- Arbitral Award
- International Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation
SALES CONTRACT - BETWEEN A BELGIAN COMPANY AND A RUSSIAN COMPANY - SILENT AS TO THE APPLICABLE LAW - UNIDROIT PRINCIPLES APPLICABLE ONLY IF AGREED BETWEEN THE PARTIES
PENALTY CLAUSE - PENALTY FOR DELAY IN PAYMENT OF PRICE - PENALTY GROSSLY EXCESSIVE IN RELATION TO HARM SUFFERED BY AGGRIEVED PARTY - REDUCTION BY COURT (ART. 7.4.13(2)UNIDROIT PRINCIPLES)
Plaintiff, a Belgian company, concluded a contract of sale with Defendant, a Russian company. Plaintiff duly performed its obligations under the contract, while Defendant did not pay the whole price.
Plaintiff claimed payment of the balance, penalty and arbitration costs.
After commencement of arbitral proceedings Defendant paid the remaining part of the price but objected to the payment of the penalty on the ground, among others, that its amount was grossly excessive and should therefore be reduced in accordance with the practice of the International Commercial Arbitration Court of the Russian Federation and Article 7.4.13(2) of the UNIDROIT Principles.
The contract was silent as to the applicable law. The Arbitral Tribunal held that in accordance with the Russian conflict of laws rules Belgian law was applicable in the case at hand.
With respect to Plaintiff’s request for a reduction of the penalty in accordance with Art. 7.4.13 of UNIDROIT Principles, the Arbitral Tribunal rejected it on the ground that the UNIDROIT Principles would be applicable only if agreed between the parties and this was not the case in the dispute at hand.