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

Francesco G. Mazzotta
July 2004

Appendix 9

COURT OF ARBITRATION OF THE INTERNATIONAL CHAMBER OF COMMERCE (ICC)

1. ICC Arbitration case, No. 7153 of 1992, available at <http://cisgw3.law.pace.edu/cases/927153i1.html>.

Original language:     
Translation:
German
Available (14 Journal of Law and Commerce (1995) 217-224)

Court (translation):

In the absence of an agreement between the parties about the payment of interest accruing from the date of the commencement of this action, the [seller's] claim concerning said interest stems from Article 78 of the Convention, pursuant to which the seller has the right to receive interest if the buyer neglects to pay the price for the goods. Moreover, the rate of said interest is not provided for in the Convention, which is why we need to turn to the national law designated by the rule on conflict of laws. (Cf. Eberstein, in: V. Caemmerer/Schlechtriem, Commentary on the Uniform Law of Sales of the United Nations -- CISG -- 1990, Article 78, end of line 3.) In this case, the court of arbitration believed the applicable law to be Czech law, i.e., the law applicable at the place of payment. It is true that the contract does not contain any provision as to the place of payment. In the absence of such a provision, Article 57(1) of the Convention nevertheless applies. The latter stipulates that the buyer is required to pay the price at the seller's place of business or, if the payment is to be made against the handing over of the goods, where said handing over takes place. At the hearing, the [seller] alleged that the payment was to be made against the handing over of the goods in Prague. Since the [buyer] did not participate in the proceeding, this position was accepted, given that the contract contains no contrary provision. The New Czech Commercial Code does not explicitly speak to the amount of interest owing. (Cf. Articles 735, 502 of the Commercial Code). Despite intensive efforts undertaken by the arbitrator, it was not possible to gain precise information on this matter. The Czech Embassy in Paris confirmed, however, that, in any case, a claim for interest at a minimum rate of 12% should be customary. In this matter, the research of the [seller] overlaps with that of the arbitration court, such that the court had to allow an accrual rate of 12%."

2. ICC Arbitration case, No. 7197 of 1992, available at <http://cisgw3.law.pace.edu/cases/927197i1.html>.

Original language:     
Translation:
German
Available (French)

CLOUT abstract:

"The tribunal awarded the seller interest on the amount due (Article 78 CISG). As the Convention does not specify the interest rate, the tribunal determined the interest rate in accordance with the substantive law applicable to the relationship between creditors and debtors (Article 7(2)). The tribunal held that the interest rate to be awarded may be higher than the legal rate since the entitlement to interest under Article 78 CISG was independent of any claim for damages under Article 74 CISG. In the case in question, the tribunal found that the seller operated on the basis of credit for which it had to pay interest at the rate of 12% and applied that rate since the seller would have to obtain credit in order to replace the funds missing due to the non-payment by the buyer."

Unilex abstract:

"As CISG does not expressly specify the rate of interest payable, the court referred to Austrian law as the law of the creditor's place of business. Although the Austrian statutory rate was 5%, the court awarded additional damages in the form of interest to the seller and the interest finally awarded was 12% being the commercial bank rate in Austria."

3. ICC Arbitration case, No. 7585 of 1992, available at <http://cisgw3.law.pace.edu/cases/927585i1.html>.

Original language:     
Translation:
English
Available (French)

Court:

"Article 78 of Vienna Sales Convention provides that the creditor is entitled to interest 'without prejudice to any claim for damages.' The purpose of this provision is to make a distinction between interest and damages and to give compensation for the financial loss due to the mere fact that delay in payment has a financial cost. The same general idea is at the origin of Article 84 which obliges the seller who is bound to refund the price, to pay interest on it from the date on which he received money. The practical consequence for the present case is that Seller is entitled to claim interest on any sum that was in arrears.... Article 78 which declares: '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' means that any delay in payment entitles the creditor to interest. Contrary to what is sometimes provided in several legal systems, the right to interest doesn't need a formal notice (cf. la mora del articolo 1224 del Codice Civile Italiano; la mise en demeure of Article 1153 of the French Civil Code). For the above reasons, Seller is entitled to interest from the date on which Buyer had to pay (the date of acceptance test and the expected date of installation).... The question of the rate of interest is not solved in the Convention. The Diplomatic conference did not agree on this issue (See Official Records I p. 138; II p. 223-226, p. 388-392, 415-419, 429-430). Several solutions are conceivable:

-    the rate in force in the state whose law is applicable;
 
-    the rate in force in the place of business of the creditor;
 
-    the rate in force in the place of procedure.

The arbitrator shares another view. In his opinion the rate of interest is linked to a precise currency. It would be rather illogical to base interest for the delayed payment of a price agreed in strong currency on the legal rate in force at a place of business located in a country which has a high inflation figure and consequently, a high rate of interest. The same reasoning would lead to the exclusion of the law applicable to the contract, the lex fori, or that of the place of payment. In the present case, the parties agreed that the price had to be paid in German Marks. The first and the second down payments had been paid in DM. The same currency was used for the payment of the bank guarantee issued by Seller. Clearly, the financial aspects of the sale are linked with the German Mark. The applicable rate of interest is therefore the German one."

4. ICC Arbitration case, No. 6653 of 1993, available at <http://cisgw3.law.pace.edu/cases/936653i1.html>. Article 84

Original language:     
Translation:
French
Available (English)

Court (translation):

"The Convention (Art. 78) generally grants the payment of interest. Article 84 of the Convention prescribes that "If the seller is bound to refund the price, he must also pay interest on it, from the date on which the price was paid." According to this text, interest is due for respondent [seller] to be paid to claimant [buyer] starting from the day of payment. The starting point of the interest is therefore the date of the payment of the item concerned. The question arises whether the interest aspired to by Art. 84 is due even it had not been formally requested. The Arbitral Tribunal finds that, for two reasons, this question must be answered in the affirmative. First of all, Article 84 of the Convention sets forth that the seller must and not "can" pay interest. Furthermore, supposed that one considers Article 84 to be ambiguous in that question, the French Law of Obligations, which has been retained as the subsidiary law, sets forth in Article 1153-1 of the Civil Code that interest is due in all cases "even in the absence of request." But then the Convention does not regulate the method of determination of the percentage of interest. The Arbitral Tribunal finds that in matters of international commerce, the percentage that must be retained is the one that corresponds to the use which the creditor could have made of the sum to be reimbursed. Consequently, it appears logical to retain a percentage currently applied between merchants and that conforms with the currency in which the settlement was made and in which the payment must be made. This solution, which is in the eyes of the Arbitral Tribunal the most logical one from the economic point of view, leads to retaining the percentage that operators of international commerce apply to settlements made in Eurodollar, i.e., the one-year percentage of LIBOR (London Inter-Bank Offered Rate), published every day in the Wall Street Journal."

5. ICC Arbitration case, No. 7331 of 1994, available at <http://cisgw3.law.pace.edu/cases/947331i1.html>.

Original language:     
Translation:
English
French

Court:

"It is acknowledged in international law that claimants prevailing on the merits are entitled to receive interest on the principal amount awarded. The Tribunal finds the application of this principle particularly appropriate in this case since [seller] has suffered damages due to delayed payment, which must be compensated by the granting of interest. It is also generally acknowledged that interest does not begin to accrue until proper notice of the claim has been given. In this case, there is no indication that proper notice was given before the filing of the Request for Arbitration. Regarding the precise rate of interest to be applied, there is no single internationally accepted rate of interest. This is reflected in the Vienna Convention, which only generally provides that parties are entitled to interest without specifying any particular rate of interest. It is, however, acknowledged in international law that where the parties are silent as to choice of law with respect to the payment of interest, the law of the State applies in which the damage resulting from the delayed payment is suffered. It is furthermore acknowledged in international law that such damage is suffered at the place of the creditor and in the creditor's market [citing ICC arbitration cases 2375 of 1975 and 5460 of 1987]. Therefore, this Tribunal shall apply the rate of interest effective for commercial matter in the country of the creditor, the [seller]."

6. ICC Arbitration case, No. 7531 of 1994, available at <http://cisgw3.law.pace.edu/cases/947531i1.html>.

Original language:      English

CLOUT abstract:

"Citing articles 86 CISG, 87 CISG and 88(1) CISG, the arbitral tribunal allowed as damages costs, expenses and losses related to the buyer's reasonable expenses for preservation of the goods. In addition, under articles 74 CISG and 75 CISG, the arbitral tribunal allowed all damages (except one, the travel costs of the buyer's customer) claimed by the buyer. The buyer's claim of cost of credit was held to be an element of the damages due according to article 74 CISG.

The arbitral tribunal further held that as the CISG was silent on the question of the maturity date of damage claims and taking into account that this element of the claim was undisputed, the buyer was entitled to receive interest from the date it communicated the amount of its claim to the seller by telex."

Editorial remarks by Professor Kritzer:

"Interest (right to, accrual of, rate of). In assessing interest under the CISG, support for a creditor's right to interest is encountered under several provisions of the Chapter on Provisions common to the obligations of the seller and the buyer:

Referring only to Article 74, the tribunal stated: "The damages suffered by [buyer] includes the cost of credit which has been stated by [buyer], undisputedly, at 11% per annum and which should be compensated at that rate as an element of the damages due according to Article 74."

The tribunal also stated: "The Convention is silent on the question of the maturity date of damage claims.... [Buyer] claims interest from the date when it communicated the amount of its claim to [seller] by telex.... [Since] this particular aspect of the claim is ... undisputed, interest should be granted from the date claimed by [buyer]."

7. ICC Arbitration case, No. 7565 of 1994, available at <http://cisgw3.law.pace.edu/cases/947565i1.html>.

Original language:     
Translation:
English
French

Court:

On the claim for interest, Claimant requests Defendant be directed to pay interest on the granted sums 'at a commercial rate compounded monthly from August 14, 1991, through the date of actual payment. As stated above, the Contract is governed by the laws of Switzerland which include the provisions of the Vienna Convention as incorporated therein, but is not limited to such provisions where the Vienna Convention does not expressly settle a particular point of law. In the Vienna Convention, nothing is said either in Article 74 (damages) nor in Article 78 (interests) about the rates nor the modus of calculation of interests where interests are due to a party in case of breach of contract by another party. According to Article 7.2 of the Convention, questions not expressly settled by it shall be determined either in accordance with the general principles on which it is grounded or by the law which shall be elected according to private international law. As the general principles do not settle the matter [...] and the parties have referred to the laws of Switzerland, it seems justified to refer to Article 73 of the Swiss Code of obligations whereby, in the absence of a determination of the rate of interest by agreement or law or usages, that rate shall be 5% per annum. Interest shall be computed from January 1, 1992, on the assumption that the cargo would normally have been resold to Claimant's customers by the end of December 1991. It shall accrue and be paid until full payment of the awarded amount."

8. ICC Arbitration case, No. 7660 of 1994, available at <http://cisgw3.law.pace.edu/cases/947660i1.html>.

Original language:     
Translation:
English
French

Court:

"In assessing the claim for non-delivered spare parts, the tribunal ruled that buyer is entitled to "interest in the amount due under applicable law (Articles 78 and 84 CISG) .... As to the starting date, interest for reimbursement of the purchase price runs from the date of payment (see Article 84(1) CISG) .... [Buyer] is entitled to interest from the maturity of the first promissory notes .... As to the amount of interest, Articles 78 and 84 CISG are silent on the matter.... [U]nder applicable (see Article 7(2). CISG) Austrian law, the statutory litigation interest applicable to commercial matters is 5% (see Section 352 HGB). "

CLOUT abstract: "The arbitral tribunal allowed the buyer's claim regarding undelivered spare parts and granted the buyer interest in the amount due under articles 78 and 84 CISG from the maturity of the first promissory notes according to article 84(1) CISG. The arbitral tribunal stated that, as the CISG was silent on the amount of interest (articles 78 CISG and 84 CISG), and, on the basis of article 7(2) CISG, Austrian law had to be applied in order to determine this issue. Given that the contract price, though valued in Lira, was due in DM at an exchange rate agreed by the parties, the arbitral tribunal held that any refund, including interest, should also be due in DM at the same rate."

Unilex abstract:

"The court noted, however, that the questions of prescription and interest rate were governed by substantive domestic Austrian law. The court granted the buyer reimbursement of the price of the non delivered equipment, and the right to interest in compliance with Art. 84 CISG. The court stated that, according to Art. 84(1) CISG, interest for refund of the price paid by the buyer accrues from the date of payment. As to the interest rate, the court applied the Austrian statutory interest rate, since the Convention is silent on this point (Art. 7(2) CISG). With regard to the currency of the reimbursement, the court stated that the buyer was entitled to reimbursement in the same currency agreed upon by the parties for the payment of the price. The amount due was determined with reference to the exchange rate agreed upon by the parties in the contract."

9. ICC Arbitration case, No. 7754 of 1995, available at <http://cisgw3.law.pace.edu/cases/957754i1.html>.

Original language:     
Translation:
English
French

Court:

"Defendant challenged the interest rate put forward by Claimant, claiming that the applicable rate, if any, should be that of Singapore as the currency of the contract or of the creditor's residence. To that end, it relied on two arbitral awards. In ICC case No 5460, the dispute involved an Austrian resident and a South African firm. The single arbitrator awarded the claimant the Austrian interest as a perfectly proper rate, without any particular justification; however, this was the rate claimed by the creditor and the issue does not appear to have been discussed. In ICC case No 6653-1993, the Arbitral Tribunal also applied the rate of the creditor's residence, which it justified as being in relation to the use which the creditor could have made of the sums and also to the currency of the contract (Journal du droit international, 1993, p. 1046). However, this tribunal was relying primarily on the CISG to adjudicate the dispute and had found that the Convention did not lay down any rule on the matter. In the present case, the parties expressly choose the substantive law of France to rule their relations. This leads the Tribunal to give primary consideration to the French law on the matter. Under French law, the prevailing rule is that the assessment of contractual damages in an international contract is governed by the law of the contract, because the function of damages is to substitute an equivalent to the obligation which was born under that law (Batiffol-Lagarde, Droit international privé, 70 éd., t. 2, No 607, p. 336: la fixation des dommages intérêts obéit à la loi du contrat parce qu'il s'agit de substituer un équivalent àl'obligation créée scion cette loi; see to this effect, Cass. Civ. 15 mai 1935, Journ. dr. mt. 1936.601, Rev. crit. dr. in pr. 1936.463; Cass. com. 20 oct. 1953, Rev. crit. dr. in privé 1954.386). The principle has also been applied by arbitral tribunals (ICC Case No 5428-1988, ICC Case No 5440-1991, quoted by Claimant). A further consideration is in favour of that solution; the choice of French law in this contract between a Polish firm and a Singapore firm obviously stemmed from the desire of each party to avoid the application of the other's national law and therefore to have a neutral law and one with which to get acquainted easily to govern their relations; the rate of interest is an element of that law (see Fr. Civ. C. art. 1907: Interest is legal or contractual. Legal interest is fixed by law. Contractual interest may exceed that fixed by law, whenever this is not prohibited by the law..). The tribunal therefore concludes that the rate of interest to be applied is the legal rate obtaining in France during the relevant period."

10. ICC Arbitration case, No. 8128 of 1995, available at <http://cisgw3.law.pace.edu/cases/958128i1.html>.

Original language:     
Translation:
French
Unavailable

Unilex abstract:

"The buyer was also awarded interest, according to Art. 78 CISG. Interest related to the reimbursement of the cost of the sacks accrued from the time of partial avoidance of the contract, while interest related to the expenses due to the substitute purchase accrued from the time in which the bank of the buyer executed the payment for the replacement goods. Since CISG does not determine the rate of interest, the Arbitral Tribunal applied the average bank short term lending rate to prime borrowers, being the solution adopted either by Art. 7.4.9 of the UNIDROIT Principles of International Commercial Contracts and by Art. 4.507 of the Principles of European Contract Law. The Arbitral Tribunal considered that such rules were applicable as they must be considered general principles on which CISG is based (Art. 7(2) CISG). In the case at hand, the London International Bank Offered Rate (LIBOR) plus 2% required by the buyer corresponded to the bank short term lending rate to enterprises. The buyer was therefore awarded interest at the required rate."

11. ICC Arbitration case, No. 8740 of 1996, available at <http://cisgw3.law.pace.edu/cases/968740i1.html>.

Original language:     
Translation:
English
Unavailable

Court:

"As the interest rate of 9 percent per annum was not disputed by either party and determined to be reasonable by the Tribunal based on the currency in question, this rate was accepted by the Tribunal."

12. ICC Arbitration case, No. 8769 of 1996, available at <http://cisgw3.law.pace.edu/cases/968769i1.html>.

Original language:     
Translation:
English
Unavailable

Court (digest):

"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, without prejudice to any claim for damages recoverable under article 74." CISG Article 78. [Seller] claimed interest at 10.5%. CISG Art. 78 does not specify a particular interest rate. The arbitrator considered it appropriate to apply a commercially reasonable interest rate in accordance with Art. 7.4.9 of the UNIDROIT Principles. Finding that the interest claimed was commercially reasonable, [seller] was awarded interest as claimed."

Unilex excerpt:

"Claimant claims interest at the French statutory rate from [...] Respondent claims interest at 10.5 % on [...] since [...]

Claimant is entitled to interest on the sums awarded pursuant to Art. 78 of the Vienna Convention. Art. 78 Vienna Convention does not specify a particular interest rate. The sole Arbitrator considers it appropriate to apply a commercially reasonable interest rate (see Art. 7.4.9. subs. 2 Unidroit Princìples). The interest rate claimed is commercially reasonable for the award currency; Austrian schillings. On [...], the date from which Respondent claims interest, the Agreement had been terminated. The sums claimed were due in the sense of Art. 78 Vienna Convention. Accordingly, interest is awarded to Respondent as claimed."

13. ICC Arbitration case, No. 8611 of 1997, available at <http://cisgw3.law.pace.edu/cases/978611i1.html>.

Original language:     
Translation:
German
Available (English)

Court (translation):

"Art. 78 CISG provides "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 ..." ...... The demand, recognized by the [buyer], for interest on arrears totaling DM 4,128.55 from earlier purchases is excluded from the general payment of interest because this would lead to interest on interest, which is prohibited in Art. 78 CISG, and which, through Art. 289 of the German Civil Code and Art. 353 of the German Commercial Code, is expressly not provided for. .... Because Art. 78 CISG does not, for obvious reasons, define the interest rate, the law applicable to this matter, in certain circumstances the monetary law, comes into force. Both are part of German law which, in Art. 352 of the Commercial Code concerning trade transactions, fixes the interest rate at 5%."

14. ICC Arbitration case, No. 8716 of 1997, available at <http://cisgw3.law.pace.edu/cases/978716i1.html>.

Original language:     
Translation:
English
Unavailable

Digest:

"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."

15. ICC Arbitration case, No. 8962 of 1997, available at <http://cisgw3.law.pace.edu/cases/978962i1.html>.

Original language:     
Translation:
English
Unavailable

Court:

"Pursuant to Art. 78 of the United Nations Convention for the International Sale of Goods, if a party is in default with payment of the price of sale or of other amount of money, the other party is entitled to interest on the amount in delay, no rights to compensation for damage being thereby affected pursuant to Art. 74 of the Convention. In the question of the interest the Claimant proposed the Romanian Government's Order Nr. 18 to he applied. With regard to what has already been mentioned about the law applicable to the merits of the dispute, the Arbitrator applies Art. 78 of the mentioned Convention to this question. Since the Claimant has the right for the amount to be paid to him in DEM, the application of Art. 78 of the said Convention implies that a commercially reasonable interest is due to the Claimant. Pursuant to Line (Article) 7 of the Purchasing Contract ... the Defendant had the obligation to pay for the goods which had been delivered within 10 days after the delivery. The delivery was made on January 28th, 1994, which means that the Defendant was obliged to pay by February 7th, 1994; at that time the commercially reasonable interest on German Marks was 5.4% pa. The Claimant has the entitlement to interest of 5.4% p.a. from February 8th, 1994, until the actual payment. The Defendant has not yet paid the amount of..., he remains in default, and this default shall expire no sooner than upon payment of the said amount."

16. ICC Arbitration case, No. 8908 of 1998, available at <http://cisgw3.law.pace.edu/cases/988908i1.html>.

Original language:     
Translation:
English
Unavailable

Court:

"The Vienna Convention lays down a general rule, in Article 78, that the liability for payment of a sum is subject to interest for late payment, but it does not lay down the criteria for calculating this interest. International case law presents a wide range of possibilities in this respect, but amongst the criteria adopted in various judgments, the more appropriate appears to be that of the rates generally applied in international trade for the contractual currency [...]. In concrete terms, since the contractual currency is the dollar and the parties are European, the applicable rate is the 3-month LIBOR on the dollar, increased by one percentage point, with effect from the due date not respected up until full payment has been made. However, capitalization of interest is excluded, as from Respondent's arbitration answer, since this is not provided for in the Vienna Convention and does not appear to be in keeping with international trade usages. Revaluation is also included in the above mentioned rate."

17. ICC Arbitration case, No. 9333 of 1998, available at <http://cisgw3.law.pace.edu/cases/989333i1.html>.

Original language:     
Translation:
French
Available (English)

Court (translation):

"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."

18. ICC Arbitration case, No. 9574 of 1998, available at <http://cisgw3.law.pace.edu/cases/989574i1.html>.

Original language:     
Translation:
English
Unavailable

Court:

"In case of transactions subject to the Austrian Commercial Code, for defaults in making money payments the debtor must pay interest at the rate of 5% p.a. (section 352 Austrian Commercial Code; Article 78 UN Sales Convention). Since the parties are both businessmen and the present contract is thus subject to the Austrian Commercial Code, the Plaintiff is, in principle, also entitled to claim interest on the remaining purchase price."

19. ICC Arbitration case, No. 9187 of 1999, available at <http://cisgw3.law.pace.edu/cases/999187i1.html>.

Original language:     
Translation:
English
Unavailable

Court:

"According to Art. 78 CISG, interest is owed if a party fails to pay the price or for any other sum that the party is in arrears with. Neither the CISG not the CO indicates whether interest is owed on damages. Legal writers are controversial, but the majority of writers answer in the affirmative and would grant the creditor of damages interest calculated from the date of occurrence of the damage (Stoll in V Caemmerer/Schlechtriem, op. cit. N 15 to Art. 78 CISG). Damage arose when the respective payments were actually made. In principle, from those points in time (and not from the date of the payment of the purchase price as contended by Claimant) interest began to accrue. However, since Claimant fails to submit a detailed interest calculation based on the respective dates, the Arbitral Tribunal deems it appropriate to award interest as of the date when Claimant filed its Request... This takes into consideration that, while some parts of the losses... occurred prior to that date, other relevant payments... had to be effected only at a later stage. As to the rate of interest, Art. 78 CISG is silent. Therefore, national law is supplementarily applicable (Stoll in V Caemmerer/Schlechtriem, op. cit., N 21, 26 to Art. 78 CISG). Swiss law provides that if and as long as the customary bank discount exceeds 5% at the place of payment, the interest rate between business people may be charged at such higher rate (Art. 104/3 CO). The burden of proof for such higher rate during the entire period for which interest is claimed lies with the claiming party. Claimant has made no argument for a higher rate short of a reference to exhibits. This reference is not sufficient since the documents submitted fail to prove that the customary discount for USD exceeded 5% between... and today. As a consequence, the Arbitral Tribunal applies the legal rate of 5%."

20. ICC Arbitration case, No. 9448 of 1999, available at <http://cisgw3.law.pace.edu/cases/999448i1.html>.

Original language:     
Translation:
English
Unavailable

Court:

"'According to art. 78 CISG, 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. The rate to be applied is, however, a matter, in the first place, for the domestic law (Farnsworth, in Bianca-Bonell, Commentary an the International Sales Law, The 1980 Vienna Sales Convention, page 570). Therefore, the Swiss Code of Obligations (CO) is applicable, According to art. 104 (1) C0, if an obligor is in default as to the payment of a financial debt, he shall pay penalty interest at five percent per annum. Between merchants, penalty interest may be calculated at a higher rate, when the usual bank discount at the place of payment is higher than five percent (art. 104 (3) CO). As Claimants did not offer any proof for this usual bank discount (which according to the Swiss Federal Supreme Court Decision BGE 116 II 141 is not the same as the interest rate on a bank loan), the penalty interest to be awarded to Respondent is five percent according to art. 104 (1) CO. Pursuant to Art. 106 (1) CO, "if the obligee has incurred greater damage than that compensated by the penalty interest (arts. 104, 105), the obligor will be obligated to also compensate such damage unless he proves that no fault is attributable to him". An example of such damage is the borrowing of third-party funds an which a higher interest than covered by the penalty interest has to be paid (Zürcher Kommentar zum Schweizerischen Privatrecht, N 2 at art. 106). Claimants submitted a table showing payments to... (an importer of Claimants) for which allegedly a credit loan was engaged... Furthermore, Claimants submitted bank statements showing that Claimants were charged a certain interest rate an their loan from the bank. This interest rate ranged between 9.0625% and 9.375% in the period of time between September 24, 1996 (the date of the earliest submitted bank statement) and June 12, 1997 (this being the maturity date for the loan as of the bank statement of February 20, 1997). Claimants' submitted bank statements provide evidence that Claimants had, in fact, taken up credit, even though these did not show the entire claimed amount for the entire time. As Claimants have not provided strict evidence for their claim - they request 9.5%, but prove at the most a rate of 9.375% for a limited period of time and a limited amount - the Arbitral Tribunal will not apply the percentage rate most favorable to Claimants, but rather an average rate of 9%. Within the Arbitral Tribunal's scope of free evaluation of the evidence, and considering that taking up a credit in a situation in which an obligor is in default is common nowadays, it accepts that for the period of time Claimants have submitted evidence, they have shown that they have suffered damages higher than the penalty interest of five percent. The Arbitral Tribunal therefore awards interest at a rate of 9% on the unpaid invoices for the time between September 24, 1996 and June 12, 1997. For the rest of the time interest is claimed, Claimants have not submitted any evidence in regard to having incurred greater damage than 5%. The burden of proof, however, lies on Claimants for the amount of the interest owed (Swiss Federal Supreme Court Decision BGE 116 II 141). Therefore, for the remainder of the time, an interest rate of 5% is to be applied as penalty interest, as no proof for a greater damage has been submitted for this period of time."

SUMMARY

Cases involving Article 78: 20
Cases for which an English translation/text is available: 17
Cases for which only an abstract was available: 3
Cases for which neither translation nor abstract was available: 0


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