Austria 28 July 1999 Supreme Court (Pipe case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/990728a3.html]
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DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 7 Ob 204/99x
CASE HISTORY: 1st instance Bezirksgericht Neunkirchen (GZ 3 C 3346/98m-2) 13 November 1998; 2d instance Landesgericht Wiener Neustadt (GZ 17 R 295/98y-10) 21 April 1999
SELLER'S COUNTRY: Germany (defendant)
BUYER'S COUNTRY: Austria (plaintiff)
GOODS INVOLVED: Pipes
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers: 4B [Scope of Convention (issues excluded): injunctive relief to prevent drawing on a bank guarantee] Descriptors:
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(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (German): CISG-Austria website <http://www.cisg.at/7_20499x.htm> Translation (English): Text presented below CITATIONS TO COMMENTS ON DECISION Unavailable
Classification of issues present
Citations to case abstracts, texts and commentaries
CITATIONS TO OTHER ABSTRACTS OF DECISION
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
4B [Scope of Convention (issues excluded): injunctive relief to prevent drawing on a bank guarantee]
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(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (German): CISG-Austria website <http://www.cisg.at/7_20499x.htm>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Queen Mary Case Translation Programme
28 July 1999 [7 Ob 204/99x]
Translation [*] by Florian Arensmann [**]
Edited by Institut für ausländisches und internationales
Privat- und Wirtschaftsrecht der Universität Heidelberg
Daniel Nagel, editor [***]
The Supreme Court is represented by Dr. Niederreiter (President of the Supreme Court) and Dr. Schalich, Dr. Trittel, Hon-Prof. Dr. Danzl and Dr. Schaumüller (Court Counselors of the Supreme Court).
This is a dispute between Plaintiff "R __ Handelsgesellschaft mBH" (a trading company with limited liability), hereafter referred to as [Buyer], represented by Dr. Christian Gassauer-Fleissner, attorney in Vienna vs. Defendant "M __ GmbH, __" (a limited liability corporation), hereafter referred to as [Seller], represented by Dr. Christoph Pöchhacker, attorney in Vienna. It is an injunction suit regarding a bank guarantee (value in dispute: 1,002,936.00 Deutsche Mark [DM] = 7,020,552.00 Austrian schillings [ATS]), as a result of [Buyer]'s appeal on points of law against a decision of the District Court (Landesgericht) Vienna Neustadt as Appellate Court of 21 April 1999 (GZ 17 R 295/98y-10) which amended the decision of the Municipal Court (Bezirksgericht) Neuenkirchen of 13 November 1998 (GZ 3 C 3346/98m-2).
The Supreme Court of Austria reached the following decision:
|-||[Buyer]'s appeal on points of law is dismissed.|
|-||[Buyer] is ordered to pay [Seller] the costs of the appellate proceedings in the amount of 36,252.75 ATS (including 6,042.13 ATS for sales tax) within fourteen days.|
JUDGMENT OF THE COURT OF FIRST INSTANCE
The Court of First Instance has ascertained the facts as follows:
By contract dated 17 September 1998, [Buyer] purchased from [Seller] pipes according to certain exact specifications. Among other requirements, it was agreed that:
|-||Specifications. The tolerance for the bore of the pipe may be only +/- 1 % and the tolerance for wall thicknesses - 0/ + 0.5 mm. The minimum wall thickness should not be
allowed to fall below that tolerance.|
|-||Acceptance. The acceptance of the goods is to be conducted by an independent inspector. The "S__-Co. mbH __" (limited liability company, hereafter referred to as S) was authorized as inspector. According to the inspection order, S should have visually checked the outside condition of the pipes, particularly for corrosion, spot-checked the measurements, especially the wall thickness, and, furthermore, discovered the quantity of goods delivered.|
If the inspection results were satisfactory, S was to verify the conformity of the goods with the comment "goods have been delivered according to the contract terms."
To assure payment of the purchase price, Thrift Institution N issued bank guarantee no. 7591 by order of [Buyer] in the amount of 1,002,936.00 DM (= 7,020,552.00 ATS) in favor of [Seller]. In that guarantee, the thrift institution obligated itself to transfer the requested amount to [Seller] within six days after receipt of [Seller]'s first written demand for payment with the declaration that [Buyer] had not complied with [Buyer]'s contractual duty to pay. The following documents were to be attached to the request for the guarantee:
|-||a copy of the commercial invoice;|
|-||a copy of the FCR/forwarding agents certificate of receipt; indicating that the goods were irrevocably placed at [Buyer]'s disposal, and that the expenses for the handling including the unloading as well as warehouse rent for four weeks were paid;|
|-||a copy of the report by S in English language with the comment "goods have been delivered according to the contract terms."|
At the inspection on 21 October 1988, S's inspector did not use a so-called "scanner" but only a vernier caliper. Such a vernier caliper is some millimeters wide and does not lie directly against the pipe as it cannot adjust itself to the radial face of the pipe. For this reason, the measured data is regularly greater than the actual data. In addition, the wall thickness of a pipe at the end is not measurable with the vernier caliper. Only a scanner is a suitable tool for measuring such pipes.
The measures taken with a scanner by a manager of [Buyer] showed that the wall thickness of the pipes delivered by [Seller] were up to 7% lower than determined in the contract, that the weld seam did not comply with the standard, that the galvanized pipes were not blown off, that the measured plating of zinc had been partly up to 100 my, and that pipes did not display any registration numbers..
After the confirmation of that measurement result by another expertise also obtained by [Buyer], [Buyer] requested [Seller] to refrain from drawing on the bank guarantee. On 29 October 1998, S issued its report. In that report, S declared that the goods delivered by [Seller] complied with the provisions of the contract. However, this report does not address the defects detected by [Buyer] at its examination.
According to the further conclusions of the Court of First Instance:
It is "unexplainable why S did not issue the expertise according to objective considerations - i.e., based on the defects discovered together -- but to [Seller]'s advantage. S must have known that the method applied for measurement was not appropriate."
Relying on the expertise issued by S, [Seller], by fax dated 10 October 1998, insisted on contractual performance. The pipes were -- as agreed -- ready for collection by [Buyer] in Antwerpen.
Another expertise obtained by [Buyer] showed that the pipes were not of the minimum wall thickness which was expressly agreed upon. The Court of First Instance furthermore explained:
"The pipes were not suitable for the intended purpose and were thus not accepted by [Buyer]; [Seller] was informed in writing about the defects, and [Seller] was in arrears with its contractual obligation due to the defective delivery. [Seller] is therefore aware of the deficiency of its goods as well as of the fact that it is in arrears with its contractual obligation. Consequently, [Seller] also knows that it is not entitled to the payment of the purchase price or, respectively, to draw on the bank guarantee."
[Buyer] gave as reason for its demand for safeguarding that drawing on the bank guarantee by [Seller] would constitute an abuse of law. [Seller] would still insist on the payment of the purchase price although [Seller] was not entitled to this claim. There was the danger that [Seller] would draw on the bank guarantee whereas two expert opinions presented with the claim proved this procedure to be an abuse of law. Without the Garnishee Order against the guarantor, the prosecution or the realization of the injunctive relief would be frustrated by the expected payment of the guarantee amount.
According to the claim, the Court of First Instance issued the preliminary injunction without previous hearing of [Seller] and limited this action to 30 November 1998. It held that as there was an imminent danger, the preliminary injunction with respect to the bank guarantee was necessary to safeguard [Buyer]'s claim.
JUDGMENT OF THE COURT OF APPEAL
The Court of Appeal dismissed the provisional order. The Court of Appeal estimated the decision's subject as exceeding with 260,000 ATS and declared the raising of the appeal to be admissible. Although the bank guarantee at hand had already expired at the time of the appellate decision, [Seller] was still charged by the decision of the Court of First Instance with regard to § 394 EO [*]. Before the coming into effect of the Lugano Convention, the jurisprudence had already affirmed a legitimate interest in the proceedings for the issuing of a preliminary injunction without checking the possibility of enforcement abroad if -- as in the present case -- the danger could be averted by domestic actions.
However, [Buyer]'s injunctive relief resulted from the contractual relationship and was therefore to be assigned to the basic or value relationship. The United Nations Convention on Contracts for the International Sale of Goods (CISG) was to be applied to this legal relationship. However, the CISG did not contain any express provision for the injunctive relief which is to be dealt with in the present case. For this reason, the relevant rules and regulations of the Austrian law were to be applied to this legal relationship. According to § 36 IPRG [*], German law was to be applied to the injunctive relief at hand. In contrast to this, Austrian law was to be applied to the obligations arising out of the bank guarantee pursuant to § 38 IPRG since this was a bank transaction of a lending institution seated in Austria.
The legal situation concerning the question of an injunctive relief for an abuse of law with respect to the drawing on a bank guarantee was at least to such extent similar in Germany and Austria that the principles developed by the Austrian jurisprudence -- which the parties in dispute referred to -- could be applied by analogy. It was characteristic for a bank guarantee that autonomous rights are granted to the recipient independent of the value relationship. These rights comprised that, for a start, payment is made available for the recipient only for the mere allegation that the case of warranty had occurred and that his contractual partner was referred to a redemanding claim. This exclusion of objections with respect to the value relationship which is characteristic of a bank guarantee should not be avoided crabwise. For this reason, claims of the contractual partner against the recipient based on the value relationship could not lead to the performance being made dependent on the basic relationship by a preliminary injunction as requested in the instant case.
Due to the abstractness of the bank guarantee, the ordering party was not only entitled to a claim against the recipient for forbearance or withdrawal from drawing on the bank guarantee but also to a claim against the guarantor (bank) for refraining from the net payment:
|-||if the inexistence of the recipient's claim in the value relationship was proved as evident
|-||if the recipient acted with intent to cause damage, consequently, i.e., fraudulently.|
Disputes between the parties concerning whether the performance was in compliance with the contract were basically to be dealt with in the context of the value relationship, which means in the proceeding between the ordering party and the recipient concerning the redemanding of the guarantee amount which first had to be paid off. All abstract claims had in common that -- in case of availment -- the question of the definite substantial entitlement was only to be dealt with in a later proceeding. In doing so, the recipient should take on the more advantageous position of defendant.
The recipient could not be accused of acting fraudulently or in abuse of law as long as it was not definitely proven that it was not entitled to claim the purchase price. The affirmation or the negation of the clearness of the evidence to be brought by [Buyer] to prove an abuse of law was in any case an act of consideration of evidence carried out by a judge although the clearness of the guarantee's abuse could not be assessed entirely without legal considerations.
"[Seller]'s knowledge" -- as assumed by the Court of First Instance -- concerning the deficiency of the pipes delivered could not be inferred from the documents' content presented by [Buyer] as such an admission by [Seller] was not derivable from them. The "conclusion" drawn by the Court of First Instance was therefore not based on stringent reasoning. [Buyer], therefore, did not prove the danger of an abusive availment of the bank guarantee by [Seller].
There was no case law regarding the question which law had to be applied to an injunctive relief -- claimed by an Austrian company in a safeguarding proceeding -- concerning an abusive availment of a bank guarantee which was to be demanded in Austria by a recipient seated in Germany if the CISG was to be applied to the underlying transaction. For this reason, the appeal was regarded as admissible.
DECISION OF THE FEDERAL SUPREME COURT
[Buyer]'s appeal against this decision is inadmissible as the Court of Appeal solved the question of which law is to be applied to the bank guarantee in compliance with the relevant case law (EvBl [*] 1994/97; SZ [*] 70/176; 1 Ob 554/95). Furthermore, the Court of Appeal appropriately identified and applied the basic principles developed by the jurisprudence concerning the question on how an abusive availment of a bank guarantee is defined and which national law is to be applied to a withdrawal of such a guarantee.
To start with, the Court of Appeal's decision is to be affirmed with respect to the fact that [Buyer]'s objection still exists by reason of possible conclusions according to § 394 EO although the bank guarantee has already expired on 30 November 1998 (cf. 2 Ob 574/95 with further evidence as well as Konecny: Zur Wirksamkeit einstweiliger Verfügungen nach Ablauf der Verfügungsfrist, ÖBA [*] 1997, 987 et seq. with further evidence). The Court of Appeal has also correctly held that:
|-||The basic relationship dealt with in the present case is governed by the CISG; |
|-||This Convention, however, does not contain a provision concerning an injunctive relief; and that|
|-||The decisive causal rules and regulations are to be discovered according to Austrian law as a result of an Austrian Court being engaged in this case (cf. 7 Ob 336/97 with further evidence).|
Hence, the rules and regulations regarding the sales contract and thus, according to § 36 IPRG [*], German law is to be applied to the claimed injunctive relief. This results from the fact that the subject matter is a delivery of goods of a company seated in Germany to an Austrian company, that the deduced claim is not to be assigned to a bank transaction and finally that German law does not provide for a further reference for such case (cf. Palandt, BGB [*], Art. 28 EGBGB [*] para. 21).
The legal conceptions that
|-||According to § 38(1) IPRG, Austrian law is to be applied to estimate the obligations arisen
from the bank guarantee for lack of claiming a previous contrary choice-of-law; and that |
|-||The claim being at the basis of the preliminary injunction, i.e. the claim to be secured to the non-availment of the bank guarantee, conforms with the contractual relationship concluded between the parties.|
can also be affirmed.
The Court of First Instance and the Court of Appeal only ignored that the guarantee document itself recites a choice-of-law. It is stated in this document that "Austrian law is applicable to this bank guarantee" (cf. attachment ./C below) which here -- in the outcome -- conforms in any event to the application of § 38(1) IPRG. Precisely in the preliminary decision 6 Ob 506/88 (= SZ 61/39 = ÖBA 1988/609 with comment by P. Doralt, cf. also Konecny: Zur Anwendung fremden Rechts bei der Anspruchsprüfung im Provisorialverfahren, ÖBA 1988, 1184 et. seq.) on which the Court of Appeal based its decision, it is argued, in accord with the preceding considerations, that the right to withdraw a bank guarantee has to conform with the law which is decisive for the contractual relationship. Since, as the Court of Appeal correctly held, the question of an abuse of a bank guarantee is dealt with in a completely similar manner in the German and the Austrian jurisprudence (cf. Palandt, BGB, prior § 783 para. 4 with further evidence), the solution of the legal question which the Court of Appeal stated with respect to its declaration of admissibility is irrelevant in the present case. Contrary to the allegations made in the appellate proceedings, the application of Austrian law was thus not incorrect.
The appeal wrongly assumes that the Court of Appeal based its decision without restrictions on the "conclusion" made by the Court of First Instance. In fact, the contrary is the case. The statements of the Court of First Instance initially given in quotation marks are -- as the Court of Appeal correctly held -- in every respect to be assigned to the (incorrect) legal conclusion of the Court of First Instance. The reference to Art. 49 CISG is also useless for [Buyer] due to a lack of the required prerequisites. Rather, it is to be assumed in accord with the Court of Appeal that the conclusions drawn by the court of first instance from the documents provided by [Buyer] do not comply with the documents' content. These conclusions are not statements of facts but legal statements which are not covered by the substrate of the findings. The Court of Appeal correctly held as well that the issue of [Buyer]'s injunctive relief is to be assigned to the basic or value relationship (cf. Konecny, Zur Anwendung fremden Rechts bei der Anspruchsprüfung im Provisorialverfahren, ÖBA 1988, 1184 para. 2). [Buyer] ignores anew in its submission concerning the reference to the CISG with the aim to nullify the sales contract for violation of contractual obligations by [Seller] resulting in the loss of the basic relationship on which the bank guarantee is based, that the alleged violation of contractual obligations by [Seller] would be assessed pursuant to the basic or value relationship. According to the leading doctrine and case law, this is not to be discussed in a proceeding concerning a preliminary injunction. Therefore, [Seller] did not demand the bank guarantee in bad faith. [Buyer] has not succeeded in proving that the availment of the bank guarantee by [Seller] will be abusive. Since the Court of Appeal was aware of these prerequisites, the appeal in the case at hand is dismissed. The decision on costs is based on §§ 402, 78 EO [*], §§ 526(3) and 500(2) ZPO [*].
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Austria is referred to as [Buyer] and Defendant of Germany is referred to as [Seller].
Translator's note on other abbreviations: ATS = Austrian schillings [former Austrian currency]; BGB = Bürgerliches Gesetzbuch [German Civil Code]; DM = Deutsche Mark [former German currency]; EGBGB = Einführungsgesetz zum Bürgerlichen Gesetzbuche [German Code on Private International Law]; EO = Exekutionsordung [Austrian Distraint Code]; EvBl = Evidenzblatt der Rechtsmittelentscheidung [Journal on Austrian jurisprudence]; IPRG = Bundesgesetz zum Internationalen Privatrecht [Austrian Conflict of Laws]; ÖBA = Österreichisches Bankarchiv [Austrian law journal]; SZ = Entscheidungen des österreichischen Obersten Gerichtshofes in Zivilsachen [decision of the Supreme Court of Austria in civil matters]; ZPO = Zivilprozeßordnung [Austrian Civil Procedure Code].
** Florian Arensmann is a law student at the University of Osnabrück, Germany, and participated in the 13th Willem C. Vis International Commercial Arbitration Moot with the team of the University of Osnabrück.
*** Daniel Nagel has been a law student at Heidelberg University since October 2002 and an exchange student at Leeds University in 2004/2005.Go to Case Table of Contents