The basis of all arbitration is the common will of the parties. What they have agreed upon, is binding for the arbitrators. If they have agreed upon the law in country X to be applied, the arbitrators should apply that law. There are perhaps some modifications, if we should go in-depth into the problems, but that it is not my task in these comments of limited space. So, to determine the applicable law we should always primarily look upon what the parties have agreed upon.
More often they have not agreed at all or at least not in a clear manner, and a question will be: Do we really need the law of a specific country?1 From time to time we see arbitral decisions being based upon “lex mercatoria,” “recognised principles,” “equity.” This will be correct if the parties have agreed upon such a frame-work, or their common will must be interpreted to be so. Here we should also mention the possibility for the arbitrators to act as “amiables compositeurs,” if the parties have agreed to vest them with this competence.
But otherwise it should be held safer to design a national law as a frame-work for the cases. So, our question is what law to be applied for issues on: