- Arbitral Award
- International Court of Arbitration of the Chamber of Commerce and Industry of the Republic of Belarus
SALES CONTRACT - BETWEEN BELARUSIAN COMPANY AND FRENCH COMPANY - BELORUSSIAN LAW AS GOVERNING LAW - APPLICATION OF THE CISG SINCE PARTIES SITUATED IN TWO CONTRACTING STATES (ART. 1(1)(A) CISG)
RIGHT TO INTEREST - RATE OF INTEREST NOT DETERMINED BY CISG - PARTIES' REFERENCE TO ART. 7.4.9(2)UNIDROIT PRINCIPLES - COURT DECIDING ACCORDINGLY
Plaintiff, a French company, concluded a sales contract with Defendant, a Belarusian Company. Plaintiff ordered delivery of 5 truckload of goods and made an advance payment of 20 000 DM but Defendant delivered only one truckload of goods for a value of 4433, 60 DM.
Plaintiff sent Defendant notice of avoidance of the contract as to the its unperformed part and claimed the a refund of the price paid for the undelivered goods plus compensation of the costs of the bank transaction and payment of interest. Defendant did not even reply to Plaintiff’s requests.
Plaintiff commenced an arbitral proceedings.
According to the contract, the governing law was the law of Belarus. During arbitral proceedings the parties agreed that the Civil Code of the Republic of Belarus of 1998 should apply, Art 1(3) of which states that “the rules, established by the civil legislation, are applied to the relations with participation of the foreign citizens, stateless persons, foreign and international legal persons (the organizations not being legal persons), foreign states, unless otherwise is determined by the Constitution of the Republic of Belarus and the treaties of the Republic of Belarus”. Since the parties were situation in two different States, both of which are Contracting Parties to the CISG, the CISG was held applicable to the case at hand.
Defendant acknowledged its obligation to refund the price of the undelivered goods and the costs for the bank transaction, but refused to pay the interest claimed by Plaintiff. Defendant alleged that under the contract it was not obliged to pay such interest and argued that Art 366 of the Civil Code regulating payment of interest was not applicable in the case at hand since the price was to be paid in a foreign currency.
The Arbitral Tribunal held that Defendant’s obligation to pay interest derived from Art. 78 of the CISG, which provides that “if a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, without prejudice to any claim for damages recoverable under Article 74”, and from Art. 84 (1) of the CISG according to which “if the seller is bound to refund the price, he must also pay interest on it, from the date on which the price was paid”. Since the CISG does not determine the applicable rate of interest, it has to be determined in accordance with the applicable domestic law, i.e. the Civil Code of the Republic of Belarus. However Art. 366 of the Civil Code could not be applied in the case at hand since the price was not expressed in Belarusian rubles.
Given the inapplicability of the relevant provisions contained in the Belarusian Civil Code the parties ultimately referred to Art. 7.4.9 of the UNIDROIT Principles and the Arbitral Tribunal, quoting the full text of this provision, awarded Plaintiff interest at “the average bank short-term lending rate to prime borrowers prevailing for the currency of payment at the place for payment”.