Ex Aequo et Bono: Demystifying an Ancient Concept

"Settlement of a dispute ex aequo et bono rather than on the basis of law, results neither from the nature of the dispute, nor from lacunae in international law, but solely from the decision of the parties to obtain such a solution."1 I. INTRODUCTION The ancient concept ex aequo et bono holds that adjudicators should decide disputes according to that which is "fair" and in "good conscience." Despite its long history in international adjudication, and even though it is enshrined in the Statute of the International Court of Justice, the concept of ex aequo et bono is often avoided on grounds that it operates outside of law, or is deemed to be contrary to law. This Article argues that the concept has a valuable and emerging significance in modern law. It is ideally suited to resolving disputes between parties who are engaged in complex and long-term relationships or in emerging fields in which the law is either inadequately developed or unsuitable to resolve complex disputes. The Article evaluates the negative conceptualization of ex aequo et bono. It argues against the overly artificial divide between equitable decisions, which accord with law, and ex aequo et bono decisions, which by inference do not. Tracing the evolution of the concept historically through the Medieval Law Merchant to modern times, the Article sets out how ex aequo et bono might be revitalized in both international and domestic law. Arguing that ex aequo et bono operates along a continuum rather than at a fixed point between law and nonlaw, the Article illustrates how it can be both formulated and applied. The Article demonstrates how to relate ex aequo et bono to the law of equity and how to reconcile it with "gap filling" under law. It also shows how discretion in applying ex aequo et bono can be subject to internal and external limits, and how parties can invoke it most effectively to resolve their disputes. The Article concludes by presenting a methodology by which to guide the application of ex aequo et bono to such disputes. Section II discusses the current status of the doctrine of ex aequo et bono. It also considers key issues surrounding the doctrine, including the consent of the parties to its application and the attitude of international courts and tribunals to its ambit of operation. section III outlines the evolution of ex aequo et bono historically and in modern public and private international law. section IV evaluates the tension between equitable and ex aequo et bono decisionmaking. section V explores "gap filling" in the exercise of adjudicator discretion. sections VI and VII set out internal and external limits on ex aequo et bono. section VIII examines the impact of ex aequo et bono upon party autonomy. section IX proposes guidelines in which ex aequo et bono might operate. The Article concludes that the viability of ex aequo et bono depends on the confidence with which parties adopt it and how effectively and fairly adjudicators apply it in accordance with practical reason. II. THE STATUS OF Ex AEQUO ET BONO The concept ex aequo et bono is often negatively stereotyped, misunderstood, or both. It is supposed that an adjudicator, by deciding according to that which is "fair" and "good," acts "outside of the law," or more pejoratively, "acts notwithstanding the law."2 It is in part for these reasons that both public and private parties to international agreements often avoid resorting to ex aequo et bono in resolving their differences. The result is that, absent express party consent, decisions ordinarily are not reached ex aequo et bono? In limited instances adjudicators decide cases based on principles not ordinarily contained in international law, including assurances that treatment of the parties is humane and that remedies are proportionate, but only if such action is permitted by the applicable law. The presumption is that such principles are legitimately invoked because they are permitted by the applicable domestic or international legal system and are not the result of an independent decision by the adjudicator to decide ex aequo et bono? …