- Arbitral Award
- ICC International Court of Arbitration, New York 16314
LONG-TERM CONTRACTS - GAS TURBINE ENGINES SUPPLY CONTRACT - BETWEEN A UNITED STATES COMPANY AND A SHIPYARD INCORPORATED IN A EUROPEAN COUNTRY - GOVERNED BY THE LAW OF COUNTRY X IN EUROPE
VIOLATION OF INTELLECTUAL PROPERTY RIGHTS - CONTRACT INTERPRETATION UNDER APPLICABLE DOMESTIC LAW - REFERENCE TO ART. 2.1.17 UNIDROIT PRINCIPLES AND TO ART. 2:105 PECL TO CONFIRM THE RULE EXPRESSED BY THE APPLICABLE LAW - EXTRINSIC EVIDENCE MAY BE RELIED UPON TO INTERPRET THE CONTRACT AS FAR AS THE COMMON INTENTION OF THE PARTIES CANNOT BE DETERMINED BY THE PLAIN WORDING OF THE CONTRACT
A US company (Claimant), wholly owned subsidiary of a European company, concluded a sub-contract with a shipyard incorporated in a European country (Respondent), whereby the former was to supply to the latter some gas turbine engines for the construction of two war ships, also providing services and associated support. The contract contained a choice of law clause in favour of the law of Country X in Europe.
The dispute arose when Claimant denounced that Respondent had breached its intellectual property rights by transmitting Claimant's proprietary and confidential information to the Client, the Country X's Armed Forces, without restriction and safeguards. Moreover, according to Claimant, Respondent had breached the agreement by drawing down on a performance bond issued by Claimant. Respondent denied both of Claimant's claims arguing that it was entitled to payment from the performance bond since Claimant had breached the contract by supplying defective goods and providing a poor service.
As to the violation of intellectual property rights, the Arbitral Tribunal rejected Claimant's claim finding that Respondent and the principal had acted within the scope of the contract. In doing so, the Arbitral Tribunal referred to the rules of contract interpretation of the applicable law, according to which the meaning to be derived from the plain contract language shall be presumed to correspond to the common intention of the parties. It also pointed out that the law of Country X on this point corresponds to the general principle laid down in the UNIDROIT Principles (Art. 2.1.17) and in the PECL (art. 2:105). In applying that rule of interpretation to a merger clause contained in the contract, the Arbitral Tribunal came to the conclusion that the contract could not be contradicted or supplemented by evidence of prior statements or agreements, unless the common intention of the parties could not be determined by the plain wording of the contract.
With respect to Respondent's counterclaim concerning the alleged non-conformity of the goods, the Arbitral Tribunal found that Respondent had failed to establish a breach of contract by Claimant. As the counterclaimed failed, there was no basis for Respondent withholding the amount received from the bank following the draw down of the performance bond. Therefore, the Arbitral Tribunal ruled that Respondent had to repay with interest the full amount received from the bank.