An Italian company (the main contractor) and a Kuwaiti company (the subcontractor) entered into a contract for the installation and maintenance of electrical works. The contract provided for arbitration to be held in Italy and subject to Swiss law. The dispute arose when, despite completion of work by the subcontractor, the main contractor failed to pay and refused to release performance bonds. The subcontractor requested the release of these bonds and in addition claimed damages; the main contractor counterclaimed damages arising from the delayed completion of work, alleging that such delay (20 months) was due to several failures to perform (gross mistakes) by subcontractor.
In an interim award, rendered in December 1989, the Arbitral Tribunal interpreted the reference to Swiss Law as a choice of the law governing the arbitration procedure. As to the law applicable to the substance of the dispute, the Tribunal concluded in favour of Kuwaiti law as the law most closely connected with the relevant elements of the contract, but it decided also to take into account "principles generally applicable in international commerce".
In its final award the Arbitral Tribunal, without further explanation, referred on several occasions to the UNIDROIT Principles. Thus it referred to Article 7.1.6 to interpret the notion of gross mistake under Kuwaiti law, and concluded that a party's conduct is grossly negligent when it leads to a performance substantially different from what the other party reasonably expected. Moreover, it referred to Articles 7.4.3(3) and 7.4.7 to interpret Article 300(1) of the Kuwaiti Civil Law no. 67 of 1980 determining the factors to be taken into consideration by the court when assessing the amount of damages. Finally, it referred to Article 7.4.9(3) to confirm the rules contained in Articles 110 and 111 of the Kuwaiti Commercial Code no. 68, according to which the aggrieved party is entitled to additional damages if the non-payment caused it harm greater than would be covered by the normally applicable rate of interest. |