- Arbitral Award
- ICC International Court of Arbitration 11227
MEMORANDUM OF UNDERSTANDING - BETWEEN A SPANISH COMPANY AND PORTUGUESE COMPANIES - CLAIMANT ARGUING ON THE BASIS NOT ONLY OF THE APPLICABLE DOMESTIC LAW (PORTUGUESE LAW) BUT ALSO OF THE UNIDROIT PRINCIPLES REFERRED TO AS "INTERNATIONAL PRACTICE"
QUESTION AS TO WHETHER MEMORANDUM OF UNDERSTANDING LEGALLY BINDING NOTWITHSTANDING PARTIES HAD LEFT SEVERAL MATTERS TO BE DETERMINED AT LATER STAGE - SOLUTION IN THE AFFIRMATIVE ACCORDING TO PORTUGUESE LAW AND TO THE UNIDROIT PRINCIPLES (ARTICLES 2.11(2) AND 2.14 [ARTS. 2.1.11(2) AND 2.1.14 OF THE 2004 EDITION])
Claimant, a Spanish company, entered into a memorandum of understanding with Defendants, Portuguese companies, specifying the interest each would take in a third company whose shares they intended to buy. When Defendants decided to sell their interest to another company, Claimant accused them of breach of the memorandum of understanding.
The first question to be decided by the arbitrator was whether the memorandum of understanding was legally binding notwithstanding the fact that the parties had left several matters to be determined at a later stage. In arguing that notwithstanding this the memorandum of understanding was legally binding, Claimant based itself on the applicable Portuguese law but at the same time specified that Portuguese law did not on this point differ very much from international practice and specifically referred to Articles 2.11(2) and 2.14 [Arts. 2.1.11(2) and 2.1.14 of the 2004 edition] of the UNIDROIT Principles.
[Claimant] considers that clause 4 of the MOU contains an express commitment to execute a "shareholders' agreement" which essentially obliges each of the parties to proceed in good faith for the completion of such an agreement and that the only matters subject to future negotiation were those comprising the Shareholders'Agreement. It would not be true that the financial leverage, the need for a Technology Agreement or the commitment in respect of the flotation of [Company X] remained open for discussion.
Nevertheless, according to [Claimant], the fact that one or more matters in the MOU were left to future discussion did not prevent the MOU from being perfected as a contract. In this aspect, Portuguese law does not differ very much from the international practice. In this respect, article 2.11 §2 and article 2.14 of the UNIDROIT principles set forth that the fact that the parties leave certain matters for future discussions or to the determination of a third party does not prevent the contract from being completed, its effectiveness not being even affected if the parties fail to reach an agreement on such matters or the third party fails to determine them.}}
Excerpt in ICC International Court of Arbitration Bulletin, 2005 Special Supplement, pp. 87-88.}}