Data

Date:
05-08-2016
Country:
Arbitral Award
Number:
--
Court:
Madrid International Arbitration Centre
Parties:
--

Keywords

LAW OF CONTRACTING STATE AS LAW GOVERNING THE CONTRACT – CISG APPLICABLE (ART. 1(1)(b) CISG)

BREACH OF CONTRACT – SELLER’S FAILURE TO PERFORM ANY OBLIGATION UNDER THE CONTRACT (ART. 45(1) CISG)

EFFECTS OF AVOIDANCE - RESTITUTION OF PRICE PAID (ART. 81(2)) AND PAYMENT OF INTEREST BY SELLER (ART. 84(1))

INTEREST RATE - MATTER COVERED BUT NOT SETTLED BY CISG - TO BE RESOLVED IN ACCORDANCE WITH LAW APPLICABLE IN ABSENCE OF CISG

Abstract

[CLOUT CASE n. Abstract prepared by Mauricio Rapso]

The arbitration, the seat of which was in Madrid, concerned a dispute between a buyer from the United Arab Emirates (the claimant) and a seller from Colombia (the
defendant) in relation to a claim for breach of the delivery obligations assumed by the seller under an international contract for the sale of coal (metallurgical coke).
Although the buyer made a down payment of 65 per cent of the price, the seller did not comply with the delivery dates set forth in the contract. The buyer submitted
multiple claims to the seller, since the schedule for the departure of the vessels from the port was not being adhered to. Consequently, negotiations were held between the
parties with a view to reduction of the quantity of the goods to be delivered and subsequently to the refund of the money.
However, the negotiations were unsuccessful, the goods were not delivered and the price paid was never refunded by the seller. On the basis of those facts, the claimant
requested the tribunal to declare valid the avoidance of the contract as previously communicated to the defendant and to order the payment of damages, which consisted
of reimbursement of the price paid and the payment of interest. In the arbitration, the defendant based its defence on the existence of force majeure, on the basis of the
clause agreed in the sales contract.

The first of the matters settled by the tribunal in the award was the law applicable to the substance of the dispute; in that regard, it was concluded that the United Nations
Convention on Contracts for the International Sale of Goods (CISG) was applicable. The tribunal determined that the case involved the international sale of goods given
that it concerned parties whose places of business were in different States (the United Arab Emirates and Colombia).

In the tribunal’s view, the fact that the United Arab Emirates was not a party to the Convention did not rule out the application of that text, since article 1(1) of the
Convention provides for its application when the private international law rules of the forum lead to the application of the law of a Contracting State. In the case under consideration, the tribunal cited as a rule of private international law the Rome I Regulation, article 3(1) of which provides for freedom of choice of applicable law.
Thus, the choice of the law of Spain, a State party to the Convention, entailed the mediate or indirect application of the CISG to the case.
With regard to the merits of the case, the tribunal analysed articles 30 and 45 of the CISG and concluded that delivery obligations in sales contracts were fundamental and
that no further analysis was needed given that the seller had failed to deliver the goods. Avoidance of the contract was therefore appropriate in accordance with
article 49(1)(a) of the CISG, one of the effects of avoidance being restitution for an obligation already performed, such as payment of the price, under articles 81(2) and
84(1) of the CISG.

Such restitution, according to the tribunal, entailed the payment of interest, in accordance with articles 45(1) and 84(1) of the Convention and article 1124 of the
Civil Code of Spain. In accordance with the latter provision, the tribunal determined that the interest accrued should be calculated from the date on which the payment was
made, since the defendant had benefited from the amount paid as of that date without fulfilling its own obligations, a situation which made the defendant’s enjoyment of
those funds illegitimate. Since neither the contract nor the CISG included provisions relating to the applicable interest rate, the tribunal referred to additional sources,
including article 1108 of the Civil Code of Spain, and calculated the interest in accordance with the current interest rate in Spain as established by law.
Finally, the tribunal rejected the defendant’s claims of force majeure, not only because of the lack of evidence in support of those claims but also because they contradicted
previous communications, in which the impossibility of performance owing to force majeure had never been relied upon. The claim was therefore upheld, the contract was
deemed avoided and the seller was ordered to pay the damages and interest sought.

Fulltext

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Source

CASE LAW ON UNCITRAL TEXTS (CLOUT), A/CN.9/SER.C/ABSTRACTS/CISG/2186}}