Data

Date:: 30-12-1998
Country:: Arbitral Award
Number:
Court:: Ad hoc Arbitration (Uruguay)
Parties:: Compañia Rioplatense de Hoteles S.A. v. Joao Fortes Engenharia S.A. and J. F. International S.A.

Keywords

LONG-TERM CONTRACTS - CONSTRUCTION CONTRACT – BETWEEN AN URUGUAYAN HOTEL COMPANY AND TWO BRAZILIAN CONSTRUCTION COMPANIES - PARTIES’ CHOICE OF DOMESTIC LAW (URUGUAYAN LAW) AS LAW GOVERNING THE DISPUTE – REFERENCE BY ARBITRAL TRIBUNAL TO THE 1994 UNIDROIT PRINCIPLES (ARTS. 2.18, 4.2.2., 4.6) TO DEMONSTRATE THAT SOLUTION REACHED UNDER APPLICABLE DOMESTIC LAW CORRESPONDED TO INTERNATIONALLY ACCEPTED PRINCIPLES

Abstract

In November 1990 a Uruguay hotel company (CRIOHSA) entered into a construction and renovation turnkey contract with two Brazilian construction companies of the same group (JOAO FORTES) whereby the latter undertook to renovate and rebuild a famous hotel in Montevideo in a 36-month period from the end of the excavation works (which occurred in Sept. 1991).
The compensation due to JOAO FORTES was agreed on the following basis: the equivalent of 18% of total investment made by CRIOHSA in the construction works plus 11% of furniture and other elements incorporated into the buildings. The estimated cost for the completion of the works was US$ 44,180,000 for a 43,000 m2 of built area.
However, due to several events, in November 1996 the works had not yet been concluded and the total expenditures made had amounted to US$ 118,319,102.
The dispute arose when CRIOHSA terminated the contract with JOAO FORTES, by the means of a notice received by the latter on Dec. 30, 1996.
On Dec. 4, 1997, the parties partially settled their disputes. In 1998 they submitted their remaining controversies to a sole arbitrator. The arbitration hearings occurred in May 1998, followed by site inspections and a final hearing in February 1999.
Various issues were at stake. JOAO FORTES alleged that termination of the contract was illegal, abusive and violated good faith. The constructor also alleged that the refusal of the works by CRIOHSA was illegal, and several penalties and damages claimed were undue. It asked for damages, including moral damages.
CRIOHSA alleged that JOAO FORTES had not complied with the contract terms and conditions, which amounted to a contractual non-perfomance. It also alleged undue delays by constructor, defective work and the employment of defective materials, and claimed for restitution of anticipated payments as well as recovery of the guarantee initially offered by JOAO FORTES.
The sole arbitrator firstly found that the dispute involved an international commercial contract, as defined by art. 1° of the 1994 Inter-American Convention on the Law Applicable to International Contracts.
Subsequently, in accordance with the choice of the parties, the arbitrator found that Uruguay law – the Código General de Proceso – was applicable to the procedural aspects of the dispute. Because the parties were silent as to subjecting the dispute solely to the law applicable, art. 477 par. 5° of the C.G.P. allowed the arbitrator to resolve the dispute also in equity (“ex aequo et bono”). Furthermore, the arbitrator found that Uruguay law was also applicable to the merits of the dispute, not only because of the parties’ choice but also as a result of the Uruguay rules of private international law (“lex executionis”).
The arbitral award applied the 1994 UNIDROIT Principles to supplement the solution given to certain aspects of the dispute by the Uruguay Civil and Commercial Codes. Accordingly, the award alluded to:
(i) art. 2.18, which deals with written modification clauses, but states that a party may be precluded by its conduct from asserting such clause to the extent that the other party has acted in reliance on that conduct;
(ii) art. 4.2(2), on the interpretation of statements and other conduct of the parties, which states a “reasonableness” test to establish the intention of the party performing the act or to determine the understanding of a reasonable person; and
(iii) art. 4.6, which sets forth the contra proferentem rule by stating that “if contract terms supplied by one party are unclear, an interpretation against that party is preferred”.
As a result the arbitral tribunal found that CRIOHSA had illegally terminated the contract and rejected its claim for contractual penalty; that JOAO FORTES had inexecuted the contract and should pay damages to CRIOHSA in the amount of US$ 632,934; that CRIOHSA was not entitled to restitution of anticipated payments made in favor of JOAO FORTES; that JOAO FORTES was not entitled to obtain damages for being hindered from execution of part of the works as agreed in the contract, and for alleged abuse in the contract termination; that JOAO FORTES was entitled to be reimbursed of the costs incurred in payment of wages and other sums, in the total amount of US$ 20,239.

Fulltext

EXCERPTS:

On the 1994 Inter-American Convention on the Law Applicable to International Contracts:
“Sobre el carácter internacional del contrato no existe controversia, ni podrían plantearse tampoco mayores dudas ya que el domicilio real de las partes contratantes en diferentes estados (…) es condición suficiente para asignarle ese carácter.
Es oportuno recordar acá la Convención Interamericana sobre Derecho aplicable a los Contratos Internacionales suscrita en México en ocasión de la CIDIP V en 1994 (…), que expresa en su artículo 1 lo siguiente: (…)
‘Esta Convención determina el derecho aplicable a los contratos internacionales. Se entenderá que un contrato es internacional si las partes del mismo tienen su residencia habitual o su establecimiento en Estados Partes diferentes, o si el contrato tiene contactos objetivos con más de un Estado Parte’.”
On the 1994 UNIDROIT Principles in general:
“Es evidente que las reglas uniformes sobre los principios aplicables a los contratos internacionales de UNIDROIT forman parte privilegiada del marco normativo de los usos del comercio que rigen este juicio. Como es sabido el Instituto Internacional para la Unificación del Derecho Privado (UNIDROIT) es una organización intergubernamental independiente, con más de 50 miembros (entre los que se encuentra Uruguay) con sede en Roma, cuyo objetivo es estudiar los medios de armonizar y coordinar el derecho privado entre los Estados con el fin de lograr una legislación uniforme. Junto con la Comisión de las Naciones Unidas para la Unificación del Derecho Mercantil Internacional (CNUDMI) y la Conferencia de la Haya, son los foros más importantes a nivel mundial de producción de Convenciones y estudio del derecho comparado e internacional.
Pero, aún más alla de la aplicación que esta normativa pueda tener en el caso concreto, - que de hecho la tiene -, es evidente que se trata de una disposición racional, esencialmente justa, y aplicable al caso de autos.”

On art. 2.18 – written modification clauses – of the UNIDROIT Principles:
“De lo que viene de exponerse parece evidente que actitudes de CRIOHSA toleraron ‘de hecho’ la prolongación del plazo, y razonablemente pudieron dar a entender a JOAO FORTES que existía tal prorroga.
Corresponde ahora analizar estas actitudes a la luz de los artículos 83 y 84 del Pliego, que son severos en cuanto a las modificaciones de sus cláusulas, y en cuanto parecen enervar valor a las acciones u omisiones de las partes como para renunciar a sus derechos.
A este respecto la parte de JOAO FORTES cita en su apoyo el art. 2.18 de los Principios de UNIDROIT que dice: “Todo contrato que exija que toda modificación o extinción sea por escrito, no podrá ser modificado ni extinguido sino por este medio. No obstante, cualquiera de las pares quedará vinculada por sus propios actos y no podrá valerse de dicha cláusula en la medida en que la otra parte hubiera actuado confiando en dicha conducta”. (…)
On art. 4.2 (2) – interpretation of statements and other conduct - of the UNIDROIT Principles:
“(…). Este procedimiento implicó el principio de que no podía haber sanción sin aviso al deudor, no pudiéndose concebir que se diera un incumplimiento del plazo total de obra sin que se produjese incumplimiento de los plazos parciales.
(…)
La no comunicación de otros atrasos parciales y la conducta acorde del Comitente, nos conduce a la presunción de que no existió atraso de los plazos parciales y por ende que no se dio incumplimiento del plazo total de obra (art. 4.2 (2) Principios de UNIDROIT)”
On art. 4.6 – contra preferentem rule – of the UNIDROIT Principles:
“El pliego fue redactado por CRIOHSA, lo que hace aplicable en su contra la regla del art. 1304, inc. 2 Código Civil (art. 4.6 Principios UNIDROIT), por cuanto las disposiciones del Pliego están sesgadas en beneficio del Comitente.”}}

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