- Arbitral Award
- ICC International Court of Arbitration ICC-FA-2020-006
SALES CONTRACT - BETWEEN A NORTH AMERICAN PARTY AND ASIAN PARTIES - PARTIES' CHOICE OF CISG AS THE LAW APPLICABLE TO THE CONTRACT
GENERAL DUTY OF GOOD FAITH ACCORDING TO ART. 7(1) CISG - ARBITRAL TRIBUNAL HELD THAT NO DUTY OF GOOD FAITH DIRECTED TO THE PARTIES OF A COMMERCIAL CONTRACT CAN BE DERIVED FROM ART. 7(1) CISG
DUTY OF GOOD FAITH - REFERENCE ACCORDING TO ART. 7(2) CISG TO DOMESTIC LAW (§ 1-203 OF UNIFORM COMMERCIAL CODE) TO FILL A GAP OF THE CONVENTION - ARBITRAL TRIBUNAL HELD THAT ART. 7(2) CISG DOES NOT ALLOW TO "IMPORT" A GENERAL DUTY TO ACT IN GOOD FAITH TO FILL THE GAP
In a dispute relating to a sale contract between a North American party and an Asian parties, governed by CISG (following parties’ subsequent agreement), Claimant invoked a breach by Respondents of the duty of good faith.
The parties discussed the value to be attributed to the reference to good faith contained in Art. 7(1) CISG: while Claimant affirmed the existence of a general duty to observe good faith in an international contractual relation governed by the CISG, Respondents denied such freestanding duty of good faith in Article 7 CISG, whether for pre-contractual conduct or the performance of contractual duties. Moreover, Claimant submitted that, since the contract had been executed in New York, §1-203 UCC had to be applied to fill the gap according to Art. 7(2) CISG. On their turn, Respondents argued that Art. 7(2) CISG does not operate to introduce, by way of private international law, a local law (US law) duty into the contract and that the reference to national law can be used only in relation to a matter covered, but not expressly dealt with by the CISG, which was not the case.
The Arbitral Tribunal concluded that no duty of good faith directed to the parties of a commercial contract can be derived from Art. 7(1) CISG since it concerns only the interpretation of the Convention. In reaching this conclusion, the Arbitral Tribunal referred also to the UNIDROIT Principles which "in contrast to the CISG ... contain a specific provision directed to the parties of an international commercial contract to observe these obligations in good faith in international trade".
Moreover, according to the Arbitral Tribunal, Art. 7(2) CISG applies where the subject matter of the dispute is addressed by the CISG and does not operate to “import” a general duty to act in good faith in circumstances where the matter (here delivery) is one expressly dealt with by the CISG but not “expressly settled” by the “general principles” of the CISG. In any event Claimant did not submit convincing evidence or arguments as to why US or New York law should be the proper law of the contract nor did it provide sufficient evidence that there would be a duty to act in good faith (and the specifics of it) according to New York law.