39th Freshfields Arbitration Lecture

Prof. Dr. Mohamed Abdel Wahab discusses Iura Novit Arbiter: A Practicum – Beyond Cultural Considerations and Legal Desperation

The annual Freshfields Arbitration Lecture took place on 18 November 2024 with Prof. Dr. Mohamed Abdel Wahab delivering the keynote address. The lecture was held at the Great Hall in Lincoln’s Inn. Professor Abdel Wahab was introduced by Sylvia Noury KC, Partner in Freshfields’ International Arbitration Group, and Professor Julian Lew KC, Head of the School of International Arbitration at the Queen Mary University of London.

Professor Abdel Wahab elected to speak about iura novit arbiter (INA), a rephrasing of the principle of iura novit curia: the court knows the law. In its simplest form, the principle states that parties to a dispute do not need to plead the law (which the adjudicator is presumed to know already) but simply supply the facts. Applied to international arbitration, the theory goes that a tribunal is empowered to ascertain the content of the applicable law to the dispute and, if the parties fail to do so, the tribunal must develop its own legal reasoning in order to fulfil its mandate. 

But this is where any simplicity ends: there is no universal consensus on the scope of INA. 

Although more commonly accepted in civil law jurisdictions, uncertainties around the role of INA in international arbitration extend far beyond the common law and civil law divide. Whether a party can successfully challenge an award based on an unforeseen legal principle which they were not given the opportunity to address differs not only between legal systems but from case to case. 

Throughout his lecture, Professor Abdel Wahab explored the polarised opinions surrounding INA in both academic debate and international case law. Without wishing to be labelled as an advocate for one approach over another, he concluded that a practical solution offering a base level of certainty and transparency is needed. One that innovates and regulates the operation of INA, but does not undermine party autonomy or the right to due process. 

He finished by outlining a new set of draft provisions to be used in Procedural Order No. 1 which enable parties to choose whether the tribunal is entitled to determine the legal issues and apply unpleaded law following the INA principle. 

International Arbitration as a “Third Culture”

Professor Abdel Wahab’s lecture was framed by the idea that international arbitration is an example of a “third culture”. An arbitral tribunal does not render justice in the name of one State or legal order; and in carrying out their role, arbitrators have to put aside their own practice and principles, their legal education, experience, and expertise – including their views on INA - to ensure the integrity of proceedings. 

He offered a number of representative dilemmas a tribunal can face in practice. 

For example, where a party has terminated a contract under the force majeure provision on the basis of impossibility, but the tribunal considers hardship is a better basis of relief. Should the tribunal recharacterise the claim and grant relief on the basis of hardship, and in doing so risk aiding one party’s case over another, or dismiss the claim on the grounds that (on the pleaded case) the conditions of force majeure have not been met? 

Similarly, in a civil law context, what if a party claiming breach of contract ignores the good faith provision of the civil code but the tribunal considers this to be applicable? Or in an investor-State context, what if one party invokes a particular treaty provision but the tribunal relies on another provision as the basis of its award? 

In the latter two examples, the civil code and investment treaty would be a matter of record, even if the parties did not invoke or address them specifically. 

In each scenario the tribunal may risk exceeding its mandate. This is not helped, as Professor Abdel Wahab noted, by the lack of globally accepted parameters regulating INA. In common law jurisdictions it is opposing counsel who put forward the legal principles, which limits the court’s ability to make use of unpleaded law or overturn incorrectly invoked law. Whereas in civil law jurisdictions the courts will more freely make use of any provisions available in the applicable code. But even within common and civil law jurisdictions respectively, national courts have varied practically case to case on whether a tribunal is entitled to proceed on the principle of INA. 

No Consensus on INA

By providing a whistlestop global tour of the case law on INA, Professor Abdel Wahab demonstrated that there is no settled approach. 

Switzerland, Egypt, and Italy, among others, are jurisdictions where national courts have held that an arbitral tribunal has discretion to apply legal rules beyond the parties’ submissions. A common reason being that as arbitrators are appointed due to their knowledge of the law, the arbitral process should not be a mere rubber stamping of the positions advanced by the parties. 

In any case, as Switzerland’s Federal Tribunal has held, the tribunal are bound by subject matter, the pleaded facts, and the scope of relief – all of which provide a “safe zone” in which INA operates. 

In the UK, where one might expect the adversarial nature of proceedings to neutralise INA, there has been a noticeable shift over the last twenty years. In OAO Northern Shipping Co v Remolcadores De Marin SL (2007) it was held that arbitrators had a duty to put points never raised to the parties for comment, and this duty applied equally to unargued points of law as to unargued questions of fact. 

However, the Privy Council in Gol Linhas Aereas SA v Matlin Patterson Global Opportunities Partners (Cayman) II LP and others (Cayman Islands) (2022) moved away from a test based on whether or not an authority is on record. The court held that the tribunal had far greater leeway in matters of law than fact, and although it would be prudent to afford parties the opportunity to comment, failure to do so would not amount to any serious denial of procedural fairness to the extent that this would prevent enforcement of an award under the New York Convention. 

The Three Ds: Duty, Discretion, Delimitation

Before offering a practical way forward, Professor Abdel Wahab noted that arbitrators are caught in a triangle of duty, discretion, and delimitation. The duties of arbitral tribunals are easy to identify, i.e., duty to determine the applicable rules and ascertain their content, to continually interpret this law and assess party arguments in light of them, and remain relatively uncontroversial. 

The devil is in the detail of how the tribunal should exercise its decision-making powers conferred by the applicable procedural and substantive laws, always bearing in mind the following four key limitation factors: (i) respect for party autonomy and legitimate expectations, (ii) not to exceed the parties’ claims and relief, (iii) the importance of impartiality, and (iv) observing due process and avoiding taking the parties by surprise. 

In this sense, INA sits at the centre of competing interests, namely the need for the proper administration of justice (which includes preventing the evasion of law and safeguarding public policy) and at the same time respect for party autonomy and the requirements for due process. Professor Abdel Wahab argued that a transparent protocol was needed to calibrate these duties, discretion powers and delimitations. 

Procedural Certainty, Predictability & Transparency

As a “modest” contribution to promote procedural certainty, Professor Abdel Wahab finished his lecture by offering a set of draft provisions that parties could use in Procedural Order No. 1 to establish the parameters of INA. The six provisions attempt to bridge the jurisdiction-specific approach and offer uniformity in place of confusing and polarised opinion. 

Together the provisions clearly define how a tribunal can ascertain, interpret, and apply (a) legal principles and (b) provisions in a legal agreement forming the basis of a claim or defence, in cases where they are on record but not clearly pleaded by the parties.

The first three effectively providing that parties will dispose of their burden of proof through counsel submissions or legal expert evidence and in the process adduce all supporting legal authorities, are fairly standard. But in the final three, parties would have the freedom to empower the tribunal to recharacterise claims and introduce new determinative legal arguments (all provided parties have the opportunity to comment): 

(4) When considering the parties’ legal submissions, the arbitral tribunal shall [or shall not have] have the power to: 

a- legally characterize agreements, other applicable instruments and/or documents to the extent necessary for the determination of the issues in dispute; 

b- construe, interpret, assess the legal relevance, and/or make any necessary legal inference with respect to the agreement, legal texts and/or other documents on record; 

c- assess the reliability and weight of the legal arguments, submissions and/or legal expert evidence relied upon by the parties, in light of the applicable rules of law and the legal authorities on record, including statutes, case law, scholarly writings and/or other legal materials; 

d- apply any applicable legal provisions and principles, even if not clearly pleaded by the parties, insofar as they are (i) pertinent to the determination of the issues in dispute; (ii) of mandatory or public policy nature under the applicable rules of law; or (iii) of an overriding mandatory nature under another law to the extent such overriding mandatory provisions claim direct application to one or more of the issues in dispute and/or raise issues of illegality; 

e- apply any provisions in the agreement or any other legal instrument constituting the basis of the parties claims and defences, insofar as the agreement or such other legal instrument is on record, and irrespective of the 

whether the specifically pertinent provision(s) is/are directly invoked by the parties; f- assess the legality of the remedies and relief sought by the parties under the applicable rules of law; and 

g- question the parties on (i) the legal issues in dispute and/or relevant to the arbitral tribunal’s determinations; and (ii) the parties’ submissions and evidence on the content of the applicable rules of law.

(5) When exercising its powers under (4) above, the arbitral tribunal shall not unless otherwise expressly mandated by overriding mandatory provisions of the relevant governing law: 

a- in any way exceed the parties’ claims, defences and prayers for relief; 

b- introduce new legal arguments and/or propositions of law that are determinative of the outcome of the dispute, in whole or in part, if not raised by the parties; 

c- decide the dispute on the basis of legal characterizations that have not been pleaded by the parties, unless the parties have been given a reasonable opportunity to express their views in relation to such legal characterizations; 

d- apply legal and contractual provisions that are not pleaded, unless the parties have been given a reasonable opportunity to express their views in relation to such legal provisions; and 

e- rely in its reasoning on legal authorities that are not on record, unless (i) such legal authorities only affirm a legal principle already pleaded and expressed in other authorities on record; or (ii) the parties have been given a reasonable opportunity to express their views on such legal authorities. 

(6) In all cases, the Tribunal shall: 

a- exercise reasonable care when using its powers under (4) above and observe the delimitations under (5) above; 

b- avoid any unnecessary costs and expenses associated with ascertaining the content of the applicable rules of law; 

c- observe the requirements of impartiality and independence, and avoid raising novel legal arguments in aid of either party’s case; and 

d- observe the requirements of due process. 

To watch the 2024 Freshfields Arbitration Lecture, click here.