By Fernando Aguilar and Roque J. Caivano
Arbitration ex aequo et bono or equitable arbitration allows arbitrators to decide cases in accordance with equitable principles or the conscience of a good faith arbitrator, rather than based on statutory rights. Despite broad discretion, the amiable compositeur must meet the procedural standards of due process. Further, he may not stray from the terms in which the dispute was set forth, concede more to a party than requested, nor ignore facts that have been sufficiently demonstrated. However, so long as the arbitrator acts independently, in good faith, and provides each party equal opportunity to present its case, his decision will be enforced with res iudicata effects.
Once dictated, decisions of an amiable compositeur are not subject to appeal, though a final decision may be annulled if it is tardy or encompasses matters not included in the arbitration agreement. Also, a decision in violation of public order rules leads to non enforceability. It should be noted that, as any other arbitration, only certain matters may be subject to arbitration ex aequo et bono. That is, the rights that underlie the dispute must be rights that contracting parties are free to settle.
Equity arbitration has been criticized for allowing arbitrators excessive discretion. However, in long term multi party international contracts, equity arbitration provides a flexible framework that allows for fair and equitable solutions avoiding contradictory norms or unforeseen losses. In contrast with the excessive rigidity of judicial procedural rules, arbitration ex aequo et bono achieves the ultimate purpose of the procedure, which is to attain knowledge of the truth and consequently the most fair and just decision.