Nigeria: Ex Aequo Et Bono Arbitration: To Be Or Not To Be

Last Updated: 31 May 2016
Article by Adeyinka Aderemi

International arbitration is increasingly criticized for having become too inflexible, inefficient and overburdened with several debilitating civil courts' interference predicated on the lex causae and the lex arbitri – the law governing only the mutual rights and obligations of the parties to the contract as agreed with respect to the material terms of the contract and the procedural law or rules guiding the arbitration itself as agreed by the parties or derived from the law of the seat of the arbitration. It is common phenomenon in international arbitration that the strict application of a particular national law of either of the parties may lead to arbitrary direction in proceedings and decisions in the final award. Often times, the intent of the parties to the contract containing the arbitration clause may be suppressed or defeated entirely because of the ever evolving national laws of the various states which in the resolution of commercial dispute may not be fair or commercially sound. This is more precarious as the business environment, situations, conditions and terms of commercial transactions are never certain but subject to constant changing factors which may not be contemplated by the parties at the time of the contract.

DEFINITION

One of the fundamental principles of arbitration is 'party autonomy' which is the right of the parties to a contract to elect the means of resolution of any dispute thereof. One of the application of this principle is the right of the parties to elect that any dispute may be decided 'ex aequo et bono' by the arbitral tribunal. 'Ex aequo et bono' which means "according to the right and good" or "from equity and conscience". This concept in the context of international arbitration requires that the parties grant arbitrator(s) power to dispense with the consideration of the law and consider solely what they consider to be fair and equitable in the case at hand. It is often described as arbitration and not arbitrary which may be the result of strict application and interpretation of the various applicable laws to the arbitration.

This ancient concept of 'ex aequo et bono' is now part of most modern public international arbitration law and is also expressly provided for in the UNCITRAL Model Law on International Commercial Arbitration 1985. Article 38(2) of the Statute of the International Court of Justice (ICJ) provides that the court may decide cases ex aequo et bono, but only where the parties agree thereto. Equally, Article 33 of the United Nations Commission on International Trade Law's Arbitration Rules (1976) provides that the arbitrators shall consider only the applicable law, unless the arbitration agreement allows the arbitrators to consider ex aequo et bono, or amiable compositeur, instead. Article 13(4) of the ICC Arbitration Rules and Articles 28(3) and 33(2) of the UNCITRAL Model Law 1985 with the amendments adopted in 2006 allow the arbitrators to act as amiable compositeur, but only if the parties confer such powers upon them.

APPRAISAL

The current trend in international arbitration where parties confer such powers upon the arbitrator to act as 'amiable compositeur' or to decide the dispute between the parties ex aequo et bono, such Arbitrator(s) have the power to depart from the strict application of rules of law and decide the dispute according to justice and fairness. The arbitrator is allowed to disregard not only the non-mandatory provisions of the national laws, but also the mandatory provisions of law, however the decision must respect international public policy. Arbitration ex aequo et bono is usually the substitution of the harshness and arbitrariness of national laws for a decision premised on equity and fair-play in accordance with commercially accepted international principles.

There are several advantages of arbitration ex aequo et bono or 'amiable compositeur'. The major attraction is the flexibility of the procedure and the means of arriving at the final decision. This procedure is suitable especially (i) where the rights and obligations of the parties cannot always be determined from the beginning in long-term contracts (ii) where unforeseen circumstances are likely to occur in the life time of the contract, and (iii) where the parties involved may be more like joint venture partners than adversaries with conflicting interests.

Another advantage is the denationalization of the procedures of the international arbitration which ultimately promotes international and cross boarder commerce. The main concern of foreign investors and international commerce is the application of the principles of various national civil laws or the law of the seat of the arbitration which may not be favorable to the foreigner or international commerce. Just as equity came to ameliorate the pains and harshness of common law and the lex mercatoria during the medieval age to safeguard merchants and their goods.

Finally, because the various national laws differs by the day more and more because of the peculiarity of the various legal systems and commercial life, foreigners and investors justifiably believe that the national rules and laws are not appropriate for the resolution of dispute in international commerce. This coupled with the complicated rules on conflict of laws and the civil resolution procedures which takes too much time and resources makes the application of concept of ex aequo et bono a ready solution.

On the other hand the opponents of ex aequo et bono arbitration have argued that an ad hoc justice, as the amiable compositeur or ex aequo et bono arbitration leads to conflicting decisions and thus loss of confidence in the system. It is further argued that the uncertainty involved in this system encourages discrimination and bias unlike the more secure position and consistency of several national laws and rules applicable to arbitration. The lack of precedential value of the decisions in arbitration ex aequo et bono and that of the amiable compositeur awards is equally highly criticized.

Lastly and perhaps the most debilitating argument against the use of ex aequo et bono arbitration is the registration and enforceability of the amiable compositeur award. The ultimate purpose for resolving conflict via arbitration is the possibility of the registration and enforcement of the final award. It is equally the cardinal duty and obligation of arbitrators to render an enforceable award. Even in arbitration ex aequo et bono or when acting as amiable compositeur, the arbitrator must ensure enforceability of the award in the state which has a connection with a given case. The challenge here is that the possibility of enforcement of an award under ex aequo et bono arbitration depends on the law of the state of enforcement whether it recognizes arbitration conducted under the ex aequo et bono concept or not.

APPLICABILITY

However, most developed countries presently are moving towards acceptance of equity-type clauses and ex aequo et bono arbitration which makes such decisions or awards enforceable in these countries. Both the English legal system and the French legal system are now liberal towards amiable compositeur awards.

In the United States of America, under the New York Convention the civil court would not be able to refuse enforcement of the arbitral award just because the arbitrator acted as amiable compositeur. Ex aequo et bono is not expressly recognized in statutes or the case law in the US, but it is very frequent in practice. Ex aequo et bono arbitration and the amiable compositeur is not regarded as a different form of decision-making or award in the US because equity is an integral part of the law. The rationale of liberal approach of the United State is that every arbitrator ought to make equitable considerations, even without express authorization by the parties. Hence, the US arbitral awards rendered under the concept of amiable compositeur or ex aequo et bono are sheltered form judicial review.

In Nigeria, there is no direct reference to amiable compositeur or ex aequo et bono in the Arbitration and Conciliation Act LFN 2004. S.15 (1) provides that arbitral proceedings shall be in accordance with the procedure contained in the Arbitration Rules. S.15 (2) however gives the arbitral tribunal the power to 'conduct the arbitral proceedings in such a manner as it considers appropriate so as to ensure a fair hearing'. This power conferred on the tribunal by the provision of S. 15 (3) 'include the power to determine the admissibility, relevance, materiality and weight of any evidence placed before it'. This in my opinion coupled with the express powers of the parties to arbitrate ex aequo et bono under their agreement (party autonomy) would give recognition to amiable compositeur or ex aequo et bono arbitration in Nigeria.

The current trend with enforcement of arbitral award in Nigerian Courts is that the courts are more reluctant to meddle with arbitral award or set same aside for no just cause. The Court is bound to accept findings of fact and even of law which do not appear on the face of the record to have been irregular or manifestly wrong provided that the arbitrators did not act outside the agreement of parties. The rationale for this current trend in the words of Augie JCA is that 'parties take their arbitrator for better or for worse both as to decision of fact and decision of law. The court must not be over-ready to set aside awards where parties have agreed to abide by the decision of the tribunal of their selection unless it is a radically wrong or vicious proceedings'. Both the ACA and the Courts recognized the fact that the arbitrator is at liberty to make findings of fact and act on such findings in line with the parties' agreement.

One can then conclude that Courts in Nigeria would give recognition and enforce decisions of amiable compositeur or ex aequo et bono arbitration if the parties confer such powers upon the arbitrator since equity is an integral part of Nigerian legal system.

CONCLUSION

Parties can breathe certainty into ex aequo et bono arbitration and award by providing the amiable compositeur with specific references developed in particular precedents or legal systems or by referring to certain commercial or trade standards as guide for what is equitable and fair in any specific dispute. Equally, general principles of lex mercatoria and equity can also be sources of equitable discretion of the amiable compositeur and ex aequo et bono arbitration.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
PUNUKA Attorneys & Solicitors
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
PUNUKA Attorneys & Solicitors
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions