What is the “seat” of an arbitration and why does it matter?
One of the most important choices parties make in agreeing to arbitrate disputes is the location of the arbitration’s “seat.” That choice can have significant consequences. It may impact the conduct of an arbitration. And it can affect the fate of an arbitral award.
What is an arbitration’s seat?
The seat is a legal concept referring to the jurisdiction in which the arbitration is deemed to take place. It is the ‘legal place’ of an international arbitration.
The seat is usually determined by the parties in their arbitration agreement. Under most arbitration rules, in the absence of agreement, the seat is fixed by the arbitral institution or the arbitral tribunal once appointed.
In many arbitrations, the seat and the physical place of an oral hearing are the same. But it is possible for parties to designate one place as seat, and hold hearings in a different place for convenience.
The seat also need not be located in the jurisdiction whose law governs the substance of the dispute. For example, an arbitration may involve a contract governed by New York law but be seated in France. A choice-of-law clause in a contract determines which law governs the dispute’s merits. It will not determine the seat.
Why does the seat matter?
The selection of the seat carries important legal and practical consequences. It affects the law governing an arbitration’s procedure, the so-called lex arbitri. An arbitration’s procedure is mostly fixed by party agreement (including agreement to use an institution’s rules). But the lex arbitri can play an important gap-filling role in deciding procedural issues on which the parties have not reached agreement.
Further, many jurisdictions impose mandatory requirements on arbitrations seated within them. Those rules cannot be waived. For example, if an arbitration is seated in England, it is subject to English law on arbitration, which imposes certain duties on arbitrators. It requires an arbitrator to adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense.
Choice of seat also amounts to an agreement by parties to designate the courts that will exercise a ‘curial role’ over the arbitration: Courts of the seat have sole jurisdiction to hear applications to annul or set aside an arbitral award. Although courts of other jurisdictions may be able to decline enforcing an award, they do not have authority to vacate one.
Choice of seat therefore also determines the grounds on which awards can be annulled. Because standards and procedures for challenging arbitral awards differ between jurisdictions, the seat can have a significant impact on a challenge’s success.
The choice of seat also confers jurisdiction on the seat’s courts to hear applications for interim relief. Courts of the seat can typically compel recalcitrant parties to arbitrate. Or they often can assist parties in obtaining discovery.
Where are arbitrations seated?
Surveys suggest that, besides the U.S., the most popular seats include London, Paris, Singapore, Geneva, Zurich, and Hong Kong. Some jurisdictions are considered safer than others. There have been recent efforts to rate objectively the favorableness of arbitral seats.
In the United States, New York is the most popular seat. It accounts for more than half of all ICC arbitrations seated in the U.S.
Because choice of seat can affect so many dimensions of an arbitration—from local conduct rules to annulment grounds and remedies—it is not a choice to be made lightly.
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