-of-law rules of the arbitral seat (Stockholm, Sweden). This is a key distinction from national courts.  

​B. Conflict of Laws Analysis

​The tribunal will likely consider various factors to determine the most appropriate law, moving away from a rigid application of national private international law rules:

​Connecting Factors: The tribunal will weigh the center of gravity of the dispute. Relevant factors include:

​Place of Performance: The concession relates to mining and exploration in Siberia (Russia). The performance of the contract is centered there.  

​Nature of the Contract: It is a mining concession contract with a Russian regional government. This often suggests a close connection with the law of the host state (Russia). Concession contracts, especially those involving the state, may involve issues of public law.  

​Seat of Arbitration: Stockholm. This is generally relevant to procedural law, not substantive law.  

​Parties’ Nationality/Location: The parties are a Canadian subsidiary acting for a French company, and a Russian regional government.  

​The Law of the Host State (Russia): Due to the contract’s subject matter (natural resources/mining concession) and the involvement of a state entity, the law of the state where the resources are located and where the contract is performed (Russian law) would be a strong candidate for the appropriate law.

​Transnational Law/General Principles: For a complex, cross-border commercial dispute, the tribunal might consider applying:

​General Principles of International Law.  

​Lex Mercatoria (general principles and customs of international trade).  

​The UNIDROIT Principles of International Commercial Contracts as an internationally recognised set of rules reflecting general principles of contract law.  

​3. Conclusion

​Given the facts:

​The contract of dispute (2006 Concession Contract) is silent on applicable law.  

​The tribunal is operating under ICC Rules with a seat in Stockholm.  

​The arbitrators should apply the rules of law they determine to be appropriate.

In a dispute concerning a mining concession with a Russian regional government for resources in Siberia, the most likely outcome, based on the principle of the closest connection, is that the arbitrators would conclude that Russian law is the most appropriate law to govern the merits of the dispute.