- Arbitral Award
- Ad hoc Arbitration, Buenos Aires
SHARE PURCHASE AGREEMENT - BETWEEN THE SHAREHOLDERS OF AN ARGENTINEAN COMPANY AND A CHILEAN COMPANY - SILENT AS TO APPLICABLE LAW - PARTIES CLAIMS BASED ON ARGENTINEAN LAW - ARBITRAL TRIBUNAL AUTHORIZED BY PARTIES TO ACT AS AMIABLES COMPOSITEURS - APPLICATION OF UNIDROIT PRINCIPLES AS "USAGES OF INTERNATIONAL TRADE REFLECTING THE SOLUTIONS OF DIFFERENT LEGAL SYSTEMS AND OF INTERNATIONAL CONTRACT PRACTICE" IN CONFORMITY WITH ART. 28(4) UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION
NOTICE OF AVOIDANCE (ART. 3.14 UNIDROIT PRINCIPLES)
CONFIRMATION OF CONTRACT (ART. 3.12 (AND COMMENT) UNIDROIT PRINCIPLES)
CONTRA PROFERENTEM RULE - CONTRACT CLAUSE DRAFTED BY DEFENDANT INTERPRETED MORE FAVOURABLY TO CLAIMANT (ART. 4.6 UNIDROIT PRINCIPLES)
The shareholders of an Argentinean company (Sellers) and a Chilean company (Buyer) entered into a contract for the sale by the former of 85% of the shares of the Argentinean company. After conclusion of the contract, the buyer discovered hidden debts of the Argentinean company and suspended payment of the remainder of the purchase price. The Sellers commenced the arbitral proceeding requesting full payment. In its defence, the Buyer requested that the Arbitral Tribunal confirm the avoidance of the contract and award damages, or failing that, to reduce the contract price in proportion to the hidden debts discovered.
The contract did not contain a choice of law clause and the parties authorized the Arbitral Tribunal to act as amiables compositeurs.
Notwithstanding the fact that both parties had based their claims on specific provisions of Argentinean law, the Arbitral Tribunal decided to apply the UNIDROIT Principles. It held that the UNIDROIT Principles constituted usages of international trade reflecting the solutions of different legal systems and of international contract practice, and as such, according to Art. 28(4) of the UNCITRAL Model Law on International Commercial Arbitration, they should prevail over any domestic law.
On the merits of the case, the Arbitral Tribunal rejected the Buyer's argument that the contract was avoided on account of fault or mistake and held that the comunication the Buyer had sent to the Sellers, informing them of the discovery of the hidden debts, could not be considered a proper notice of avoidance according to Art. 3.14 of the UNIDROIT Principles, as not only was there no indication of the intention to avoid the contract but its content even led the Sellers to believe that the Buyer wanted to stick to the contract, though in a modified version. Moreover, the Arbitral Tribunal held that the Buyer's subsequent conduct (in particular its proposal to terminate the contract by agreement; the payment of another installment of the price; the entering into negotiations with a view to modifying the contract) amounted to a confirmation of the contract according to Art. 3.12 of the UNIDROIT Principles (in this connection the Arbitral Tribunal expressly referred also to the Comment to Art. 3.12).
As to the request for a price reduction, the Arbitral Tribunal granted a reduction of only 65% of the hidden debts. One reason for this decision was that the contract had been drafted by the Buyer so that its provisions, including the one containing the Sellers' warranty as to hidden debts, according to Art. 4.6 of the UNIDROIT Principles, had to be interpreted in a sense more favorable to the Sellers.
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Original in Spanish:
Abstract published in English and French:
- Uniform Law Review / Revue de droit uniforme, 1998, 178-179}}