Case digest
EDITOR: Daniel J. Morse [*]
ICC arbitration award
Case No. 8716 of February of 1997
Facts. This dispute concerned the payment for goods ordered through an agent. The Respondent [buyer] refused to take delivery of the goods shipped to it by the Claimant [seller] due to cancellation of orders by the [buyer]'s customers. Alternatively, the [buyer] proposed different terms of payment to which the parties were unable to agree. Pursuant to the arbitration clause of the agency agreement, the seller commenced these proceedings seeking payment for the goods or alternatively reimbursement for the cost of returning the goods to origin. The arbitrator first considered her jurisdiction over the matter given that the claim arose from an isolated incident involved in a long-term contract (the Agency Agreement), which included the arbitration clause.
The arbitrator's jurisdiction. The "Agency Agreement" between the [seller] and the [buyer] provided that the [buyer] agreed to act as an agent of the [seller] in Israel. Article 6a of that Agreement stated:
"All disputes, controversies or differences which may arise between the parties out of or in connection with this agreement or the breach thereof shall be referred and settled by the arbitration court of the International Chamber of Commerce in Paris in accordance with the respective provisions of rules and by-laws of the said arbitration court. "The award to be rendered shall be final and binding upon both parties."
Since the dispute arose out of an individual contract for the sale of goods in lieu of the "Agency Agreement", despite the contention by the [seller] that the latter Agreement purported to be the basis of all commercial transactions between the parties, and thus the jurisdiction of the arbitrator need first be determined. The arbitrator determined that she did have jurisdiction over this dispute since the sale of goods contract had been signed during the validity of the Agency Agreement, Article 7 of which set out that "all relations between the parties fall under this agreement."
Application of the Convention and Incoterms. The terms of the Agreement are binding on the parties, based not only on the general principle in international business (pacta sunt servanda) but also on the legal obligations as expressed in the relevant concerned legal systems. The parties had expressly referred to these systems by agreeing on an "ex-work" sale. [page 62] [**]
It was determined that the CISG would apply to this dispute. The parties had not expressed a choice of law to govern the contract however had clearly agreed to an international sale of goods in which they refer to the "Ex Work" Incoterm. The choice of this Incoterm expresses a localization of the performance of the contract to the location where the seller is located, namely Italy. Since Italy has ratified the CISG, the parties could reasonably have expected that such system would apply to the subject contract.
Obligations of the parties.The [seller] had substantially completed its obligations under the contract by shipping the goods thereby obligating the [buyer] to perform its two obligations: 1) payment for the goods, and 2) taking delivery of the goods. [Buyer] did neither.
Damages. Although the contract did not provide for sanctions and remedies, damages could be considered in light of Arts. 53, 54 and 74 CISG to award damages. In particular, Art. 74, which gives the right for an aggrieved party to be compensated for any predictable damages arising out of the fundamental non-performance of a contracting party.
Since the [buyer] did not dispute that the [seller] had completed its obligations under the contract, [buyer] was required to perform its obligations. When it did not do so, the [seller] was entitled to compensation for predictable damages pursuant to Article 74. The arbitrator awarded that the [buyer] pay the cost of goods to the [seller] but did not award the cost for return shipment, since this latter damage was claimed merely as an alternative.
Interest. Interest was awarded at a rate of 5%, the rate in force in Italy at the time of the award, running from the time when the [seller] put the [buyer] on notice to fulfill its obligation until payment was made by the [buyer] in full. [page 63]
FOOTNOTES
* Daniel J. Morse is a member of the Bar of the State of New York. He is associated with the law firm Hardin, Kundla, McKeon Poletto & Polifroni. Go to Case Table of Contents
Pace Law School
Institute of International Commercial Law - Last updated September 3, 2002
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