Austrian-Polish Twin Conference 2011

Re-shaping contracts
ex aequo et bono (?)

Lisa Beisteiner – Schoenherr Attorneys, Vienna

Structure

1. General adaptation clauses

2. Power of arbitrators to adapt contracts (in general)

3. Equity-Decisions: Stick to the contract? Question 1

4. Enforcing general adaptation clauses by ex aequo et

bono decision-making? Question 2

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1. General Adaptation Clauses
For example:
“If the legal, economic or technical conditions relevant to the
parties upon conclusion of this contract substantially change,
the parties have to agree on a respective amendment of the
contract, taking into account the contractual equilibrium
as intended by and the initial spirit of the contract.”

 Frequently, for lack of certainty such clauses will not

be enforceable in court.

 May arbitration with its possibility of equity decision-

making help?

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2. Arbitrators‘ Power to Adjust Contracts

In general, could arbitrators be authorized to “make

contracts”?

 Deciding under strict Law

– Arbitrators enjoy powers concurrent to those of state
court judges.

 Deciding in equity (ex aequo et bono)

– Generally, it may be assumed that arbitrators’ powers to
adapt contracts can exceed those of state court judges,
when deciding in equity.

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 Question 1

Equity-Decisions: Stick to the

contract?
 Question 1

3. Ex aequo et bono: Stick to the Contract?

 It is controversial whether amiables compositeurs have to
stick to the contract.

 Differentiation
– according to the nature of the contract/individual circumstances

 Departure from the contract (= terms) may at times be

required to honor the contract (= common intention).
– E.g.: adaptation clauses; complex long term contracts; etc.
– Cf. IBM vs. Fujitsu (1987)
– Beyond these cases: merely mitigating harsh effects of the parties’
bargain without altering its basic terms.
– Cf. ICC Arbitration Case No. 3938 of 1982

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 Question 1
 ICC Rules – Article 17
(2) - In all cases the Arbitral Tribunal shall take account of the provisions of the
contract and the relevant trade usages.

(3) - The Arbitral Tribunal shall assume the powers of an amiable compositeur or
decide ex aequo et bono only if the parties have agreed to give it such powers.

 UNCITRAL Model-Law – Article 28

(3) - The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur
only if the parties have expressly authorized it to do so.

(4) - In all cases, the arbitral tribunal shall decide in accordance with the terms of
the contract and shall take into account the usages of the trade applicable to the
transaction.

 Austrian Code on Civil Procedure - Section 603

(3) - The arbitral tribunal shall decide ex aequo et bono or as amicable compositeur
only if the parties have expressly authorized it to do so.

 VIAC Rules – Article 24

(3) - The sole arbitrator (arbitral tribunal) may decide on equity only if the parties
have expressly authorized him (it) to do so.

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 Question 2

Enforcing general adaptation clauses

by ex aequo et bono decision-making?
 Question 2

4. Enforcing general adaptation clauses

by ex aequo et bono decision-making?
 If a contract contains both a general adaptation clause
plus an arbitration clause:
– > authorization to decide ex aequo et bono?

– > means of enforcing general adaptation clauses?

 Difficulties may arise as mostly “explicit authorization”

is required for decision-making in equity.
– E.g. Article 28/3 Model-Law, Section 603/3 ACCP:

“The arbitral tribunal shall decide ex aequo et bono

or as amiable compositeur only if the parties have
expressly authorized it to do so.”

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 Question 2

4. Enforcing general adaptation clauses

by ex aequo et bono decision-making?
 E.g. authorization to submit settlement proposals
seems to be insufficient (OLG Munich 22.6.2005, 34 Sch 10/05)
 But: There appear to be good arguments that a
general adaptation clause + arbitration clause may
well suffice as express authorization.
– Parties’ will that their general adaptation clause be enforced (in
arbitration)
– Argumentum a minori ad maius: adaptation clause more specific
than the abstract lable “ex aequo et bono”

 Decision in law, refusing to enforce adaptation clause,

open to challenge?

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 Question 2

4. Enforcing general adaptation clauses

by ex aequo et bono decision-making?
 Uncertainties remain
– Enforceability (?), Challenge of the Award?
– Challenging and unconventional task for the arbitrators
– Arbitration vs. expert determination
– Decision supra legem (not merely contra legem) is
still a decision ex aequo et bono?

 On balance:
There seem to be good reasons to enforce general
adaptation clauses by means of ex aequo et bono-
arbitration.

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Austrian-Polish Twin Conference 2011

Thank you
for your attention!