- Arbitral Award
- ICC International Court of Arbitration 12193
LONG-TERM CONTRACTS - DISTRIBUTION CONTRACT - BETWEEN GERMAN MANUFACTURER AND LEBANESE DISTRIBUTOR - CONTRACT SILENT AS TO THE LAW GOVERNING THE CONTRACT - LEBANESE LAW APPLIED
ONE PARTY'S REQUEST FOR SUBSIDIARY APPLICATION OF GENERAL PRINCIPLES OF LAW OR LEX MERCATORIA AS EXPRESSED IN UNIDROIT PRINCIPLES - REQUEST REFUSED - ACCORDING TO ARBITRAL TRIBUNAL APPLICATION OF LEX MERCATORIA JUSTIFIED ONLY IF CONTRACT IS CLOSELY CONNECTED WITH MORE THAN ONE COUNTRY OR IF APPLICABLE DOMESTIC LAW FAILS TO PROVIDE SOLUTION TO ISSUES AT STAKE
REFERENCE BY ARBITRAL TRIBUNAL TO ARTICLE 7.4.1 UNIDROIT PRINCIPLES TO DEMONSTRATE THAT CORRESPONDING PROVISION OF LEBANESE LAW CONFORMS TO LEX MERCATORIA
Defendant, a German manufacturer, and Plaintiff, a Lebanese distributor, entered into a distribution contract. The contract was silent as to the applicable law but contained a clause stating that “le lieu d’exécution et de compétence juridique est la Chambre de Commerce Internationale de Bâle pour tous les litiges résultant du présent contrat”. When a dispute arose the parties submitted to arbitration requesting the Arbitral Tribunal to determine the law governing the merits of the dispute according to Article 17 of the ICC Rules of Arbitration.
According to Plaintiff the Arbitral Tribunal had to rely on the Swiss conflict of law rules as Switzerland was the place of arbitration and to apply, in accordance with Article 187 of the Swiss Act on Private International Law, the law of Lebanon as the law of the country most closely connected with the contract since it was there that Plaintiff had to carry out its activity. Defendant objected that the Arbitral Tribunal should determine the applicable law directly without referring to any domestic conflict of law rules (“voie directe”) and, since by indicating the International Chamber of Commerce of Basle as the place of performance and of jurisdiction the parties clearly had intended to exclude the application of the domestic laws of both parties and implicitly chosen Swiss law as the law governing the contract, the Arbitral Tribunal should decide the dispute according to Swiss law. However Defendant also requested the Arbitral Tribunal to apply subsidiarily the general principles of law or the lex mercatoria as expressed in the UNIDROIT Principles.
The Arbitral Tribunal decided in favour of the application of the law of Lebanon. As to the subsidiary application of the UNIDROIT Principles as requested by Defendant, the Arbitral Tribunal held that normally recourse to general principles of law or the lex mercatoria was justified only where the contract was closely connected to more than one country equally or where the applicable domestic law failed to provide a solution to the issue(s) at stake. In the case at hand neither of these conditions had occurred since Plaintiff had to carry out its activity only in one country, i.e. in Lebanon, and the Lebanese law made express provision for the right to damages in case of termination for breach of a distribution contract. Nevertheless the Arbitral Tribunal expressly referred to Article 7.4.1 of the UNIDROIT Principles which lays down the general principle of the right to damages for breach of contract in order to demonstrate that the Lebanese law was in accordance with the lex mercatoria.
Excerpts of the award in Journal du droit international 2007, 1276.}}