Discarding the importance of the lexfori, advocates of the contractual theory debate that arbitration is foundedon the agreement between the parties. They refute that any convincing relationshipexists between the arbitration proceedings and the law of the place in whichthe arbitration resides. They uphold that parties possess the autonomy to choosethe appropriate concerns regarding the arbitration procedures and this autonomyshould commonly not be intruded with by the influences of any form of statepower. The contractual theory contrastswith the jurisdictional theory, and scrutinises the nature of arbitration froma contractual perspective. Whilst the contractualists acknowledge the reality thatarbitration proceedings and arbitration agreements can be swayed by the relevantnational laws, they maintain that arbitration possesses a contractual personalitythat is derived from the parties’ arbitration agreement. Correspondingly, anarbitration agreement is freely created among the parties, and countenancesthem to regulate the time and place of arbitration, choose the arbitrators to adjudicatetheir dispute and select the laws leading both technical and practical matters.The promoters of the contractualtheory deem that the resolution of the dispute in arbitration ought not be manipulatedby the authority of any form of state power, and that the hypothesis of pactasunt servanda shouldreign, thereby rendering it compulsory to the parties to implement thearbitration agreement prepared between them exclusive of the state’s burden1. Kellordescribes the following:Arbitrationis wholly voluntary in character.
The contract of which the arbitration clauseis a part is a voluntary agreement. No law requires the parties to make such acontract, nor does it give one party power to impose it on another. When suchan arbitration agreement is made part of the principal contract, the partiesvoluntarily forgo established rights in favour of what they deem to be thegreater advantages of arbitration.2Correspondingly, besides the concessionsof arbitrability and public policy, the lex fori has relatively small stimulusin the processes and result of the arbitration. Additionally, it has beenestablished that domestic arbitration laws exist solely to enhance and completevoids in the arbitration proceedings and to offer an efficient guideline that appropriatelysupervises the management of an arbitration.3The medium of internationalcommercial arbitration is indubitably planned on the foundation of contractualtheory in most jurisdictions. Most courts acknowledge the necessity of having amore versatile method of adjudication; therefore, they habitually choose to respectthe contractual theory and infer that the arbitration agreement is essentiallya contract.
For example, in the case of Cereals S.A. v Tradax Export S.A.4, the court stated thata contractual relationship was in existence between the parties and thearbitration tribunal5.
Additionally, the court held that the arbitrators turned out to be parties tothe arbitration agreement as soon as they accepted the appointment6.The court perceived the following: “It is the arbitration contract that thearbitrators become parties to by accepting appointments under it. All partiesto the arbitration are, as a matter of contract (subject always to the variousstatutory provisions), bound by the terms of the arbitration contract.
“7It is accurate to depict, to anundeniable degree, the alliance between parties and arbitrators as a contract. Thecontractual alliance examined in this paragraph is inclusive of two contracts: thefirst being the contract between the parties (the arbitration agreement),whilst the second is the appointment agreement between the parties and thearbitrators. On one hand, it has already been established that, in order to commencearbitration proceedings between two parties, a valid arbitration agreement mustbe existence. On the other hand, concerningthe second type of aforementioned contract, it is imperative to note that theselection of arbitrators cannot be approved by a singular party’s one-sideddecision, and hence consent from both the parties and the arbitrators is crucialto ensure a valid selection of the arbitrators. Subsequently, the differences amongstthe parties are then presented to the arbitrators, the arbitrators carry out theirduties in order to resolve those differences, and then the arbitrators aregiven sufficient payment in exchange for their time and efforts in deliveringthe arbitral award. The contractual theory doesnot indicate a reasonable answer to the question concerning the immunity of arbitrators,which is a premeditated measure created to circumvent proceedings being broughtagainst arbitrators by a discontented party. Although diverse latitudes ofimmunity exist across numerous jurisdictions, arbitrators normally experience aquasi-judicial form of immunity, which is only natural since arbitratorsperform a quasi-judicial function in the first place.
In France, there is noexplicit reference to the concern of arbitrator’s immunity in their legaldoctrines; however, it is commonly acknowledged that the discontented party oughtto submit an appeal for annulment of the award prior to initiating a civilaction against the arbitrators. In England, the House of Lords case of Sutcliffev Thackrah8endows absolute immunity to arbitrators9.The courts of the United States have further developed the issue of immunity incomparison to the English courts, in the sense that immunity is also offered toarbitration institutions. Judicial immunity was initiallyestablished in the case of Bradley v Fisher10 on the consensus that:”If civil actions could be maintained in such cases against the judges, becausethe losing party should see fit to allege in his complaint that the acts of thejudge were done with partiality or maliciously or corruptly, the protectionessential to judicial independence would be entirely swept away.”11This immunity is also extensive to arbitrators on the basis that their dutiesto the parties are quasi-judicial in nature, which is corroborated in the caseof Cahn v International Union Ladies’ Garment Workers Union12.