SCC Spotlight Talk: Gretta Walters

Party autonomy stands as one of arbitration's defining principles, yet its practical application and limitations often raise complex questions for practitioners navigating international disputes. In this SCC Spotlight Talk with Gretta Walters, we explore how parties can effectively exercise their autonomy in crafting arbitration agreements, the potential pitfalls of overly detailed clauses, and the cultural considerations that influence how this fundamental concept is interpreted across different jurisdictions.

Arbitration practitioners often refer to “party autonomy” as one of the hallmarks of arbitration, but what does it mean?

Party autonomy in arbitration means that the parties to a dispute can agree on how that dispute looks.  They can choose the scope, applicable law, rules, and procedures that will govern their arbitration. 

Perhaps most fundamentally, party autonomy recognise the parties’ freedom to agree to resolve their dispute through arbitration, as opposed to domestic courts.  This means that courts will respect the parties’ autonomy in agreeing to forgo litigation in favour of arbitration when a dispute arises.  And, by extension, arbitrators will respect the parties’ autonomy in agreeing to specific scopes, laws, rules, or procedures that apply to the arbitration. 

Is there such a thing as too much party autonomy? Why might parties choose to limit their autonomy?

While party autonomy is a broad concept, parties should be careful not to agree to too many mechanisms that cannot be followed or that may delay resolution of their dispute.  Party autonomy in agreeing to arbitrate is most commonly exercised through arbitration agreements, and most arbitration agreements are made at a pre-dispute phase when the contract is initially signed.  This is typically long before any dispute has arisen and at a time when it might be difficult for the parties to even imagine how a potential dispute could look.  Parties sometimes find that overly detailed arbitration clauses do not work for the actual dispute that eventually arises.

Parties therefore may wish to be more restrained in agreeing to an arbitration clause by including only key provisions.  Such provisions might include, for instance, the arbitral seat, the language of the arbitration, the number of arbitrators, enforcement of the award, and the applicable arbitral rules.  If the parties incorporate sophisticated, modern arbitral rules, like those of the SCC, those rules will give the parties well-tested default procedures to fill in the gaps that they might need in the eventual dispute. 

Can the parties’ autonomy be limited or “overridden” by an arbitrator or the courts?

Even though party autonomy is one of the hallmarks of arbitration, it is not unlimited.  For example, parties’ arbitration agreements cannot violate mandatory laws, such as the widely recognise procedural rights to equal treatment of the parties and to a fair opportunity of presenting one’s case.  Further, certain public policies might limit the types of disputes that parties can agree to arbitrate.  For instance, parties generally cannot agree to resolve criminal or family law disputes in arbitration.

If the parties’ agreement is clear and consistent with the limits of the law, courts and arbitrators typically will respect such agreements.  Where the parties have not agreed on certain aspects of the procedure or the agreement is unclear, however, arbitrators generally have the discretion to determine the applicable procedures.  This exercise of discretion should be consistent with the parties’ exercise of autonomy, nonetheless. 

Given your cross-jurisdictional experiences, would you say that the local legal culture affects how the principle of party autonomy is considered and applied?

It can. Considering the different jurisdictions that might be relevant to a dispute, parties will sometimes provide in their arbitration agreement that certain domestic litigation practices do or do not apply to the arbitration.  For example, in contracts that touch on the United States, I have seen arbitration clauses that expressly exclude or limit U.S.-style discovery and certain damages available under U.S. laws (such as, punitive damages). 

Additionally, how an arbitrator interprets what the parties intended to agree (that is, to what did the parties agree in exercising their autonomy) can vary, depending on the applicable law and backgrounds of the arbitrators and parties.  Particularly where it might be ambiguous as to what the parties agreed on procedural matters, cross-cultural backgrounds and approaches can impact how an arbitrator exercises his or her discretion in resolving those issues.

What advice do you have for parties and their legal counsel when drafting dispute resolution clauses for their contracts?

As noted, less is often more when drafting a dispute resolution clause because it is difficult to predict how a dispute will look before it arises.  Include key provisions like those noted and incorporate well-regarded arbitral rules but avoid including overly detailed procedural requirements or steps that can make your dispute resolution clause unworkable.

And, of course, be sure to ask a disputes lawyer to review your clause with enough time to still incorporate feedback!