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| In 1991 an Italian seller and a Canadian buyer entered into an Equipment Purchase Agreement whereby the seller would supply two machines as well as engineering, supervision and accessories. The contract also contained a guarantee against defects for a period of twelve months starting from the date of order. The parties agreed that French law was the law governing the contract and that any dispute would be settled in accordance with the ICC Rules of Arbitration. The machines were delivered in 1992. In 1998, the buyer and an insurer entered into a machinery insurance policy assigning to the Insurer (hereinafter “Plaintiff”) the right to recover any sum paid to the buyer under the insurance policy. After compensating the buyer for damage suffered because one of the machines failed to function, the claimant filed a request for arbitral proceedings against the seller.
It was agreed that the Arbitral Tribunal would first examine the matters of applicable law and limitation periods. The Arbitral Tribunal held that CISG could not be applied pursuant to Art. 1(1)(a) CISG since it had not yet entered into force in Canada at the time the contract was concluded (Art. 100(2) CISG). Instead, CISG could be applied pursuant to Art. 1(1)(b) CISG if the rules of private international law led to the application of the law of a Contracting State. However, given that arbitrators are not bound by the conflict of laws rules but by the parties' choice of law made in conformity with the principle of party autonomy prevails and such a principle has to be considered as part of the rules of private international law referred to in Art. 1(1)(b) CISG (as well as according to Art. 17(1) of the ICC Rules of Arbitration and Art. 1496 of the French Code of Civil Procedure), it followed that, unless the parties, by choosing French law, intended to exclude the application of CISG, the Convention was to be applied as it had been incorporated into French law. The Arbitral Tribunal denied that CISG could be considered tacitly excluded (Art. 6 CISG) only by virtue of the parties’ choice of French law, all the more so because the parties had failed to submit any element from which such an intention could be inferred. Nor could Plaintiff’s argument be upheld that the contractual derogation concerning the warranty period was to be interpreted as showing the parties’ intention to exclude the application of CISG. In the opinion of the Court, any contradiction between a contractual clause and CISG with respect to a particular question may only be interpreted as a presumption of the parties’ intention to derogate from the corresponding provision of CISG and not to exclude the Convention as a whole. As to the limitation period issue, it was undisputed that the claimant had failed to give notice of lack of conformity within the two-year limit time provided for in Art. 39 CISG. However, according to Art. 40 CISG, a seller is not entitled to rely on Arts. 38 and 39 if it knew or ought to have known the defects. The Tribunal found that such an issue could only be settled if the limitation period had elapsed and, since CISG does not deal with limitation periods, the matter had to be determined in conformity with the applicable domestic law (i.e. French law). In the view of the Tribunal, the application of different limitation periods to the rights provided for by CISG was unsuitable because it would have amounted to an artificial re-creation of distinctions existing under the applicable national laws which CISG aimed to avoid with a view to the promotion of international uniformity. Instead, the general ten-year limitation period provided for in Art. 189 bis of the French Code of Commerce had to be applied, independently of the specific cause of action. Consequently, because less than ten years had elapsed between the conclusion of the Agreement in 1991 and the filing of the request for arbitration in December 2000, the claim was not time-barred. |