- Arbitral Award
- Arbitration Centre of the Costa Rican Chamber of Commerce
SERVICE CONTRACT - BETWEEN A COSTA RICAN COMPANY AND A COSTA RICAN ACCOUNTING FIRM - GOVERNED BY COSTA RICAN LAW - REFERENCE BY ARBITRAL TRIBUNAL TO THE UNIDROIT PRINCIPLES "NOT AS A SOURCE OF LAW AGREED UPON OR INVOKED BY THE PARTIES, BUT INSTEAD FOR THEIR DOCTRINAL VALUE"
PERFORMANCE OF CONTRACT - PARTIES' DUTY TO ACT IN ACCORDANCE WITH GOOD FAITH (ART. 1.7 UNIDROIT PRINCIPLES)
A Costa Rican company in the hotel industry engaged a Costa Rican accounting firm to prepare an insurance claim for damage to one of its hotels caused by a flash flood. The accounting firm submitted to the insurance company a damage report two weeks before the deadline for lodging the claim. The insurance company notified the Costa Rican company that the damage had to be specified in a more detailed manner. Instead of forwarding this communication to the accounting firm, the Costa Rican company hired another accounting firm to do the job. The first accounting firm, which was paid only part of the agreed fee, brought an action against the Costa Rican company claiming it had breached the contract by unilaterally terminating the agreement without informing it of the insurance company’s remarks thereby preventing it from supplementing its report.
The Arbitral Tribunal, while basing its decision on the law of Costa Rica, also referred to the UNIDROIT Principles “not as a source of law not agreed upon or invoked by the parties, but instead for their doctrinal value”.
As to the merits the Arbitral Tribunal decided in favour of the plaintiff. In stressing the duty of the parties to act in accordance with good faith when performing their contract, it referred among others to Article 1.7 of the UNIDROIT Principles.
“Without applying them as a source of law not agreed upon or invoked by the parties, but instead for their doctrinal value, it is relevant to recall that the UNIDROIT Principles of International Commercial Contracts were repeatedly applied in several awards of the I.C.C. International Court of Arbitration up until 1998 and also in domestic arbitration. These Principles are the result of years of intensive comparative investigation and deliberation carried out by group of selected legal experts from the most diverse legal systems …. .
In contracts that involve the reciprocal performance of contractual obligations, as the one that existed in this case, the parties must comply with the principle of good faith and especially with the duty of cooperation (the ‘Mittwirkungspflichten’ of German doctrine), they must particularly make their best efforts in achieving the object of the contract. Therefore, they must perform the activities that are instrumentally necessary for the accomplishment of the main obligation (‘Nebenleistungspflichten’) and should not obstruct the execution of the contract nor cause damage to their counterparty (‘Schadenverhütungspflichten’).
The duty of cooperation is one of the general principles of the Lex Mercatoria that arbitrators in international trade stalwartly enforce. This principle is mainly applied in relation to the performance of contracts. The I.C.C. International Court of Arbitration has stated that each party must act in a way that does not damage the other party and that the parties must comply with this obligation of cooperation that modern doctrine derives from the principle of good faith that must govern the execution of every contract. Additionally, it has recently been provided by I.C.C. International Court of Arbitration that according to the UNIDROIT Principles of International Commercial Contracts, the usages of international trade require good faith in the fulfilment of contractual obligations (I.C.C., Award 9593, 1998).”
V. Pérez Vargas - D. Pérez Umana, The UNIDROIT Principles of International Commercial Contracts in Costa Rican Arbitral Practice, Uniform Law Review, 2006, pp. 183-184.}}