- Arbitral Award
- ICC International Court of Arbitration 12112
STATE CONTRACTS - LONG-TERM CONTRACTS - JOINT-VENTURE AGREEMENT - BETWEEN TWO INVESTORS OF UNKNOWN NATIONALITY AND A GOVERNMENT AGENCY OF STATE Y - PARTIES' CHOICE OF LAW OF STATE Y AS GOVERNING LAW
STATE AGENCY FAILING TO PERFORM ITS OBLIGATIONS UNDER AGREEMENT DUE TO SERIOUS SOCIAL CRISIS IN THE REGION - NOT EXCUSED ON GROUND OF FORCE MAJEURE - ACCORDING TO ARBITRAL TRIBUNAL STATE PARTNER UNDER STRICT DUTY TO ASSESS SOCIAL AND POLITICAL CONDITIONS ON ITS TERRITORY BEFORE ENTERING INTO AGREEMENTS WITH FOREIGN INVESTORS TO MAKE SURE THAT IT IS ABLE TO PERFORM ITS CONTRACTUAL OBLIGATIONS - REFERENCE TO GENERAL PRINCIPLE OF GOOD FAITH RECOGNISED BY APPLICABLE DOMESTIC LAW AS WELL AS "IMPERIO RATIONIS" BY ANALOGY AND A FORTIORI TO ARTICLES 6.14 - 6.17 UNIDROIT PRINCIPLES
Claimants, two foreign investors, and Respondent, a State agency of State Y, concluded a joint venture agreement for the cultivation of agricultural products. A dispute arose between the parties when Respondent proceeded to make the land granted to Claimants under the joint venture agreement available to an international organization to accommodate refugees from a neighboring country.
The Sole Arbitrator first held that the law applicable to the substance of the dispute was the law of State Y to which the parties only referred in respect of their mutual obligations during the arbitration proceedings.
As to the merits, the Sole Arbitrator found that Respondent did not perform its contractual obligations because it had failed to make available the land, equipment, and facilities that it was to contribute to the joint venture. Moreover, Respondent’s failure to perform could not be excused on grounds of force majeure, because Respondent must have known about the social climate and forces in its region that made it difficult to ensure performance. In the Arbitrator’s opinion, “the national public partner has a strict legal duty to check that performance will be possible at the promised time, taking also into consideration the social climate that the foreign partner cannot estimate properly; if it has not made the necessary verification, it must bear all consequences towards its foreign contractual partner”. In reaching such a conclusion, the Arbitrator referred to Arts. 6.1.14-6.1.17 UNIDROIT Principles which, in his view, regulate the behaviour of a national contracting party, even not public, in similar circumstances.
Albert Jan van den Berg (ed), Yearbook Commercial Arbitration 2009 – Vol. XXXIV (Kluwer Law International 2009) pp. 77-110}}