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Austrian- Polish Twin Conference 2011

Austrian- Polish Twin Conference 2011. L isa Beisteiner – Schoenherr Attorneys , Vienna. Re- shaping contracts ex aequo et bono (?). Structure. Question 1. Question 2. General adaptation clauses Power of arbitrators to adapt contracts (in general )

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Austrian- Polish Twin Conference 2011

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  1. Austrian-PolishTwin Conference 2011 Lisa Beisteiner – SchoenherrAttorneys, Vienna Re-shapingcontracts ex aequo et bono (?)

  2. Structure Question 1 Question 2 General adaptationclauses Power ofarbitrators to adaptcontracts (in general) Equity-Decisions: Stick to thecontract? Enforcinggeneraladaptationclausesby ex aequo et bonodecision-making? Austrian-PolishTwinConference

  3. 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? Austrian-PolishTwin Conference

  4. 2. Arbitrators‘ Power to AdjustContracts 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. Austrian-PolishTwin Conference

  5. Question 1 Equity-Decisions: Stick to thecontract?

  6. 3. Ex aequo et bono: Stick to theContract? Question 1 • It is controversial whether amiablescompositeurshave 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 Austrian-PolishTwin Conference

  7. 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 contractand 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. Austrian-PolishTwin Conference

  8. Question 2 Enforcinggeneraladaptationclausesby ex aequo et bonodecision-making?

  9. 4. Enforcinggeneraladaptationclausesby ex aequo et bonodecision-making? Question 2 • 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 compositeuronly if the parties have expressly authorized it to do so.” Austrian-PolishTwin Conference

  10. 4. Enforcinggeneraladaptationclausesby ex aequo et bonodecision-making? Question 2 • 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? Austrian-PolishTwin Conference

  11. Question 2 4. Enforcinggeneraladaptationclausesby ex aequo et bonodecision-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. Austrian-PolishTwin Conference

  12. Austrian-PolishTwin Conference 2011 Thankyou foryourattention!

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