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| A United States seller (Defendant) and a Middle Eastern buyer (Claimant) entered into a contract for the supply of goods. The Claimant, a governmental agency, claimed damages and interest in connection with a delay in the delivery of the goods. The contract contained no choice of law clause. The Defendant, invoking the application of the law of Maryland as the place where the significant contractual obligations, i.e., the manufacture of the goods, had been performed, deemed the claim to be time-barred. The Claimant relied on its own domestic law under which the action would not be time-barred, and, subsidiarily, invoked the application of general principles of law.
In investigating the intent of the parties, the Arbitral Tribunal found that the absence of a choice of law clause in the contract demonstrated that neither party was prepared to accept the other's domestic law. Given such an implied negative choice, the Arbitral Tribunal was faced with three alternatives: to apply a neutral law, to adopt the tronc commun doctrine, or to choose a de-nationalised solution and apply generally accepted principles of law. After rejecting the first two solutions the first because it considered it artificial and arbitrary, the second because it would require lengthy comparative law research and might not lead to any conclusion the Arbitral Tribunal, by a majority, opted in favour of the third solution which it considered would fully maintain the equilibrium between the parties and respond to both parties' reasonable expectations. With express reference to ICC Award No. 7110, it decided to apply those general principles and rules of law applicable to international contractual obligations which qualify as rules of law and which have earned a wide acceptance and international consensus in the international business community, including notions which are said to form part of a lex mercatoria, also taking into account any relevant trade usages as well as the UNIDROIT Principles, as far as they can be considered to reflect generally accepted principles and rules. In the Arbitral Tribunal's view the UNIDROIT Principles contain in essence a restatement of those principes directeurs that have enjoyed universal acceptance and, moreover, are at the heart of those most fundamental notions which have consistently been applied in arbitral practice. However, it also pointed out that the UNIDROIT Principles have not as yet stood the test of detailed scrutiny in all their aspects so that some of their individual provisions might not reflect international consensus. It was for this reason that the Arbitral Tribunal was prepared to apply the UNIDROIT Principles only to the extent that they actually reflect generally accepted principles and rules. On the merits of the case, the Arbitral Tribunal declared that it was not ready to make a final decision. Though admitting that general principles of law and the lex mercatoria were by their very nature too vague as to provide precise answers to the statute of limitations and that the UNIDROIT Principles did not contain any specific provisions dealing with the issue, the Arbitral Tribunal nevertheless invited the parties to submit their memorials on substance having regard to applicable general principles of law rather than to their sole domestic laws. |