How do the terms of a contract affect an arbitrator’s decision?

In commercial arbitration, the terms of a contract play a foundational role in guiding an arbitrator’s decision-making process.

When determining the law to be applied to a dispute, an arbitrator is generally required to base their award on the specific law designated by the parties within their agreement. If the parties have not specified the governing law, the arbitrator must apply the law they deem appropriate in accordance with the principles of the conflict of laws. In either scenario, the arbitrator is obligated to take into consideration the specific terms of the contract as well as the usage and customs of the relevant trade.1

Furthermore, the arbitration agreement itself establishes the procedural rules that govern the proceedings. If the agreement does not specify these rules, the arbitrator is responsible for determining the procedure to be followed. While courts may intervene to determine if an arbitrator has the authority to address a specific conflict, they generally do not review an arbitrator’s decisions regarding the application of the law or the facts of the case.1