Divergence from Conflict-of-Law Analysis: The Need for a Coherent Standard of Review for Economic Sanctions in International Arbitration

The recent reinstatement of economic sanctions by the US against Iran, China and Hong Kong (The Comprehensive Iran Sanction, Accountability andDivestment Act of 2010, Pub. L. 111–195, 124 Stat.1312, enacted 1 July 2010; Comprehensive Iran Sanction, Accountability and Divestment Act (CISADA). International Emergency Economic Powers Act (IEEPA), 50 U S C.1701–1706.) brings into focus how to best resolve disputes related to these sanctions in arbitral proceedings. Arbitral tribunals tend to apply conflict-of-law rules in order to determine the application and the validity of the sanctions. This article contends that the invocation of private international law principles, such as the conflict-of-laws analysis, to adjudicate these cases is conceptually and pragmatically challenging as it forces the arbitral tribunal to determine the applicable law according to complicated rules with a discretionary nature and thereby hinders arbitral tribunals from considering sanctions through the prism of public international law. The principles of Public International Law should be considered by arbitral tribunals when reviewing sanctions with transnational elements. The paper analyses the existing approach adopted by arbitrators and proposes that arbitral tribunals undertake a minimal standard of review based on Public International Law principles.