- 4 A_360/2011
LONG-TERM CONTRACTS - JOINT-VENTURE AGREEMENT AND SUPPLY CONTRACT - BETWEEN COMPANY X AND A UNITED STATES COMPANY (Z) - SILENT AS TO APPLICABLE LAW
SOLE ARBITRATOR ENTITLED TO DECIDE EX AEQUO ET BONO - REFERENCE TO UNIDROIT PRINCIPLES - AWARD ANNULLED ON OTHER GROUNDS
RIGHT TO DAMAGES - REFERENCE TO ART. 7.4.1 AND 7.4.2 UNIDROIT PRINCIPLES - NEED FOR A CAUSAL LINK BETWEEN THE NON-PERFORMANCE AND THE HARM
Company X and Company Z, a company incorporated in Delaware (USA), concluded a supply and joint venture agreement. According to the contract, company X entrusted company Z with the exclusive distribution of its products in the area defined in the agreement ((United States of America, Canada and Mexico) and company Z undertook to acquire certain products exclusively from company X.
A dispute arose between the parties in relation to the exclusivity clause, after company Z had noted that a Californian supermarket marketed products manufactured by company X and imported into the United States of America by a competitor of Z. Moreover, Company X had failed to comply with its contractual obligation to take product liability insurance during the term of the contract. Consequently, Company Z informed Company X that it was terminating their contractual relations.
Company Z, based on the arbitration clause contained in the contract, initiated arbitration proceedings against Company X asking compensation for damages resulting from the violation of the exclusivity clause. For its part, Company X filed a counterclaim in order to obtain the payment of outstanding invoices.
The Sole Arbitrator, referring to Arts. 7.4.1 (which states that any breach of a contractual obligation gives the other party a right to damages) and 7.4.2 (which affirms the need for a causal link between the non-performance and the harm) of the Unidroit Principles, ordered Company X to pay damages to Company Z, which in turn was ordered to pay part of the sum requested by Company X.
Company X then requested the Swiss Supreme Court to set aside the final award, since in its opinion the Arbitrator had violated the principle of equal treatment of the parties and its right to be heard. In particular, the Arbitrator issued his award without taking into consideration the Post-Hearing Brief of Company X.
The Supreme Court decided to annull the award since it found a violation of Company X's right to be heard. The Court, however, did not address in its decision the Arbitral Tribunal’s reference to the UNIDROIT Principles.