- Arbitral Award
- ICC International Court of Arbitration 9950
LONG-TERM CONTRACTS - CONTRACT FOR THE SUPPLY OF INDUSTRIAL PLANT AND SUPERVISION OF ITS CONSTRUCTION - BETWEEN AN EGYPTIAN AND A FRENCH COMPANY - GOVERNED BY EGYPTIAN LAW
DELAY IN COMPLETION OF PLANT - CLAIM BY PURCHASER FOR DAMAGES FOR LOSS OF PROFITS - IN DECIDING IN FAVOUR OF CLAIMANT, ARBITRAL TRIBUNAL REFERRED NOT ONLY TO EGYPTIAN LAW BUT ALSO TO SWISS LAW AS THE LAW OF THE PLACE OF ARBITRATION AND TO THE UNIDROIT PRINCIPLES (ARTICLES 7.4.1 - 7.4.3).
Claimant, an Egyptian company, concluded a contract with Defendant, a French company, for the supply of equipment for an industrial plant and the supervision of the construction of the plant. Due to Defendant's faulty design and performance, the plant could not be run on schedule prompting Claimant to initiate arbitration proceedings in which it claimed damages for loss of profits.
The contract was governed by Egyptian law. However in addressing the question of the quantification of the losses the Arbitral Tribunal referred not only to the relevant provisions in the Egyptian Civil Code (Articles 170 - 171, 221 - 222) but also to Swiss law, i.e. to Article 42 of the Swiss Code of Obligations, as the law of the place of arbitration and to the UNIDROIT Principles, i.e. Arlticles 7.4.1, 7.4.2 and 7.4.3, quoting them in extenso.
As stated... above, the Tribunal is satisfied that the Claimant has suffered substantial losses of profits. An Arbitral Tribunal must not be deterred by the complexities of quantification from awarding full compensation to an aggrieved party. The Egyptian Civil Code places responsibility on a judge to fix the amount of damages, and the Egyptian Court of Cassation has referred on a number of occasions to the elements of judicial discretion in the allocation of damages. The Tribunal further notes that Article 42 of the Swiss Code of Obligations recognises an element of discretion in cases where exact damages cannot be quantified:
II. Fixation du dommage
1 La preuve du dommage incombe au demandeur.
2 Lorsque le montant exact du dommage ne peut étre établì, le juge le
détermine équitablement en considération du cours ordinaire des choses et des mesures prises par la partie lésée.
There is further support for such an approach in the statement of the principles for the assessment of damages in Article 7.4 of the UNIDROIT Principles of International Commercial Contracts (1994):
(Right to damages)
Any non-performance gives the aggrieved party a right to damages either exclusively or in conjunction with any other remedies except where the non-performance is excused under these Principles.
(1) The aggrieved party is entitled to full compensation for the harm sustained as a result of the non-performance. Such harm includes both any loss which it suffered and any gain of which it was deprived, taking into account any gain to the aggrieved party resulting from its avoidance of cost or harm.
(Certainty of harm)
(1) Compensation is due only for harm, including future harm, that is
established with a reasonable degree of certainty.
(3) Where the amount of damages cannot be established with a sufficient degree of certainty, the assessment is at the discretion of the court.
This discretion in the assessment of damages operates, however, within the confines of a scrupulous examination of the evidence presented by the Parties. The Tribunal continues to operate within a frame defined by the law, and specifically must avoid acting as an amiable compositeur (which powers the present Tribunal does not have).
It is also relevant to note that the Terms of Reference in this arbitration require the Tribunal “to decide, resolve and pronounce on all claims and counterclaims of the Parties”. Similarly, Article 190.2.c of the Swiss Statute on Private International Law provides that an award may be impugned "when the arbitral tribunal ... failed to rule on one of the claims submitted". This Tribunal would fail in its duty to the Parties, and arguably leave the award open to challenge as infra petita, if it declined to award damages for loss of profits simply on the basis of the complexities of their quantification.
The Tribunal has considered whether a possible solution to the difficulties of quantification was to reopen the proceedings and call for more evidence, or even to appoint an expert to investigate this issue. However, after considering alternative methods of calculating the Claimant's loss of profits and the evidence relating to them, the Tribunal is convinced that it is in a position to assess the Claimant's loss of profits without further evidence.}}
Excerpt in ICC International Court of Arbitration Bulletin, 2005 Special Supplement, pp. 77-79.}}