Some parties readily recourse to amiable composition, thinking the arbitrator will free himself from the rule of law. Others, conversely, fear arbitrariness because for them, the concept’s boundaries are blurry and its result is unpredictable.
What is amiable composition and why choose it?
Pursuant to Article 1478 of the French Code of Civil Procedure, “The arbitral tribunal shall decide the dispute in accordance with the law, unless the parties have empowered it to rule as amiable compositeur“. It would thus be logical to consider it is a standard different than the rule of law, to which the arbitrator will refer to decide the dispute. However, this provision does not define amiable composition.
Article 187(2) of the Swiss Federal Law on Private International Law provides that “The parties may authorize the arbitral tribunal to decide ex aequo et bono“. Would amiable composition be the fact for an arbitral tribunal to decide in equity?
Certain arbitration rules operate an even more subtle distinction, providing that the arbitral tribunal decides, if the parties so agree, in amiable composition or “ex aequo et bono“, i.e., “from what is good and just” (see, e.g., Article 21(3) of the ICC Rules or 35(2) of the United Nations Commission for International Trade Law (“UNCITRAL”) Rules.
The issue of the definition of boundaries of amiable composition, equity, or the fact that an arbitral tribunal decides ex aequo et bono remains debated. However, scholars, case law and pratictitioners all agree that these concepts refer to some form of equity (different from the Common law concept of Equity).
The Paris Court of Appeal, ruling on an award in which the arbitral tribunal had decided in amiable composition, summarised the consequences of such a choice in the following way:
“The amiable composition clause is a conventional renounciation to the effects and benefit of the rule of law, the parties losing the prerogative to request its strict application and, as a corollary, the arbitrators being empowered to modify or moderate the consequences of the contractual provisions, provided that equity or the well understood common interest of the parties requires it” (Paris Court of Appeal, 28 November 1996, Rev. arb. 1997, p. 381, note E. Loquin ; Paris Court of Appeal, 4 November 1997, Rev. arb. 1998, p. 704, obs. Y. Derains).
Consequently, the arbitrator amiable compositeur must first search the dispute’s solution in law. Then, if he is convinced that the solution is unjust or inequitable in the matter at hand, he may set aside or correct the consequences of the strict application of the rule of law.
However, is it not risky for a party to entrust what is just or equitable to the sensibility of one or three arbitrators?
Elements permit to regulate this subjectivity. Thus:
- Parties may choose their arbitrators; it is up to them to choose people they trust, for their reputation or their knowledge of a designated sector;
- The arbitrator has the obligation to motivate his award (Article 1482 of the French Code of Civil Procedure), failing which in domestic arbitration, the award may be annuled (Article 1483 of the French Code of Civil Procedure);
- Parties may, in their submissions, explain to the arbitrator not only the reason why their claims should succeed from a legal standpoint, but also that such a solution is just and equitable…
The subjective character of amiable composition may prove to be an advantage in cases in which the technicity and economical reality are predominant compared to legal issues. In fact, certain arbitral institutions in identified sectors, gathering professionals very well versed in specific sectors, do not hesitate to provide in their arbitration rules that the arbitral tribunal will decide in amiable composition unless the parties agree otherwise (see, e.g., Article 24 of the Arbitration and Mediation Rules of the Fédération Nationale des Travaux Publics (“FNTP”), according to which the arbitral tribunal “decides as amiable compositeur unless the parties request it to respect the rule of law“).
In consequence, parties should analyse the pros and cons of having the arbitral tribunal decide in law or in amiable composition at the time of the drafting of the arbitration clause, taking into account the contractual elements of the industry and the applicable arbitration rules.