A Yugoslavian seller entered into a contract with an Austrian buyer for the sale of mushrooms. Later on, the seller assigned its claim for payment of the purchase price to another Austrian party (assignee). Pursuant to an arbitration agreement a dispute between the buyer and the assignee was settled by the Yugoslavian Arbitration Tribunal in Foreign Commercial Matters in Belgrade which held the assignee entitled to recover the purchase price plus interest calculated at 0.2% per day capitalized on a daily basis (meaning an interest rate of 73% per annum and, taking into account the daily capitalization, 107,35% per annum). The assignee filed an action in order to obtain recognition and enforcement of the arbitral award in Austria.
The Court of First Instance granted enforcement of the arbitral award only for the part regarding payment of the purchase price, holding that the interest rate as calculated by the Arbitral Tribunal was contrary to the Austrian Civil Code and to public order. The Appellate Court took instead a different position, as it found - inter alia - that the stipulation of an interest rate of 73% amounted to a penalty clause which, under the Austrian Commercial Code, was valid and thus did not infringe public order. The Appellate Court’s decision was contested both by the buyer and the assignee.
The Supreme Court ruled that, in the case at hand, the application of the interest rate would have as a consequence the payment of an amount greater than the actual debt. In the Court’s view, such a result was to be regarded as an abuse of private autonomy and, as such, not only immoral and void under the Austrian Civil Code, but also contrary to public order. Nor could the excessively high interest rate be justified by invoking Yugoslavia’s high inflation rate at the time the contract had been concluded. Indeed, the agreement between the parties was governed by CISG as, at the time of the conclusion of the contract, the parties had their places of business in different Contracting States (Art. 1(1)(a) CISG) and, on the basis of the criteria set forth in Art. 8 CISG for interpreting statements and other conduct by the parties, it could not be clearly ascertained that the parties had intended to exclude its application. It followed that, under Art. 57(1)(a) CISG, the buyer was bound to make payment at seller's place of business in Yugoslavia; however, since according to the Arbitral Tribunal the purchase price was to be paid in Deutsche Mark (and, starting from 1 January 2002, in Euro), the Court, without mentioning either Art. 78 or Art. 74 CISG, held that the assignee had not been exposed to the Yugoslavian inflation rate.
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