- Arbitral Award
- ICC International Court of Arbitration - Brussels 8240
LONG-TERM CONTRACTS - DISTRIBUTION AGREEMENT - PLURALITY OF PARTIES OF DIFFERENT NATIONALITIES (SWISS, SINGAPOREAN, BELGIAN) - GOVERNED BY DOMESTIC LAW (SWISS LAW) - REFERENCE BY ARBITRAL TRIBUNAL TO THE UNIDROIT PRINCIPLES FOR CONFIRMATION AT INTERNATIONAL LEVEL OF A SIMILAR RULE OF SWISS LAW
PAYMENT IN LOCAL CURRENCY ART. 6.1.9(3) UNIDROIT PRINCIPLES TO DETERMINE EXCHANGE RATE
Parties from Switzerland, Singapore and Belgium concluded a contract of distributorship. After termination of the contract by agreement, the question arose as to how to regulate the buying back of the inventories.
Although the parties had indicated Swiss law as the law governing their contract, the Arbitral Tribunal, in deciding the rate of exchange to be chosen for the payment in the local currency, referred to Art. 6.1.9(3) of the UNIDROIT Principles for a confirmation at an international level of a similar rule of Swiss law.
The determination of the exchange rate in be applied in Claimant's claim under Art.1 of the Termination Agreement requires interpretation of said stipulation under the applicable law.
The parties have agreed that the choice of law clause contained in Art. 36 of the Distribution Agreement and referring in the laws of Switzerland as the governing law of their contract shall also be applicable to the Termination Agreement. This agreement constitutes a valid choice of law clause and, according to the wording of Art. 36 of the Distribution Agreement, also applies in the interpretation of the contracts.
Under Swiss law, contract interpretation is governed by Art. 1 and 18 of the Swiss Code of Obligations (Obligationenrecht) in connection with Art. 1, Sec. 2 of the Swiss Civil Code (Zivilgesetzbuch). These provisions require the Arbitrator in look first for corresponding intentions of the parties as expressed in the contractual stipulations (Swiss Federal Tribunal BGE 105 II 16; 111 II 457; Guhl, Das Schweizerische Obligationenrecht, 8th ed. 1991, at 97). If no such natural consensus can be discerned, the Arbitrator has to look for the parties' implied or normative consensus. Towards this end the Arbitrator has in discern what reasonable parties acting in good faith must have expressed as their common intentions at the moment of conclusion of the contract […]. The principle of good faith thus establishes a presumption of reasonableness to be followed by the Arbitrator in his task of construing the contractual provision in dispute. Starting from the wording of the contractual stipulation this objective interpretation has in take into account not only the conduct of the parties before and after the conclusion of the contract but also the purpose of the contract and of previous contracts concluded between the same parties and the economic context in which it was concluded […].
In answering this question one has in focus again on Art 1(c) of the Termination Agreement. It must be determined whether this provision can be considered to contain an implied currency clause, fixing the date of conversion in the date of the individual purchase of each item of inventory. Since such a will is not expressed on the face of said provision, one has in apply the principles of objective interpretation as outlined […] above.
Every attempt that tries to give Art. 1(c) of the Termination Agreement such a broad meaning has in take into account the principle of nominalism. This principle provides that absent a specific provision in the agreement of the parties each debtor has in pay a monetary debt at its nomina! value. Therefore, without any special agreement, each party carries the risk of currency depreciation. The principle of nominalism is a general principle of transnational law. It is laid down not only in Swiss court (decisions and doctrinal writings […] but also in An. 6.1.9(3) of the Unidroit Principles of lnternational Commercial Contracts, allowing the obligor in make payment of a money debt expressed in a currency other than that of the place for payment in the currency of that place at the rate of exchange prevailing there when payment is due (Unidroit (ed.), Principles of International Commercial Contracts, 1994, at 127), As a consequence of this general principle of law, international arbitral tribunals are very reluctant to intervene into a contract because of inflation and currency depreciation in the absence of a specific currency depreciation clause[…].
This principle sets high standards for the Claimant who, according to the generai principles of actori incumbit probatio, carries the burden of proof for a specific currency clause contained in the agreement of the parties. The Tribunal is not convinced that Art. 1(c) of the Termination Agreement contains such a currency clause […].}}
Original in English (published in excerpt):
- ICC International Court of Arbitration Bulletin, Vol. 10, No. 2, Fall 1999, 60-62
Abstract published in English and French:
- Uniform Law Review / Revue de droit uniforme, 1991, 168-169}}