- Arbitral Award
- Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce
SALES CONTRACT - BETWEEN A SERBIAN SELLER AND AN ITALIAN BUYER – PARTIES' CHOICE OF SERBIAN LAW AS THE LAW APPLICABLE TO THE SUBSTANCE OF THE DISPUTE - CISG APPLICABLE ACCORDING TO ITS ART. 1(1)(A) – ARBITRAL TRIBUNAL DECIDES ALSO TO APPLY BOTH THE PRINCIPLES OF EUROPEAN CONTRACT LAW AND THE UNIDROIT PRINCIPLES AS EXPRESSION OF THE TRADE USAGES IT HAD TO TAKE INTO ACCOUNT ACCORDING TO THE RELEVANT ARBITRATION RULES
SELLER’S FAILURE TO DELIVER TOGETHER WITH THE GOODS THE CERTIFICATE OF THEIR ORIGIN AS REQUESTED UNDER THE CONTRACT – AMOUNTS TO A NON-PERFORMANCE (ARTICLES 35(1), 36(1) AND 45(1)(B) CISG))
BUYER’S RIGHT TO DAMAGES FOR THE LOSSES CAUSED BY SELLER’S NON-PERFORMANCE – REFERENCE TO ARTICLE 74 CISG AND TO ARTICLES 9:501 AND 9:502 OF THE PRINCIPLES OF EUROPEAN CONTRACT LAW AND TO ARTICLES 7.4.1 AND 7.4.4 OF THE UNIDROIT PRINCIPLES.
RIGHT TO INTEREST – APPLICABLE RATE – REFERENCE TO METHOD OF CALCULATION INDICATED IN ARTICLES 9:508 OF THE PRINCIPLES OF EUROPEAN CONTRACT LAW AND 7.4.9 OF THE UNIDROIT PRINCIPLES
Claimant, an Italian company, entered into a contract with Defendant, a Serbian company, for the purchase of white crystal sugar of Serbian origin, 2002 harvest. Apart from other documents regarding the goods, Defendant was required to provide a certificate of origin of the goods (“EUR 1”) to be issued by the Customs Administration of the Republic of Serbia as evidence of the established origin of the goods. After having delivered ca. ¾ of the sugar with the required certificate of origin, Defendant was no longer in a position to provide the required certificate with respect to the remaining part of the sugar due to the fact that the Serbian Customs Administration, following an inspection by the European Anti–Fraud Office, had withdrawn the EUR 1 certificates it had previously issued. As a result, the imported sugar could no longer benefit from a favored treatment and Claimant had to pay the Italian customs authorities import duties plus VAT.
Claimant commenced arbitral proceedings requesting from Defendant compensation for the loss it has suffered as a result of Defendant’s failure to deliver the goods together with the requested certificate of origin.
The contract was silent as to the applicable law, but at the beginning of the arbitral proceedings both parties agreed that the law of the Republic of Serbia should govern the substance of the dispute. Taking into account not only the parties’ agreement but also Article VII(1) of the European Convention of 1961 on Arbitration as well as Article 50(4) of the Serbian Law on Arbitration of 2006 (both requesting the Arbitral Tribunal to take in all cases into account trade usages, the Arbitral Tribunal decided to apply, first of all the terms of the contract, followed by the CISG (as the two parties were situated in different Contracting States), the Principles of European Contract Law (as lex mercatoria), the UNIDROIT Principles 2004 (as lex mercatoria), the 1992 UNCITRAL Model Law on International Credit Transfers (as lex mercatoria) and the Law on Contracts and Torts of the Republic of Serbia. In particular the Arbitral Tribunal pointed out that “[c]onsidering that, absent the adequate provisions of the substantive law chosen by the parties, both the Principles and UML on the International Transfer of Funds can provide more up-to-date and modern solutions for the dispute at hand, that they ‘determine the general principles for international commercial contracts…they may be used for interpreting and complementing the international unified rules…’ as well as for ‘interpreting and complementing the provisions of national law’, [it] strongly supports the application of the abovementioned Principles in this dispute – as lex mercatoria”.
As to the merits of the case, the Arbitral Tribunal decided that Claimant’s request for compensation by Defendant for the losses suffered was justified. Defendant’s failure to deliver the certificate of origin of the goods as requested by the contract clearly amounted to a non-performance of the contract according to Articles 35(1), 36(1) and 45(1)(b) of the CISG. As to Claimant’s right to damages as a consequence of Defendant’s non-performance, the Arbitral Tribunal referred not only to Article 74 CISG and Articles 262 (1)(2) and 266 of the Serbian Law on Contracts and Torts, but also – and even more extensively – to Articles 9:501 and 9:502 of the Principles of European Contract Law and to Articles 7.4.1 and 7.4.4 of the UNIDROIT Principles. Finally, in granting Claimant also the right to interest on the sum Defendant had to pay as damages the Arbitral Tribunal referred not only to Article 78 CISG and Articles 277(1) and 279(2) of the Serbian Law on Contracts and Torts, but also to Article 9:508 of the Principles of European Contract Law and Article 7.4.9 of the UNIDROIT Principles, as well as to Article 2 (2)(lit.m) of the UML on International Credit Transfers, and in determining the applicable rate of interest, it followed in substance the method indicated by both the Principles of European Contract Law and the UNIDROIT Principles, i.e. the short lending rate for the currency involved (which in the case at hand was the EURO).
CISG CASE PRESENTATION
Serbia 23 January 2008 Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce (White crystal sugar case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/080123sb.html ]
Primary source(s) of information for case presentation: Text of the award
Queen Mary Case Translation Programme
Foreign Trade Court of Arbitration attached to the
Serbian Chamber of Commerce in Belgrade, Serbia
Award of 23 January 2008 [Proceeding No. T - 9/07]
Translation [*] by Jovana Stevovic
Edited by Dr. Vladimir Pavic, Milena Djordjevic, LL.M. [**]
Claimant of Italy [Buyer] vs. Respondent of Serbia [Seller]
1.) The [Seller] is ordered to pay to the [Buyer] the sum of 90,904.91 € for the main debt with 4.62% yearly interest, distributed in the following way: for the sum of 76,657.63 € the interest is due for the period from 18 June 2007 until the final payment; for the sum of 8,260.58 € the interest is due for the period from 19 June 2007 until the final payment and for the sum of 5,986.70 € the interest is due for the period from 5 June 2007 until the final payment, within 15 days of the receipt of this Award, subject to court enforcement in case of non-payment.
2.) The [Seller] is ordered to pay to the [Buyer] the amounts of US $146.00 and 2,623.15 € as compensation of the costs of proceedings and the amount of 73,630.00 RSD, for the cost of representation in this dispute, within 15 days from the day receipt of the Award, subject to court enforcement in case of non-payment.
3.) The [Buyer]’s claim against the [Seller] in the amount of 33,939.07 € is rejected as unfounded.
STATEMENT OF REASONS
1. Jurisdiction of the Court of Arbitration
In his Claim of 5 July 2007 against the [Seller] (both Parties have been fully named in the operative part of this Award, which is not disputed), the [Buyer] based the jurisdiction of the Court of Arbitration on the arbitration clause contained in Sales Contract No. 3585 concluded in the written form with [Seller] in Belgrade on 7 October 2002. The arbitration clause in the abovementioned contract reads as follows: “All disputes between the Parties arising out of or in connection with this Contract shall be resolved directly by the Parties. If that is not possible, the Court of Arbitration attached to the Serbian Chamber of Commerce in Belgrade shall be competent to settle the dispute.”
[Seller]’s argument for the challenge of jurisdiction consists of the following:
The arbitration clause contained in the Contract between the [Seller] and the [Buyer] refers to the “Foreign Trade Court of Arbitration attached to the Chamber of Commerce in Belgrade” and not to the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce.
Due to the imprecise reference to the name of the arbitral institution, the Arbitral Tribunal should find that it does not have jurisdiction over the merits of the case.
[Buyer] gave a detailed explanation in regards to the plea contesting jurisdiction in his submission of 17 July 2007. [Buyer]’s position was that the Court of Arbitration was competent regardless of the imprecise naming of the Court of Arbitration in the Contract. [Buyer], further supported his position by invoking Article 99 paragraph 2 and Article 100 of the Serbian Law on Contracts and Torts (hereinafter referred to as: the LCT). Furthermore, [Buyer] emphasized that in regards to the same contract and the same arbitration clause a dispute has already been brought before this Court of Arbitration in Case No. T-10/06. In that dispute, [Seller] did not contest the Tribunal’s jurisdiction. Due to the fact that from that time there have not been any significant changes in the wording of the arbitration clause, [Buyer] considers [Seller]’s challenge to be unfounded.
Reasons for the ruling of the Expanded Arbitral Tribunal
In the case at hand, it is clear that the Parties agreed to resolve their potential disputes by means of arbitration rather than by litigation before a state court. This is not disputed between the Parties. In addition, it is well known that in Belgrade, apart from this Court of Arbitration, there is no other permanent arbitration body for the settlement of disputes having an international business character, nor has such a body ever existed. It is important to note that, on the basis of the arbitration clause in question, the same Parties have already brought a dispute before this Court of Arbitration in Case T-10/06. In that case, [Seller] did not raise a plea contesting jurisdiction and the dispute was finally settled by arbitration.
Relying on the reasoning presented above and having in mind the arbitral practice of this Court of Arbitration, as well as the practice of other internationally renowned arbitral institutions in relation to this question, the Expanded Arbitral Tribunal applied the well-known principle of useful effect, according to which the provision of an arbitration agreement should be interpreted in the sense which gives it a certain effect (here – the settlement of the arbitral dispute), and not in the sense that deprives it of any effect at all. Every other interpretation of the arbitration clause in the case at hand would lead to the callous infringement of the basic principle of contract law – the principle of good faith and fair dealing, which this Court of Arbitration does not condone. Due to the abovementioned reasons, the Expanded Arbitral Tribunal has unanimously decided to “cure” the pathology of the arbitration clause in question by giving it correct meaning and sense.
3. Arbitration proceedings, statements and evidence presented by the Parties
1.) On 5 June 2007, [Buyer] submitted a Statement of Claim against [Seller] to the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce in Belgrade. [Buyer] requested the Court of Arbitration to order [Seller] to pay damages in the amount of 114,819.45 €, with interest which the European Central Bank stipulates for debts in Euros, on the following amounts: for the amount of €77,383.33 the interest was to be paid as of 24 May 2005 until the final payment, and for the amount of €37,436.12 the interest was to be paid as of the submission of the claim until the final payment. [Buyer] also requested costs of the procedure to be reimbursed to him.
[Buyer] stated in the claim the following: On 7 October 2002, [Buyer] concluded Sales Contract No. 3585 with [Seller] and an Annex No. 1 to this Contract on 9 December 2002. According to the Contract, [Seller] was required to sell and deliver to [Buyer] 671 tons of white crystal sugar of Serbian origin, 2002 harvest. Apart from the other documents regarding the goods, [Seller] was required to provide a certificate of origin of the goods – EUR 1, as evidence of the agreed origin of the sugar. It noted that in several successive deliveries until the end of March 2003, [Seller] delivered the agreed goods and provided a EUR 1 for each successive delivery, which was issued by the Customs Administration of the Republic of Serbia. However, in the middle of August 2004, the Government of the Republic of Serbia communicated about 5,000 suspicious cases of the export of sugar into the EU which were followed by EUR 1 forms to the Customs Administration. The European Anti–Fraud Office (OLAF) demanded an explanation regarding the validity of the EUR 1 forms issued. After the subsequent inspection, the Customs Administration RS sent report No. 01/13 No. D-908/1 of 19 January 2005 to [Seller] informing him that it withdrew the certificate of origin (EUR 1) for 168 tons of sugar. After the withdrawal of the certificate of origin (EUR 1), there was no basis for a favored treatment of the acquired and imported sugar, therefore, the competent customs organs of Italy instructed [Buyer] (as the buyer and importer of the sugar in question for which EUR 1 was withdrawn) to pay 66,369.60 € in the name of customs with VAT and due interest up to 24 May 2005 in the amount of 9,013.73 €. [Buyer] stated that, due to all these circumstances, he suffered damages in the amount of 1,550 € and 5,886.12 € and that tax costs amounted to 30,000 €.
The Statement of Claim and document increasing the amount of claim were duly delivered to [Seller].
4.) In the submission of 10 September 2007, [Seller] contested the basis and the amount requested in the claim. [Seller] stated that proceedings between the Parties have already been held on the same basis before this Court of Arbitration, under Case No. T-10/06, and terminated by an award of 27 November 2006 and that the [Seller] paid “… the entire amount of damages which were claimed under this basis.” He contested the [Buyer]’s claim in regard to the unpaid customs, due to the fact that previously [Buyer] requested a smaller amount on the same basis. He asserted that [Buyer] had come to an agreement with the customs organs in his country to pay under a favored condition just the amount of 16,592.25 €. This sum was already the subject matter of the abovementioned claim before this Court of Arbitration. The [Seller] disputed the obligation to pay the costs of the guarantee and the fees for legal representation. He particularly stated that he is not obliged to pay 32,489.65 € for tax, since [Buyer] has not paid this sum. In reference to Article 279 paragraph 1 of the Serbian LCT, [Seller] contested [Buyer]’s right to interest. [Seller] emphasized that in the entire business operation regarding sale and delivery of sugar there is no fault on his part, due to the fact that he performed his contractual obligations in good faith and professionally.
In [Seller]’s opinion, the Customs Administration RS, on its initiative, conducted a subsequent inspection and verification of the issued certificates of origin of goods and then withdrew the issued certificate EUR 1. Therefore, there is no responsibility or fault on the part of [Seller], so he should not be ordered to pay the requested amount to [Buyer]. [Seller] requested the Tribunal to dismiss the claim as unfounded. He requested reimbursement of the costs of arbitration, however, he did not specify their amount nor did he provide evidence on that subject. As evidence of his assertions, he suggested the examination of the records of Case T-10/06 before this Court of Arbitration. [Seller] submitted [Buyer]’s letter of 13 January 2006 as evidence.
5.) In his submission of 25 October 2007, [Buyer] contested all of [Seller]’s assertions from the previous submission. […]
4. Substantive law
The arbitration clause was silent with regard to the choice of substantive law. The Parties’ counsel agreed at the hearing that the substantive law of the Republic of Serbia should be applied in the present dispute.
Acting in accordance with the agreement between the Parties, and keeping in mind Article VII paragraph 1 of the European Convention of 1961, Article 50 paragraph 4 of the LA and Article 48 paragraph 3 of the Rules, the Arbitral Tribunal was obliged to also take into consideration the trade usages which might be applied to the present dispute and underlying transaction..
As the question of “hierarchy of regulations” was considered not to be essential, and in accordance with the abovementioned obligation to settle the dispute, this Arbitral Tribunal has applied:
1. The terms of Sales Contract No. 3585;
2. The United Nation Convention on Contracts for the International Sale of Goods, Vienna, 11 April 1980 (hereinafter: Vienna Convention 1980). It was ratified by both Italy and Serbia. According to the international standardized practice and domiciliary regulations of the States, the Vienna Convention is to be applied directly (without recurring to the conflict of law rules);
3. The Principles of European Contract Law – PECL, published in 1998 and 2002, also known in practice as: the Ole Lando Principles (as it will be further referred to) – as a generally accepted part of the lex mercatoria;
4. The UNIDROIT Principles of International Commercial Contracts, 1994, with later amendments, hereinafter: UNIDROIT Principles – as lex mercatoria;
5. The UNCITRAL Model Law on International Credit Transfers of 1992. (UNCITRAL, XXV session in 1992 – documents of the UN General Assembly – Supplement No. 17 (A/47/17) hereinafter: UML on International Credit Transfers – as lex mercatoria.
6. The Law on Contracts and Torts, Official Gazette of SFR Yugoslavia, No. 29/1978, with later amendments, which is now applied as the law of the Republic of Serbia.
The Ole Lando Principles are interpreted and applied together with the UNIDROIT Principles (adopted in 1992 by the International Institute for the Unification of Private Law) and the Vienna Convention of 1980. This also applies to the UML on International Credit Transfers.
The Arbitral Tribunal paid due regard to the widely known fact that from the end of the 20th and the beginning of the 21st Century there could be noted a development and harmonization of a new international commercial practice and trade usages which was “codified” in the form of the abovementioned UNIDROIT Principles, UML on International Credit Transfers and Ole Lando Principles. They became available to everyone who performs international business transactions as well as to those who arbitrate disputes in the field of international commerce. Respectable Arbitral Tribunals in the world (especially the ICC Court of Arbitration) have long since made awards pursuant to these Principles and arbitrated disputes between Parties by applying these principles as lex mercatoria. Considering that there is no reason for this Court of Arbitration to keep avoiding their application, the Arbitral Tribunal has decided to interpret these principles in regard to the present dispute, to apply them and to arbitrate in accordance with their contents and aims.
The Arbitral Tribunal has commenced with the undisputed and clear obligation laid down in Article VII paragraph 1 of the European Convention of 1961 that trade usages should be applied “to all cases“. The Tribunal also respected the obligation laid down in Article 50 paragraph 4 of the LA, accordance to which it “shall always take into account the terms of the contract and usages“, as well as the obligation contained in Article 48 paragraph 3 of the Rules that it “shall make the award in accordance with the provisions of the contract, and it shall take into account trade usages that may be applicable to the transaction“. Considering that trade usages represent the “hard core” of lex mercatoria, that they are modern, widely accepted and that their content is to the greatest extent harmonized in the abovementioned Principles, the Arbitral Tribunal, decided to primarily apply the abovementioned Principles as trade usages, in addition to the Sales Contract. However, the Tribunal did not neglect the mandatory norms of the substantive law chosen by the Parties (Serbian Law on Contracts and Torts).
Considering that, absent the adequate provisions of the substantive law chosen by the Parties, both the Principles and UML on the International Transfer of Funds can provide more up-to-date and modern solutions for the dispute at hand, that they “determine the general principles for international commercial contracts … they may be used for interpreting and complementing the internationally unified rules …” as well as for “interpreting and complementing the provisions of national law”, the Arbitral Tribunal strongly supports the application of the abovementioned Principles in this dispute – as lex mercatoria.
By applying the Principles in accordance with their meaning, the Arbitral Tribunal has found that they contain solutions for the questions disputed between the Parties.
7.2. The basis of the claim
In regard to the circumstances of the basis of the claim, the Arbitral Tribunal has determined the following:
On 7 October 2002, the Parties concluded Sales Contract No. 3585 according to which [Seller] was required to sell to [Buyer] a certain amount of “white crystal sugar of Yugoslav origin, harvest 2002”. According to the same contract [Seller], was required to provide the specifically stipulated documents regarding the goods, among which is also the certificate of origin of goods – EUR 1. That was not disputed between the Parties. [Seller] exported the agreed goods in the period of end of 2002 until March 2003. With each successive delivery it provided a certificate of origin in the form EUR -1, which it obtained from the competent bodies – Federal Customs Administration. From the memo of the Customs Administration of the Republic of Serbia 01/13 No. D-908/1 of 19 January 2005, the Arbitral Tribunal has determined that the Customs Administration has acted in accordance with the order of the Ministry of Finance and conducted a subsequent inspection of the issued certificates of the origin of goods – EUR-1. All this occurred after the request of the European Anti-Fraud Commission (OLAF), which suspected that some certificates (around 5,000) were not valid. The subsequent inspection determined that for 7 certificates it was not possible to confirm the national origin of the exported good which [Buyer] bought.
According to this evidence, the Arbitral Tribunal established that [Buyer] paid the total amount of 90,904.91 € for the fees of the customs, VAT and other necessary expenses in regards to it.
The amount of 90,904.91 € paid represents damages which [Buyer] incurred due to the withdrawal of EUR – 1 by the customs organs of Serbia by which a certain quantity of the acquired sugar lost its favored treatment, so [Buyer] had to pay for it an import custom with VAT. Due to these reasons, [Buyer] also had other expenses mentioned above.
In examining the legal basis of the obligation to pay damages which [Buyer] incurred:
- The Arbitral Tribunal commenced with Articles 9.501 and Article 9.502 of the Ole Lando Principles according to which the aggrieved party is entitled to damages for loss caused by the other party's non-performance which is not justified. The general measure of damages is such a sum that would put the aggrieved party in the closest possible position to the one in which it would have been if the contract had been duly performed. The Arbitral Tribunal does not have any doubts in regard to whether [Seller] could reasonably foresee the possible consequences of the non-performance of his obligation to deliver sugar “of Yugoslav origin, harvest 2002” at the time of the conclusion of the Contract. As a professional businessman he ought to have reasonably foreseen such consequences. [Seller] ought to have foreseen that the non-performance of his contractual duties could make [Buyer] responsible before the authorities of his country until the payment of the penalty and subsequently assessed customs, and in connection to that the costs incurred in his country.
- The same rights to damages due to non-performance of the contract are granted to the aggrieved party (in this case [Buyer]) pursuant to Article 7.4.1 and Article 7.4.4 of the UNIDROIT Principles. The right to damages is more closely specified in these Articles exclusively or in conjunction with other remedies. [Seller] did not invoke the exclusion of his liability and he did not prove that conditions for the exclusion of liability are fulfilled. The provisions regarding foreseeability of harm (Article 7.4.4) provide that the non-performing party is liable only for harm which it foresaw or could reasonably have foreseen at the time of the conclusion of the contract as being likely to result from his non-performance. [Seller], who professionally does business, certainly falls in to the category of people who could have at the conclusion of the contract foreseen and expected the consequences for the contracting party due to non-delivery of goods whose origin is not in conformity with the contract.
- The provisions of Chapter II of the Vienna Convention of 1980 (Article 35(1), Article 36(1), Article 45(1)(b) and Article 74.) have clearly determined that apart from the goods, the seller (here respondent) must provide the buyer (here claimant) with the specified documents in regard to the goods. It is undisputed that certificate EUR-1 falls within these documents, which should verify that the exported sugar is of “Yugoslav origin, harvest 2002.” It is only on the basis of an accurate document that [Buyer] would not be required to pay the subsequently determined customs, which is the economical effect relevant for him, which cannot be disregarded.
- [Seller] was required to provide [Buyer] with the specified documents regarding the goods which can in a credible manner prove the Yugoslav origin of the goods, harvest 2002. [Seller] was obliged to deliver the goods in conformity with the quality and origin required by the contract. Only such goods could have the favored treatment in regard to the exemption of custom duties. Any other goods of the same quality which is not of “Yugoslav origin, harvest 2002” would not have had a favored treatment. That is why [Buyer] had to pay customs and VAT for the imported goods. According to the Arbitral Tribunal’s opinion, the contract provision concerning the goods of Yugoslav origin, harvest 2002 is an essential element of the contract. Respondent as a Seller is liable for the non-conformity of goods which existed at the time of the passing of the risk to Claimant as the Buyer, even though the lack of conformity became apparent only after that time, which was the case in the present dispute. In accordance with Article 45(1)(b) and Article 74 of the Vienna Convention of 1980, [Buyer]’s right to damages is undisputed and the amount of the damages has been proven.
According to the Arbitral Tribunal there are no fundamental differences in the obligation to pay damages which occurred due to non-performance of the contract on the part of the Seller who at the time of the conclusion of the contract as a reasonable person could have foreseen, regardless of the legal basis which the Arbitral Tribunal invokes. All three documents: the Ole Lando Principles, UNIDROIT Principles and the Vienna Convention of 1980 regulate the obligation to pay damages which can be foreseen at the time of the conclusion of the contract in a similar manner.
There are no fundamental differences between the three mentioned documents and the LCT in regard to damage that occurred due to breach of a contract. Article 262 paragraph 1 and 2 and Article 266 of the LCT determine the basic right of the obligee in the obligational relationship to demand the fulfillment of an obligation, and obligor (in this case: Respondent as the Seller) is required to fulfill the obligation in good faith as it is specified. If it fails to do so, the obligee (here: Claimant as the Buyer) has the right to demand damages which it incurred, if the other party had to foresee such harm as a possible consequence of the breach of contract, due to the facts that were known to it or that it should have known. This Arbitral Tribunal, in regard to the evidentiary material in this case, had no dilemma whether [Seller] knew or could have known that in Italy sugar is imported under a favored treatment and that there is a financial consequence for [Buyer] if [Seller] does not deliver goods which are in conformity with the conditions of the contract, especially in regard to the origin and the type of harvest.
Under Article 510 of the LCT, [Seller] is also responsible for the restriction of the public law nature, - for the payment of customs on the goods which had defects in regard to its origin and which it did not delivered in conformity with the contract. [Buyer] also had the right to invoke the [Seller]’s responsibility for the defects in case when it admitted the right of his country to the subsequently determined customs even without the notification of the [Seller] or the dispute.
Assessing the [Seller]’s actions during entire performance of the contract, the Arbitral Tribunal has concluded that the [Seller] has not acted in accordance with the principle of good faith and fair dealing, on which all of the modern legislation is based, This principle is also accepted by the acts that the Arbitral Tribunal invokes as the legal sources of substantive law on the basis of which it decided this dispute.
Pursuant to the evidence put forward and by applying the provisions of the mentioned Principles, Vienna Convention of 1980 and the LCT, the Arbitral Tribunal has unanimously reached the decision – as is stated in the operative part of this Award under 1.
The claim in the amount of 33,939.07 € is rejected as unfounded, which is stated in the operative part of this Award under 3. [Buyer] did not submit any evidence to prove that he actually paid that amount.
7.3. Right to interest
The Arbitral Tribunal recognizes [Buyer]’s right to interest according to:
- Article 9.508 of the Ole Lando Principles;
- Article 7.4.9 of the UNIDROIT Principles;
- Article 78 of the Vienna Convention 1980;
- Article 2 paragraph 1 (m) of the UML on International Credit Transfers; and
- Article 277 paragraph 1 and Article 279 paragraph 2 of the LCT.
All of these provisions are very similar. All of them provide in a very similar manner that the obligor must pay the interest on the debt, payment of which is delayed.
- Article 9.508 of the Ole Lando Principles determines that if payment of a sum of money is delayed, the aggrieved party is entitled to interest on that sum from the time when payment is due to the time of payment at the average commercial bank short-term lending rate to prime borrowers prevailing for the contractual currency of payment at the place where payment is due.
- Article 7.4.9 of the UNIDROIT Principles provides that the rate of interest shall be the average bank short-term lending rate to prime borrowers prevailing for the currency of payment at the place for payment, or where no such rate exists at that place, then the same rate in the State of the currency of payment. In the absence of such a rate at either place the rate of interest shall be the appropriate rate fixed by the law of the State of the currency of payment.
- The Vienna Convention of 1980 in Article 78 establishes the obligation of a party whose payment is in arrears, to pay interest on that amount, without further specification of the interest rate and of how it is to be determined.
- Article 277 paragraph 1 and Article 279 paragraph 2 of the LCT, as well as the prior regulations and Principles, provide that the obligor who is in delay with payment is obliged to pay the default interest for the main debt from the date that it became due, and for the amount of interest that is not paid it can demand a default interest from the day that the claim for its payment was submitted to the court.
As none of the abovementioned Principles and regulations determine the interest rate, but rather make it definable, and because as of March 2001 there is no law in Serbia to fix such a rate for claims in a foreign currency, in the determination of the interest rate the Arbitral Tribunal has relied on the abovementioned principles as a safe indicator how to determine such a rate.
Article 9.508 of the Ole Lando Principle, as well as Article 7.4.9 of the UNIDROIT Principles clearly address the “short term lending rate“ which the Arbitral Tribunal has accepted as the method in which to determine the interest rate. Having in mind Article 2 paragraph 1 (m) of the UML on International Credit Transfers, by which interest is defined as a time value of the funds or money involved, which, unless otherwise agreed, is calculated at the rate and on the basis customarily accepted by the banking community for the funds or money involved, therefore for the Euro. The Arbitral Tribunal is only left to determine the average interest rate.
In order to determine this, the Arbitral Tribunal, on its own initiative, acquired the Statistical Report of the European Central Bank for December 2007 (www.ecb.int) according to which it determined how the amounts of the interest rate (EURIBOR) have changed from the submission of the claim until the end of November 2007 – when the information was given to the Report. In the specified time period the interest rate of the Central European Bank was variable. The Arbitral Tribunal took as the most realistic interest rate for the time period from the submission of the claim until the end of November 2007, until the information existed, and determined the average interest rate of 4.62% - as stated in operative part of this Award under 1.
8. Finality and validity of the Award
Pursuant to Article 56 paragraph 1 of the Rules this award is final. According to Article 64 paragraph 1 of the Law on Arbitration this award has the effect of a final and binding court decision.
Belgrade, 23 January 2008. Arbitral Tribunal:
No. T- 9/07
Members of the Tribunal: signed}}