Austria 26 January 2005 Supreme Court (Mushrooms case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050126a3.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 3 Ob 221/04b
CASE HISTORY: 1st instance Bezirksgericht Feldkirch (GZ 3 E 3677/02v-2) 19 November 2002; 2d instance Landesgericht Klagenfurt (GZ 2 R 1/03d-32) 22 April 2004
SELLER'S COUNTRY: Yugoslavia (plaintiff is seller's assignee)
BUYER'S COUNTRY: Austria (defendant)
GOODS INVOLVED: Mushrooms
Reproduced from Internationales Handelsrecht (5/2005) 199
"1. The granting of an annual interest rate of 107.32% by an arbitration tribunal in former Yugoslavia in 2002 is, in spite of the extreme inflation rates at the place of the arbitration tribunal at that time, contrary to public order under Austrian law if payment was to effected in Deutsche Mark according to art. 57, para. 1 CISG, because there was no risk of a corresponding exchange loss.
"2. If several bilateral or multilateral treaties or conventions are applicable (here the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958, the Treaty between the Austrian Republic and the Federal People's Republic of Yugoslavia on the mutual Recognition and Enforcement of Arbitral Awards and Settlement Agreements in Commercial Matters of 18 March 1960 and Agreements in Commercial Matters of 18 March 1960 and the European Convention on International commercial Arbitration of 21 April 1961), the creditor applying for an enforcement order is entitled to rely on any of these conventions: the debtor is only entitled to a suspension of the enforcement if a reason for such suspension is provided by each of the applicable conventions.
"3. The possibility to enforce an arbitration award which was suspended due to an infringement of the public order at the place of the arbitration tribunal in another state is an intended feature of international arbitration."Go to Case Table of Contents
APPLICATION OF CISG: Yes [Article 1(1)(a)]
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
8A [Intent of party making statement or engaging in conduct]; 10A [Which place of business is relevant]; 57A [Place for payment: in absence of agreement, payment at seller's place of business]
8A [Intent of party making statement or engaging in conduct];
10A [Which place of business is relevant];
57A [Place for payment: in absence of agreement, payment at seller's place of business]
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=1055&step=Abstract>
CITATIONS TO TEXT OF DECISION
Original language (German): RIS website of Austria [go to <http://www.ris.bka.gv.at/jus/>, check "jus texte" box, enter "3 Ob 221/04b" as "suchworte", click "suche starten"]; Internationales Handelsrecht (5/2005) 198-204; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1055&step=FullText>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Case text (English translation)
Queen Mary Case Translation Programme
26 January 2005 [3 Ob 221/04b]
Translation [*] by Veit Konrad [**]
Translation edited by Camilla Baasch Andersen [***]
Plaintiff [Seller's Assignee]'s appeal (Revisionsrekurs) cannot be justified. Defendant [Buyer]'s appeal (Revisionsrekurs) is allowed as far as it concerns part of [Seller's Assignee]'s claim for interest. The decision (Beschluss) of the Court of First Appeal (Rekursgericht) [see: Court of Appeal (Landesgericht) Klagenfurt decision GZ 2 R 1/03d-32 of 22 April 2004] is overruled to the extent that it diverges from the decision (Beschluss) of the Court of First Instance [see: District Court (Bezirksgericht) Feldkrichen/Kärnten GZ 3 E 3677/02v-2 of 19 November 2002].
The Austrian [Buyer] entered into a contract with [Seller] of Novi Sad, Yugoslavia (respectively Serbia and Montenegro) for the sale and delivery of mushrooms. [Seller] assigned to the Austrian Plaintiff [Seller's Assignee] its rights to the purchase price for that delivery. On 3 April 2002, relying on an arbitration agreement of 10 February 2000, the Yugoslavian Arbitration Tribunal in Foreign Commercial Matters in Belgrade held that, under Yugoslavian law, [Seller's Assignee] was entitled to:
|-||DM (Deutsche Mark) 22,500.00 for the purchase price for the delivered goods (ad 2);|
|-||DM 18,625.47 as 0.2 % interest per day on the purchase price, capitalized on a daily basis
(so-called '"conformity method of calculation"; Konformmethode) from 15 March 2000 to 29
December 2000 (ad 3);|
|-||Interest calculated according to the "conformity method", i.e., 0.2 % per day, capitalized daily, on the total sum of DM 41,125.47 (DM 22,500.00 plus DM 18,625.47) due from 29 December 2000 to the day when payment would be delivered (ad 4);|
|-||The costs for the arbitration proceedings and the [Seller's Assignee]'s fees for representation before the Tribunal (ad 5).|
On 21 June 2002, the Tribunal declared this award executable. In its decision, the Tribunal took account of the fact that on 19 December 2001 and on 4 February 2002, [Buyer] had stayed away from the proceedings without reasonable excuse. Following the testimony of Witness S., who at the time had accepted delivery per procurationem [power of attorney] of the Slovenian A. Company as [Buyer]'s representative, the Belgrade Tribunal held that the delivered goods had complied with the contract, as no complaint had been made at the time of delivery. Consequently, the Tribunal regarded [Buyer]'s note of complaint given at the end of March 2002 as not having been made within a reasonable time.
[Seller's Assignee] appeared before the Court of First Instance [District Court (Bezirksgericht) Feldkrichen/Kärnten, decision (Beschluss) GZ 3 E 3677/02v-2 of 19 November 2002], filed for recognition of the Yugoslavian Tribunal's award and pursued its execution in Austria. The Court of First Instance held that, under the Convention on Mutual Recognition and Enforcement of Arbitrational Awards and Settlements in Commercial Matters concluded between the Republic of Austria and the Federal Republic of Yugoslavia [Abkommen zwischen der Republik Österreich und der Bundesrepublik Jugoslawien über die gegenseitige Anerkennung und Vollstreckung von Schiedsprüchen und Schiedsvergleichen in Handelssachen vom 18. März 1960, BGBl 1961/115, BGBl III 1997/156; hereafter referred to as VA-JU], the award was executable up to the amount of DM 22,500.00 (position ad 2) as payment for the purchase price for the delivered goods. Relying on the Tribunal's documents, the Court of First Instance found that, in responding to [Seller's Assignee]'s claim in the arbitrational proceedings, [Buyer] had subjected itself to the Tribunal's jurisdiction. Thus, the award was recognized and declared enforceable according to Art. 2(a) VA-JU. However, as concerns position ad 3 (DM 18,625.47 as capitalized interest for the period between 15 March 2000 and 29 December 2000) and position ad 4 (0.2 % interest capitalized on a daily basis on the amount of DM 41,125.47 since 29 December 2000), the Court of First Instance denied enforcement holding that an interest rate of 73 % and more per annum would be contrary to § 879 of the Austrian Civil Code (Allgemeines Bürgerliches Gesetzbuch; ABGB) and Austrian public policy (ordre public), thus falling under the exception of Art. 2(c) VA-JU.
In [Buyer]'s first appeal (Rekursverfahren) [see Court of Appeal (Landesgericht) Klagenfurt decision GZ 2 R 1/03d-32 of 22 April 2004], the [Buyer] argued that the recognition and enforcement of the Yugoslavian Tribunal's award as a whole can neither be brought under the provisions of the VA-JU, nor is it justified under the Convention on the Recognition and Enforcement of Foreign Arbitration Awards [Übereinkommen über die Anerkennung und Vollstreckung ausländischer Schiedsprüche vom 10. Juni 1958, BGBl 2001/126; hereafter referred to as NYÜ], or under the Geneva Convention on Jurisdiction in International Commercial Matters [Europäisches Übereinkommen über die internationale Handelsgerichtsbarkeit vom 21. April 1961, BGBl 1964/107; hereafter referred to as EÜ].
|-||The [Buyer] maintained that its signature on the arbitration agreement of 10 February 2000 had
been forged and the agreement, therefore, had to be considered invalid. Consequently, the
Belgrade Tribunal lacked jurisdiction on the case. [Buyer] further submitted that, in the
proceedings before the Tribunal, its right to be heard in court had not been respected.|
|-||Moreover, [Buyer] claimed that the award had been based on the false testimony of Witness S. For all these reasons, the recognition and the enforcement of the award would be against Austrian public policy.|
The Court of First Appeal held [Buyer]'s appeal to be justified and referred the case back to the Court of First Instance for retrial.
|-||It held that stipulation of an interest rate of 73 % p.a., comparable to a punitive liability clause
which is considered legal under conditions recited in § 348 and § 351 of the Austrian
Commercial Code (Handelsgesetzbuch; HGB), cannot stand as contrary to Austrian public
|-||And, even on the assumption that [Buyer]'s signature on the arbitration agreement had been
forged, the Court found that as this would not suffice for a reopening of proceedings under
Austrian law, it can hardly be seen as an infringement of Austrian public policy.|
|-||However, under Austrian law, false testimony of Witness S. would constitute a reason for reopening the case under § 530(1) No. 2 and No. 7 of the Austrian Code of Civil Procedure (Zivilprozeßorndung; ZPO), as recognition and enforcement of the arbitration award would violate Austrian public policy.|
To that extent, the decision of the Court of First Instance had to be quashed and the case referred back for further investigation of S.'s testimony.
[Seller's Assignee]'s appeal (Revisionsrekurs) against the Court of First Appeal's decision must be dismissed. [Buyer]'s second appeal (Revisionsrekurs) is justified as far as it concerns the enforceability of [Seller's Assignee]'s claim for interest.
(a) According to § 86 of the Austrian Enforcement Directive (Exekutionsordnung; hereafter referred to as EO), recognition and enforcement of foreign files and documents is governed by § 79 EO et seq. only as far as these national provisions are not derogated by international conventions such as the VA-JU, the NYÜ and the EÜ. According to Art. VII(1) NYÜ, Art. 8 VA-JU and Art. X(7) EÜ, the three conventions are equally applicable to the award at issue. This being the case, the party who seeks recognition and enforcement of a foreign award can rely on any suitable provision of the three conventions - the other party may only prevent recognition or enforcement if that is provided for in each of the three conventions.
(b) As regards the presumably false testimony of Witness S., Art. V (1)(e) NYÜ provides that a foreign award may only be denied recognition or enforcement if it lacks binding effect in the State where or under whose law it had been issued. However, Art. IX(1) and (2) EÜ decree that in case the NYÜ and the EÜ are both applicable, an award may only be denied recognition or enforcement under Art. V(1)(e) NYÜ if it touches upon the public policy of the State where recognition or enforcement is sought, meeting the additional requirements of Art. IX(1) EÜ. Following this provision, even if the award had been quashed for reasons of public policy in the country where, or under whose law, it had been issued, this would not necessarily affect its recognition or enforcement in Austria: As the claimed false testimony of Witness S. does not fall under the exceptions cited in Art. IX(1) EÜ, the award cannot be denied recognition or enforcement in Austria.
(c) According to Art. 2(e) VA-JU and Art. V(2)(b) NYÜ, an Austrian court in deciding upon the recognition or enforcement of a foreign award must take account of Austrian public policy (ordre public). Circumstances which may affect the validity of an award in the country where, or under whose law, it has been made, if not exceptionally declared relevant by the conventions (e.g., by provisions of Art 2 and Art. 3 VA-JU or Art. VI NYÜ), have to be taken into account by the Austrian court only to the extent that they touch upon Austrian public policy. Yet its may not amount to a revision au fond: The Austrian court will only consider whether recognition or enforcement of a foreign award stands in gross substantial opposition to fundamental principles of the Austrian Federal Constitution (Bundesverfassung), of Austrian criminal, civil or procedural law.
(1) As far as [Buyer] claimed the award relied on perjury - submitting a certified declaration of Witness S. about its false testimony - this would not amount to a violation of Austrian public policy under Art. V(2)(b) NYÜ and Art. 2(e) VA-JU. Otherwise, the court would have had to interfere with the authority of the Belgrade Tribunal, de facto revising the evaluation of evidence it conducted.
(2) [Buyer] further argues that recognition and enforcement of the award had to be considered invalid and denied on grounds of Austrian public policy because the agreement to the Tribunal's jurisdiction was a forgery. Art. V(1)(a) NYÜ provides that a party may prevent the recognition or enforcement of a foreign award if it is sustainable that the award was invalid in the country where, or under whose law, it has been issued. Similarly, Art. 1(1)(a) VA-JU requires foreign awards to be validly issued in order to be recognized or enforced in Austria. However, under Art. V(1) EÜ, a party is obliged to raise its complaint about the lack of a Tribunal's jurisdiction due to an invalid agreement, at the time when it first submits as to the merits of the case. Otherwise, the complaint is precluded and the party may not rely on it in further proceedings (Art.V(2) EÜ). According to the Court of First Appeal (Rekursgericht), [Buyer] had been involved in the arbitration proceedings in a way that its right to be heard in court had been taken account of. Yet, it did not bring its complaint about the presumed lack of jurisdiction before submitting to the merits of the case. Therefore, its complaint about the invalid jurisdiction agreement is precluded and cannot be relied on in the current proceedings.
(3) [Buyer]'s appeal is justified as far as it concerns the interest [Seller's Assignee] claimed. In Art. 1 of attachment No. 2 to the contract, the parties agreed that payment of the purchase price was due within thirty days after delivery. In case of delay, interest of 0.2% per day was to be capitalized on a daily basis according to the "conformity method of calculation" (Konformmethode) that had been stipulated. Consequently, the Belgrade Arbitration Tribunal granted DM 18,625.47 as interest on the purchase price of DM 22,500.00 for the period between 25 March 2000 and 29 December 2000 (position ad 3) plus 0.2 % interest per day on the total sum of DM 41,125.47 (DM 22,500.00 plus DM 18,625.47) on daily capitalization for the period from 29 December 2000 onwards (position ad 4). § 1335 of the Austrian Civil Code (Allgemeines Bürgerliches Gesetzbuch; ABGB) provides for a maximum interest rate, which may not overreach the actual debt (ne ultra alterum tantum). However according to Art. 8 No.7 of the Austrian Introductory Directive to the Code of Commercial Law (Einführungsverordnung zum Handelsgesetzbuch; EVHGB) and the newly revised version of Art. 1335 ABGB this does not apply to contracts, where professionals conducting their commercial business relations meet on equal terms, as is the case here. Also, the conditions of usury as provided in § 879(2) No. 4 ABGB implying the unlawful exploitation of an advantageous bargaining position are not met. According to § 879(1) ABGB, a contract is ineffective in case it stands in gross opposition to core moral standards (Sittenwidrigkeit). Even if not considered usury under § 879(2) No.4 ABGB, a contract may still be void under § 879(1) AGBG if implying an existential disadvantage for one part. The agreed interest of 0.2 % per day amounts to an annual interest rate of 73 %. Taking into account the daily capitalization (Zinsverzinsung), an effective annual interest rate (effektiver Jahreszins) of 107.35 % had been stipulated. Overreaching the actual debt in the stipulated interest rate must be regarded as an excessive abuse of private autonomy and as such not only immoral and void under Art. 879(1) ABGB, but also contrary to Austrian public policy. As to the interest, [Seller's Assignee]'s claim cannot be executed in Austria.
The outstanding interest rate cannot be justified with the admittedly high inflation rates of Yugoslavia, respectively Serbia and Montenegro, at the time. As at the time the contract had been concluded, [Buyer] of Austria and [Seller] of Yugoslavia were domiciled in Member States of the CISG, due to Art. 1(1)(a) CISG, this Convention was applicable to the contract. Art. 8(1) CISG requires that statements or other conduct by the parties be interpreted according to its intent, where the other party knew or could have not been unaware of what that intent was. Following this standard for interpretation, a derogation of CISG provisions under Art. 6 CISG cannot be inferred and has not been claimed by either party. Hence, the contract is governed by the CISG as incorporated into Yugoslavian law [see ruling of the Austrian Supreme Court (Oberster Gerichtshof; OGH) 1 Ob 77/01g in SZ 74 page 178 et seq. = ÖBA 2002 page 651 = RdW 2002 page 276 = ecolex 2002 page 247 = ZfRV 2002 page 74]. Although, according to Art. 57(1)(a) CISG, [Buyer] had to offer payment at [Seller]'s place of business in Yugoslavia (Bringschuld) as defined by Art. 10 CISG, the Belgrade Tribunal held that the purchase price was due in Deutsche Mark, and since 1 January 2002 in Euro. Therefore, [Seller's Assignee] had not been exposed to the Yugoslavian inflation rates, irrespective of whether they might have justified the stipulation of higher interest rates.
The court is not authorized to speculate as to what interest rate the Belgrade Tribunal would have deemed appropriate instead of the interest rate that cannot to be executed due to Austrian public policy. Therefore, the award can be recognized and enforced only partially, as far as it concerns the purchase price of DM. 22,500.00. As regards the interest, the claim is not enforceable and [Buyer]'s appeal is justified.
The decision on the costs relies on § 78 of the Austrian Enforcement Directive (Exekutionsordnung; EO) and § 43(1) and § 50 of the Austrian Code of Civil Procedure (Zivilprozeßornung; ZPO).
* This presentation comprehends and abridges passages of the original decision as found suitable for the purposes of CISG interpretation. All translations should be verified by cross-checking against the original text. For purposes of this translation, the Austrian Plaintiff is referred to as [Seller's Assignee]; Defendant is referred to as [Buyer].
** Veit Konrad has studied law at Humboldt University, Berlin since 1999. During 2001-2002 he spent a year at Queen Mary College, University of London, as an Erasmus student.
***Camilla Baasch Andersen is a Lecturer in International Commercial Law at University of Leicester, as well as a Visiting Lecturer at University of London (SAS and QMUL). She is also a Fellow of the Institute of International Commercial Law at Pace University School of Law and assists in editing the cisgw3 website.Go to Case Table of Contents