Adaptation of Longterm Contract by International Arbitrators

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Klaus Peter Berger

Adaptation and supplementation of contracts by international arbitrators has always been one of the most important and also one of the most debated issues of international arbitration law. Two reasons account for this. First, the international arbitrator's competence to adapt a contract to changed circumstances or to fill gaps in the contractual stipulations of the parties always involves a complex interaction of the applicable procedural law (the lex loci arbitri) and the substantive law applicable to the contract (the lex contractus). If the arbitration law does not allow for the adaptation or gap-filling by the arbitrator, an arbitral tribunal acting under this law may not proceed to adapt the contract before it, even if the applicable substantive law allows for contract adaptation, unless this procedure may be qualified as a mere construction of the contract under the applicable law. Secondly, contract adaptation by international arbitrators involves a basic conflict between two fundamental principles of contract law, the notion of sanctity of contracts (‘pacta sunt servanda’) on one side and of ‘clausula rebus sic stantibus’ (and its relatives in domestic legal systems) on the other. The rigidity of the former and the need for flexibility and ‘souplesse’ of the latter, e.g. in the context of complex long-term contracts, seem to be irreconcilable. This conflict is aggravated by the traditional doctrinal and philosophical dif-ferences between common law and civil law jurisdictions with respect to the judges’ or arbitrators’ authority to ‘rewrite’ the contract. Within this complex framework of doctrinal clashes the book provides an excellent analysis of the law of contract adaptation and gap-filling by international arbitrators under German and English law. The author has chosen these juris-dictions because both countries have recently enacted new arbitration laws without deciding in the law itself the controversial issue of contract...
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