|A Swiss seller and an Italian buyer concluded a contract for the sale of two ship cargoes of urea. The parties agreed upon payment within 30 days after the issue of the bill of lading. The seller issued an invoice containing the note that payment had to be made by bank transfer to the seller's bank account which it held with a Swiss bank in a certain region. Since the purchase price remained unpaid, the seller commenced an action to recover the price before the Court of the region where the seller's bank was located, whereas the seller's place of business was in a different region. The buyer counter-claimed that the Court had no jurisdiction to hear the case.
In order to determine whether it had jurisdiction, the Court applied Art. 5(1) of the EC Convention on Jurisdiction and Enforcement of Judgements in Civil and Commercial Matters (Lugano 1988), under which a person domiciled in a Contracting State (i.e. the buyer) may be sued in the court of the place of performance of the obligation in question (in the case at hand: the payment of the price).
The Court applied Art. 57 CISG to determine the place of payment of the price, as both parties had their place of business in Contracting States (Switzerland and Italy) (Art. 1(1)(a) CISG).
As the contract involved the handing over of documents, the Court verified first whether the place of payment was to be determined according to Art. 57(1)(b) CISG (place of payment at the place of handing over of documents). The Court noted, however, that Art. 57(1)(b) was not applicable. According to the Court, Art. 57(1)(b) applies only when the respective obligations of the buyer and the seller have to be simultaneously fulfilled and not when, as with the case in question, the buyer is entitled to pay within 30 days after the issue of the bill of lading. In the opinion of the Court, the parties agreed upon a purchase on credit which does not fall under the scope of Art. 57(1)(b) CISG.
The Court therefore applied Art. 57(1)(a) CISG, according to which the place of payment is the seller's place of business. As the seller's place of business was not located in the region of the Court, the Court denied its jurisdiction.
The Court dismissed several allegations brought by the seller trying to show that the parties had agreed upon a place of payment different from the seller's place of business (i.e. the place of the seller's bank), thus derogating from Art. 57(1) CISG.
One of the seller's arguments was that the invoice containing the note on to the seller's bank account constituted a letter of confirmation which, as not objected to by the buyer, became part of the contract. The Court clarified that a document generally known in Switzerland as a letter of confirmation belongs to the process of the formation of the contract, so that in certain circumstances its content may become part of the contract, whereas an invoice belongs to the process of performance of the contract. Therefore, without investigating whether a letter of confirmation existed, the Court held that in the case at hand the note in the invoice could not become part of the contract, since an invoice does not qualify as a letter of confirmation.
The Court also dismissed the seller's allegation that the indication on the invoice of the seller's bank account established a practice between the parties under which the buyer was bound to pay at the seller's bank, therefore the bank's place being the place of performance. In the Court's opinion, although it left open the issue of whether the parties concluded one or two different contracts for the delivery of two ship cargoes, it held that under Art. 9(1) CISG two contractual relationships were anyway not sufficient to establish a practice between the parties. According to the Court, in order for a practice between the parties to be established, long lasting contractual relationships involving more sale contracts between the parties is required.
The Court also rejected the seller's argument according to which the payment of the price by means of bank transfer to the seller's bank account constitutes an international usage according to Art. 9(2) CISG. Although the Court recognized that payment by means of bank transfer instead of cash is widely employed in international trade, in the Court's opinion, however, such employment is not sufficient to establish an international usage under Art. 9(2) CISG. A usage would be established only if a notice by a seller on payment to its bank account would widely be known as an indication by the seller of a new exclusive place of performance, and not just an alternative place of payment, as in the Court's opinion such indication is known.