The respondent, a company registered in an East European State [X], entered into a contract with an advertising agency based in Central America for the publication of an advertisement in the press. The claimant initiated arbitration proceedings upon the respondent's failure to pay the price as agreed in the parties' contract. The respondent objected that the contract was not valid, that it was but a preliminary agreement requiring further details, and that it was incorrectly performed. In their contract, the parties agreed that the arbitrator should act as amiable compositeur, 'who shall decide the case according to the principles of equity without needing to observe legal or procedural rules'.

'As to interest, Clause 1.2 of the Contract Terms and Conditions provides: "Should payment not be made within the period established in Clause 1.1 or on the front page, the Advertiser shall pay to the Company interest on the amount outstanding, at a rate of 1.8% per month, from 30 days (payment due dated indicated in Clause 1.1), to the date when payment is actually received by the Company, without need of any demand for payment". The payment being due since May 18, 1995, such late-payment interest would run from June 18, 1995 until full payment.

The Arbitrator considers that the parties have the freedom to decide on the rate of such contractual interest, subject to public order of the applicable law. The Arbitrator considers that the purpose of a contractual clause providing for an interest rate applicable for late payment is to compensate the creditor's monetary damage during the period for which the Contract debt remains unsettled.

In the present case, the Arbitrator - who has the powers of an amiable compositeur and is to decide the case according to the principles of equity without needing to fully apply legal or procedural rules - is entitled to review the consequences of contractual provisions and to depart from a strict enforcement of such Contract provisions within the limits of the Contract's global balance.

It is obvious that the intent of the parties was to ensure protection against a devaluation that would make the payment of interest unrealistic. It cannot have been the intention of the parties to replace interest by usury. What would have been understandable if the payment was foreseen in a weak currency is not applicable to a payment in US dollars. Article 13 of the Rules compels the arbitrator to apply the stipulations of the Contract, but also trade usages. No one would accept, as a trade usage, a yearly interest of 21.6% as applied to the US dollar. Indeed, such interest applied to a contract price made in US dollars, is too high in view of equity and trade usages and should be adapted in order to cope with the evolution of the economic circumstances. Indeed, such a rate would (1) not serve the sole purpose of serving as interest rate without a massive depreciation of the US dollar and (2) would too hardly damage the Defendant, especially in view of the fluctuation of the exchange rates between US dollar and the [State X currency].

Accordingly, the Arbitrator rejects Claimants claim for interest at the rate of 1.8% per month and decides to apply to the principal an interest rate at LIBOR+2 running from June 18, 1995 until full payment on the principal . . .'