CS Professional · Arbitration, Mediation and Conciliation · Commercial Transactions

Under a contract between Verma Pharma Ltd and a German distributor, with the seat in Hyderabad, the parties chose German law. The clause says nothing on the tribunal deciding in equity. The tribunal, thinking strict German law harsh, decides ex aequo et bono without consulting the parties. The distributor challenges the award. What is the correct position?

The tribunal erred. It may decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorised it. Implied authority or the tribunal's own view of fairness is insufficient, and the dispute must be decided under the law the parties designated.

1. AThe tribunal acted validly since commercial tribunals may always decide in equity
2. BThe tribunal erred, since it may decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorised itCorrect
3. CThe tribunal acted validly because the parties may be taken to have impliedly authorised it
4. DThe tribunal erred only if the award was not in writing