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CISG Article 78: Endless disagreement among
commentators, much less among the courts

Francesco G. Mazzotta
July 2004

Appendix 8

HUNGARY

Courts

Fovárosi Biróság Metropolitan court

1. Arbitration Court of the Chamber of Commerce and Industry of Budapest, January 17, 1994, available at <http://cisgw3.law.pace.edu/cases/940117h1.html>.

Original language:     
Translation:
Hungarian
Unavailable

2. Arbitration Court of the Chamber of Commerce and Industry of Budapest, November 17, 1995, available at <http://cisgw3.law.pace.edu/cases/951117h1.html>.

Original language:     
Translation:
German
Unavailable

Unilex abstract:

"The Court found that the seller was entitled to interest on the unpaid price (Art. 78 CISG). After noting that CISG does not specify the interest rate, the Court held that it would be improper to determine it according to the law otherwise applicable to the contract (Hungarian law, as agreed upon by the parties), in particular taking into account the different inflation figures in the two countries involved (Hungary and Austria). Since payment was to be made in Austrian Shillings, the Court disregarded the provisions of the Hungarian Civil Code fixing the interest rate at 20 % and granted interest at 5 % in accordance with the law of the State in whose currency payment was to be made."

3. Arbitration Court of the Chamber of Commerce and Industry of Budapest, December 5, 1995, available at <http://cisgw3.law.pace.edu/cases/951205h1.html>.

Original language:     
Translation:
German
Available

Court (translation):

"CISG Art. 78 provides that, if a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, since the time the sums were due. CISG Art. 78 is silent on the amount of interest rate (see Loewe, p. 95). It is accepted as a problem that it is neither logical nor fair to apply rules of one State on a sum that is expressed in the currency of another State if the currency of one of the States is stable or the influence of inflation is minor and the currency of the other State continuously diminishes in value. In Austria, the inflation rate in 1994 and 1995 was on the average 3%, in Hungary 20%. Commenting on an award of the Court of International Arbitration of the Austrian Federal Economic Chamber in Vienna, Schlechtriem, in Recht der Internationalen Wirtschaft 1995 pp. 593/94, proposed three ways of establishing the interest rate:

  1. via the application of the lex contractus;

  2. via the autonomous establishment of the interest rate by the Court or Arbitration Tribunal through comparison of criteria for different bank rates;

  3. in conformity to private international law according to Art. 7(2) CISG, preferably taking into consideration the State of the currency.

Schlechtriem advocates the last solution; the arbitrator agrees. Therefore, the interest rate is to be established according to Austrian law; according to 352 para.1 of the Commercial Code, the rate is 5% for bilateral commercial activities. The [seller] has neither asked nor proved that credits should have been taken into account, which became more expensive since the Ft [Hungarian Forint] diminished in value 5% per year compared to the sA [Austrian Schilling]."

4. Arbitration Court of the Chamber of Commerce and Industry of Budapest, December 10, 1996, available at <http://cisgw3.law.pace.edu/cases/961210h1.html>.

Original language:      English

Court:

"The Vienna Convention on the International Sale of Goods (chosen by the parties as applicable law) does not contain relevant provisions on interest for delay. Therefore, the arbitrators have to establish the applicable law by virtue of the relevant Hungarian conflict rules applicable on ground of Article 14(2) of the Rules of Proceedings of this Court of Arbitration. The relevant conflict rule is contained in 24 of the 1979 Hungarian Act on Private International Law. According to this provision, the applicable law is the substantive law of the Seller -- which is in this case Yugoslav law. In Yugoslavia, the relevant norms on interest on default are contained in the 1978 Act on Obligations (articles 277-279 in particular) as well as in the 1993 Act on the Amount of Interest on Default. The Yugoslav rules referred to above have not made it perfectly clear whether interest on default is only due when delay in payment is attributable to the fault of the debtor, or whether such interest is a simple consequence of the objective fact that payment was not made in time. Article 277 of the Act on Obligations, and Article 1 of the Act on the Amount of Interest on Default simply state that interest on default is owed if the debtor is late with payment. In recent Yugoslav scholarly writings two justices of the Supreme Court of Serbia have taken a position that interest on default is due when the debtor is responsible for the delay. According to Justice Latinovic, "Interest on default is a consequence of breach of contract by the debtor . . ." (Z. Latinovic, Zatezna kamatazbog docnje u placanju novcane obaveze, Pravni zivot 9-10/1992, 1426, at p. 1428). In the words of Justice Maljkovic "Interest on default regarding pecuniary claims is due from the moment the debtor is in default." (B. Maljkovic, zatezna kamata na novcano potrazivanje nenovcane stete, Pravni zivot 9-10/1992, 1436, at p. 1438.) Under Yugoslav law, there is no default if lack of performance is not imputable to the debtor. At the same time, according to Article 262 (4) of the 1978 Act on Obligations, the debtor will be responsible even if his performance became impossible, if it became impossible after the debtor fell into default. We shall be guided by these rules."

5. Fovárosi Biróság Budapest, July 1, 1997, available at <http://cisgw3.law.pace.edu/cases/970701h1.html>.

Original language:     
Translation:
Hungarian
Unavailable

SUMMARY

Cases involving Article 78: 5
Cases for which an English translation is available: 2
Cases for which only an abstract was available: 1
Cases for which neither translation nor abstract was available: 2

A 1995 decision clearly states it is not fair to "to apply rules of one State on a sum that is expressed in the currency of another State if the currency of one of the States is stable or the influence of inflation is minor and the currency of the other State continuously diminishes in value." Instead, the interest rate is to be determined "in accordance with the law of the State in whose currency payment was to be made."

Another 1995 decision, instead, decided the case "in conformity to private international law according to Art. 7(2) CISG, preferably taking into consideration the State of the currency."

A 1996 decision from the same institution, however, reached a quite different solution. As Article 78 does not solve the matter, the gap must be filled by the law determined pursuant the rules of international private law.


Pace Law School Institute of International Commercial Law - Last updated November 15, 2004
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