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CISG CASE PRESENTATION

ICC Arbitration Case No. 9781 of 2000 (Waste recycling plant case) [English text]
[Cite as: http://cisgw3.law.pace.edu/cases/009781i1.html]

Primary source(s) of information for case presentation: Yearbook Comm. Arb. (2005)

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Case identification

DATE OF DECISION: 20000000 (2000)

JURISDICTION: Arbitration ; ICC

TRIBUNAL: Court of Arbitration of the International Chamber of Commerce

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 9781 of 2000

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Germany (respondent)

BUYER'S COUNTRY: Italy (claimant)

GOODS INVOLVED: Waste recycling plant


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 3 ; 4 ; 6 ; 7 ; 10

Classification of issues using UNCITRAL classification code numbers:

3A [Sale of goods to be manufactured (all of the materials supplied by seller; value of services portion of the sale only approximately 5 to 7% of the total order amount)];

4B [Scope of Convention (issues excuded): representation];

6B [Agreements to apply Convention: choice of law of Contracting State (“If the exclusion can be implicit, still the will of the parties must be certain. In case of doubt, the principle of applicability of the Convention must prevail ...")];

7A [Principles of interpretation of Convention: international character];

10A [Place of business: definition of]

Descriptors: Scope of Convention ; Business, place of ; Choice of law ; Internationality

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (English): Text presented below; see also 30 Yearbook Commercial Arbitration (2005) 22-41

Translation: Unavailable

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text

Published at Yearbook Comm. Arb'n XXX. Albert Jan van den Berg, ed. (Kluwer 2005) 22-41. Copyright owner: The International Council of Commercial Arbitration (ICCA). Reprinted with the permission of ICCA.

ICC Arbitration Case 9781 of 2000 (Interim award)

DATA ON THE AWARD

Parties:

   -   Claimant: Buyer (Italy)
   -   Defendant: Seller (Germany)

Place of arbitration: Geneva, Switzerland

Published in: Unpublished

Subject matter:

   -   jurisdiction
   -   1980 UN Sales Convention
   -   applicable law to form and substance of arbitration clause
   -   applicable law to contract
   -   qualification as sale contract

FACTS

In March of 1996, the German company D concluded a sales agreement with the Italian company C for the delivery of a waste recyling [sic] plant (the March sales agreement). The March sales agreement specified the type of plant and the guaranteed capacity. The agreement was executed in Italian and German. Both versions provided in Art. 6 that in case of a dispute arising out of the agreement, German law was applicable and, further provided for the jurisdiction of the competent courts in Germany. An offer for the recyling [sic] plant (the offer) was also drawn up by D.

The Italian financing company F intervened at C's request and with D's consent. As a consequence, in April 1996 F submitted to D its Order (the April order) for the recyling [sic] plant. In May 1996, D confirmed this order by letter (D's confirmation letter) directly to F. By a letter of the following day (referred to as the May sales agreement or May letter) F, referring expressly to the April order, provided that "in derogation to our April order and in partial modification [page 22] of the same, we communicate to you the variations to bring thereto, as agreed upon with the lessee" and introduced several amendments. It also contained the following dispute settlement and applicable law clauses:

"This agreement shall be submitted in all its aspects to Italian law and it is deemed to have been concluded in Italy. All questions which might be raised relating to the construction and/ or implementation of the present agreement shall be submitted to the International Chamber of Commerce of Paris."

The letter was signed "Per accettazione specfica delle presenti variazioni" by both C and D. F's signature was labeled as fornitore (supplier) and C's was labeled as conduttore (lessee).

Problems arose with respect to the recyling [sic] plant and in December of the following year, C initiated ICC arbitration against D, alleging breach of contract. D had started an arbitration against F (the D-F arbitration). D and F had agreed upon a sole arbitrator and F had asked the ICC International Court of Arbitration (ICC Court) to extend the D-F arbitration to C, since both disputes concerned the same legal relationship. C suggested to join the two arbitrations.

D in its response, contested the existence of a valid arbitration agreement between itself and C. Subsequently D agreed to conclude an arbitration agreement with C provided, inter alia, that the arbitration be consolidated with the D-F arbitration and that the same arbitrator be appointed. The parties initially agreed to this, but subsequently withdrew their agreement. The ICC Court decided that the arbitration between C and D should proceed separately, designated Geneva as the seat of the arbitration and appointed a different sole arbitrator.

In their Terms of Reference, the parties agreed that the ICC Rules applied and where these rules were silent, the arbitration would be governed by Chapter 12 of the Swiss Private International Law Act (PILA). The Terms of Reference also provided that the arbitrator would first decide in an interim award on jurisdiction and the applicable law to the merits of the case.

The sole arbitrator held that the arbitration agreement was valid as to form and substance and superseded the jurisdiction clause contained in the March sales agreement. He concluded that he did have jurisdiction and that the United Nations Sales Convention 1980 applied to the parties' agreement. With respect to the validity of the arbitration agreement, the arbitrator first determined that Art. 178 of the Swiss Private International Law Act applied to this question. The arbitration agreement was concluded in a valid form as both D and C had signed [page 23] F's May letter "for specific acceptance". The substantive validity was examined under Italian law, as the law governing the object of the dispute. The sole arbitrator rejected D's argument that C did not have capacity to enter into the arbitration agreement as it had only signed the May letter in its sole capacity as lessee. The sole arbitrator examined this question from the point of view of whether C had acted as an agent for F or had signed in its own capacity, finding that C had signed in its own name and on its own behalf. The sole arbitrator further held that the May sales agreement entirely replaced the March sales agreement and that the arbitration clause in the May sales agreement was the only existing jurisdiction clause binding the parties.

Claimant argued that Italian law, rather than the CISG, applied to the agreement, as the contract was a procurement contract (a contratto d'appalto) as characterized under Italian law, rather than a sales contract, as argued by the defendant. The sole arbitrator reasoned that Germany and Italy were both parties to the CISG and that the contract was to be characterized under the Convention which provided a uniform substantive rule for the characterization of the contract. Moreover, the place of business of the parties were in different States which satisfied the basic criterion of Art. 1(1) of the Convention. Because only five to seven per cent of the contract price related to services, rather than the supply of goods, this was not sufficient to bring the contract outside the scope of the Convention. Nor had the parties opted out of the application of the Convention as the clause in the contract stating that the agreement was deemed to be made in Italy could not be construed as an exclusion clause.

Excerpt

I. JURISDICTION

[1] "The first observation of the Tribunal with respect to the issue of jurisdiction is the following: the only question to be resolved at this stage is the validity of the arbitration clause contained in the May sales agreement as regards C as such. The only questions to be dealt with at this stage are indeed the following:

(i) Is the arbitration clause contained in the May sales agreement valid as to form as regards C and [page 24]

(ii) Is the arbitration clause contained in the May sales agreement valid as to substance as regards D and C? In particular, did C sign the arbitration clause in its capacity as agent to F or in its own name and on its own behalf?

(iii) Does the arbitration clause contained in the May sales agreement supersede, as the case may be, the jurisdiction clause contained in the March sales agreement?

[2] "Before entering into the discussion of the questions at stake, the issue has to be addressed of the law applicable to the validity as to form and as to substance of the arbitration clause. It being recalled that the Terms of Reference expressly provide for the application of the ICC Rules and, where the rules are silent, of Chapter 12 of the Swiss Private International Law [Act] (PILA), one notes:

(i) that the ICC Rules are silent on the issue of validity of the arbitration clause;

(ii) that Art. 178 PILA provides that:

'1. As to form, the arbitration agreement shall be valid if it is made in writing, by telegram, telex, telecopier or any other means of communication that establishes the terms of the agreement by a text.

2. As to substance, the arbitration agreement shall be valid if it complies with the requirements of the law chosen by the parties or by the law governing the object of the dispute and, in particular, the law applicable to the principal contract, or with Swiss law.

3. The validity of an arbitration agreement may not be contested on the grounds that the principal contract is invalid or that the arbitration agreement concerns a dispute which has not yet arisen.'

[3] "Thus, Art. 178(3) PILA clearly states that the issue of the main contract, its validity, its binding effect, is foreign to the question of the validity of the arbitration clause. As set out by the legal writers:

'When the parties to an agreement containing an arbitration clause enter into that agreement, they concluded not one but two agreements, the arbitral twin of which survives any birth defect or acquired disability of the principal agreement.'[1] [page 25]

As a consequence thereof

'L'arbitre est competent pour juger sur tout grief portant sur I' existence ou la validité du contrat principal, pourvu que la convention d'arbitrage per se ne soit pas entachée d'une clause [rectius: cause] de nullité.'[2] (Translation: 'The arbitrator is competent to decide on any claim regarding the existence or the validty [sic] of the main contract, provided that the arbitration agreement [is] not vitiated by a [reason for] nullity ...').

[4] "The conclusion to be drawn from the above is crystal clear: the question as to whether C is entitled to the claims brought in these proceedings against D or not is foreign to the question of jurisdiction at stake.

[5] "This being said, the question remains of the validity as to form and to substance of the arbitration clause contained in the May sales agreement.

[6] "As to form, Art. 178(1) PILA sets a substantive rule of direct application.[3] The arbitration clause shall therefore be deemed as valid if it complies with the requirements provided for in this article. There is little to discuss in this respect. The arbitration clause contained in the May sales agreement undoubtedly complies with Art. 178(1) PILA, inasmuch as the proposed clause results from F's May letter to D and has been executed by both C and D with the same wording, i.e., 'Per accettazione specifica delle presenti variazioni' (Translation: 'For specific acceptance of the present variations' ) [T]he fact that C is identified as Il Conduttore (the lessee) relates to C's rights (contested by D ) to the claims brought in these proceedings, and not to the validity of the arbitration agreement as such.

[7] "As to substance, Art. 178(2) PILA sets a rule of conflict of law in favorem validitatis which constitutes an alternative connection.[4] The validity as to substance of the arbitration clause will be admitted in the first place if the clause complies with the law chosen by the parties for this specific clause or for the agreement as a whole.[5] As a matter of fact, the May sales agreement does only refer as a whole to Italian law. In the absence of any specific choice of law applicable to the arbitration clause only, the validity of the latter shall therefore be examined under Italian law. [page 26]

[8] "Art. 808(3) of the Italian Code of Civil Procedure [6] provides that:

'The validity of the arbitration clause must be examined autonomously with respect to the contract to which it refers; however, the power to stipulate the contract includes the power to enter into the arbitration clause.'

As recalled by legal writers, the lack of capacity is held as a cause of nullity of the arbitration clause.[7]

[9] "D's reasoning with respect to the issue of C's capacity to enter into the May sales agreement does not specifically address the issue. In a nutshell, D contends that C is not a party to the agreement mentioned, inasmuch as this agreement only concerns two parties, D on the one side (the seller) and F on the other side (the buyer), C having simply signed the agreement in its capacity as lessee and its purpose being limited to evidencing its approval and consent to the variations of F's April Order. D adds that for C to be a party to the May sales agreement, it would have been necessary that F expressly assign its rights as buyer to C, which it did not.

[10] "In the opinion of the Tribunal, the issue at stake is actually foreign to the reasoning recalled above. In the present discussion on the validity of the arbitration clause, the only question to examine is clearly to know whether C signed the agreement and the arbitration clause contained therein in its own name and on its own behalf, or conversely, in F's name and on the latter's behalf. In this case indeed (and in this case only), C would clearly not be bound to the May sales agreement or to the arbitration clause. As set out in Art. 1388 of the Italian Civil Code (CCIt) indeed:

'Il contratto concluso dal rappresentante in nome e nell' interesse del rappresentato, nei limiti delle facoltà conferitegli, produce direttamente effetto nei confronti del rappresentato.'

Translation: 'The agreement concluded by the agent in the name and on behalf of the principal, within the limits of the powers conferred to it, produces effects directly to the principal.' [page 27]

Pursuant to Italian case law:

'La contemplatio domini, necessaria perché il contratto concluso dal mandatario produca effetti nei confronti del mandante, non richiede formule solenni, ne deve risultare espressamente dal contratto, essendo sufficiente, perché si realizzi, che il rappresentante abbia reso noto all' altro contraente, in modo esplicito e non equivoco, che egli intende agile, oltre che nell' interesse, anche nel nome di altro soggetto.'[8]

Translation: 'The contemplatio domini, necessary for the contract concluded by the agent to produce effect towards the principal, [requires] neither ... formal declarations, nor must result expressly from the contract, it being sufficient, for it to be achieved, that the agent ha[s] brought to the other contracting party's knowledge in explicit and unambiguous terms that it intends to act in the interest as well as in the name of the other individual.'

In other words, Italian law admits that an agency relationship may be inferred from any circumstances showing that the agent has made known to the contracting party expressly and unequivocally that the contract it executed was not binding upon itself but upon other persons.

[11] "Now, not only does D not raise such an argument, but moreover it clearly states that C signed the agreement in its capacity as lessee, and lessee only. Thus D does not allege that it ever considered that C signed the agreement in the name and on behalf of F. C does not allege it either.

[12] "The conclusion to be drawn from the above is simple: C signed the May sales agreement in its own name and on its own behalf, and thus the arbitration clause contained therein is valid and binding upon the parties, D on the one side, and C on the other side.

[13] "The last question to be solved with respect to the jurisdiction issue is as to whether the arbitration clause contained in the May sales agreement replaced the jurisdiction clause contained in the March sales agreement.

[14] "Relying in particular on the so-called collegamento funzionale, C contends that the May sales agreement modified and integrated the March sales agreement, and that the jurisdiction clause contained in the latter in favour of the ordinary courts at [Germany] was superseded by the arbitration clause contained in the former. D holds on its side that the May sales agreement was in substitution of [page 28] each previous agreement on the same matter, and in particular of the March sales agreement, that it actually replaced.

[15] "The Tribunal notes in the first place that both claimant's and defendant's reasoning ... lead to the same result: the sole existence of the arbitration clause contained in the May sales agreement, either because this agreement modified the jurisdiction clause contained in the March sales agreement (claimant's thesis) or because the May sales agreement entirely replaced the March sales agreement (defendant's thesis). Both parties are therefore substantially in agreement on this point.

[16] "Moreover, the Tribunal notes that the only question to resolve at this stage is to know whether the arbitration clause contained in the May sales agreement actually replaced the ordinary jurisdiction present in the March sales agreement. This question does not relate, in the opinion of the Tribunal, to the so-called theory of the collegamento funzionale (which actually relates to the May and March sales agreements as well as to other agreements at stake, such as the Leasing agreement ... and/or the agreement between C and P [the purchaser of the output of the plant] which regards the substance of the claims, but merely to the construction of the May sales agreement.

[17] "In this respect, the Italian applicable law provides that the first rule to be complied with is the literal method.[9] As set forth by legal writers:

'Il giudice si dovré limitare all' esame del senso letterale delle parole in quanto la comune volonté delle parti emerga in modo certo e immediato dalle espressioni adoperate, di modo che l'elemento letterale assorba ed esaurisca ogni altro criterio di interpretazione.'[10]

Translation: 'The judge must limit himself to the examination of the literal meaning of the words inasmuch as the common intent of the parties results from the wording used in a certain and immediate way so that the literal element integrates and exhausts any other criterion of interpretation.'

Only where there is some ambiguity or doubt left, Art. 1362 CCIt will apply, pursuant to which: [page 29]

'Nell' interpretare il contratto si deve indagare quale sia stata la comune intenzione delle parti e non limitarsi al senso letterale delle parole.

Per determinare la comune intenzione delle parti, si deve valutare il loro comportamento complessivo anche posteriore alla conclusione del contratto.'

Translation: 'In interpreting the contract, one ha[s] to enquire on the common intent of the parties and not limit oneself to the literal sense of the words.

For determining the common intent of the parties, one must estimate their behaviour as a whole also after the execution of the contract.'

When examining the wording of the May sales agreement, one notes:

(i) that it expressly integrates F's April order, in partial modification thereof and in express agreement with the lessee, C;

(ii) that it expressly refers to the description of the goods (descrizione dei beni) as set out in the March offer.

[18] "There is therefore, in the opinion of the Tribunal, little room left for interpretation: the parties to the May sales agreement, i.e., as set out above, F, D and C whatever the rights of which of them can be as a result there from, intended to:

(i) integrate, hence hold as contractually binding upon all the three parties concerned the description of goods as per D's March offer;

(ii) integrate, hence hold as contractually binding upon all three parties concerned the F's April order;

(iii) modify these orders, as the case might be, in the clear and unambiguous wording of the May sales agreement.

[19] "Ex abundanti cautela, if we proceed to a comparison between the provisions contained in the March sales agreement and the contractual documents set forth above ([18]), one notes that the provisions of the parties contained in the latter are contained anew, albeit modified as the case may be, in the former. Thus, and in particular:

(i) the (general) description of the goods to be manufactured and delivered ex Arts. 1 and 2 of the March sales agreement as well as the consideration therefor [page 30] result anew from (i) F's April order, (ii) D's confirmation letter, and (iii) D's March offer;

(ii) the guarantee clause ex Art. 3 of the March sales agreement result anew from (i) D's March offer, (ii) D's confirmation letter of F' s April order;

(iii) the payment's rates ex Art. 4 of the March sales agreement result anew in the May sales agreement;

(iv) the jurisdiction clause ex Art. 6 of the March sales agreement is contained anew, albeit modified, in the May sales agreement.

(20] "The conclusion reached by the tribunal at this stage of these proceedings, and without prejudice of the existence or absence of the rights claimed therein, is that the May sales agreement, together with the documents expressly mentioned therein, namely (i) D's March offer, (ii) F' s April order together with D's confirmation letter of this order, all as amended, as the case may be, by the May sales agreement itself, entirely replaced the March sales agreement. Therefore, the arbitration clause contained in the May sales agreement constitutes the only existing jurisdiction clause binding upon the parties."

II. THE LAW APPLICABLE TO THE DISPUTE

1. Position of the Parties

[21] "In its Request for Arbitration, the claimant refers to Art. 6 (b) of the May sales agreement which provides for the application of Italian law to the agreement. The defendant contends on its side that both 'the terminated March sales agreement and the May sales agreement are governed by the UN- Convention on Contracts for the International sales of Goods of April 1980 (CISG), Italy and Germany being contracting states to the CISG.

[22] "The defendant holds indeed that the preconditions of Art. 3(1) CISG are fulfilled. Defendant had to supply goods, which were to be manufactured. The defendant further contends that as per Art. 3(2) of the CISG, the predominant part of the obligations assumed by D did not consist in the supply of labour and other services. Although defendant had to erect and commission the recyling [sic] plant, the value of these services was approximately 5 to 7% of the total Order amount. The defendant still notes that there is no agreement between the parties [page 31] to exclude the application of the CISG according to Art. 6 CISG,[11] the reference to German law in the March sales agreement or to Italian law in the May sales agreement not constituting such an exclusion. Defendant also relies on Art. 13 (5) of the ICC Rules [12] relating to relevant trade usages reflected in international conventions, thus the CISG. The defendant finally relies on the arbitral tribunal' s Order No. 4 in the F- D arbitration, whereby the tribunal held that the May sales agreement is governed by the CISG .

[23] "The claimant replicates in confirming that the CISG has been ratified in Italy by Law No. 765 of 11 December 1986 (recte: 1985) and hence became Italian law. The claimant admits that the CISG applies to the sale of goods (including contracts for the supply of goods to be manufactured ex Art. 3 CISG). However, C holds that the agreement under scrutiny is to be characterised as a contratto d'appalto as per Art. 1655 CCIt, and not as a sale contract as per the characterisation given to it by Art. 1470 CCIt. The difference between the two as identified by the claimant is that while in the sales contract, the main feature is the transfer of the ownership of a good against a consideration (Art. 1470 CCIt), in the contratto d'appalto, the performance of the works prevails on the materials. Claimant indeed contends that the main feature is to produce a given result arising from the performance of the work rather than to transfer the ownership of the good. In the case of contratto d' appalto, the plant must not be a standardised one. The appaltatore undertakes to design, plan and manufacture the plant as per the customer's requirements. In the claimant's views, the criteria cited are all met in the case at stake.

[24] "In its final brief, D notes that even if under Italian law, the May sales agreement had to be characterised as a contratto d'appalto (which is contested by D), the contractual relationship at stake would remain governed by the CISG, since the latter is a multilateral treaty providing for uniform substantive rules relating to international sales of goods. The defendant contends that, in line with [page 32] Art. 7(1) CISG [13] and the prevailing doctrine, it is a matter for the CISG, and not for the Italian Civil Code, to characterise the contract. The defendant confirms that in its view the May sales agreement is exclusively governed by the CISG .

[25] "In its final brief, C contends that the May sales agreement is a purely domestic contract since it is expressly 'deemed to have been made in Italy'. As a consequence thereof, Italian domestic law is applicable to the exclusion of the CISG, which relates to international relationships. The claimant repeats that the plant ordered [from] D is not a standardised one, and therefore, the performance of the work prevails over the supply of the material. That was the very reason for C to apply to a foreign company, notoriously specialized in the design, planning and manufacturing of the required plant. .

[26] "C further refutes D's argument as per Art. 7 CISG, in that this provision applies to contracts precisely governed by the Convention, which is not the case of the contratto d'appalto, excluded by Art. 3(2) of the CISG.

[27] "Finally, C rejects D's argument resulting from the arbitral tribunal's Order No. 4 in the F-D arbitration, inasmuch as the tribunal's conclusion that the CISG is applicable to the May sales agreement is contradicted by the same tribunal's grounds that:

(i) the agreement at stake has to be characterised as a contratto d' appalto;

(ii) the choice of Italian law in the May sales agreement is binding upon the parties so that Italian law is applicable;

(iii) the expression 'the contract shall be deemed to have been made in Italy' is recognised as classifying the contract as a pure domestic agreement.

C emphasised D's contradiction in arguing, on the one hand, that C is not a party to the May sales agreement, and, on the other hand, that the present tribunal is bound to the conclusion reached by the sole arbitrator in the F-D arbitration that the law applicable to the May sales agreement is the CISG." [page 33]

2. CISG Applies

[28] "The tribunal emphasises at the outset ... that it is surely not its task to scrutinise and discuss the arbitral tribunal's Order No. 4 in the F-D arbitration, incorporated verbatim in the partial award of the same tribunal. C was not and still is not a party to these proceedings. The conclusion reached by the tribunal in the F-D arbitration could therefore in no possible way bind as such the parties to the present arbitration proceedings.

[29] "Be it as it may, the tribunal entirely shares the conclusion reached by the sole arbitrator in the F-D arbitration that the CISG is applicable to the May sales agreement for the reasons set out hereafter.

[30] "Being undisputed, and indeed indisputable, that both Italy and Germany are State Parties to the CISG,[14] the first question to be dealt with is the characterisation of the May sales agreement as an international or a domestic contract, as argued by the claimant. It is undisputed and indeed indisputable, that since now like at the time the May sales agreement was entered into, C was and still is a company with its registered offices in Italy, and that D was and still is a company with its registered offices in Germany, Italian Private International Law (IPIL)[15] applies. This law indeed:

'rappresenta ... una codificazione organica del diritto internazionale privato, riunendo in un unico testo normativo la disciplina delle situazioni che presentano elementi di estraneita rispetto all' ordinamento italiano ...'.[16]

Translation: 'represents ... an organic codification of private international law, putting together in a single normative text the discipline of the situations which present foreign elements as compared to the Italian legal order ...'.

[31] "Art. 1 IPIL provides that the law is applicable to the issues of jurisdiction, applicable law, enforcement of foreign decisions. Art. 2 IPIL read as follows: [page 34]

'1. Le disposizioni della presente legge non pregiudicano l'applicazione delle convenzioni internazionali in vigore per l'Italia.

2. Nell 'interpretazione di tali convenzioni si terré conto del loro carattere internazionale e dell' esigenza della loro applicazione uniforme.'

Translation: '1. The provisions of the present law do not prejudice the application of the international conventions in force for Italy.

2. For the interpretation of these conventions, one shall take into account their international character and the need for their uniform application.'

Pursuant to the Report to the law presented to the Senate:

'Il comma 2 dell' art. 2 ribadisce i principali criteri di interpretazione delle convenzioni in vigore, prescrivendo che si tenga conto del loro carattere internazionale e dell' esigenza della loro applicazione uniforme. Cio tende ad evitare che, in sede interpretativa, le considerazioni desumibili dall' unita del sistema giuridico italiano prevalgano sulla natura internazionale della disciplina convenzionale; questa invero va applicata da tutti i contraenti in modo uniforme. A tal fine, dovrénno essere valorizzati i criteri interpretativi ispirati dalla prassi degli altri Stati contraenti. ...' [17]

Translation: 'Art. 2(2) reaffirms the main criteria of interpretation of the conventions in force, prescribing that their international character and the need for their uniform interpretation must be taken into account. This tends to avoid, in matter of interpretation, that considerations drawn from the unity of the Italian legal system prevail over the international nature of the international discipline; the latter must be applied by all contracting parties in a uniform manner. With this aim in view, the criteria of interpretation inspired by the praxis of the other Member States ... must be [fully appreciated].'

[32] "Hence, the rule is clear: the criterion to be used for the characterisation of the May sales agreement as an international contract in the meaning of the CISG (and without prejudice of the characterisation of the agreement as such as a contract of sale in the meaning [o]f this Convention or not) or conversely, a domestic contract not governed by the CISG is to be taken in the CISG itself. [page 35]

[33] "Pursuant to Art. 1 of the CISG:

'(1) This Convention applies to contracts of sale of goods between parties whose places of business are in different States:
(a) when the States are Contracting States; or
(b) when the rules of private international law lead to the application of the law of a Contracting State.

(2) The fact that the parties have their places of business in different States is to be disregarded whenever this fact does not appear either from the contract or from any dealings between or from information disclosed by, the parties at any time before or at the conclusion of the contract.

(3)....'

Thus, the basic criterion of Art. 1 for the application of the Convention is 'that the places of business of the parties are in different States'.[18] As set out by the legal authorities:

'The mere place of contracting does not constitute a place of business (see Honnold, Uniform Law, 80-81) ; neither does the locality where the negotiations have taken place. Reference is made to a permanent and stable business organisation and not the place where only preparations for the conclusion of a single contract have been made.'[19]

The conclusion to be drawn from this principle is that the criterion of the place of conclusion of the agreement as set out in the May sales agreement 'questo contratto ... si considera stipulato in Italia' is of no relevance to the effect of the (general) application of the CISG .

[34] "Regarding the exception set out in Art. 1 (2) of the CISG ...the tribunal notes that the fact that D's place of business was situated in Italy [rectius: Germany] was perfectly known by C at the time of the negotiations and conclusion of the agreement in dispute. Indeed, C explains:

'If the plant was a standardised one, supplied also by the Italian market, it is not understandable why claimant should have applied to a foreign [page 36] company (respondent), notoriously specialised in the design, planning and manufacturing of the required kind of plant.'

One is bound to conclude from this very admission of the claimant that the exception of Art. 1(2) CISG is not applicable in the present case: the claimant was perfectly aware of D's foreign place of business at the time of the negotiations and conclusion of the agreement.

[35] "The second issue to examine is whether the May sales agreement is 'a contract of sale' in the meaning of the CISG (D's contention) or conversely, is to be held as a procurement contract (contratto d'appalto) not comprised in this international convention (C's contention). The first observation to be made here is that the question of the legal characterisation of the May sales agreement has to be made autonomously (i.e., independently of any domestic law and in particular in the present case, of Italian domestic law) with respect to the CISG. This principle results beyond any possible ambiguity from the very Report to the IPIL as quoted above ([31]). Therefore, the question as to whether the May sales agreement is to be identified as a contratto d'appalto pursuant to Art. 1655 CCIt or a 'sales contract' pursuant to Art. 1470 CCIt is relevant only to the extent that the CISG is deemed not to be applicable to this agreement.

[36] "Pursuant to Art. 3 CISG:

'(1) Contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production.

(2) This Convention does not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services.'

[37] "The interpretation of Art. 3 CISG is given in the first place by the CISG itself. Thus, Art. 42 of the same provides, with respect to the obligation of the seller to deliver goods which are free from any right or claim of a third party, the case where: [page 37]

'The right or claim results from the seller's compliance with technical drawings, designs, formulae or other such specifications furnished by the buyer.'[20]

It stands to reason therefore that the fact that the goods are manufactured on the basis of technical specifications given by the buyer does not preclude as a matter of principle the application of the CISG.

[38] "Moreover, legal writers and case law unanimously set forth specific criteria as to whether, and in the affirmative, to which extent, a contract providing for both work and materials falls within the scope of the CISG. Thus:

(i) A contract for work and materials (Art. 3(1)) is basically treated as a contract of sale.[21] 'It is otherwise only where the party ordering the goods has to supply a "substantial part" of the necessary raw materials or semi-finished goods.'[22]

(ii) A contract for supply and installation (Art. 3(2)) is clearly outside the scope of the CISG 'if the obligation to supply or obtain labour or other services alongside the obligation to deliver goods ... constitutes the preponderant part of the obligations ... .In view of the uncertainty associated, in most cases, with the need to estimate those values, it will be necessary for the share of services to be clearly in excess of 50%.'[23]

[39] "By comparing the above mentioned principles to the May sales agreement as presented and argued by the parties, one is bound to conclude that this agreement clearly falls within the scope of the CISG. Indeed:

(i) the fact that the seller or appaltatore as per the claimant's definition undertakes to design, plan and manufacture the plant as per the customer's requirement (above, at [23]) not only does not preclude the application of the CISG, but moreover is expressly provided by Art. 3(1) of the same (above, at [36]); [page 38]

(ii) None of the parties ever alleged in the present proceedings that the party ordering the goods (or in the present case, the lessee) had to supply any part of the necessary raw materials or semi-finished goods. The May sales agreement as identified above (at [35]), i.e., together with D's March offer and F's April order, does not provide anything of the kind. On the contrary, it results from the very same order and D's confirmation letter thereto that the entire raw materials and 'semi-finished' goods had to be supplied by C;

(iii) C never contested D's contention that although the defendant had to erect and commission the recyling [sic] plant, the value of these services was approximately 5 to 7% of the total order amount (above, at [22]). This figure has therefore to be held as correct. However, and as confirmed by legal writers and international case law, the figure required for the exclusion as per Art. 3(2) of the CISG is of 50% at least.

[40] "The tribunal is bound to conclude from the above analysis that, as a matter of principle, the May sales agreement is actually governed by the CISG. However, the question remains as to whether the parties to the May sales agreement excluded the application of the CISG as per Art. 6 of the same, or not. It has to be emphasised in this respect that the claimant does not discuss the defendant's argument that there was no such an exclusion in the case under scrutiny.

[41] "Be it as it may, the tribunal notes that pursuant to doctrine and case law:

'Si l'exclusion peut se faire de manière implicite, encore faut-il que la volonté des parties soit certaine. En cas de doute sur cette volonté, c'est le principe de l'applicabilité de la Convention qui doit l'emporter: l'application de la Convention n'est en effet pas subordonnée à la volonté des parties. C'est le système du "opting out" et non du "opting in" qui a été retenu par les redacteurs de la convention.'[24]

Translation: 'If the exclusion can be implicit, still the will of the parties must be certain. In case of doubt, the principle of applicability of the Convention must prevail: indeed, the application of the Convention is not subject to the parties' will. It is the principle of the "opting out" and not of the "opting in" which had been held by the Convention's authors.' [page 39]

Thus, in an ICC Arbitration referred to by legal writers, the tribunal held that the contractual provision [stating] that the tribunal shall apply 'the substantive laws of France' does not constitute a valid 'opting out'.[25]

[42] "The application of these principles to the case under scrutiny aims at putting aside any voluntary exclusion of the parties in the meaning of Art. 6 CISG. It is true that the May sales agreement expressly states that 'the agreement is deemed to be made in Italy' (above, at [24]). However, this contractual provision -- already discussed above (at [33 ]) -- cannot be construed -- in the tribunal's view -- as an exclusion clause. This is not argued by the claimant either. The tribunal is bound to conclude from the above analysis that the May sales agreement is actually governed by the CISG.

[43] "It has to be emphasised at this point that the said characterisation does not entirely exclude the application of Italian domestic law to the resolution of the present dispute. As set forth by Art. 4 of the CISG:

'This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract.'

Art. [4] then sets forth a non exhaustive list of subject matters not concerned by the Convention such as:

'(a) the validity of the contract or of any of its provisions or of any usage;
(b) the effect which the contract may have on the property in the goods sold.'

[44] "Amongst the various questions remained outside the scope of the Convention, one may quote for example the issue of representation [26] or question of the identity of the parties to the contract.[27] Thus, it is the clear opinion of the tribunal that the question as to whether the claimant -- in its capacity as lessee -- is entitled to exercise part or all of the buyer's rights is a question submitted to Italian law." [page 40]

III. CONCLUSION

[45] "On the basis of its analysis of the facts and the law and the conclusions with respect thereto as expressed above, the tribunal makes the following Interim Award:

A. As to jurisdiction: The tribunal is competent to decide on the dispute pending between, C on the one side, and D, on the other side, resulting from the May sales agreement between the parties;

B. As to the applicable law:

1. The May sales agreement is governed by the United Nations Convention on Contracts for the International Sale of Goods (CISG);

2. For contractual matters not governed by the United Nations Convention on Contracts for the International Sale of Goods (CISG), Italian Law is applicable.

C. Costs: The tribunal makes no order as to the costs of the arbitration in this Interim Award, and reserves the same for a subsequent Award." [page 41]


FOOTNOTES

1. "S. Schwebel, The Severability of the Arbitration Agreement, International Arbitration: Three salient problems (Grotius 1987) pp. 1-60."

2. "A. Dimolitsa, ' Autonornie et "Kompetenz -Kompetenz"', Revue de I' Arbitrage (1998) pp. 305 et seq. p.309."

3. "P. Lalive, J.F. Poudret, Le Droit de l' Arbitrage interne et international en Suisse (Payot, Lausanne 1989) ad Art. 178 at 8, p. 317; at 14,p. 321."

4. "P. Lalive, J.F. Poudret, op. cit., ad Art. 178, at 14, p. 321."

5. "P. Lalive, J.F. Poudret, op. cit., ad Art. 178, at 15, p. 322."

6. "In its version as per Art. 3 of the Italian International Private Law of 5 January 1994, n. 25."

7. "Giuseppe Mirabelli, 'La capacità a compromettere in arbitri', Rivista dell ' arbitrato (Giuffrè, Milano 1994, No. 2) pp. 215 et seq., p. 223, and references."

8. "Cass, 7 December 1994, No. 10523; 24 February 1986, No. 1125; 5 September 1985, No. 4614; 20 February 1982, No. 1071; 4 December 1980, No. 6320."

9. "Cass. 96/2372; 80/4864; 75/1314."

10. "Cian Trabucchi, Commentario breve al Codice Civile (CEDAM, Milano 1997) Art. 1362, Note III with reference to stable case law."

11. Art. 6 of the United Nations Convention on Contracts for the International Sale of Goods (1980) (CISG) reads:

"The parties may exclude the application of this Convention or subject to article 12, derogate from or vary the effect of any of its provisions."

12. Art. 13(5) of the ICC Rules of Conciliation and Arbitration 1988 reads:

"In all cases the arbitrator shall take account of the provisions of the contract and the relevant trade usages."

13. Art. 7 CISG reads:

"(1) In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.

(2) Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law."

14. "The CISG entered into force in Italy on 15 January 1988 and in the Federal Republic of Germany on 15 January 1991."

15. "No. 218 of 31 May 1995, entered into force on 1 September 1995, with the exception of Sect, IV relating to the enforcement of foreign decisions."

16. "F. Pocar, Il nuovo diritto internazianale privato italiano (Giuffrè, Milano 1997) pp. 4 and 5."

17. "Relazione al Disegno di Legge N 1192 'Riforma del sistema italiano di diritto internazianale privato' presentati nel carso della XI legislatura al Senato della Repubblica ... il 29 aprile 1993."

18. "Secretariat's Commentary, Official Records, I, 15."

19. "C.M. Bianca, M.J. Bonell, Commentary on the International Sales Law, the 1980 Vienna Sales Convention (Giuffrè, Milan 1987) at Art. 1, at 2.3., p. 30."

20. "Claude Witz, Les premieres applications jurisprudentielles du droit de la vente internationale, Convention des Nations Unies du 11 avril 1980 (L.G.D.J. 1995) at 16, p. 35."

21. "OLG Frankfurt, RIW (1991) p. 850 with a note by Schlechtriem, EWiR Sect. 25 CISG 1/91, 1081.

22. "Peter Schlechtriem, Commentary on the UN Convention on the International Sale of Goods (CISG) (Clarendon Press, Oxford 1998) Art. 3, at 1, p. 39."

23. "Peter Schlechtriem, op. cit., Art. 3, at 2, p. 39, with reference to Honnold, para 60.1; Enderlein/Maskow/Strohbach, Art. 3, note 5; ICC Case No. 7153/93, JDI (1992) 1005, 1006 on the supply and assembly of plant for a building project (predominant value of the goods supplied leads to the application of the CISG)."

24. "Claude Witz, op. cit., p. 44., confirmed by OLG Dusseldorf, 8 January 1993, NJW-RR (1993) pp. 999 et seq.; OLG Koln, 22 February 1994, RIW (1994) pp. 972 et seq."

25. "ICC Case No. 6653, 1993, JDI (1993) p. 1040, obs. JJA."

26. "ICC Case No. 7197, 1992, JDI (1993) p. 1029."

27. "LG Hamburg, 26 Sept. 1990, RIW 1990, p. 1015 et seq.; IPRax 1991, p. 400 et seq.; CLOUT, 17 May 1993, p. 3."

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