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CISG CASE PRESENTATION

ICC Arbitration Case No. 9333 of October 1998 (Services case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/989333i1.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISION: 19981000 (October 1998)

JURISDICTION: Arbitration ; ICC

TRIBUNAL: Court of Arbitration of the International Chamber of Commerce

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 9333 of October 1998

CASE NAME: Unavailable

CASE HISTORY: Unavailable

CLAIMANT'S COUNTRY: Morocco

RESPONDENT'S COUNTRY: France

GOODS INVOLVED: Services, not goods


Classification of issues present

APPLICATION OF CISG: Dicta reference to CISG and UNIDROIT Principles ["usages of international trade . . . are echoed by [the CISG and the] UNIDROIT Principles . . ."]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 78 [Also relevant: Article 9 ]

Classification of issues using UNCITRAL classification code numbers:

78A [Interest on sum in arrears]

Descriptors: Interest

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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

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=400&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (French): Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=400&step=FullText>; ICC International Court of Arbitration Bulletin, Vol. 10, No. 2 (Fall 1999) 102-104

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Liu Chengwei, Recovery of interest (November 2003) n.26

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Case text (English translation) [second draft]

ICC Arbitration Case No. 9333 of October 1998

Translation [*] by Kirsten Stadtländer [**]

[…]

The contract between the parties is subject to the Swiss Code of Obligations. Nevertheless, according to Respondent, the Foreign Corrupt Practices Act [FCPA] of the United States is fully applicable to the contractual relations of the parties. … Respondent asserts that the FCPA [*] prohibits him from making payments to Claimant outside of Morocco.

A contract that is contrary not to Swiss law but to a foreign law, is in principle not illegal under Article 20 of the Swiss Code of Obligations, as this provision protects only with respect to Swiss law. In extraordinary circumstances, a violation of a foreign law can nevertheless be considered as contrary to morality under Article 20 of the Swiss Code if it is incompatible with Swiss morality. … This is not the case here. … The Tribunal … concludes that the Respondent's allegation of corruption is not established by proof. …

A foreign law of the quality of police regulations could possibly find application to a contract otherwise subject to Swiss law, indirectly through Article 19 LDIP [*]. If the requirements for the application of Article 19 LDIP were met, a violation of such a law could render the contract illegal. The question whether Article 19 WIP [*] is applicable to an international arbitration and the requirements for application of that provision are controversial. … The question can nevertheless be left open if the Arbitral Tribunal is of the opinion that (i) the application of the Foreign Corrupt Practices Act of the United States under the title of foreign law of the quality of police regulations is not justified; and (ii) hypothetically, the requirements of the application of the FCPA are not met.

The present proceedings are brought forward by the Claimant, a Moroccan national, against the Respondent, a French subsidiary company of the American corporation (X). The American corporation (X) is not party to the proceedings. There is no connection to American law except the fact that the Respondent has become a subsidiary company of an American corporation according to the conclusion of a contractual agreement. This affiliation is under the circumstances insufficient for the application of the Foreign Corrupt Practices Act of the United States under the title of Article 19 LDIP.

In any event, it is not necessary to search for a connection, as the U.S. Foreign Corrupt Practices Act is not applicable to foreign subsidiaries of American corporations. … On the other hand, under the FCPA, a parent company based in the United States is liable for the actions of those companies that are members of the group over which it presides. It is in this perspective that American multinationals have introduced programs in all of their subsidiaries and affiliates to assure respect for the FCPA -- in order to limit the risk in relation to their own liability.

[…]

It is added that even if the U.S. Foreign Corrupt Practices Act had been applicable to the Respondent, this would not mean that an international Arbitral Tribunal would be bound to apply it in that manner. Even if it is supposed that (i) it is a law of a quality of police regulations and (ii) the arbitration acknowledges that such a law can be applied despite the choice of another material law, a strong and legitimate interest of the United States to apply this law must still be demonstrated. Serious doubts concerning this subject may result from the fact that the FCPA is not primarily aimed at the protection of the fundamental public order of the United States, but that its object is to restore public confidence in the integrity of American enterprises whose reputation has been spoiled by a series of sensational scandals. … It is therefore not appropriate to apply in that manner the FCPA on enterprises outside the United States. …. The battle against corruption, certainly a worthy objective, does not necessarily justify the exportation of methods or the code of conduct unique to the FCPA in order to reach that objective.

[…]

[Claim for interest]

Claimant has modified its claim attempting to obtain interest on sums in arrears, in that it claims interest that is calculated at the rate of 5 % under the provisions of Article 104 of the Swiss Code of Obligations (and not the legal rate under French law) accruing from the date of filing the arbitration suit. …

Claimant had already requested the payment of interest when filing the arbitration suit. Had the Claimant persisted on basing its claim on French law, the Tribunal would have been obliged not to declare the claim to be inadmissible, but to apply the Swiss Code of Obligations.

Furthermore, one can consider the question whether interest does not after all constitute a part of the principal claim. For example, an author recently wrote:

"From a functional perspective, the interest claim in Art. 78 CISG, just as the one incorporated in Art. 7.4.9 of the UNIDROIT Principles, and any statutory interest claim constitutes the minimum lump sum compensation for damages in areas where the creditor need not prove the actual damage incurred. It is a long-standing practice of international arbitrators, as well as of the Iran-U.S. Claims Tribunal, to consider the interest claim as part of the general claim for damages." (Klaus Peter Berger, "International Arbitral Practice and the UNIDROIT Principles of International Commercial Contracts", American Journal of Comparative Law, Vol. 46, 199, p. 135 s.)

[…]

Under Article 104 of the Swiss Code of Obligations, to which the contract is subject, every debtor being in delay with a payment of an amount of money owes interest of 5 % per year on the sum in arrears. Nothing in the contract suggested that the parties had intended to exclude the right to the payment of interest for delayed payment. Such an exclusion would have been difficult to reconcile with the usages of international trade which are echoed by, among others, the United Nations Convention on Contracts for the International Sale of Goods (CISG) and also the UNIDROIT Principles of International Commercial Contracts, referred to by the author mentioned above.

In the light of Article 104 of the Swiss Code and the claim of Claimant, it is adequate to combine ordering the Respondent to make payment to Claimant for the commission with an order for the payment of interest at a rate of 5% since the date of filing the arbitration suit.

[…]


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, translator's note on abbreviations: FCPA = Foreign Corrupt Practices Act, a civil and criminal statute of the United States; LDIP =   ; WIP =   .

** Kirstin Statlδnder is a student of law at Humboldt University Berlin. She was a member of the team of Humboldt University at the 9th Willem C. Vis International Commercial Arbitration Moot 2001/02 and is a coach of the team at the 10th Willem C. Vis International Commercial Arbitration Moot 2002/03. The second-iteration redaction of this translation was by Dr. John Felemegas of Australia.

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Pace Law School Institute of International Commercial Law - Last updated February 15, 2007
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