The role of ex aequo et bono in ICSID arbitration

Abstract

This article examines the role of the principle of ex aequo et bono in arbitration before the International Centre for Settlement of Investment Disputes (ICSID). At the outset, the author remarks that the cases in which the application of ex aequo et bono was agreed upon by the parties are very scarce. Nevertheless, despite that scarcity, it is possible to draw some conclusions on the way in which equity was invoked by the parties and applied by the ICSID tribunals. Two scenarios are analyzed in particular: the use of ex aequo et bono as the applicable framework for dispute settlement and the reliance on ex aequo et bono in an attempt to nullify the award before an ad hoc Committee. The author concludes that the reluctance of the parties to agree on ex aequo et bono may be explained by the lack of predictability of outcomes that is inherent to this source of law. On the contrary, it might be expected that the parties will continue trying to come up with creative arguments aimed at proving the unauthorized application of ex aequo et bono by the tribunals in their attempts to annul the awards on the basis of excess of powers.