Data
- Date:
- 00-00-2004
- Country:
- Arbitral Award
- Number:
- 13012
- Court:
- ICC International Court of Arbitration 13012
- Parties:
- Unknown
Keywords
CONTRACT BETWEEN A FRENCH COMPANY AND A UNITED STATES COMPANY - SILENT AS TO THE APPLICABLE LAW – ONE PARTY INVOKED APPLICATION OF FRENCH LAW, THE OTHER APPLICATION OF THE LAW OF THE STATE OF ILLINOIS – ARBITRAL TRIBUNAL FOUND THAT NONE OF THE CONNECTING FACTORS WITH ONE OR THE OTHER DOMESTIC LAW WAS COMPELLING AND DECIDED TO BASE ITS DECISION ON GENERAL PRINCIPLES OF LAW OR THE LEX MERCATORIA – RECOURSE TO THE UNIDROIT PRINCIPLES “AS A PRIMARY SET OF GUIDELINES IN DETERMINING INTERNATIONAL RULES OF LAW APPLICABLE TO THE PARTIES’ CONTRACT”.
Abstract
A contract between a French company and a U.S. company was silent as to the applicable law. Invited by the Arbitral Tribunal to make their submissions on the issue of the law applicable to the merits of the dispute one party pleaded for the application of French law and the other party for the application of the law of the State of Illinois and both pleaded, as a subordinate alternative, for the application of general principles of law. The Arbitral Tribunal held that in the case at hand none of the connecting factors used by the parties to select the applicable law such as the parties’ domicile, the place of contracting or the place of performance of the contracts was compelling. And since the parties themselves have indicated the general principles of law as a subordinate alternative, it concluded that it would be more appropriate not to apply any particular domestic law but rather follow the so-called direct method admitted under Article 17(1) of the ICC Rules of Arbitration and base its decision on general principles of law or the lex mercatoria. In this respect the Arbitral Tribunal recalled “that several ICC cases have considered that the UNIDROIT Principles are the best approach to apprehend the general principles of law and announced that it would likewise have recourse in the case at hand to the UNIDROIT principles “as a primary set of guidelines in determining international rules of law applicable to the parties’ contract”. At the same time, however, the Arbitral Tribunal would also “duly consider the lex mercatoria in its two fundamental principles, i.e. the standards of good faith which the parties should observe when performing the contract and the rule of pacta sunt servanda”. In conclusion the Arbitral eventually decided “(…) that the material law applicable to the case shall be the general principles of law resulting from the UNIDROIT Principles (2004 edition) and from the aforesaid fundamental rules of the lex mercatoria, as well as from the commercial usages prevailing in the sector of activities to which the parties’ agreement relates (…).”
Fulltext
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“Whereas according to paragraph [X] of the Terms of Reference executed by the Arbitral Tribunal and the parties’ representatives on [date 1], the Arbitral Tribunal shall decide on the applicable law to the merits of the dispute in a partial award;
Whereas in accordance with the Arbitral Tribunal’s Procedural Order No. 1 of [date 1], the parties have respectively submitted on [date 2] briefs limited to the issue of the applicable law;
Whereas in accordance with the same Procedural Order the Arbitral Tribunal reserved the possibility of inviting the parties to a hearing on the applicable law issue, but has not found it necessary to do so;
Whereas the Arbitral Tribunal is, thus, now in a position to decide the issue of the applicable law;
Whereas to determine the law governing the contract of [date 3], both parties had recourse to the so-called cumulative method as well as to the so-called direct choice method;
Whereas regarding this first method, Claimant submits that the rules of law with which the case has the closest connection are those of France, whilst according to Respondent, the laws of Illinois have the closest connection to the matters at issue;
Whereas for the purpose of determining the law applicable to this dispute, article 17(1) of the ICC Rules (edition 1998) grants a broad discretion to the arbitral Tribunal, stating in the absence of any party’s agreement on that matter that: “the Arbitral Tribunal shall apply the rules of law which it determines to be appropriate”;
Whereas none of the connecting factors used by the parties to select the applicable law such as the parties’ domicile, the place of contracting or the place of performance of the contract is satisfactory;
Whereas in particular the place of performance would depend upon whether one focuses on the production of technical information or on its receipt;
Whereas a strict choice of law analysis is in any event inappropriate in the instant case where the parties’ rights and obligations under the contract at stake are perfectly symmetrical;
Whereas it would be arbitrary to decide that the law governing the [date 3] contract should depend on which side failed to perform and this is also an argument which goes against the application of the so called direct method;
Whereas in situations where the parties did not select the material law governing their agreement, arbitrators have frequently filled up this lacuna by a recourse to the general principles of law or Lex Mercatoria;
Whereas in the ICC case No. 7110 published in 10(2) ICC Bull. 39 & 46 (1999) an arbitral tribunal excluded any specific municipal legal system on the following grounds:
‘(i) there is no express choice-of-law stipulation… and (ii) the parties have buttressed neutrality as to the applicable law by agreeing to submit their contractual disputes to international commercial arbitration. … it can only be concluded that no national law was judged adequate or adapted to govern such transactions without the risk of disturbing the balance of neutrality between the parties. In consequence, when the parties negotiated and finally entered into the Contracts they only left room for the application of general legal rules and principles adequate enough so govern the Contracts but not originated in a specific municipal legal system.’
Whereas absent a choice of law in the contract, arbitrators in other ICC cases have similarly applied the general principles of law;
Whereas several ICC cases have considered that the UNIDROIT Principles of International Commercial Contracts (‘UNIDROIT Principles’) are the best approach to apprehend the general principles of law;
Whereas for the foregoing reasons the Arbitral Tribunal shall have recourse in the instant case to the UNIDROIT Principles as a primary set of guidelines in determining international rules of law applicable to the parties’ contract;
Whereas when relying on the general principles of law as embodied in the UNIDROIT Principles, the Arbitral Tribunal shall duly consider the Lex Mercatoria in its two fundamental principles, i.e. the standards of good faith which the parties should observe when performing the contract and the rule of pacta sunt servanda;
Whereas in accordance with Article 17 § 2 of the ICC rules (1998 edition), the Arbitral Tribunal shall also take into account the provisions of the contract and the relevant trade usages;
Whereas the solution reached by the Arbitral Tribunal remains within the expectation of both parties since they have proposed as an alternative to a strict choice of law analysis the application of the general principles of law;
Based on the foregoing, the Arbitral Tribunal decides:
(…) that the material law applicable to the case shall be the general principles of law resulting from the UNIDROIT principles (2004 edition) and from the aforesaid fundamental rules of the Lex Mercatoria, as well as from the commercial usages prevailing in the sector of activities to which the parties’ agreement relates(…).”
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Source
E. Jolivet, L'harmonisation du droit OHADA des contrats: l'influence des Principes d'UNIDROIT en matière de pratique contractuelle et d'arbitrage, in Unifrom Law Review, p. 127 et seq. (p.137 fn 29)}}