5 A Proposed Bright-Line Test—The Closest Connection Test
- Choice of law clauses — Stateless applicable law — Unidroit Principles and choice of law — Contractual obligations — Legal risk in multi-state transactions — Applicable law in multi-state transactions
This chapter recommends the closest connection test as the basis for the reform of arbitral conflicts of laws. It assesses thirteen different ways in which the governing substantive law can be identified, based primarily on the conflicts rules addressed in Chapter 2. To facilitate this analysis, these thirteen methodologies are divided into three groups: ‘Category A rules’ are those considered out-of-favour in the modern international commercial arbitration environment; ‘Category B rules’ are those enjoying some contemporary endorsement in arbitral conflicts of laws, but which remain controversial; and ‘Category C rules’ are those rules considered mainstream in contemporary arbitral conflicts discourse. Only Category A’s international instruments rule and Category C’s closest connection test emerge as potentially feasible bright-line tests. On further comparison of these two alternatives, the closest connection test emerges as the optimal conflict of laws rule for international commercial arbitration.