- Arbitral Award
- ICC International Court of Arbitration ICC-FA-2020-226
SUPPLY CONTRACT - BETWEEN TWO EUROPEAN PARTIES - CHOICE OF LAW CLAUSE IN FAVOUR OF THE LAW OF THE SUPPLIERS'S COUNTRY - ARBITRAL TRIBUNAL APPLIES CISG AS PART OF THE LAW OF THE SUPPLIER'S COUNTRY
GOOD FAITH - BREACH OF THE DUTY OF LOYALTY BETWEEN CONTRACTING PARTIES - EXPRESSION OF A GENERAL PRINCIPLE OF GOOD COMMERCIAL PRACTICE REFLECTED IN ART. 1.7 UNIDROIT PRINCIPLES
GOOD FAITH - REFERENCE TO THE UNIDROIT PRINCIPLES IN ORDER TO INTERPRET ART. 7(1) CISG
A European Buyer and a European Supplier concluded a contract for the supply of custom-made industrial product. The contract provided for application of the law of the Supplier country as governing law and for arbitration in Stockholm in accordance with the rules of the International Chamber of Commerce (ICC).
The Buyer made advance payments but then discovered that Supplier had provided incorrect certifications in respect of the product.
Buyer then commenced ICC Arbitration as provided for in the contract, claiming that it had been entitled to terminate the contract for breach on the part of Supplier and seeking the refund of the advance payments it had made on the purchase price together with interest, as well as a declaration that Supplier would not have further claim against Buyer under the contract. The Supplier denied that the contract had been validly terminated and counterclaimed for payment of the outstanding purchase price and for storage costs.
The Arbitral Tribunal ordered Supplier to return the advance payments made by Buyer, together with interest, and dismissed both Buyer's request for declaratory relief and Supplier's counterclaim.
As to the applicable law, the Arbitral Tribunal confirmed the application of the law of the Supplier's country together with CISG, which forms part of that law.
As to the merits of the case, the Arbitral Tribunal affirmed that the contract was validly terminated since the termination notice sent by the Buyer met the requirements of clarity provided by Art. 26 CISG and had also been timely according to Art. 49(2)(b) CISG. Buyer was entitled to terminate the contract on the ground of the fundamental breach of contract by Supplier, who had provided intentionally erroneous certifications concerning the custom-made industrial product sold.
Moreover, Supplier's prolonged failure to provide pertinent information relating to the true performance of the product constituted a breach of the duty of loyalty between contracting parties, a general principle "consistent with good commercial practice and ... reflected in [Supplier's] country law ...and in Art. 1.7 UNIDROIT Principles 2010 ...further applicable to the interpretation of Art. 7(1) CISG"; that breach constituted an additional ground for termination.