Data

Date:
11-05-2006
Country:
Arbitral Award
Number:
SCH-4921
Court:
Internationales Schiedsgericht der Wirtschaftskammer Österreich
Parties:
Unknown

Keywords

SALES CONTRACT - BETWEEN AN AUSTRIAN COMPANY AND A EASTERN EUROPEAN COMPANY - PARTIES AGREED ON APPLICATION OF AUSTRIAN LAW INCLUDING CISG AS THE LAW APPLICABLE TO THE SUBSTANCE OF THE DISPUTE

ASSIGNMENT OF CLAIM TO PAYMENT OF PRICE TO FINANCIAL INSTITUTION – OBLIGOR ENTITLED TO RIGHT OF SET-OFF VIS-À-VIS ASSIGNOR UNTIL INFORMED OF ASSIGNMENT (SEE § 1396 OF THE AUSTRIAN CIVIL CODE AS WELL AS ARTICLES 9.1.10(1) AND 9.1.13(2) OF THE UNIDROIT PRINCIPLES 2004 AND ARTICLES 11:303(4) AND 10:107(1) OF THE PRINCIPLES OF EUROPEAN CONTRACT LAW)

THIRD PARTY’S ACCEPTANCE TO BE SUBSTITUTED AS NEW OBLIGOR VIS-À-VIS OBLIGEE – OLD OBLIGOR REMAINS JOINTLY AND SEVERALLY LIABLE UNLESS EXPRESSLY DISCHARGED BY OBLIGEE (SEE § 1406 OF THE AUSTRIAN CIVIL CODE AS WELL AS ARTS. 9.2.1 AND 9.2.5(3) OF THE UNIDROIT PRINCIPLES 2004)

RIGHT TO INTEREST (ART. 78 CISG) – APPLICATION OF STATUTORY RATE CREDITOR'S DOMESTIC LAW – RATE OF 9,47% P.A. AS PROVIDED BY § 1333(2) OF THE AUSTRIAN CIVIL CODE AS AMENDED IN ACCORDANCE WITH THE EC DIRECTIVE 2000/35 ON COMBATING LATE PAYMENT IN COMMERCIAL TRANSACTIONS

Abstract

A, an Austrian trading company, entered into two contracts for the sale of commodities with Defendant, a company from Eastern Europe. When Defendant failed to pay the price of the goods, Plaintiff, an Austrian bank, to whom A had previously assigned all its present and future receivables deriving from its business, commenced an arbitral proceedings claiming the payment of the price plus interest. Defendant did not deny its failure to pay but with respect to the first sales contract objected that, as permitted under a separate agreement attached to it, it had transferred its obligation of payment to C, another company from the same Eastern European country, which has fulfilled this obligation by setting it off against claims C had vis-à-vis A; moreover, with respect to the second sales contract Defendant denied any obligation to pay on its part since the goods had actually been delivered to and taken over by C which subsequently accepted to be substituted as the new obligor vis-à-vis A. According to Plaintiff C was not entitled to set off the obligation of payment arising from the first sales contract against claims it had vis-à-vis A since A had already assigned the receivables to Plaintiff, while with respect to the second sales contract Plaintiff argued that irrespective of C’s acceptance to be substituted as the new obligor Defendant still remained jointly and severally liable.

The two sales contracts between A and Defendant contained an arbitration agreement in favour of the Vienna International Arbitration Court, but were silent as to the applicable substantive law. However, at the beginning of the arbitral proceedings Plaintiff and Defendant agreed on Austrian law, including CISG, as the law applicable to the substance of the dispute.

The Sole Arbitrator rejected Plaintiff’s argument that C was not entitled to set off against A the obligation of payment arising from the first sales contract: at the time C exercised the right of set-off it had not yet been informed of the assignment of A’s claim to Plaintiff, and according not only to § 1396 of the Austrian Civil Code but also to internationally accepted principles, as laid down in Articles 9.1.10(1) and 9.1.13(2) of the UNIDROIT Principles of International Commercial Contracts 2004 and Articles 11:303(4) and 10:107(1) of the Principles of European Contract Law, an obligor is discharged by paying the assignor and may exercise against the assignee any right of set-off available to it against the assignor until it receives notice of the assignment. The Sole Arbitrator nevertheless awarded Plaintiff the amount claimed, because the claims C had set off against A had been immediately questioned by A and Defendant was unable to produce sufficient evidence to prove their validity. Also with respect to the obligation of payment arising from the second sales contract the Sole Arbitrator decided in favour of Plaintiff: indeed, even assuming that the goods had been taken over by C and that C had accepted to pay the price for them, Defendant still remained jointly and severally liable since, as stated not only in § 1406 of the Austrian Civil Code but also in Arts. 9.2.1 and 9.2.5(3) of the UNIDROIT Principles of International Commercial Contracts 2004, a third party may agree with the obligee to be substituted as the new obligor but unless the obligee expressly discharges the original obligor the latter remains as a rule jointly and severally liable. In the case at hand Defendant was unable to prove that either A or Plaintiff had ever declared to discharge Defendant from its obligation of payment arising from the second sales contract.

Moreover, the Sole Arbitrator awarded Plaintiff interest at the rate of 9,47% p.a. as provided by § 1333(2) of the Austrian Civil Code as amended in accordance with the EC Directive 2000/35 on Combating Late Payment in Commercial Transactions. The Sole Arbitrator, though recalling that the two sales contracts were governed by CISG and that in international case law and legal writings the view has been expressed that Art. 78 CISG ought to be interpreted autonomously, i.e. by applying not the rate provided by domestic law but the average commercial rate of the currency of payment, found that in the case at hand the application of the Austrian statutory rate of interest was justified on the ground that Defendant had not object to Plaintiff’s claim to this effect.

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