The Arbitral Role in Contractual Interpretation

Abstract

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.