Data

Date:
06-08-2015
Country:
Arbitral Award
Number:
244/2014
Court:
International Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation
Parties:
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Keywords

COMMISSION CONTRACT - LINKED TO A CONSTRUCTION CONTRACT AND TO A CONTRACT FOR PERFORMANCE OF WORKS AND PROVISION OF SERVICES - BETWEEN A RUSSIAN COMPANY AND A GERMAN COMPANY - GOVERNED BY RUSSIAN LAW - ARBITRAL TRIBUNAL DECIDED TO APPLY ALSO TO UNIDROIT PRINCIPLES 2010 GIVEN THE COMPLEXITY OF THE RELATIONSHIP BETWEEN THE PARTIES AND THE FACT THAT IT WAS A MATTER OF INTERNATIONAL TRADE

NOTION OF DEFECTIVE GOODS - REFERENCE BY THE ARBITRAL TRIBUNAL TO ARTS. 1.7, 5.1.6 AND 4.8 UNIDROIT PRINCIPLES

Abstract

Under a construction contract, a Russian company (defendant 1) had undertaken to another Russian company (claimant) to deliver equipment and materials, and to supervise the construction works and installation of the equipment, etc.

A commission contract was also concluded whereby defendant 1 was obliged to take all necessary legal and actual actions to ensure delivery, including in its own name, but at the expense and in favor of the claimant to conclude contracts for the delivery of equipment and materials. A German company (defendant 2) has assumed the obligations of defendant 1, in guaranty.

Arguing that the goods delivered by defendant 1 were defective, the claimant has filed an action before the ICAC-RF and therefore claimed the expenses he had incurred for the correction of these defects from defendant 1 as well as from defendant 2 as co-debtor.

While the arbitral tribunal retains the application of Russian substantive law, he noted that it was also possible to apply the UNIDROIT Principles 2010 in this case, given the complexity of the relationship between the parties and the fact that it was a matter of international trade.

In accordance with the defendant 1, the arbitrators considered that the supplied goods could not be deemed “defective” because they complied with the Russian standards and the US standard agreed upon by the parties. But, at the same time, the arbitral tribunal holds that the defendant 1 who delivered the goods with detected drawbacks violated the terms and conditions of the contract for performance of works and provision of services because such drawbacks « impeded or affected the safe and smooth operation of the plant » in which the goods were to be used (event though they corresponded to the GOST and US standards). The arbitral tribunal considers that the defendant 1, as an experienced entity, should have warned the claimant of the disadvantages of the goods and the potential expenses that could be incurred to correct them. Having not done so, the arbitral tribunal could not consider that the supply of the goods with the defects was of reasonable quality.

The arbitral tribunal recalls that good faith is an inherent principle of Russian law according to Articles 1, 6 and 10 of the Civil Code. It refers to Art. 1.7 of the UNIDROIT Principles which require parties to act in accordance with good faith and fair dealing in international trade and Art. 5.1.6. about determination of quality of performance. The arbitral tribunal also refers to Art. 4.8 about omitted term.

(Abstract kindly provided by François Mansourati)

Fulltext

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Source

'principal (Russian Federation) v. 1. commissioner (Russian Federation), 2. surety (Germany) (Award), ICAC Case No. 244/2014, 06 August 2015', in International Commercial Arbitration Review}}