Do Tribunals Have the Power to Relocate the Arbitral Seat?

Over the past two years, the arbitration between the Heirs of Sulu and Malaysia has featured repeatedly in the arbitration news. Surprisingly, however, a thorny legal question that the sole arbitrator addressed has largely escaped the headlines: do tribunals have the power to transfer the seat of arbitration absent agreement from the parties to the proceedings? 

As explained in more detail below, even though tribunals have found that the power to transfer the seat may exist under the applicable rules, no tribunal to date has overridden a party-agreed seat. 

This post addresses this issue as follows: We first provide an overview of the applicable legal principles, and then survey arbitral decisions addressing the issue. The post ends with concluding remarks.

Party autonomy v. the tribunal’s power to conduct the proceedings 

The principle of party autonomy has been described as the cornerstone of international arbitration. It extends to, among other things, the parties’ freedom and right to determine the legal seat, or place, of the arbitration. Along with the agreement to arbitrate and the procedural rules, the choice of seat is one of the most important expressions of party autonomy. It determines the courts with supervisory jurisdiction over the proceedings, the remedies and recourse available in relation to the award and, in many cases, the law applicable to procedural issues. The law of the seat can also govern the parties’ capacity to arbitrate. 

For these reasons, choosing a seat should be a decision that the parties make by thoughtfully and carefully weighing the benefits and disadvantages of different jurisdictions. And when the choice of seat is included in the arbitration agreement, as any other contractual clause, the seat may only be changed by agreement of the parties. However, just like with other contractual clauses, there may be arguments—like impossibility, duress, and a fundamental change in circumstances—that could justify reforming or otherwise changing the contractual text, depending of course on the dictates of the applicable law.

So, what happens when one of the parties considers that there are circumstances that make it impossible to conduct the arbitration in the previously agreed seat? 

Survey of arbitral decisions on the transfer of the seat

While uncommon, several tribunals have addressed the question of relocating the seat without mutual agreement of the parties.

Based on the publicly available decisions, an alleged change of circumstances appears to be the most frequently invoked ground for changing the seat. This is unsurprising given that many jurisdictions generally recognize that a fundamental change of circumstances may justify that a third party—be it a court or arbitral tribunal—revise the parties’ contractual arrangements (take, for example, the rebalancing of a contract in some civil law systems or termination due to frustration). 

With respect to the question at issue, both scholars and institutions agree that exceptional circumstances may justify revising a parties’ agreement on the seat. The Institut de Droit International was among the first to acknowledge this possibility. In a 1989 resolution, the Institut included the following provision: “Should it become unduly difficult to carry on an arbitration at the agreed place, the tribunal is entitled, after consultation with the parties, to remove the arbitration to such place as it may decide.” (seeArticle 3(d) of the Resolution). Since then, other institutions have addressed the issue. For instance, the Secretariat’s Guide to ICC Arbitration (chapter 3) notes that “[i]n extreme cases where the place of arbitration initially agreed upon can no longer function as such . . .  it is conceivable that a party could apply to the arbitral tribunal to change the place of arbitration.” In the same vein, Gary Born notes that “recognition of party autonomy is central to international arbitration and only exceptional circumstances justify disregarding agreements on the arbitral seat.” (seeG. Born, “Selection of Arbitral Seat in International Arbitration,” in International Commercial Arbitration (2021), §14.04(B)(2)).

The issue has been addressed by tribunals, as follows:

• Himpurna California Energy Ltd. v. Republic of Indonesia (II) (see ICCA Yearbook Commercial Arbitration (Vol XXV), pp. 109-215): While this arbitration seated in Jakarta was ongoing, the claimant applied to change the seat because the Indonesian courts issued anti-arbitration injunctions and the respondent State allegedly threatened the claimant’s employees, witnesses and counsel and the arbitral tribunal with fines and/or imprisonment if the arbitration continued (later, it was reported that the government allegedly arranged the abduction of a co-arbitrator). The claimant alleged that these were changed circumstances making arbitration in Jakarta unfeasible. The tribunal rejected the claimant’s request, though it relocated the physical venue to the Netherlands.
• ICC Cases No 10373 and 10439 (see P. Lalive, On the transfer of seat, p. 6): These related cases (seated in Belgrade) concerned a dispute between a U.S. corporation and the Serbian state and a Serbian state enterprise. The U.S. party applied to transfer the seat given the open conflict between the United States and Serbia during the Milosevic regime, which allegedly controlled the same Serbian judiciary that had rendered decisions expropriating the claimant’s investments, which gave rise to the arbitration. The tribunal rejected the request because none of the arbitrators had been subject to pressure from either Serbia or the U.S., and hearings could be held at a physical venue outside of Serbia.
• National Iranian Oil Co v Ashland Oil Co (see Nat’l Iranian Oil Co. v. Ashland Oil, Inc., 817 F.2d 326 (5th Cir. 1987)): In this case, the claimant, an Iranian state owned company, argued that the Iranian revolution had rendered the parties’ arbitration agreement in Tehran inoperable. The request was brought before a U.S. court, which found that principles of contract law could be applied to deny recognition of an arbitration agreement. However, it rejected the claimant’s request to relocate the seat because it considered that the claimant, as a state-owned entity, could not claim that the revolutionary changes were unforeseen. 
• Heirs to the Sultanate of Sulu v Malaysia, Final Award, ¶¶ 133-45: The sole arbitrator had set Madrid as the seat of the arbitration because the arbitration agreement was silent on the issue. The claimants later requested that the seat be relocated after the Madrid courts vacated the sole arbitrator’s appointment. The sole arbitrator reasoned that the Superior Court’s judgment “created a disruptive situation in the arbitration” that “threaten to render the [a]rbitration [a]greement inoperative or incapable of being performed.” The arbitrator granted the request and relocated the seat to Paris. 
• Pope & Talbot v Canada, Ruling Concerning the Investor's Motion to Change the Place of Arbitration, ¶ 14): In Pope & Talbot, a NAFTA dispute under the UNCITRAL Rules, the tribunal accepted that it had the authority to change the seat of arbitration. However, in that case the parties had not contractually agreed on the seat of the arbitration, rather the tribunal itself had set the original seat of arbitration. The tribunal ultimately denied the claimant’s request because the proceedings were well underway, and it was not efficient or effective to change the seat at that point.
• Europa Nova Ltd. V Czech Republic, Award, ¶¶ 24, 26, 38: In this case, brought under the Energy Charter Treaty, and the UNCITRAL Rules, the tribunal had set the seat of arbitration in Paris. The claimant later requested the transfer of the seat of arbitration citing the request of the European Commission for leave to intervene in the proceedings and certain actions taken by it and E.U. courts in unrelated arbitrations. The tribunal granted the request and transferred the seat to Geneva, Switzerland. 

Concluding remarks

The decisions discussed above show that while a tribunal may have the power to change the seat, that power is typically exercised only in extreme situations. In the two cases in which tribunals granted the request for transfer, the seat had been set by the tribunal itself, and the decisions were motivated by circumstances that involved interference with the arbitral proceedings. In neither case did the tribunal revise or replaced the seat agreed by the parties’ arbitration agreement. 

Tribunals deciding on the transfer of the seat should carefully balance the principles at stake, and consider the parties’ autonomy and the extent to which the circumstances invoked prevent the fair conduct of the arbitration.