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CS Professional · Arbitration, Mediation and Conciliation · Commercial Transactions

Mehta Agro Ltd and Pillai Traders have a domestic arbitration in Kochi. The clause says nothing about equity. The sole arbitrator, finding the contractual price clause harsh, proposes to decide as amiable compositeur and ignore the clause and the trade usage of the grain market. Which statement is correct?

The proposal is not permissible. A tribunal can decide as amiable compositeur only when the parties expressly authorise it, and in every case it must take into account the contract terms and trade usages applicable to the transaction, as Section 28(2) and (3) provide.

  1. APermissible, since a tribunal may decide on fairness whenever the contract is harsh
  2. BPermissible if the other party does not object during hearings
  3. CNot permissible, as amiable compositeur needs express authorisation, and the contract terms and trade usages must be taken into account in all casesCorrect
  4. DPermissible, but only in international commercial arbitration

Explanation

A tribunal may decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorised it. Also, in all cases it must take into account the contract terms and applicable trade usages. Silence or lack of objection is not express authorisation.

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