- Arbitral Award
- International Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation
SALES CONTRACT - BETWEEN A BULGARIAN PARTY AND A RUSSIAN PARTY - GOVERNED BY CISG – UNIDROIT PRINCIPLES APPLIED AS MEANS TO INTERPRET AND SUPPLEMENT CISG (PREAMBLE OF UNIDROIT PRINCIPLES) – UNIDROIT PRINCIPLES APPLIED AS REFLECTING INTERNATIONAL USAGES (ART. 9(2) CISG)
PENALTY CLAUSE – PAYMENT OF PENALTY FOR DELAY IN PAYMENT OF PRICE – MATTER NOT COVERED BY CISG – RECOURSE TO ART. 7.4.13 UNIDROIT PRINCIPLES
AMOUNT OF PENALTY EXCESSIVE – REDUCTION TO REASONABLE AMOUNT (ART.7.4.13(2) UNIDROIT PRINCIPLES)
A sales contract between a Bulgarian and a Russian party provided for the payment of a penalty by the buyer in case of delay in the payment of the price corresponding to 0,5% of the price per day. When the buyer actually failed to make the payment in time, the seller asked for the payment of the penalty as agreed upon in the contract. The buyer objected on the ground that the agreed sum was excessive.
The contract was governed by the UN Convention on Contracts for the International Sales of Goods (CISG). After having found that CISG is silent on the issue, the Arbitral Tribunal decided to resort to the UNIDROIT Principles in order to fill the gap. In doing so the Tribunal invoked first of all the Preamble of the UNIDROIT Principles stating that “[they] may be used to interpret and supplement international uniform law instruments”; yet the recourse to the UNIDROIT Principles was also justified on the ground that they reflect usages of which the parties knew or ought to have known and which are widely known to in international trade and are therefore applicable according to Art. 9(2) CISG.
As to the merits of the dispute, the Arbitral Tribunal found that a penalty amounting to 0,5% of the total contract price for each day of delay in the payment was indeed excessive and in applying Art. 7.4.13(2) of the UNIDROIT Principles it reduced the penalty to a reasonable amount.
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