- Arbitral Award
- International Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation
CONSTRUCTION CONTRACT - BETWEEN A RUSSIAN COMPANY AND A UNITED STATES COMPANY - ARBITRAL TRIBUNAL APPLIED RUSSIAN LAW AND, AT THE REQUEST OF THE UNITED STATES COMPANY, ALSO THE UNIDROIT PRINCIPLES
INCONSISTENT BEHAVIOUR - REFERENCE TO ARTICLE 1.8 UNIDROIT PRINCIPLES
Claimant, a Russian company, entered into a construction contract (the "Agreement") with Respondent, a U.S. company. Subsequently, Claimant and Respondent entered into negotiations regarding possible modifications of the terms and duration of the Agreement. Respondent believed that such negotiations would suspend the Agreement and therefore stopped performing its obligations under it. While Claimant for a while did not object to Respondent's behaviour, later Claimant unilaterally terminated the Agreement, invoking Respondent's breach of previously established deadlines under the Agreement.
The parties have chosen the law of the Russian Federation as applicable for the resolution of disputes under the contract. In the process of arbitration Respondent requested the Arbitral Tribunal to be guided in its decision by the Unidroit Principles of International Commercial Contracts, together with the CISG.
Claimant objected against the use of the UNIDROIT Principles and the CISG.
The Arbitral Tribunal decided that the CISG was not applicable in the case at hand, as this Convention did not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services, as is the case of construction contracts. Regarding the UNIDROIT Principles, the Tribunal held that it was entitled to take them into account in the case at hand, since they "in modern international practice of many arbitration courts, including ICAC, are viewed as the recommended source of rules governing general issues of performance and interpretation of contracts of an international character".
As to the merits of the case, the Tribunal found that Claimant, rather than continue the negotiations and then all the sudden terminating the Agreement, should have informed the Respondent of its intentions to no longer negotiate to return to the original terms of the Agreement. According to the Tribunal, Claimant's behaviour was contradictory and inconsistent with the principle of good faith in contract performance. In support of its decision the Tribunal relied on Article 1.8 of the UNIDROIT Principles, according to which a party can not act inconsistently with an understanding it has caused the other party to have, and upon which that other party reasonably has acted to its detriment.