Underlying policy considerations for assigning the applicable substantive law in international commercial arbitration

Abstract

In international commercial arbitration, when the parties do not choose any law to govern the substance of their disputes, arbitrators are responsible for doing so. The inherent flexibility of the arbitrator’s discretion makes this task critical, as their decision can significantly impact the outcome of the arbitration. This article aims, to examine relevant policies that underlie an arbitrator’s choice of the applicable substantive law in the absence of the parties’ choice. It employs a comprehensive blend of secondary research and analytical methodologies, to identify and evaluate the nature of these policies, highlighting their possible extremes and, or irreconcilable elements. This article highlights the distinction between the direct and indirect methods used to assign the applicable substantive law and questions the practical application of these methods by arbitrators. It also explores relevant policies from three perspectives – a transnational perspective, a party perspective and a jurisprudential perspective. The findings suggest that specific, policy considerations influence the arbitrator’s decision-making process, regardless of the method employed to assign the applicable substantive. By understanding and assessing these policy considerations, arbitrators can make informed decisions when assigning the applicable substantive law in international commercial arbitration.