SSRN id2535160

Prévia do material em texto

RESEARCH PAPER SERIES 
 
_____________________________________________________________________________________ 
March 2015 2015-012 
 
 
 
 
The Arbitral Role in Contractual Interpretation 
 Joshua D. H. Karton 
 
This article considers the role of arbitrators in adjudicating the merits of international commercial 
disputes. It focuses, as a case study within this broader topic, on the interpretation of contracts. 
Interpreting contracts is a highly practical activity, but arbitrators’ approach to interpretation has 
important implications both for theory and for the success of arbitration as a means for the resolution of 
international commercial disputes. Are arbitrators more like judges, bound to apply the governing law 
according to strictly-defined rules, or more like commercially-minded problem-solvers? What approach 
best serves the needs of commercial parties? 
 
The article challenges a widespread attitude that arbitrators should interpret contracts according to their 
commercially reasonable meaning, regardless of the interpretative rules provided in the governing law. 
First, it documents this attitude in the published awards and in the ‘extra-judicial’ pronouncements of 
arbitrators. Second, it confronts the various arguments that might be made in favour of arbitrators 
departing from the governing law. Finally, it sets out a suggested approach for determining the 
appropriate interpretive method in any given case. 
 
 
 
 
 
Queen’s University Faculty of Law 
128 Union Street 
Kingston ON K7L 3N6 
Canada 
www.law.queensu.ca 
http://ssrn.com/link/Queens-U-LEG.html 
 
lawresearch@queensu.ca 
 Electronic copy available at: http://ssrn.com/abstract=2535160 
THE ARBITRAL ROLE IN CONTRACTUAL INTERPRETATION 
 
JOSHUA KARTON 
 
This article considers the role of arbitrators in adjudicating the merits of 
international commercial disputes. It focuses, as a case study within this broader topic, on 
the interpretation of contracts. Interpreting contracts is a highly practical activity, but 
arbitrators’ approach to interpretation has important implications both for theory and for the 
success of arbitration as a means for the resolution of international commercial disputes. Are 
arbitrators more like judges, bound to apply the governing law according to strictly-defined 
rules, or more like commercially-minded problem-solvers? What approach best serves the 
needs of commercial parties? 
The article challenges a widespread attitude that arbitrators should interpret 
contracts according to their commercially reasonable meaning, regardless of the 
interpretative rules provided in the governing law. First, it documents this attitude in the 
published awards and in the ‘extra-judicial’ pronouncements of arbitrators. Second, it 
confronts the various arguments that might be made in favour of arbitrators departing from 
the governing law. Finally, it sets out a suggested approach for determining the appropriate 
interpretive method in any given case. 
 
Introduction................................................................................................................................ 1 
I. International Arbitrators’ Words and Deeds on Contractual Interpretation ........................... 2 
A. What we Know of the Actual Practice .............................................................................. 3 
B. International Arbitral Attitudes Toward Contractual Interpretation ............................... 12 
C. Accounting for This Attitude—Some Brief Observations .............................................. 16 
II. International Arbitrators’ Duty to Interpret Contracts According to the Governing Law .. 17 
A. The Arguments from Contract Law ................................................................................ 18 
B. The Arguments from International Arbitration Law and Practice .................................. 22 
III. How International Arbitrators Should Interpret Commercial Contracts ........................... 31 
Conclusion ............................................................................................................................... 33 
 
 
 
 Assistant Professor, Queen’s University Faculty of Law. This article is part of a larger project exploring 
international arbitrators’ duties to apply the governing law, which is generously supported by the Social 
Sciences and Humanities Research Council of Canada and the Queen’s University Senate Advisory Research 
Committee. I am grateful to Sophie Nappert and Jonas Rosengren for helpful comments on prior drafts, to Leslie 
Green for sharing some insights on the nature of legal duties, and to participants at the Queen Mary New Voices 
in Commercial Law Seminar, the American Society of Comparative Law Younger Comparativists Committee 
Annual Conference, and the Queen’s Law Faculty Works in Progress Workshop. Finally, thanks are due to the 
journal editors and two anonymous referees for helping me to rethink and improve the article. 
 Electronic copy available at: http://ssrn.com/abstract=2535160 
1 
INTRODUCTION 
 
International commercial arbitrations ‘most commonly turn on issues of contractual 
interpretation.’1 One might therefore expect that matters of contractual interpretation law are 
of great interest to both practitioners and commentators, and that international arbitrators are 
steeped in the law of contractual interpretation. However, the literature on contractual 
interpretation in international commercial arbitration (ICA) is sparse.2 As a leading Swiss 
arbitrator put it, contractual interpretation ‘is an issue that is often overlooked but is actually 
very important.’3 
The paucity of commentary is partly attributable to a widespread attitude among 
international arbitration practitioners and commentators that the governing law often does not 
matter much. International arbitration has been described as having a ‘lawless’ aspect, in that 
tribunals may decide based on what they see as the most commercially reasonable outcome 
rather than on strict application of the law. International arbitrators’ approach to 
interpretation is just one example of this attitude in action, but it exemplifies the phenomenon. 
A recent publication of the International Chamber of Commerce introduces a set of awards 
involving contractual interpretation with this observation: ‘Arbitrators are not beholden to 
national legal systems. They enjoy greater freedom than state courts when engaging in 
contractual interpretation.’4 Similarly, Derains writes that ‘The interpretation of contracts is 
one of the areas in which international commercial arbitrators are most inclined to disengage 
from national laws in order to resort to general principles of law.’5 
Many arbitrators interpret according to their sense of the ‘true intent’ of the parties 
(which often looks suspiciously like the arbitrators’ sense of the commercially reasonable 
meaning of the contract), without regard to the interpretive method prescribed by the 
governing law.6 This is not meant to imply that legal rules of contractual interpretation lead to 
unreasonable results—only that many tribunals ignore or pay mere lip service to the 
governing law. To be sure, international arbitrators do not universally subscribe to such an 
approach, and it is difficult to gauge empirically whether it constitutes the position of a 
majority. However, if such an approach is at all widespread, it would be problematic. 
As I will argue, the governing law’s rules on interpretation are not just important, but 
are unavoidable in all contractual disputes. One cannot interpret a contract without at least a1 Alan S Rau and Edward F Sherman, ‘Tradition and Innovation in International Arbitration Procedure’ (1995) 
30 Texas Intl L J 89, 101. See also James Spigelman, ‘The Centrality of Contractual Interpretation: A 
Comparative Perspective’, The 2013 Kaplan Lecture (Hong Kong, 27 November 2013) 1, 
<http://clients.squareeye.net/uploads/oec/KAPLAN_LECTURE_27.11.13.pdf> accessed 28 October 2014 (‘In 
my experience ... the majority of commercial disputes involve questions of contractual interpretation. Often, 
such questions are at the heart of the dispute.’). 
2 Aside from my own previous research, the only published scholarly pieces I have found are Spigelman (n 1) 
(which deals mostly with interpretation of arbitration agreements); Laurent Lévy and Fabrice Robert-Tissot, 
‘L’interprétation arbitrale’ [2013], 4 Revue de l’Arbitrage 861 (which deals with both contractual interpretation 
and interpretation of the law, and covers commercial, investment, and sports arbitration) Jonas Rosengren, 
‘Contract Interpretation in International Arbitration’ (2013) 30(1) J Intl Arb 1; Giuditta Cordero-Moss, 
‘International Arbitration and Commercial Contract Interpretation: Contract Wording, Common Law, Civil Law 
and Transnational Law’ in P Lindskoug and others (eds), Essays in Honour of Michael Bogdan (Juristförlager i 
Lund 2013) 33; Leslie G Fagen and Daniel Thacker, ‘Choice of Law and Interpreting Contracts in International 
Commercial Arbitration’ (2006) 21(8) Mealey’s Intl Arb Rep 1. 
3 Interview with the author, 12 June 2012. 
4 Unsigned introductory note. (2014) 25(1) ICC Bull 39. 
5 ICC Case No 2291 of 1975 [1976] JDI 989, obs Yves Derains. 
6 See below, section I.B.2. 
2 
passing reference to some body of interpretive rules. More importantly, arbitrators have a 
legal duty to interpret contracts according to the interpretive rules of the governing law. 
Admittedly, the importance of the governing law is not obvious with respect to contractual 
interpretation (unlike, for example, mandatory rules on the validity of various contractual 
terms). Nevertheless, rules of contractual interpretation are essential and the applicable law 
can be decisive to the outcomes of disputes. In addition, commercial parties would benefit 
from a ‘legalistic’ approach to interpretation—one that follows the governing law, and is 
therefore rigorous and predictable. 
Part I makes the case that many international arbitrators do in fact adopt a legally-
untethered approach to contractual interpretation. This contention is supported by two kinds 
of evidence. First, a review of published ICA awards that include instances of contractual 
interpretation shows that arbitrators sometimes ignore the governing law when interpreting 
contracts. Second, arbitrators’ own descriptions of their interpretive practices (as expressed in 
published awards, academic commentaries, and a set of interviews with active arbitrators) 
match this description. 
Part II confronts the arguments that might support a legally lax approach to 
contractual interpretation by international arbitrators. These arguments relate to contract law 
and to international arbitration law and practice, and I consider them separately. The 
arguments from international arbitration law and practice are the more important, since they 
go to the heart of debates over the proper adjudicative role of international arbitrators, and 
have consequences beyond contractual interpretation. 
Part III builds on the observations I make about the proper adjudicative role of 
international arbitrators to sketch some rules of thumb about how arbitrators ought to 
determine the appropriate method of contractual interpretation in each case. 
Two caveats are in order. First, I make no claim that the attitude I describe in Part I is 
universal; many arbitrators are meticulous in the way that they apply the law. However, the 
attitude that downplays the importance of the governing law is sufficiently prevalent that it 
must be addressed. Second, there is no reason to think that arbitrators who depart from the 
governing law have contempt for the law or are hostile to it; the attitude I describe is not 
illegal, but rather non-legal. 
Greater attention to the rules of interpretation in the governing law would not only be 
more accurate in a legal sense, but would also be more likely to correspond with the 
intentions of the parties. For arbitration to enjoy continued success as a method of 
international commercial dispute resolution, it is important to get these matters right. 
 
I. INTERNATIONAL ARBITRATORS’ WORDS AND DEEDS ON CONTRACTUAL 
INTERPRETATION 
 
International arbitrators often assert that most international commercial disputes can 
and should be resolved according to the contract and relevant usages, without reference to the 
governing law. In his seminal text on choice of law in ICA, Lew asserts that ‘[t]he answer to 
every dispute is to be found prima facie in the contract itself. What did the parties intend, 
what did they agree and what did they expect?’7 Böckstiegel even states that the ‘usual way’ 
of deciding cases in ICA is ‘exclusively on the interpretation of contracts and the relevance of 
 
7 Julian D M Lew, Applicable Law in International Commercial Arbitration (Oceana 1978) 581. 
3 
trade usages, so that very little depends on the question of the applicable law.’8 These two 
leading arbitrators thus describe their own practice as interpreting contracts without 
application of the governing law’s rules of interpretation. 
In this section, I argue that such an attitude is widespread in the international 
arbitration community. I draw first on a set of published awards involving instances of 
contractual interpretation. The pattern seen in the published awards is supported by analysis 
of a variety of written sources, such as articles and lectures by arbitration practitioners, as 
well as interview data. 
The interview data come from a series of semi-structured9 interviews conducted in 
2012 with twenty active international commercial arbitrators.10 It was important that the 
interviewees felt that they could speak freely, so all interviews are presented in an 
anonymized fashion. 
Twenty interviews is a small sample, and the interviewees are not intended to be 
representative of all international arbitrators in a statistical sense. However, they represent as 
wide a range of backgrounds as possible.11 Except on a few well-defined issues characterized 
by clear differences in national legal traditions, 12 interviewees’ responses were highly 
consistent with each other, regardless of differences in age, gender, national origin, 
professional background, years of experience as an arbitrator, and the like. This gives me 
confidence that a larger sample would not have yielded substantially different findings. 
Of course, not everything said by arbitrators should be taken at face value. However, 
the fact that the statements quoted below are congruent with what we know of international 
arbitrators’ actual practices should give them credence. Moreover, writings by arbitrators and 
interview data are important even if they do not accurately describe majority practices, 
because they give us a sense of international arbitrators’ self-image—a significant 
determinant of their decision-making approach. 
 
A. What we Know of the Actual Practice 
This section draws on my own prior research published in 2013;13 however, a review 
of awards released since then, included in the discussion below, shows that the trends I 
previously observed have continued. 
 
8 Karl-Heinz Böckstiegel, Arbitration and State Enterprises: A Survey of the Nationaland International State of 
Law and Practice (Kluwer 1984) 27. 
9 There was not a single set of scripted questions that was posed to every interviewee; instead, a series of general 
topic areas, outlined in advance, was proposed for discussion, and interviewees were encouraged to speak freely 
on those topics or on related topics that came to mind. See Louis Cohen and others, Research Methods in 
Education (6th edn, Routledge 2007) 352–55. 
10 The interviews were conducted during the preparation of a recently-published book, Joshua Karton, The 
Culture of International Arbitration and the Evolution of Contract Law (OUP 2013). 
11 For a profile of the interviewees, see ibid 10-11. 
12 The clearest example is the appropriateness of arbitrators actively encouraging settlements between the 
parties, an issue that caused some anxiety among interviewees. All but one of the interviewees who indicated 
that it is their practice to take an active role in helping the parties to settle were trained in jurisdictions that have 
a strong tradition of national court judges encouraging settlements, such as Germany, Switzerland, and various 
East Asian states. 
13 Karton (n 10) ch seven. An earlier version of the same research appeared as ‘International Commercial 
Arbitrators’ Approaches to Contractual Interpretation’ [2012] 4 Intl Bus L J / Revue de Droit des Affaires 
Internationales 383. 
4 
It is important to acknowledge some methodological limitations. The vast majority of 
ICA awards are confidential, and the few that have been published constitute a small and 
non-representative sample of the whole. Complicating matters, tribunals often do not specify 
which interpretive method they are applying. For example, if the award focuses solely on the 
language of the contract, it is impossible to tell whether extrinsic evidence was excluded on 
legal grounds, was never adduced by the parties, was discounted as unconvincing, or was 
ignored because the answer seemed clear from the text of the contract. (However, the fact 
that so many tribunals make no effort to describe their interpretive approach supports my 
underlying argument that they see the governing law as incidental to this task.) In addition, 
since most of the awards are published in summary or redacted form, it is possible that 
relevant discussions were excluded from the published extract. For all these reasons, robust 
generalizations about ICA cannot be made. 
That said, certain patterns are visible. There are seventy-three awards in the data set.14 
This number may appear small to readers unfamiliar with ICA; it is explained by the 
confidential nature of most international arbitrations and the fact that the institutions that 
select awards for publication emphasize awards that deal with jurisdictional and procedural 
matters.15 I have included only those cases where the parties disagreed as to the content of a 
commercial contract, which excludes cases where the respondent defended purely on the 
basis that the contract was unenforceable or that its breach of contract was excused. Also 
excluded are cases where the only contractual terms interpreted were arbitration agreements, 
because interpretations of arbitration agreements cannot be directly compared to 
interpretations of substantive contractual provisions.16 
To put the awards in context, a brief review of the comparative background is 
helpful. 17 Stereotypically, the common law proceeds from an objective perspective and 
disregards what the parties themselves actually thought their contract required: for common 
law judges, ‘the question is what reasonable persons, circumstanced as the actual parties were, 
would have had in mind.’18 The opposing view is exemplified by article 133 of the German 
BGB: ‘It is necessary to ascertain the true intention rather than adhering to the literal meaning 
of the declaration.’ 19 The civil law approach is classically described as ‘subjective’. It 
‘answers the question whether a given set of facts falls within the scope of a particular 
contractual clause exclusively on the basis of what the parties actually (subjectively) 
intended.’20 
To an extent, ‘subjective’ and ‘objective’ are more talismans than descriptions of the 
interpretive process. In Anglo-American law, the inquiry is not entirely objective in that the 
 
14 I do not discuss the tribunals’ choice of law; the analysis assumes that the governing law is set and proceeds 
to see how tribunals applied (or failed to apply) that law. 
15 Karton (n 10) 34. 
16 I hope to explore the interpretation of arbitration agreements in a subsequent article. 
17 Contractual interpretation is often given short shrift the major comparative law texts, and those that do 
address the issue are often focused on European legal systems. Useful comparative discussions can be found in, 
eg, Jacques H Herbots, ‘Interpretation of Contracts’ in Jan M Smits (ed), Elgar Encyclopedia of Comparative 
Law (2nd edn, Edward Elgar 2012); Nicole Kornet, Contract Interpretation and Gap Filling: Comparative and 
Theoretical Perspectives (Intersentia 2006); Konrad Zweigert and Hein Kötz, Introduction to Comparative Law 
(Tony Weir (tr), 3rd edn Clarendon 1998) 400-09. 
18 Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 1 AC 749, 778 (HL). 
19 Similarly, under article 1156 of the French Code civil, interpreters are directed to discover the ‘common 
intention of the parties … rather than pay attention to the literal meaning of the terms’. Official translation 
available online: <www.legifrance.gouv.fr/content/download/1950/13681/version/3/file/Code_22.pdf> accessed 
October 27 2014. 
20 Stefan Vogenauer, ‘Interpretation of Contracts: Concluding Comparative Observations’ in Andrew Burrows 
and Edwin Peel (eds), Contract Terms (OUP 2007) 123, 125. 
5 
purpose of contractual interpretation remains the determination of the intentions of the 
parties21—although, of course, those intentions must be determined objectively.22 The civil 
law jurisdictions do maintain a rhetorical allegiance to subjective interpretation. In practice, 
however, Germanic systems employ primarily objective methods.23 Romanistic law is closer 
to pure subjectivity, but nevertheless directs judges to consider a variety of objective 
phenomena24 and may restrain them from altering clear and unambiguous contractual terms.25 
The modern international contract law instruments all represent a compromise 
position between the common law and civil law. However, at least with respect to contractual 
interpretation, Germanic models predominate. The CISG and UNIDROIT Principles both 
direct tribunals to take a two-step approach to interpretation, first to look at the unilateral 
subjective intent of each party but, if that intent cannot be determined or was not made 
known to the other party, to interpret the contract objectively.26 
The common law’s dedication to objectivity leads it to place great importance on the 
ordinary meaning of the final written text. A set of exclusionary rules, most notably the parol 
evidence rule, shut out wide categories of evidence extrinsic to the contract itself, including 
evidence of the parties’ communications and actions before, contemporaneous with, and 
subsequent to the conclusion of the contract, and of their subjective understanding of what 
the contract meant. The civil law has no counterpart to these rules. All relevant evidence is 
admissible, and the adjudicator is charged with determining its weight and reliability.27 The 
same is true of the major international contract law instruments, all of which direct 
adjudicators to consider all relevant evidence.28 
Since roughly the 1970s, the strictness of the common law exclusionary ruleshas 
been loosened to a great degree, at least in the Commonwealth jurisdictions, where courts 
now regularly admit extrinsic evidence that is part of the context or surrounding 
circumstances of the contract, even when the contractual language is unambiguous. 29 
However, the traditional rules continue to apply in other common law jurisdictions, in 
particular some US states, and the rationales behind them continue to be influential across the 
common law world. 
 
21 See, eg, Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724, 736 (Lord Diplock) (‘The 
object sought to be achieved in construing any … contract is to ascertain what were the mutual intentions of the 
parties.’) 
22 Lord Diplock continues that the court’s object is to determine ‘the mutual intentions of the parties as to the 
legal obligations each assumed by the contractual words in which they … chose to express them.’ Ibid. 
23 See, eg, Vogenauer (n 20) 128, citing BGH 9 December 1970, LM § 157 (Ga) no 18. This position is justified 
by citing s 133 together with s 157 BGB, which requires contracts to be interpreted according to good faith, 
taking into account customary practices. 
24 Zweigert and Kötz (n 17) 406. 
25 According to the in claris non fit interpretatio maxim, clear terms need no interpretation. This maxim is 
widely recognized across the civil law world, and is particularly prominent in the law of Spain and the 
jurisdictions associated with it. Lévy and Robert-Tissot (n 2) 895. In France, trial courts may not ‘denature’ a 
clause claire et précise, and will be overturned on appeal if they do so. Barry Nicholas, The French Law of 
Contract (2nd edn, OUP 1992) 403. 
26 CISG Art. 8(1-2); UNIDROIT Principles Art. 4.2. 
27 Rules analogous to the common law exclusionary rules may apply to certain nominate contracts, especially 
those that must be in writing, be notarized, or comply with other formalities. For contracts that must be in 
writing, oral evidence is frequently inadmissible to contradict the written terms. See, eg, the French Code Civil, 
art 1341. 
28 See, eg, CISG Art. 8(3); UNIDROIT Principles Art. 4.3. 
29 cf Gerard McMeel, ‘The Principles and Policies of Contractual Construction’ in Andrew Burrows and Edwin 
Peel (eds), Contract Terms (OUP 2007) 27, 41 (‘Ambiguity is no longer a precondition for recourse to extrinsic 
evidence.’). 
6 
In theory, the seventy-three awards in the data set should be easy to distinguish 
because they should each employ the rules of contractual interpretation supplied by their 
respective governing laws. Awards decided under amiable composition or governed by 
general principles or lex mercatoria should be less predictable because tribunals may differ as 
to the fair result in a given case or as to the content of the relevant general principles. 
Most awards follow the expected pattern, or at least are not obviously inconsistent 
with the governing law. (It is often difficult to determine what, if any, interpretive rubric the 
tribunal followed.) However, a minority of awards clearly depart from the governing law 
and—more importantly—all do so the same way. As will be seen, all of the awards that 
depart from the law do so by seeking the ‘true intent’ of the parties when the law calls for 
objectivity, and, in cases governed by common law, by considering extrinsic evidence that 
common law courts would exclude. The awards applying general principles or adjudicated 
under amiable composition—where arbitrators have the greatest flexibility to adjudicate as 
they see fit—also adopt a noticeably subjective perspective and consider (or at least do not 
exclude) extrinsic evidence. 
The published awards thus give an indication of international arbitrators’ preferred 
interpretive method: subjective interpretation supported by liberal consideration of extrinsic 
evidence, but with priority given to the plain meaning of clearly drafted terms. They also 
show that, when the governing law does not fit that preferred method, arbitrators may depart 
from the law or ‘creatively interpret’ it to make it fit. 
 
1. Review of the published awards 
Awards applying the law of civil law jurisdictions comprise nearly half of the awards, 
thirty-two out of seventy-three.30 These awards are largely consistent with each other and 
with the approach required by the governing law. As would be expected, they include little 
discussion of the admissibility of extrinsic evidence. In no case was extrinsic evidence 
adduced by a party excluded from the record, but in a significant minority of the awards 
 
30 ICC Case No 1250 of 1964, (1980) V YB Comm Arb 168; ICC Case No 1434 of 1975, [1976] JDI 978; ICC 
Case No 2708 of 1976, [1977] JDI 943; ICC Case No 3055 of 1980, [1981] JDI 937; ICC Case No 3130 of 1980, 
[1981] JDI 932; ICC Case No 3894 of 1981, [1982] JDI 987; ICC Case No 4131 of 1982, [1983] JDI 899; ICC 
Case No 5080 of 1985, (1987) XII YB Comm Arb 124; ICC Case No 5485 of 1987, (1989) XIV YB Comm Arb 
156; ICC Case No 5505 of 1987, (1988) XIII YB Comm Arb 110; CRCICA Case No 21/1990, Award of 8 June 
1994, MEI Alam Eldin, ed, Arbitral Awards of the Cairo Regional Centre for International Commercial 
Arbitration Volume I (Kluwer 2000) 147; ICC Cases Nos 6515 and 6516 (joined) of 1994, (1999) XXIVa YB 
Comm Arb 80; ICC Case No 6527 of 1991, (1993) XVIII YB Comm Arb 44; ICC Case No 6653 of 1993, 
[1993] JDI 1040; ICC Case No 6673 of 1992, [1992] JDI 992; ICC Case No 7518 of 1994, [1998] JDI 1034; 
ICC Case No 7792 of 1994, [1995] JDI 993; Zürich Chamber of Commerce Award of 25 November 1994, 
(1996) 14(2) ASA Bulletin 303; CRCICA Case No 64/1995, Award of 24 September 1996, MEI Alam Eldin, 
ed, Arbitral Awards of the Cairo Regional Centre for International Commercial Arbitration Volume I (Kluwer 
2000) 175; ICC Case No 9443 of 1998, [2002] JDI 1106; ICC Case No 10188 of 1999, (2003) XXVIII YB 
Comm Arb 68; ICC Case No 10335 of 2000, <www.unilex.info/case.cfm?id=699> accessed October 27 2014; 
ICC Case No 11440 of 2003, (2006) XXXI YB Comm Arb 127; ICC Case No 11776 of 2002, [2006] JDI 1460; 
ICC Case No 12174, (2014) 25(1) ICC Bull 41; ICC Case No 12745, (2010) XXV YB Comm Arb 40; ICC Case 
No 13278, (2008) XXXIII YB Comm Arb 118; ICC Case No 13615, (2014) 25(1) ICC Bull 49; ICC Case No 
14630, (2012) XXXVII YB Comm Arb 90; ICC Case No 14793, (2014) 25(1) ICC Bull 61; Netherlands 
Arbitration Institute, Partial Award of 17 May 2005, Final Award of 5 July 2005, (2006) XXXI YB Comm Arb 
172; Russian Chamber of Industry and Commerce Award of 22 December 2008, 
<www.unilex.info/case.cfm?id=1477> accessed October 27 2014. 
7 
(twelve), the tribunals did not discuss any extrinsic evidence, most likely because the 
disputed term was clear on its face.31 
In four awards, the tribunal considered extrinsic evidence but explicitly declined to 
rely upon it because the contract was clear.32 Yet the only tribunals to cite a legal basis for 
this textualist approach were those in ICC Case No 5485 and CRCICA Case No 64/1995. 
Both cited versions of the in claris non fit interpretatio maxim, which is codified in Spanish 
and Egyptian law, the governing law of the two contracts.33 
The remaining awards governed by civil law also looked first at whether the written 
contract, in its context, was unambiguous, and then if necessary examined extrinsic evidence. 
ICC Cases 5505 and 10188 are exemplary. In the former, the tribunal found the relevant 
contractual term to be ambiguous, while in the latter, the tribunal found the written contract 
to be silent on the issue in dispute. In both cases, the tribunal went on to consider evidence of 
the parties’ negotiations.More distinctively civilian in their approach are cases where the tribunal considered 
extrinsic evidence regardless of the clarity or completeness of the written contract. In every 
case applying civil law in which extrinsic evidence was admitted, the tribunal considered 
evidence of the parties’ subjective intentions, ranging from negotiation correspondence34 to 
witness testimony about the negotiators’ understandings,35 to internal memoranda of one 
party.36 In six awards, the tribunal considered evidence of one or both parties’ subsequent 
conduct.37 
Taken together, these awards tend to show that, when applying the law of civil law 
jurisdictions, tribunals will not hesitate to consider any extrinsic evidence that may be helpful 
in determining the intent of the parties. However, none of the tribunals sought out such 
evidence on its own motion. 
Tribunals consistently expressed their fidelity to the principle of subjective 
interpretation, even in cases governed by the law of Germanic jurisdictions, which now 
employ objective methods. In thirteen awards, tribunals expressly declared their intention to 
seek the ‘true intention’ of the parties or otherwise indicated that they would proceed by a 
subjective interpretive method.38 The lone exceptions were Zürich Chamber of Commerce 
Award of 25 November 1994 (governed by Swiss law) and ICC Case No 13615 (governed by 
German law), where the tribunals stated that, although the Swiss and German Civil Codes 
codify the subjective principle, case law requires tribunals to interpret commercial contracts 
objectively. 
 
31 ICC Cases Nos 1250, 3055, 3130, 3894, 5485, 6515/6516, 6673, 9443, 11440, 11776, and 14630, and the 
Russian Chamber of Industry and Commerce Award of 22 December 2008 
32 ICC Cases Nos 2708, 5485, and 11440, and CRCICA Case No 64/1995. In addition, the tribunal in ICC Case 
No 10335 refused to consider extrinsic evidence because the contract contained an entire agreement clause. 
33 See above, n 25. 
34 ICC Cases Nos 1434, 4131, 5080, 5485, 5505, 6527, 6653, 7518, 7792, 10188, and 13278, and the 
Netherlands Arbitration Institute award of 5 July 2005. It is important to recall these cases relying on evidence 
of the parties’ negotiations—which account for twelve of the twenty-nine awards applying civil law, would 
likely have had a different outcome if they were governed by the law of common law jurisdictions. 
35 ICC Case Nos 10335 and 12745. 
36 ICC Case No 7518. 
37 ICC Cases Nos 4131, 6527, 7518, 10335, 12174, and 13278. In ICC Case No 12174, the tribunal stated that 
the parties’ performance of their agreement ‘is the most important element in determining the real and joint 
purposes of the parties’. 
38 ICC Cases Nos 1434, 5505, 6527, 7518, 10188, 10335, 11440, 12174, 12745, 13278, and 14793, Zurich 
Chamber of Commerce award of 25 November 1994, and Russian Chamber of Industry and Commerce Award 
of 22 December 2008. 
8 
The thirteen awards applying international contract law instruments as the governing 
substantive law were also largely consistent with each other and with the letter of the 
governing instruments.39 In no case was extrinsic evidence excluded; it was specifically 
mentioned in seven of the twelve awards. In the others, the tribunals appear to have admitted 
any extrinsic evidence that the parties adduced, but did not rely on it to reach a decision 
because the contract was clear.40 
The award in ICC Case No 6309, where the Uniform Law on International Sales 
(ULIS) was the applicable law, is of interest because the ULIS contains no provision relating 
to the interpretation of contracts. The claimant contracted to sell to the respondent a lift 
system for an office building. The claimant had attached to its offer a copy of the General 
Conditions of the Association of German Mechanical Construction Firms (‘the VDMA 
Conditions’). However, these were not attached to the ‘order confirmation’ that the claimant 
sent after receiving the respondent’s acceptance. The respondent argued that the VDMA 
Conditions had not been incorporated into the contract. The sole arbitrator admitted extrinsic 
evidence, and held that the respondent must have been aware of the VDMA Conditions 
because of their attachment to the claimant’s offer. Its failure to object to the VDMA 
Conditions meant that they became binding obligations of the contract. The published extract 
does not address the admissibility of this evidence, nor did the tribunal state any basis for its 
approach. 
When we come to the twelve awards that apply the law of common law jurisdictions, 
inconsistencies appear. 41 In eight, the tribunal proceeded according to the letter of the 
applicable substantive law, following an objective method of interpretation and treating 
evidence in accordance with the applicable rules.42 However, in four awards,43 the tribunal 
considered extrinsic evidence of one party’s subjective understanding of the contract, and 
held that this evidence was decisive as to the meaning of the contract even though it 
contradicted the plain meaning of the text. 
The first eight awards are unremarkable. Of the four remaining awards, ICC Case No 
7722 is difficult to characterize because the applicable law was that of an unidentified Middle 
 
39 ICC Case No 6309 of 1991, [1991] JDI 1046; ICC Case No 7585 of 1994, [1995] JDI 1015; ICC Case No 
7645 of 1995, (2001) XXVI YB Comm Arb 130; ICC Case No 8324 of 1995, [1996] JDI 1019; ICC Case No 
8782 of 1997, (2003) XXVIII YB Comm Arb 39; ICC Case No 8817 of 1997, (2000) XXV YB Comm Arb 355; 
ICC Case No 8908 of 1998, <www.unilex.info/case.cfm?id=663> accessed October 27 2014; Russian Chamber 
of Commerce and Industry Award of 24 January 2000, <www.unilex.info/case.cfm?id=841> accessed October 
27 2014; ICC Case No 10377 of 2002, (2006) XXXI YB Comm Arb 72; Lausanne Chamber of Commerce and 
Industry Award of 25 January 2002, <www.unilex.info/case.cfm?id=863> accessed October 27 2014; Russian 
Chamber of Commerce and Industry Award of 5 November 2002, <www.unilex.info/case.cfm?id=857> 
accessed October 27 2014; ICC Case No 12173, (2009) XXXIV YB Comm Arb 111; ICC Case No 16621, 
(2014) 25(1) ICC Bull 78. 
40 ICC Cases Nos 7585 and 7645, Russian Chamber of Commerce and Industry Awards of 24 January 2000 and 
5 November 2002, and the Lausanne Chamber of Commerce and Industry Award of 25 January 2002. 
41 ICC Case No 4555 of 1985, (1986) XI YB Comm Arb 140; ICC Case No 4975 of 1988, (1989) XIV YB 
Comm Arb 122; ICC Case No 5946 of 1990, (1991) XVI YB Comm Arb 97; ICC Case No 6955 of 1993, 
(1999) XXIVa YB Comm Arb 107; ICC Case No 7722 of 1999, (2007) XXXII YB Comm Arb 13; ICC Case 
No 8694 of 199, [1997] JDI 1056 (published in French translation; unpublished original in English); Alpha 
Express International v Unity Air Express 
<www.lordhacking.com/awards/LCIA%20AWARD%20Alpha%20Express% 20v%20Unity%20Express%20 
December%202000.pdf> accessed October 27 2014; ICC Case No 11869, (2011) XXXVI YB Comm Arb 47; 
ICC Case No 12172 of 2003, (2007) XXXII YB Comm Arb 85; ICC Case No 13459, (2014) 25(1) ICC Bull 47; 
ICC Case No 15254, (2014) 25(1) ICC Bull 67; ICC Case No 15610, (2014) 25(1) ICC Bull 70. 
42 ICC Cases Nos 4975, 6955, 8694, 11869, 13459, 15254, and 15610, and Alpha Express International v Unity 
Air Express. 
43 ICC Case Nos 4555, 5946, 7722, and 12172. 
9 
Eastern country. However, citations in the award to case law from England and the US make 
it likely that the unnamed country is itself a common law jurisdiction. The tribunal did not 
declare its adherence to any particular method of interpretation, but did cite a statute of the 
unidentified countrythat directs adjudicators to consider all the circumstances surrounding 
the conclusion of the contract, including the parties’ correspondence. On the other hand, the 
tribunal also cited case law from the unidentified country that gives priority to the written text 
of the contract. It is therefore possible that the unidentified country’s rules on contractual 
interpretation differ from traditional common law methods. 
In the other three cases, the outcome is harder to justify. Tribunals declared their 
adherence to common law methods of interpretation but then proceeded to admit evidence 
that a common law court would likely have excluded. 
In ICC Case No 5946, the sole arbitrator stated that New York law would apply to 
interpret the contract. He held that the plain meaning of the disputed term was both clear and 
decisive, but then—without explanation—considered extrinsic evidence of the parties’ 
negotiations. The arbitrator found that the extrinsic evidence did not change the result, but a 
New York court is not likely to have admitted it. 
In ICC Case No 4555, the governing law was that of an unnamed US state. The 
arbitrator stated that he would ‘place substantial weight on the objective, commonly 
understood meaning of the contract language actually employed, and give less weight to 
unarticulated and undocumented understandings.’ He or she allowed that ‘This meaning of 
the term could be overridden by persuasive evidence of standard commercial usage or the 
clear intent of the parties.’ Thus far, the arbitrator had followed the approach that courts in 
most US states would likely have followed. However, the arbitrator then admitted testimony 
to the effect that the claimant believed that the letter of credit it had opened conformed to the 
requirements of the contract, thus basing the interpretation in part on extrinsic evidence of 
one party’s subjective understanding of the contract—evidence that continues to be 
inadmissible in all common law jurisdictions. 
Finally, in ICC Case No 12172, the applicable law was English. However, at the 
hearing, the sole arbitrator considered the testimony of a witness ‘directly responsible for 
negotiating the contract with the Respondent’. This witness gave evidence on his impressions 
of what was agreed during the parties’ negotiations. Describing the witness as ‘credible’, the 
arbitrator accepted his evidence as decisive on one of the points of dispute between the 
parties. The arbitrator also considered evidence of the parties’ negotiations that an English 
court would likely have excluded. 
The six awards applying general principles or decided under amiable composition44 
also support the conclusion that arbitrators prefer subjective interpretation and avoid 
exclusionary rules. For the purposes of this analysis, these awards are lumped together with 
the nine awards that do not identify the governing law.45 In the absence of any reference to 
 
44 ICC Case No 3267, Partial Award of 1979, (1982) VII YB Comm Arb 96; ICC Case No 5953 of 1989, [1990] 
JDI 1056; ICC Case No 9875 of 2000, <www.unilex.info/case.cfm?id=697> accessed October 27 2014; ICC 
Case No 9797 of 2000, Andersen Consulting Business Unit Member Firms v Arthur Andersen Business Unit 
Member Firms and Andersen Worldwide Société Cooperative <www.unilex.info/case.cfm?id=668> accessed 
October 27 2014; ICC Case No 13129, (2009) XXXIV YB Comm Arb 231; Permanent Court of Arbitration, 
Eurotunnel Partial Award of 2007, Permanent Court of Arbitration Case No 2003–06, Partial Award of 30 
January 2007. 
45 ICC Case No 2103 of 1972, (1978) III YB Comm Arb 218; ICC Case No 2291 of 1975, [1976] JDI 989; ICC 
Case No 2478 of 1974, (1978) III YB Comm Arb 222; ICC Case No 3820 of 1981, (1982) VII YB Comm Arb 
134; ICC Case No 6281 of 1989, (1990) XV YB Comm Arb 96; ICC Case No. 6378 of 1991, [1993] JDI 1018; 
10 
substantive law, it seems fair to assume that the tribunal drew its interpretive method from 
what it saw as general or widely-accepted principles of contractual interpretation. 
In cases involving amiable composition or where the tribunal otherwise applied 
general principles of international commercial law, tribunals have the greatest latitude to 
apply whatever rules they consider appropriate. They therefore provide the clearest evidence 
of the preferences of international commercial tribunals. However, only in three of these 
awards, ICC Cases Nos 9797 and 13129 and the Eurotunnel arbitration, did the tribunal 
discuss explicitly what rules it would apply with respect to the interpretation of the contract 
and the use of extrinsic evidence. 
In Eurotunnel, the tribunal interpreted both a treaty and a contract under the rules of 
the Vienna Convention on the Law of Treaties (VCLT). The tribunal hewed closely to the 
principles set out in the VCLT, beginning with the ordinary meaning of the contract, viewed 
in its context, and then making a ‘supplementary interpretation’ based on extrinsic evidence. 
Both parties had relied on evidence of the negotiations, which the tribunal admitted with the 
caveat that it would be considered with ‘due caution’.46 However, the tribunal found that 
nothing in the negotiations contradicted the plain meaning of the disputed term, and 
interpreted the contract on that basis. 
ICC Case No 9797 is the well-known Arthur Andersen arbitration. The choice of law 
provision in the contract stated only that the tribunal was ‘not bound to apply the substantive 
law of any jurisdiction’. The tribunal took this as a mandate to apply general principles, 
which, in turn, led to application of the UNIDROIT Principles, which the tribunal 
characterized as a ‘reliable source of international commercial law in international 
arbitration’. The tribunal cited and applied the two-step interpretive process set out in Article 
4 of the UNIDROIT Principles. 
In ICC Case No 13129, the sole arbitrator applied general principles because he could 
not find any reason to apply any national law. This was despite his expressed ‘reservations as 
to the real existence of anything that can be described as lex mercatoria’. The arbitrator held 
that a ‘strict, legalistic’ approach to interpretation was inappropriate. This was justified by the 
‘common sense’ nature of general principles and by two factors specific to the contract: it 
was negotiated between traders without the assistance of lawyers, and it was concluded in 
English between negotiators whose native languages were not English. Accordingly, the 
arbitrator explained, ‘What is necessary is to read the contract [including] the parties’ 
negotiations as a whole, with a view to ascertaining the parties’ true intentions.’ 
 
2. Analysis 
Taking the awards as a group, and with due regard to the limitations of the data, some 
generalizations can be made. International arbitral tribunals do generally interpret contracts in 
a manner consistent with the governing law. 47 However, this does not mean that ICA 
tribunals actually apply the rules of interpretation in the governing law. Around 40% of the 
awards—twenty-eight of the seventy-three—make no reference to any interpretive principle, 
not even a bare citation to a relevant code provision or precedent or a statement explaining 
 
ICC Case No 8035 of 1995, [1997] JDI 1040; ICC Case No 12127 of 2003, (2008) XXXIII YB Comm Arb 82; 
ICC Case No 12421/MS of 2005, (2008) XXXIII YB Comm Arb 102. 
46 Eurotunnel para 94. 
47 The awards span nearly the whole of the modern history of international arbitration, from 1964 to 2012. No 
trend toward greater or lesser consistencywith the governing law was discernable over time. 
11 
how the tribunal would proceed.48 These tribunals apparently found that they could decide 
issues of interpretation without explaining to the parties (or perhaps even articulating to 
themselves) the legal principles applicable to this process.49 Nine awards do not mention any 
governing rules of law at all,50 although some of these do set out an interpretive rubric that 
the tribunal declared it would follow. 51 The awards are therefore consistent with the 
proposition set out above: many ICA tribunals interpret contracts without reference to the 
governing law or even interpret them inconsistently with that law. 
When one looks at what these tribunals have done—as opposed to what they have 
said—it appears that they see their primary interpretive task as discerning the true common 
intention of the parties, and will restrict themselves to objective interpretation only when the 
applicable law is that of a common law jurisdiction (and even then, not always). They tend to 
see the written contract as the best evidence of the parties intent; accordingly, they usually 
begin by examining the natural and ordinary meaning of the contractual terms in dispute, and 
(if such a meaning is determinable) may not allow extrinsic evidence of the parties’ intentions 
to overtake it. However, they do not prohibit parties from introducing whatever extrinsic 
evidence the parties may think relevant, including direct evidence of subjective intent and 
evidence of subsequent conduct. 52 In general, these tribunals seem to have disregarded 
extrinsic evidence only in those cases where they were able to reach a linguistically plausible 
and commercially reasonable interpretation based on the words of the contract alone. 
One might therefore conclude that a civil law perspective on contractual interpretation 
predominates in ICA.53 However, this pattern is equally consistent with the proposition that 
international arbitrators tend to share an implicit preferred interpretive approach, and that 
some arbitrators employ this approach even if it is inconsistent with the governing law. The 
fact that so many tribunals felt it appropriate to interpret the contract without invoking any 
rules of interpretation is noteworthy in itself, and indicative of their attitude toward the 
governing law, at least on matters of contractual interpretation. 
None of this is to say that the tribunals in these cases reached bad interpretations of 
the contracts before them. However, too many awards contain no enunciation of the 
interpretive method adopted, and too many are contradictory to the law, for one to say that 
arbitrators are simply applying the law. 
 
 
 
 
48 ICC Cases Nos 1250, 2478, 3055, 3130, 3894, 4131, 4555, 5080, 5946, 5953, 6281, 6309, 6378, 6515 and 
6516 (joined), 6653, 6673, 7585, 7792, 8035, 8782, 8817, 9443, 10377, 11776, 11869, 12421/MS, and 14630. It 
may be objected that ICC awards are not representative of the whole body of ICA awards. However, there is no 
reason to think that the arbitrators appointed in these disputes restrict their practice to ICC arbitrations, or that 
they would have decided differently in an ad hoc arbitration or one administered by another institution. 
49 It is possible that the discussion of the governing law was redacted prior to publication. However, since the 
redactions are usually performed by lawyers working for the international arbitration institutions, this too shows 
the general lack of interest of the ICA community in rules of contractual interpretation. 
50 ICC Cases Nos 2103, 2291, 2478, 3820, 6281, 6378, 8035, 12127, 12421/MS. This does not include awards 
decided under amiable composition, where it would be appropriate for tribunals not to refer to any governing 
rules of law. 
51 ICC Cases Nos 2103, 2478, 6281, 12127, and 12421/MS. 
52 This did not occur in any of the awards where the applicable law was not stated, where the tribunal applied 
general principles or lex mercatoria, or where the tribunal acted as amiable compositeur. 
53 Indeed, this is the conclusion that I reached in my earlier research on this issue. Karton (n 10) 232. I no longer 
think the matter is so clear. 
12 
B. International Arbitral Attitudes Toward Contractual Interpretation 
The field of international arbitration has long been subject to both criticism and praise 
to the effect that arbitrators pay more attention to the equities of a dispute or the 
particularities of a contract than to the applicable law.54 Some writers gone so far as speak of 
arbitral ‘lawlessness’. 55 As Ruben observes, ‘The notion of substantive “correctness” or 
“accuracy” historically has had little place in arbitration precisely because arbitration calls for 
the exercise of worldly judgment that is informed by a variety of considerations ….’56 
While opinion is divided on the extent to which ICA is in fact lawless and whether 
this is a good thing, many arbitrators consider ICA’s looser attachment to the law and greater 
attachment to commercial practices to be an important comparative advantage over litigation. 
Writes McConnaughay, ‘A principal virtue of international commercial arbitration is its 
lawlessness, its ability because of its unrestrained flexibility to accommodate the enormous 
procedural, presentational, and decisional ... differences that typically exist among parties to 
multinational transactions.’ 57 Hermann declares more broadly that ‘It is fundamental to 
arbitration that it should solve disputes according to commercial practice and common sense, 
arriving at a result considered fair in a particular business community.’58 
Interviewees often declared that awards are or should be based more on an assessment 
of a fair result in light of commercial realities than on the application of legal rules. One said 
simply, ‘I like to think my approach would be fact-based and commercial in nature—in other 
words, if at all possible to focus on the basic business aspects of the case.’ 59 Another 
criticized arbitrators who go too quickly to the legal issues: ‘That can be a sign of weakness. 
That is to say, they don’t have enough experience and knowledge to make an assessment of 
the facts, so they don’t want to go into the facts. They take comfort in the law, because that’s 
all they know.’60 Dalhuisen, an academic and active arbitrator, laments that ‘there is still an 
inclination amongst international arbitrators, especially of the professorial type, to treat 
arbitration as if it were some form of appellate jurisdiction.’61 
A Swiss arbitrator summed up his adjudicative approach in a manner that was 
representative of the interviewees: 
When you draft the award you are always looking at two 
different things: the economic situation, and the fairness of the 
possible outcome. You are trying to ensure a fair outcome that 
is acceptable to the parties. And, on the other hand, of course, 
you try to follow the rules of law. But frankly, and bluntly 
stated, I think that very often you look at the case, you form an 
opinion as who was right and who was wrong, taking into 
account all the circumstances … and you form an opinion as 
 
54 With respect to contractual interpretation, see Lévy and Robert-Tissot (n 2) 867 (‘Selon une critique 
récurrente, l’arbitre se bornerait (abusivement) à interpréter le contrat et se livrerait peu à l'analyse juridique du 
droit applicable.’). 
55 Phillip J McConnaughay, ‘The Risks and Virtues of Lawlessness: A “Second Look” at International 
Commercial Arbitration’ (1999) 93 Northwestern L Rev 453. 
56 RC Reuben, ‘Personal Autonomy and Vacatur after Hall Street’ (2009) 113 PennSt L Rev 1103, 1129. See 
also Nicholas C Ulmer ‘Language, Truth, and Arbitral Accuracy’ (2011) 28(4) J Intl Arb 295. 
57 McConnaughay (n 55) 522. 
58 AH Hermann, Judges, Law and Businessmen (Kluwer 1983) 221. 
59 Interview with the author, 11 August 2012. 
60 Interview with the author, 23 May 2012. 
61 JH Dalhuisen, ‘Legal Reasoning and Powers of International Arbitrators’ (2014) 4 
<http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2393705> accessed October 27 2014. 
13 
how this case should be decided. Then you draft your decision. 
As we all know as lawyers, you can reason almost every 
outcome of a case.62 
This is not to say that national court judges never reach their decisions by reasoning 
backward from a fair outcome. Indeed, it is human nature to reach an intuitive judgment and 
then assess (and if necessary amend) that judgment in light of the relevant evidence. However, 
national court judges usually downplay the role of intuition in their judgments and emphasize 
the importance of legal rules. International arbitrators, by contrast, proudly emphasize their 
intuitive judgments as to which results are commercially fair or reasonable. 
A related phenomenon is arbitrators’ reference to transnational law, soft law 
instruments, and other ‘optional’ sources of authority. In contrast to national courts, 
international arbitrators are more apt to ‘acknowledge factors which do not have to, but may 
be taken into account when framing a legal solution’.63 They ‘often seek solutions from 
commercial practice and trade usage … [and] feel less restrictive in using other types of soft 
law in fabricating fair and reasonable awards.’64 References to soft law and general principles 
are usually made in the name of achieving commercially reasonable results, while national 
laws are castigated as rigid, parochial, or unsuited to the needs of international commerce. A 
French interviewee invoked the oft-cited example of national rules on interest: 
It is most often absurd to apply the rate in the applicable law, 
which is in fact meant for domestic situations and in the 
currency of the country. I will not hesitate, even if a certain law 
had been chosen ... to try to convince the parties at least that it 
is not reasonable and that there is a better provision in the 
UNIDROIT Principles.65 
The same pattern obtains with respect to arbitrators’ attitudes toward contractual 
interpretation: they tend to play down the importance of the law and play up the importance 
of the commercial context. One interviewee, a leading London-based arbitrator, when asked 
about his approach to interpreting contracts, replied dismissively that there are only two rules 
of interpretation: “Common sense is one. Commercial sense is the other.” 66 A French 
academic and practitioner dismissed rules of interpretation as ‘only a guide âne,67 not really 
rules of law, but advice––be reasonable, sensible.’68 A third interviewee, when asked how she 
approaches the task of interpreting contracts, observed that, ‘Of course, if you were vigorous, 
you would look at contract interpretation rules under the applicable national law and you 
would notice significant differences.’69 
Similar declarations can be seen in some of the published awards. For example, in 
ICC Case No 12745, the tribunal observed: 
 
62 Interview with the author, 12 June 2012. 
63 Stefan Vogenauer, ‘Sources of Law and Legal Method in Comparative Law’ in Mathias Reimann and 
Reinhard Zimmerman, The Oxford Handbook of Comparative Law (OUP 2006) 879. 
64 Larry A DiMatteo, ‘Soft Law and the Principle of Fair and Equitable Decision Making in International 
Commercial Arbitration’ (2013) 1(2) Chinese J Comp L 221, 224. 
65 Interview with the author, 7 June 2012. The inadequacy of national laws as they relate to the calculation of 
interest was a recurrent theme 
in the interviews. 
66 Interview with the author, 29 May 2012. 
67 A very elementary guide; literally, a ‘guide for fools’ or ‘guide for asses’. 
68 Interview with the author, 7 June 2012. 
69 Interview with the author, 11 July 2012 (emphasis added). 
14 
[I]t is fit to recall that the French civil code … lays down some 
rules for the construction of contracts…. Such interpretation 
rules are obviously not mandatory but they are common sense 
guidelines to which judges and arbitrators will normally give 
considerable respect. Besides, they are meant to extract from 
the contract the true and actual common intent of the parties: 
they become unnecessary where such intent clearly results from 
any other circumstances as interpretation is then not useful.70 
Arbitrators’ characterizations of their preferred interpretive approach are not mere 
rhetoric. The analysis of published awards above shows that arbitrators tend to follow a 
relatively consistent interpretive approach, regardless of the governing law. This approach is 
characterized by invocation of the subjective intention of the parties, an emphasis on reading 
the contractual text in its commercial context, and an inclusive approach to extrinsic evidence 
of the parties’ intentions. 
In a recent article, Lévy and Robert-Tissot reach largely the same conclusion.71 After 
acknowledging that arbitrators are bound by the interpretive rules in the governing law, they 
conclude that, ‘In reality, by applying his common sense, experience, and personal 
convictions, the arbitrator determines the true intention of the parties.’72 This approach is 
often justified by citations to general principles of international commercial law, whether 
codified or uncodified.73 Their article is mostly descriptive rather than normative, but Lévy 
and Robert-Tissot do eventually endorse the interpretive method described: ‘Done properly, 
reaching solutions by interpreting the parties’ intentions rather than by sophisticated juridical 
reasoning deserves praise …’.74 
Of course, not all arbitrators subscribe to such a loose conception of their role in 
interpreting contracts. For example, Spigelman argues that it is incumbent upon arbitrators to 
‘either develop familiarity with, or acquire ad hoc, the principles of interpretation applicable 
in legal systems with which they may not be familiar.’75 As one interviewee observed, the 
applicable rules of interpretation ‘make an enormous difference. One of the aspects of 
national law … that is often overlooked but is actually very important, is the way a contract is 
construed. It’s absolutely essential—makes all the difference in the world, how you construe 
a contract.’76 
What might be called the ‘pro-accuracy’ position has been most forcefully expressed 
by Park, particularly in an article entitled ‘Arbitrators and Accuracy’.77 Most of the article 
 
70 ICC Case No 12745, (2010) XXV YB Comm Arb 40 [26]-[27]. 
71 In that article, they describe my previously-published findings as unsurprising. Lévy and Robert-Tissot (n 2) 
888 (‘Il n’y a pas lieu de s’en étonner.’). 
72 ibid 891 (author’s translation) (‘En réalité, en appliquant sa logique, son expérience et son intime conviction, 
l’arbitre recherche la volonté réelle des parties. Il s’agit là d’une règle émergente en arbitrage international.’). 
One interviewee, with an extensive record in both scholarship and practice, concurred: ‘If you look at what 
arbitrators do, they tend not to resort, or not always to resort, to the contract interpretation rules, but simply to 
try and focus on the real intent of the parties.’ Interview with the author, 11 July 2012. 
73 ibid 886. 
74 ibid 902 (author’s translation) (‘ … bien conduite, la recherche des solutions par l’interprétation des volontés 
plutôt que par des raisonnements juridiques sophistiqués mérite approbation …’).75 Spigelman (n 1) 5. 
76 Interview with the author, 12 June 2012. 
77 William W Park, ‘Arbitrators and Accuracy’ (2010) 1(1) J Intl Dispute Settlement 25. See also William W 
Park, ‘Arbitration in Autumn’ (2011) 2(2) J Intl Dispute Settlement 1; William W Park, ‘The Four Musketeers 
of Arbitral Duty: Neither One-for-All nor All-For-One’ in Yves Derains and Laurent Lévy, Is Arbitration Only 
15 
describes how arbitrators ought to go about discovering the true facts of the dispute, but Park 
also argues that arbitrators have an obligation to determine ‘the truth about the law’.78 But 
even there, his main goal is to encourage arbitrators to adopt diligent practices for 
determining the content of the governing law. Except for a discussion of arbitrators’ role in 
identifying and synthesizing transnational legal norms, Park seems to take it for granted that, 
once a tribunal has accurately identified the content of the governing law, it will apply that 
law in an orthodox manner.79 
Similar concerns have been raised about investment arbitration tribunals’ approaches 
to treaty interpretation. It is generally agreed that investment treaties should be interpreted 
according to the rules in articles 31 and 32 of the VCLT.80 Arbitral tribunals regularly invoke 
these provisions but, ‘whether routinely and briefly referred to or solemnly reproduced 
verbatim, they are not always systematically applied.’81 Wälde concludes that ‘It is difficult 
to find a tribunal which formally and properly applied the Vienna Rules step by step.’82 As 
Arsanjani and Reisman note, the mere lip service some investment arbitration tribunals pay to 
the applicable rules of interpretation has potentially serious consequences. 
[A] failure to apply the rules of interpretation properly may 
distort the resulting elucidation of the agreement made by the 
parties and do them an injustice by retroactively changing the 
legal regime under which they had arranged and managed their 
affairs.83 
Of particular interest is Paulsson’s dissenting opinion on treaty interpretation in 
Hrvatska Elektroprivreda d.d. v Slovenia84 He castigates the majority for abandoning the 
applicable rules of treaty interpretation in order to impose a ‘fair and reasonable’ result.85 
Specifically, he accuses the majority of ignoring the VCLT’s restrictions on the use of 
extrinsic evidence in the name of ‘commercial reasonableness’86—precisely the same practice 
seen in the review of commercial arbitration awards above. 
 
 
 
As Good as the Arbitrator? Status, Powers and Role of the Arbitrator (Dossiers of the International Chamber of 
Commerce Institute of World Business Law, vol 8, no 1, 2011) 25. 
78 ibid 42 (noting that, as compared with fact-finding, ‘less attention has been paid to the arbitrator’s truth-
seeking function with respect to legal norms’.). 
79 Similarly, Waincymer, who argues at length that international arbitrators have a ‘duty to know the law’, 
seems to assume that, once they know the law, they will apply it faithfully. Jeffrey Waincymer, ‘International 
Arbitration and the Duty to Know the Law’ (2011) 28(3) J Intl Arb 201. 
80 J Romesh Weeramantry, Treaty Interprettion in Investment Arbitration (OUP 2012) 24-30. 
81 Mahnoosh H Arsanjani and W Michael Reisman, ‘Interpreting Treaties for the Benefit of Third Parties: the 
“Salvors Doctrine” and the use of Legislative History in Investment Treaties’ (2010) 104 AJIL 597, 599. 
82 Thomas Wälde, ‘Interpreting Investment Treaties: Experiences and Examples’ in Christina Binder and others 
(eds), International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer (OUP 2014) 
746. 
83 Arsanjani and Reisman (n 81) 599. 
84 Individual Opinion of Jan Paulsson, 8 June 2009 <http://italaw.com/documents/Hrvatska-Interpretation-
Paulsson.pdf> accessed 27 October 2014. 
85 ibid para 5. 
86 ibid para 44. This is connected with a broader line of critique in the investment arbitration literature, to the 
effect that investor-state tribunals are overly influenced by commercial perspectives and commercial arbitration 
paradigms. With respect to treaty interpretation techniques, see, eg, Stephan W Schill, ‘Crafting the international 
economic order: the public function of investment treaty arbitration and its significance for the role of the 
arbitrator’ (2010) 23(2) Leiden J Intl L 401. 
16 
C. Accounting for This Attitude—Some Brief Observations 
One might suppose that arbitrators—who, after all, are independent contractors 
‘selling’ their services in a competitive market—have strong incentives to issue legally 
accurate awards. 87 Although this section will not attempt a comprehensive account of 
international arbitral decision-making, it is worth noting that none of the scholarly treatments 
of arbitral decision-making reveals any strong incentives for arbitrators to take special care in 
applying the governing law. 
To begin with, since most ICA awards are confidential, the reputational impact of 
inaccurate decision-making may be limited to the parties to a specific arbitration and their 
outside counsel.88 
More generally, when parties choose arbitrators, personal connections may be more 
important than the attributes of the arbitrator. Puig found that, in investment arbitration, the 
‘social capital’ of prospective arbitrators within the international arbitration community was 
the overwhelming determinant of appointments, not legal expertise or even predisposition 
based on the facts of the individual dispute. 89 D’Silva reached similar conclusions with 
respect to ICA, emphasizing the role of outside counsel.90 
Even when parties consider the expertise and adjudicative philosophy of prospective 
appointees, they tend to prioritize arbitrators’ skills and approach on matters of procedure. 
While it is true that familiarity with the governing law is an important factor in arbitrator 
appointments,91 Schultz and Kovacs found that skill at managing arbitrations is the most 
important factor, especially for sole or presiding arbitrators.92 To the extent that parties or 
their counsel consider prospective appointees’ records on substantive legal issues, it is 
typically just to see whether they will be predisposed to the party’s case.93 
Schultz and Kovacs’s survey results are corroborated by my interviews. An 
experienced American advocate and arbitrator observed, ‘Well obviously I’m there to make 
the decision. But I feel that most of my job is to run the hearing in the most effective and 
 
87 cf Thomas Schultz and Robert Kovacs, ‘The Law is What the Arbitrator Had for Breakfast: How Income, 
Reputation, Justice and Reprimand Act as Determinants of Arbitrator Behaviour’ (2014) King's College London 
Law School Research Paper No 2014-36, 5 <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2496827> 
accessed 27 October 2014. 
88 Note, however, that in investment arbitration, where most awards are published, even egregiously inaccurate 
applications of the law seem to have no effect on arbitrators’ prospects for future appointments. Ibid (quoting 
Federico Ortino, ‘Legal Reasoning of International Investment Tribunals: A Typology of Egregious Failures’ 
(2012) 3 J Intl Dispute Settlement 31). 
89 Sergio Puig, ‘Social Capital in the Arbitration Market’ (2014) 25(2) EJIL 387. 
90 Magdalene D’Silva, ‘Dealing in Power: Gatekeepers in Arbitrator Appointment in International Commercial 
Arbitration’ (2014) 5(3) J Intl Dispute Settlement 605. 
91 PriceWaterhouse Coopers and Queen Mary University of London, ‘Corporate Choices in International 
Arbitration: Industry perspectives’ (2013) 22<www.pwc.com/gx/en/arbitration-dispute-resolution/assets/pwc-
international-arbitration-study.pdf> accessed 27 October 2014. 
92 Thomas Schultz and Robert Kovacs, ‘The Rise of a Third Generation of Arbitrators? Fifteen Years after 
Dezalay and Garth’ (2012) 28 Arb Intl 161. In addition, as Schultz and Kovacs observe, it is easier to 
discriminate between good and bad procedural decisions (what they call ‘derailed and non-derailed arbitrations’) 
than between more or less legally correct substantive decisions. Schultz and Kovacs, ‘What the Arbitrator Had 
for Breakfast’ (n 87) 5. 
93 cf Redfern’s frequently-quoted maxim that, in arbitrator appointments, he looks for ‘someone with the 
maximum predisposition towards my client, but with the minimum appearance of bias’. Martin Hunter, ‘Ethics 
of the International Arbitrator’ (1987) 53 Arbitration 219, 223. 
17 
efficient way.’94 A senior French arbitrator agreed that case management is often uppermost 
in the minds of those who appoint arbitrators: 
One quality that is particularly appreciated is skill at managing 
the hearings, which I think is overrated because it is less 
important than drafting a good award, which doesn’t count so 
much in your reputation. People see you for two weeks [at the 
hearing] and either they are impressed or not and that is what 
counts.95 
Finally, as will be discussed below, there are significant legal consequences when 
arbitrators make poor jurisdictional or procedural decisions, but few legal consequences when 
they make poor decisions on the merits. International arbitrators therefore tend to be more 
attentive to the procedural than the substantive rules. Several interviewees expressed extreme 
caution on matters of case management that might jeopardize an eventual award, such as 
communicating a preliminary decision as an encouragement to settlement, or limiting the 
scope of arguments on a legal issue.96 None expressed the same concern about writing up the 
substantive parts of the award. One interviewee, a highly experienced arbitrator, used the 
phrases ‘You have to be very careful’ or ‘You have to be extraordinarily cautious’ fourteen 
times in a roughly one-hour interview—invariably in relation to matters of procedure.97 This 
is not to say that arbitrators approach substantive determinations unconscientiously, only that 
they are not preoccupied with that aspect of their mandate. What draws their attention is 
ensuring that no jurisdictional or procedural choice they make will affect the enforceability of 
the award. 
 
II. INTERNATIONAL ARBITRATORS’ DUTY TO INTERPRET CONTRACTS ACCORDING TO THE 
GOVERNING LAW 
 
This section addresses the various legal arguments that might be made in support of 
the interpretive approach described in Part I. In the literature and, implicitly, in some awards, 
two categories of arguments have been made to the effect that arbitrators need not follow the 
interpretive rules in the governing law. 
The first category comprises arguments from contract law. These claims turn on the 
nature of contractual interpretation laws, and generally come in two types. Some 
commentators argue that, since most disputes turn on their facts or the plain language of the 
contract, legal rules of interpretation are unnecessary except in unusual cases. Others allege 
that the various rules of interpretation in national laws and international instruments all lead 
 
94 Interview with the author, 31 August 2012. Another interviewee contended that most academics and former 
judges make poor arbitrators because they focus too much on the law and too little on case management. ‘I’ve 
sat a lot with judges, but it usually works better if someone else is the chairman. They can come in with their 
legal analytical skills … but somebody’s got to get the show on the road.’ Interview with the author, 21 May 
2012. 
95 Interview with the author, 7 June 2012. The interviewee recalled a Belgian colleague, an academic now 
deceased, who was shy and indecisive in hearings. He wrote ‘remarkable’ awards but this ‘did not get him 
particularly high reputation as an arbitrator.’ 
96 A London-based arbitrator lamented his limited ability, compared with national court judges, to cut off 
arguments that are going nowhere: ‘If a judge says “I’ve heard quite enough of that, this is pointless,” there’s no 
sort of “Oh dear, due process, touchy, touchy.”’ Interview with the author, 23 May 2012. 
97 Interview with the author, 7 August 2012. 
18 
to roughly the same results in commercial disputes, so which law governs interpretation of 
the contract is not particularly important. 
The second category comprises arguments from arbitration law and practice. Many in 
the international arbitration community hold that, since arbitrators’ role is to resolve the 
dispute between the parties, rather than to advance the law in the general sense, arbitrators 
may and should depart from the governing law in the name of reaching commercially 
reasonable results in individual disputes. 
 
A. The Arguments from Contract Law 
If rules of contractual interpretation are not necessary to the resolution of commercial 
disputes, arbitrators can disregard those rules without consequence. Similarly, if various 
national and international laws adopt similar (or at least compatible) approaches to 
interpretation, then it would not matter whether arbitrators stay faithful to the interpretive 
rules of the governing law. Both propositions—that rules of contractual interpretation are 
unnecessary, and that they all lead to essentially the same results—have been raised in 
international arbitral awards and the associated academic literature. 
 
1. The Argument that Rules of Interpretation are Unnecessary 
Arbitrators often assert that they decide cases according to the contract, resorting to 
the applicable law only if the contract does not provide a resolution. 98 Many international 
commercial disputes, it is argued, are resolvable on the facts and the terms of the contract 
alone. As one interviewee put it, ‘Very often you don’t need the applicable law that has been 
chosen by the parties. It is not that relevant. What is relevant is what is written in the 
contract.’99 Even a former judge, now an independent arbitrator based in London, concurred: 
‘In reality, you start with the contract—the law of the parties. It’s only if the contract itself 
cannot produce the result that you will then start looking outside.’100 Another senior London-
based arbitrator recounted, with pride evident in his tone of voice, ‘We’ve just written a fifty-
page award in a major dispute … and there’s only two cases in it. It’s all contract or fact.’101 
Implicit in these statements is the claim that legal rules of interpretation are 
unnecessary, that a contractual obligations may be determined without reference to law. 
There are two problems with this claim, one general and one specific. The general problem is 
that no agreement can have legal effect while being divorced from any legal context. Craig 
observes: 
While it can be debated whether, and how much, an arbitrator 
may temper the application of law in view of the 
expectations … of the parties to the contract, it is not seriously 
contested that the validity of a contract depends on a national 
law or laws and that part of the mission of an arbitrator is to 
determine what that law is and how the contract is to be 
interpreted and applied within the context of that law.102 
 
98 See, eg, Lévy and Robert-Tissot (n 2) 878. 
99 Interview with the author, 13 June 2012. 
100 Interview with the author, 23 May 2012. 
101 Interview with the author, 21 May 2012. 
102 W Laurence