- Court of Appeal State of Rio Grande do Sul
- Voges Metalurgia Ltda. v. Inversiones Metalmecanicas I.C.A. – IMETAL I.C.A.
SALES CONTRACT – BETWEEN A VENEZUELAN COMPANY AND A BRAZILIAN COMPANY - PLACE OF CONCLUSION OF CONTRACT NOT CERTAIN AND THEREFORE NOT AVAILABLE AS CONNECTING FACTOR - IN ACCORDANCE WITH THE “PRINCIPLE OF PROXIMITY” OR “THE MOST SIGNIFICANT RELATIONSHIP RULE” - COURT DECIDES TO APPLY THE CISG AND, WITH RESPECT TO MATTERS NOT GOVERNED BY CISG SUCH AS CONTRACT VALIDITY, THE UNIDROIT PRINCIPLES
PAYMENT OF THE PURCHASE PRICE MADE TWICE DUE TO DOMESTIC IMPORT-EXPORT AND EXCHANGE REGULATIONS – CLAIM FOR RESTITUTION – ALLEDGED ILLEGALITY OF FIRST PAYMENT MADE IN VIOLATION OF EXCHANGE REGULATIONS – OBJECTION REJECTED BECAUSE VIOLATION NOT NECESSARILY FALLING WITHIN SCOPE OF ART. 3.3.1 UNIDROIT PRINCIPLES - IN ANY CASE RESTITUTION REASONABLE UNDER THE CIRCUMSTANCES IN ACCORDANCE OF ART. 3.3.2 UNIDROIT PRINCIPLES
Claimant, a Venezuelan company bought 16 engines from Defendant, a Brazilian company, for US$ 73,996.44.Since the Venezuelan import-export and exchange regulations only permitted the purchase by Claimant of the required amount of US dollars once the goods had already been delivered at a port in Venezuela, Claimant anticipated the price to Defendant through a U.S. bank in order to make the sale possible.Once the goods arrived at the Venezuelan port of delivery, Claimant had to comply with the Venezuelan import-export exchange regulations and paid a second time the purchase price to Defendant. However, Defendant refused to restitute the payment made in excess by Defendant, despite having previously promised to do so.
Claimant brought an action before the Brazilian Courts requesting from Defendant the restitution of the first payment. Defendant objected that the Claimant had not proven the bis in idem payment made and argued that it had only received one payment made in accordance with the Venezuelan exchange regulations. Alternatively, Defendant argued that any restitution in favor of Claimant would be against the law, because the first payment was made in violation of the Venezuelan import-export and exchange regulations and therefore illegal. Moreover, Defendant asked the Court to declare the sales contract as a whole null and void and to reject Claimant’s claims.
The first instance Court ordered Defendant to restitute to Claimant the payment made in excess, plus interests and costs.
On appeal, as a preliminary matter, the Court of Appeal determined the law applicable to the merits of the dispute. First of all the Court asked the parties to clarify the place of conclusion of the contract so that it could properly identify the law applicable to the dispute. Claimant asserted that the sales agreement had been concluded in Venezuela, while Defendant, on the contrary, asserted that it had been concluded in Brazil.
The Court found that the parties’ submissions concerning the place of the conclusion of the contract were inconclusive so that the locus actus could not be used as connecting factor. The Court therefore decided to apply the “principle of proximity” or “the most significant relationship rule” and, following a recent precedent of the same Court [see UNILEX, Court of Appeal State of Rio Grande do of Sul of 14 February 2017], found that the laws applicable to the substance of the dispute were the 1980 Vienna Sales Convention (“CISG”) and the UNIDROIT Principles. And since the validity of the sales contract is not a matter governed by the CISG, the Court decided that in accordance with the criteria for the interpretation of the Convention set forth in Art. 7(1) CISG it would base its decision of the issues at stake on the UNIDROIT Principles, in particular on the provisions set forth in Chapter 3, Section 3 on illegality.
As to the alleged invalidity of the sales contract or at least of the first payment of the purchase price made in violation of the Venezuelan import-export and exchange regulations, the Court of Appeal found that such argument had no merit under Chapter 3 of the UNIDROIT Principles. Citing the official commentary on Articles 3.3.1 and 3.3.2 of the UNIDROIT Principles the Court noted that the domestic mandatory rules referred to in these provisions are those which bear a status of public policy provisions, and Defendant had not proved that the violated Venezuelan exchange regulations were mandatory rules of this kind. Yet even if the violation of the Venezuelan exchange regulations fell within the scope of Article 3.3.1, restitution of the first payment would be justified under Article 3.3.2. Indeed, considering the purpose of the mandatory rules in question and the seriousness of the alleged violation the Court concluded that restitution would be reasonable under the circumstances.