Ex aequo et bono

Ex aequo et bono (Latin: "according to what is fair and good") describes an arbitration mandate in which arbitrators are authorised by the parties to decide the dispute on the basis of equity and fairness rather than strict application of legal rules. It is one of the most flexible forms of alternative dispute resolution and is sometimes chosen for financial valuation disputes where rigid legal rules would produce commercially unreasonable outcomes. Ex aequo et bono arbitration is explicitly recognised under major institutional arbitration rules (UNCITRAL, ICC) when the parties expressly agree to confer this power on the tribunal.

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The notion is closely related to amiable composition in French procedural law, under which the amiable compositeur may temper the application of legal rules where equity requires, while respecting public policy. In Swiss international arbitration, the tribunal may decide ex aequo et bono only if the parties have expressly authorised it. In both traditions, the power must be granted explicitly; it is never presumed.

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In M&A practice, equity-based mandates appear in price adjustment mechanisms: earn-out disagreements, completion accounts disputes and share valuation deadlocks are frequently referred to an independent expert acting as expert determiner rather than arbitrator, with authority to reach a fair, final and binding conclusion where the contract is silent or ambiguous.

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Example: in a shareholder dispute over the buyout price of a 30% stake in a Franco-Swiss holding company, the parties agree to ex aequo et bono arbitration. The sole arbitrator, an independent financial expert, determines a value of CHF 6.8 million by weighting three methodologies and accounting for the specific exit circumstances, shareholder relations and market conditions, a nuanced outcome that strict legal application of a single mandated method could not have produced.

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Hectelion experts are qualified to intervene in ex aequo et bono proceedings, combining technical rigour with economic equity to reach defensible and commercially sound conclusions.