- Arbitral Award
- ICC International Court of Arbitration, Paris 8874
SERVICE CONTRACT - BETWEEN A UNITED KINGDOM COMPANY AND A BELORUSSIAN COMPANY
ARBITRAL TRIBUNAL AUTHORIZED BY PARTIES TO ACT AS AMIABLE COMPOSITEUR
INTEREST RATE - REFERENCE TO UNIDROIT PRINCIPLES WITHOUT FURTHER EXPLANATION
A United Kingdom and a Belorussian company entered into an advertisement contract. A dispute arose because of an alleged failure by the Belorussian company to pay the contract price. The contract authorised the Arbitral Tribunal to act as amiable compositeur and to decide the dispute according to principles of equity.
In deciding in favour of Claimant, the Arbitral Tribunal remarked that the contractually agreed rate of interest of 1.4 % per month was excessively high. It decided instead to apply the rate usually put in practice in these matters, and concluded in the case at hand for the application of the United States prime rate. In doing so, it referred without further explanation to the UNIDROIT Principles in general.
The payment of interest, in case of delay, is contractual (Art. 1.2 of the Contract) and has been accepted, as such, by both parties.
The existence of such an increased amount, in the case of delays in settling payments, is above discussion: it is a cornerstone of economic and commercial relations. Therefore, the principle of Respondent having to pay not only the contractual amount of [...] but interest, based on time elapsed since the agreed initial date of payment, cannot be discussed and must be reaffirmed [...].
The rate of interest is determined by the Contract. Therefore it is considered as accepted by both parties. However, with the powers of amiable compositeur, I wish to make the following remarks:
Respondent's situation, since the fire, is difficult and mutual understanding should lead to take it into account. They certainly have improperly dealt with the consequences of the event and they will have to fulfil their contractual engagements, which they did not formally propose to resiliate [sic]. Later, this silence to the legitimate questions raised by Claimant is surely not acceptable in the spirit of good commercial relations. But they were and probably still! are confronted with a major accident with important direct and secondary effects.
They warned even if the manner was neither formal nor strictly rightful their counterpart, which acknowledged the new situation. Respondent even showed what can be interpreted as a token of good faith in offering [...] as an indemnity.
The contractual interest rate is fixed at a level which is considerably higher than the rates which are usually put in practice in these matters, such as the US Prime Rate, recommended by the Principles of Unidroit.
In deciding a case " according to the principles of equity ", my view is that the initial contractual interest rate, if applied to the considered amount and period of time, would be disproportionate with the economic and commercial conditions of this case. I therefore substitute the US Prime Rate to the initial contractual rate of 1.4 % per month, for the delayed payment owed to Claimant by Respondent.}}
Original in English (excerpt):
- ICC International Court of Arbitration Bulletin, Vol. 10, No. 2, Fall 1999, 82-83}}