- Arbitral Award
- ICC Court of Arbitration - Paris
CONTRACT SILENT AS TO APPLICABLE LAW PARTIES' REFERENCE TO INCOTERMS 1990 AND UCP 500 ARBITRAL TRIBUNAL'S INFERENCE OF PARTIES' INTENTION THAT CONTRACT BE GOVERNED BY TRADE USAGES
AND GENERALLY ACCEPTED PRINCIPLES OF INTERNATIONAL TRADE REFERENCE TO CISG AND THE UNIDROIT PRINCIPLES AS EVIDENCING ADMITTED PRACTICES UNDER INTERNATIONAL TRADE LAW
DETERMINATION OF DAMAGES DIFFERENCE BETWEEN CONTRACT PRICE AND MARKET PRICE AT TIME OF
TERMINATION (ART. 76 CISG; ART. 7.4.6 UNIDROIT PRINCIPLES)
INTEREST COMPOUND INTEREST NOT A UNIVERSALLY RECOGNISED PRINCIPLE IN INTERNATIONAL TRADE
A Vietnamese seller and a Dutch buyer (acting through a French company as its agent) entered into a contract for the supply of rice. The contract did not contain a choice of law clause, but did provide for the application of the Incoterms 1990 (with respect to the price) and of the Uniform Customs and Practice for Documentary Credits (UCP) 500 (with respect to force majeure).
In the Arbitral Tribunal's view, the reference to both the Incoterms and the UCP indicated the parties' intent that their contract be governed by trade usages and generally accepted principles of international trade. It therefore decided to apply, with respect to the issues not regulated by either Incoterms or the UCP, the CISG and the UNIDROIT Principles, as evidencing admitted practices under international trade law.
Thus, with respect to the determination of the amount of damages, the Arbitral Tribunal referred to both Art. 76 CISG and Art. 7.4.6 of the UNIDROIT Principles in order to award claimant the difference between the contract price and the market price at the place of delivery and at the time the contract was terminated, plus interest.
The Tribunal did not award the compound interest stating that the granting of compound interest is not a universally recognised principle in international trade.
The Contract concluded between the Parties, and upon which the present proceeding is based, is silent as to the law to be applied on the merits. There is, accordingly, no express choice of law clause. Similarly, having regard to the correspondence exchanged between the Parties, the Arbitral tribunal is of the opinion that no implied choice of law can be inferred from the relationship between the Parties.
The Contract, as well as the present arbitration, involve, on the one hand, a Vietnamese seller and, on the other hand, a Dutch buyer acting through its French company. The place of arbitration is Paris, France.
This dispute has connections with several national laws, all of which may have a relevant role. Under Article 13(3) of the ICC Rules, the Arbitral Tribunal shall apply the law designated by the rule of conflict which it deems appropriate.
Although the Contract contains no choice of law clause, it refers to international trade usages. Article 6 of the Contract, with respect to the price to be paid by the buyer, provides that Incoterms 1990 shall apply. Similarly, Article 13 of the Contract stipulates, as regards force majeure, that the clause of UCP 500 shall apply.
It thus appears that the Parties have, to a large extent, agreed to submit their relationship to recognized trade usages such as the Incoterms or the Uniform Customs and Practice for Documentary Credits (UCP), published by the ICC. The Arbitral Tribunal considers that by referring to both the Incoterms and the UCP 500 the Parties showed their willingness to have their Contract governed by international trade usages and customs.
The application of the relevant trade usages is consistent with Article 13(5) of the ICC Rules and with the arbitral practice [...].
For the foregoing reasons, the Arbitral Tribunal finds that it shall decide the present case by applying to the Contract entered into between the Parties trade usages and generally accepted principles of international trade. In particular, the Arbitral Tribunal shall refer, when required by the circumstances, to the provisions of the 1980 Vienna Convention on Contracts for the International Sale of Goods (Vienna Sales Convention) or to the Principles of International Commercial Contracts enacted by Unidroit, as evidencing admitted practices under international trade law.
The Arbitral Tribunal found that the Respondent failed to comply with its obligations under the Contract and that said failure was not legally justified. It now remains to calculate the amount of compensation due to the Claimants caused by the Respondent's default.
As regards the applicable law on the question of compensation, the Arbitral Tribunal, as previously mentioned, considers that the Parties have expressed their mutual intention to have their relationship governed by general principles of international trade.
The Incoterms 1990 or the UCP 500, to which reference is made in the Contract, contain no provision regarding the effect of the failure by one party to fulfil its obligations under the Contract.
The Arbitral Tribunal considers that this question should be examined in light of generally admitted principles of international trade as contained for example in international treaties. For this reason, the Arbitral Tribunal is of the opinion that the principles embodied in the Vienna Convention on the International Sale of Goods of 1980 (Vienna Sales Convention) reflect widely accepted trade usages and commercial rules. Although the Vienna Sales Convention is not as such directly applicable to the Contract (Vietnam has not ratified this Convention), the Arbitral Tribunal finds that it may refer to its provisions as the expression of usages in the world of international commerce [...]
Article 76 of the Vienna Sales Convention reads as follows:
(1) If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale under Article 75, recover the difference between the price fìxed by the contract and the current price at the time of avoidance as well as any further damages recoverable under Article 74 [...]
(2) For the purposes of the preceding paragraph, the current price is the price prevailing at the place where delivery of the goods should have been made or, if there is no current price at that place, the price at such other place as serves as a reasonable substitute, making due allowance for differences in the cost of transporting the goods. "
Finally, the Arbitral Tribunal shall refer to the work of the International Institute for the Unification of Private Law (Unidroit). Article 7.4.6 of the Unidroit Principles of International Commercial Contracts provides :
Where the aggrieved party has terminated the contract and has not made a replacement transaction but there is a current price for the performance contracted for, it may recover the difference between the contract price and the price current at the time the contract is terminated as well as damages for any further harm.
Current price is the price generally charged for goods delivered or services rendered in comparable circumstances at the place where the contract should have been performed or, if there is no current price at that place, the current price at such other place that appears reasonable to take as a reference.
Based on these applicable principles of law, the Claimants are entitled to damages calculated as the difference between the contract price and the relevant market price. The contract price is easily determined by the contractual provisions agreed upon by the Parties, which include the initial Contract and its amendment […]
With respect to the determination of the relevant market price, two issues must be addressed. One needs first determine the reference time at which the market price is calculated, and the place of reference [...]
It results from the foregoing analysis that, unless a current price is not available, damages should be calculated with reference to the market price at the place where delivery of the goods should have been made. In the present case, the goods being sold FOB Ho Chi Minh City port, the place of delivery of the goods for the purposes of this provision is Ho Chi Minh City.
Original in English (excerpt):
- ICC International Court of Arbitration Bulletin, Vol. 10, No. 2, Fall 1999, 72-74}}