1. LEGAL THEORY OF INTERNATIONAL COMMERCIAL ARBITRATION
SUBMITTED BY: SUBMITTED TO:
JAISHIKA Ms. Shraddha Oberoi
Ba.llb(h) School of Law
IX Semester
180060401011
ABSTRACT
Although generally under-theorized, international arbitration has some theoretical
explications. Some theories are genuine and academic but others seek to justify a
predetermined outcome. This research paper offers a cultural critique of the existing theories
classified by different theoreticians. You’ll learn various theories related to international
commercial arbitration.
KEYWORDS: International commercial arbitration, Theories, Arbitration, Commercial law.
INTRODUCTION
The legality and systematisation of arbitration have been the subject of theoretical debates
since international commercial arbitration was conceptualised as a separate legal system.
There have been several arguments about the legality of arbitral rules and conventions,
including whether they can be regarded as law.

2. In these talks, academics have evaluated the arbitral system's legality using a variety of ideas.
On the basis of legal theories, they have made an effort to ascertain the substantive and
procedural characteristics of "law."
These theories are: a. Contractual theory, b. Jurisdictional theory, c. Mixed theory, d. Hybrid
theory, e. Autonomous theory.
A. CONTRACTUAL THEORY
The “contractual” theory evaluates arbitration from the approach of the business man.
It views it not as a mode of trial but as a shorter and more effective means. It demands that
on matters involving judicial precedent and judicial policy, the determination should be fairly
silent except in so far as it will be guided by such be fairly silent except in so far as it will be
guided by such procedure aas the parties have agreed upon.
According to this theory, the basis for arbitration is an agreement reached by the parties to the
dispute in order to settle it. The arbitration agreement's contractual nature is given
prominence by this. Without a written agreement, neither party may compel the other to
arbitrate a dispute; nevertheless, there are several circumstances in which this is possible,
such as mandatory arbitration.
An arbitration agreement shall govern any disputes relating to the composition of the arbitral
tribunal. The arbitral tribunal's decision is upheld and respected as a result of the arbitration
agreement.
It is based on the presumption that the jurisdiction of arbitrators to hear and resolve a dispute
rests solely on the contract between the parties. The contractual doctrine is probably the
historically oldest of all. It dates back to antiquity and has its roots in the very basis of the
existence of pre-roman “primitive justice”.
The contractual theory posits the idea that the consensual agreement of the parties is key to
determining the validity of the arbitration process, independent of the lex loci arbitri. This
theory forgoes any links between arbitral proceeding and lex fori, and purports that the
parties to the arbitration should have the freedom to decide the relevant issues within the
proceedings, without interference from the state.
Whilst it is worth acknowledging that the arbitral proceedings and the arbitration agreement
can be influenced by relevant laws in the place of arbitration, proponents of the contractual
theory suggest that the parties’ original agreement bestows the arbitration with the
characteristics of a contract, within which they state their preference for disputes to be
resolved by arbitration, as well as allowing them to choose the law that will govern the
procedural and substantive matters of the proceedings.
B. JURISDICTIONAL THEORY

3. According to the jurisdictional approach, any agreement the parties may have made is
superseded by the law of the arbitration venue (lex arbitri). The argument emphasises that the
location of the arbitration is crucial and gives state sovereignty priority over the parties'
voluntary agreement.
According to the jurisdictional principle, an arbitration that takes place within a state's
borders is governed by that state's laws, or lex fori, because that state has the right to
authorise (or disapprove, as the case may be) the actions that take place there. The arbitrator
must carry out the arbitration proceedings in accordance with the parties' wishes, but this is
constrained by the rules of the lex fori, and any actions that violate the state's laws may be
annulled by the court where the arbitration is being held. This premise is further expanded to
control the arbitrator's activities.
The jurisdictional theory has a certain elegance insofar as it has synergies with the New York
Convention and respects the sovereignty of nation states. The suggestion that the lex arbitri
is, by definition, the lex loci arbitri is simple and effective, though it is not without criticism.
The over-reliance on the laws of the place of arbitration and the restrictions inherent within
this can over-complicate proceedings and render arbitral proceedings as drawn out as court
proceedings, undermining one of the key tenets of arbitration as a method of dispute
resolution.
Although the jurisdictional theory is far from flawless, there is evidence that the judicial
components of the arbitration are subject to mandatory regulations, such as the nature of the
arbitration, the authority of the arbitrators, and the acceptance and execution of the awards.
However, the nature of arbitral proceedings is that they cannot exist without the express
agreement of both parties, and as a result, there is a contractual element within them. The
jurisdictional theory understandably respects the authority of sovereign states and as a result
supports the primacy of mandatory rules of state over the choices of parties to the arbitration.
C. MIXED/ HYBRID THEORY
This theory is considered to be a compromise between the jurisdictional theory and the
contractual theory. According to this theory, arbitration is a private agreement between the
parties with the exclusive jurisdiction of the court in the dispute.1
The mixed or hybrid theory encompasses a mixture of the above two. The commentators who
support it believe that the reality lies somewhere in the middle of the contractual and
jurisdictional theory, namely, that neither the arbitrator performs a legal function nor that the
award is a contract. “The parties, by their agreement, created and fixed the limits of their
1
https://blog.ipleaders.in/international-commercial-arbitration-2/#_Fixed_or_hybrid_theory

4. private jurisdiction” The arbitrator’s duty is to judge but the power to do so is conferred to
him by the agreement of the parties.2
D. AUTONOMOUS THEORY
According to the autonomous arbitration theory, arbitrations must remain autonomous
and free from state interference. Accordingly, international arbitrations must be
governed by international rules and practices, and not national laws. However,
proponents of this theory have acknowledged that parties must rely on courts for
enforcement of arbitral awards.
Unaffected parties are forced to approach national courts, particularly those that have
jurisdiction over the assets of the defaulting party, when parties refuse to voluntarily
comply with the conditions of an award or the instructions of the tribunal during the
arbitral procedure. Most national courts uphold national law when exercising their
authority.
While there have been many obstacles to supporting a wholly autonomous arbitration,
advances like distributed ledger technology have improved this. For arbitration to be
fully autonomous, it must not rely on states at all and must have its own enforcement
mechanism. Understanding the need for arbitral autonomy is necessary before
discussing how it might be accomplished.3
E. CONCLUSION
It can be concluded that arbitration is an alternative mechanism used by the parties
involved in the matter in order to resolve the dispute. Under this process the parties
through mutual consent enter into an agreement and award is issued by the arbitral
tribunal which is to be enforced by the court. Thus arbitration needs the assistance of
the court in order to remain effective. As it can be seen that with the colossal and
radical boom in the international trade and investment around the globe has resulted
in the staggering growth of our economy.
3
http://arbitrationblog.kluwerarbitration.com/2022/03/11/autonomous-arbitration-in-the-era-of-the-meta
verse/#:~:text=to%20mass%20a
2
https://www.inter-lawyer.com/lex-e-scripta/articles/arbitrators-immunity.htm#_ftn9

5. Works Cited
● Asthana, Subodh. “Role of National Courts in the International Commercial
Arbitration.” iPleaders, 10 September 2019,
https://blog.ipleaders.in/international-commercial-arbitration-2/#_Fixed_or_hybrid_th
eory. Accessed 14 November 2022.
● “Immunity of Arbitrators - International Arbitration.” THE INTER-LAWYER GROUP
- Law, 20 June 2002,
https://www.inter-lawyer.com/lex-e-scripta/articles/arbitrators-immunity.htm#_ftn9.
Accessed 14 November 2022.
● Rozhodci, RUZIKA, K. Arbitration in the arbitration court at the economic chamber
of Czech republic and agricultural chamber of czech republic. vol. p.20, Pilsen, 2003.
● Vijayan, Sneha, and Tarciso Gazzini. “Autonomous Arbitration in the Era of the
Metaverse.” Kluwer Arbitration Blog, 11 March 2022,
http://arbitrationblog.kluwerarbitration.com/2022/03/11/autonomous-arbitration-in-th
e-era-of-the-metaverse/. Accessed 14 November 2022.