- Arbitral Award
- ICC International Court of Arbitration 13009
SETTLEMENT AGREEMENT - BETWEEN LIECHTENSTEIN SELLER AND SPANISH BUYER - FOLLOWING DISPUTE ARISING FROM A SALES CONTRACT - SALES CONTRACT AND SETTLEMENT AGREEMENT SILENT AS TO APPLICABLE LAW - ARBITRAL TRIBUNAL DECIDED TO APPLY UNIDROIT PRINCIPLES
SELLER'S CLAIM THAT IT HAD BEEN FORCED TO AGREE TO SETTLEMENT UNDER ECONOMIC DURESS BASED ON ARTICLES 1.7, 1.9, 3.8 [ART. 3.2.5 OF THE 2010 EDITION], 3.9 [ART. 3.2.6 OF THE 2010 EDITION], 3.10 [ART. 3.2.7 OF THE 2010 EDITION], 5.1.3 AND 5.1.4, AND 7.4.8 OF UNIDROIT PRINCIPLES - ARBITRAL TRIBUNAL DISMISSED ALL SELLER’S CLAIMS ON BASIS OF FACTS
A Liechtenstein Seller and a Spanish Buyer entered into a contract for the sale of certain goods to be delivered CFR at a Spanish port. Buyer sold the goods, while in transit, to another Spanish company ("End Buyer"). A dispute arose between the parties concerning two conflicting bills of lading for the same shipment (a clean bill and a bill mentioning defects as per an independent surveyor’s report). Eventually the parties came to a settlement agreement which terminated the sales contract and provided for compensation for costs.
Seller commenced arbitration proceedings claiming that it had been forced to enter into the settlement agreement under economic duress.
In a preliminary award the Arbitral Tribunal held that it had jurisdiction over the case and that it would apply the UNIDROIT Principles to determine whether the settlement agreement had been concluded by Seller under economic duress.
Accordingly, Seller based its claim against Buyer on several provisions of the UNIDROIT Principles: Art. 1.7 for violation of good faith; Art. 1.9 for deviation from past usages and practices between the parties; Art. 3.8 [Art. 3.2.5 of the 2010 edition] for fraud; Art. 3.9 [Art. 3.2.6 of the 2010 edition] for threat; Art. 3.10 [Art. 3.2.7 of the 2010 edition] for gross disparity; Arts. 5.1.3 and 5.1.4 for non-compliance with the duty of cooperation and the duty to achieve specific results; and Art. 7.4.8 for failure to mitigate losses.
The Arbitral Tribunal dismissed all of Seller’s claims.
As to the violation of good faith (Art. 1.7 UNIDROIT Principles), the Arbitral Tribunal found that Buyer had acted in a reasonable manner and in accordance with fair practices, and that it could not be held responsible for the discrepancy between the two bills of lading.
Seller’s claim that Buyer deviated from usages and practices previously accepted and applied by the parties in case of a dispute on the quality or the conformity of the goods (Art. 1.9 UNIDROIT Principles) was dismissed since the previous practices of the parties were irrelevant in the light of the specific situation created by the presence of two conflicting bills of lading.
The Arbitral Tribunal also rejected Seller’s argument that Buyer did not comply with its duty of cooperation (Art. 5.1.3 UNIDROIT Principles) and its duty to achieve specific results (Art. 5.1.4 UNIDROIT Principles) by failing to take over the goods and to pay for them, because in the case at issue ownership of the goods was transferred to End Buyer at the conclusion of the contract, and in any event taking delivery was impossible since the master of the vessel ordered the closing of the hatches.
Nor did Buyer fail in its duty to mitigate losses (Art. 7.4.8 UNIDROIT Principles) by taking the side of End Buyer in civil and criminal court proceedings initiated by the latter, since it is common judicial practice that a defendant joins its own contractor in the proceedings.
As to the application of Art. 3.8 UNIDROIT Principles, the Arbitral Tribunal held that the facts of the case disproved Seller’s claim that Buyer committed fraud by stating that a fraudulent bill of lading was presented, whereas it had already accepted the goods in the condition in which they arrived at the Spanish port. In fact, there was sufficient evidence that Buyer objected to the quality of the goods immediately after the first stages of unloading.
In relation to threat through the bringing of several court actions (Comment 2 to Art. 3.9 UNIDROIT Principles), the Arbitral Tribunal held that Buyer did not abuse its right to apply to court in order to threaten Seller, since the latter was summoned as a third party in an action commenced by End Buyer and had first proposed the settlement agreement at issue.
Finally, Seller’s claim of gross disparity (Art. 3.10 UNIDROIT Principles) failed because the Arbitral Tribunal found that rights and duties of both parties agreed in the settlement were well balanced and could not represent a case of gross disparity.
Excerpt in J.J Arnaldez - Y. Derains - D. Hascher (eds), Collection of ICC Arbitral Awards, Kluwer Law International 2013, 599 - 618}}
Albert Jan van den Berg (ed), Yearbook Commercial Arbitration 2011 – Vol. XXXVI (Kluwer Law International 2011) pp. 70-95}}