Data

Date:: 15-06-1994
Country:: Arbitral Award
Number:: SCH-4366
Court:: Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft - Wien
Parties:: Unknown

Keywords

SALES CONTRACT - BETWEEN AN AUSTRIAN SELLER AND A GERMAN BUYER

APPLICATION OF THE 1980 VIENNA CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (CISG) - CHOICE BY PARTIES OF THE LAW OF A CONTRACTING STATE (AUSTRIAN LAW) AS GOVERNING LAW OF THE CONTRACT (ART. 1(1)(B) CISG)

DUTY TO MITIGATE DAMAGES (ART. 77 CISG) - SUBSTITUTE SALE DIFFERENCE BETWEEN CONTRACT PRICE AND SUBSTITUTE SALE PRICE

RIGHT TO INTEREST (ART. 78 CISG) - TIME OF ACCRUAL (ART. 58 CISG)

INTEREST RATE - MATTER NOT EXPRESSLY SETTLED BY CISG (ART. 7(2) CISG) - TO BE SETTLED IN CONFORMITY WITH THE GENERAL PRINCIPLES UNDERLYING CISG - FULL COMPENSATION (ARTS. 74 AND 78 CISG) AS A GENERAL PRINCIPLE OF CISG - AVERAGE PRIME RATE FOR CURRENCY OF PAYMENT IN THE CREDITOR'S COUNTRY (ART. 7.4.9 UNIDROIT PRINCIPLES)

Abstract

In 1990 and 1991, an Austrian seller and a German buyer concluded contracts for the sale of rolled metal sheets. The initial contracts provided that the goods were to be delivered FOB Hamburg, by March 1991 at the latest. Later, due to the buyer's financial difficulties, the seller allowed the buyer to take delivery in installments according to the possibilities of resale, and the buyer had to promptly pay upon receipt of each invoice and cover all storage costs. The buyer took delivery of some of the goods without paying, and refused to take delivery of other goods. Pursuant to an arbitration clause, the seller commenced arbitral proceedings, demanding payment of the price. The seller further asked for damages, including those deriving from a substitute sale of the undelivered goods.

The Arbitral Tribunal held that because the parties had chosen Austrian law, the contracts were governed by CISG as the international sales law of Austria, a contracting State (Art. 1(1)(b) CISG).

With regard to the goods delivered but not paid for, the Arbitral Tribunal found that the seller was entitled to payment of their price (Arts. 53 and 61 CISG). Regarding the cover sale made by the seller, the Arbitral Tribunal observed that the seller had the right to make a cover sale, and presumably even a duty to do so because of the duty to mitigate damages (Art. 77 CISG). The seller would be entitled to the difference between the contract price and the substitute sale price.
The Arbitral Tribunal further held that interest on the price accrued from the date payment was due (Arts. 78 and 58 CISG). Since the parties' agreement required the buyer to pay after receiving each invoice, interest accrued from the date of such receipt, which should occur within 10 days after issuance of each invoice.

The Arbitral Tribunal held that the interest rate is a matter governed but not expressly settled by CISG. Therefore, it must be settled in conformity with the general principles on which the CISG is based (Art. 7(2) CISG). Referring to Arts. 78 and 74 CISG, the arbitrator found that full compensation is one of the general principles underlying the CISG. In relations between merchants, it is expected that the seller, due to the delayed payment, resort to bank credit at the interest rate commonly practiced in its own country with respect to the currency of payment. Such currency may be either the currency of the seller's country, or any other foreign currency agreed upon by the parties. The Arbitral Tribunal observed that this solution is stated also in Art. 7.4.9 of the UNIDROIT Principles of International Commercial Contracts. The interest rate awarded was therefore the average prime rate in the seller's country (Austria), with respect to the currencies of payment (US dollars and German marks).

Fulltext

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1. By the request of arbitration of 30 March 1993, the claimant [a company with place of business in Austria] applied for an award against the respondent [a company with place of business in Germany] for payment of a total of US$ [...] DM

[...]. It submitted that the respondent had not fulfilled its obligations on the basis of two contracts for the delivery of cold-rolled sheet concluded with the claimant, since it had either not taken delivery of or had not paid for part of the goods purchased.

[...]

3. The competence of the Arbitral Centre is founded on the last paragraphs of the two contracts concluded between the parties. According thereto, all disputes that cannot be settled amicably should be finally decided according to the Arbitral Rules of the Austrian Federal Economic Chamber by one or more arbitrators appointed in accordance with those rules.

3.1. It is true that the contracts - and thus the aforesaid arbitration clause - exist only in the acknowledgement of order sent by the claimant to the respondent, which the latter never countersigned. However, there can be no doubt of the validity of the arbitration clause. The fact that Article I, paragraph 1 of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention), which applies in this case, provides that the agreement must be writing, does not mean that the arbitration clause must be contained in a contractual document signed by both parties. According to article II, paragraph 2 of the New York Convention, an 'arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams' is sufficient. The predominant view in international legal writings is that the requirement is therefore also met if the addressee replies in writing to the acknowledgement of an order in such a way that need only conclusively show that he accepts the acknowledgement of the order together with the arbitration clause mentioned therein, for example, if he expressly refers in subsequent letters or invoices to the contractual document in question (see inter alia A.J. VAN DEN BERG, the New York Arbitration Convention of 1958, 1981, 198 ff.; P. SCHLOSSER, Das Recht der internationalen privaten Schiedsgerichtsbarkeit, 2. Aufl. 1989, 280; App. Firenze, 8.10.1977, Yearbook Commercial Arbitration IV (1979) 289).

3.2 That is exactly what happened in the present case. Though initially the respondent only tacitly accepted the two acknowledgements of the order by the claimant, it subsequently - to be precise in a letter to the claimant of 19 January 1993 - expressly referred to the relevant contracts No. 19038 and No. 19101 and thus satisfied the requirement as to the written form of the arbitration clause contained therein.

3.3. Furthermore, in the present case, on the basis of the general legal principle of good faith, the respondent would be precluded from relying on the absence of an arbitration clause in writing for the purpose of negating the competence of the arbitral centre. Within a little less than three months, the respondent concluded three contracts with the claimant with essentially identical wording but never countersigned the acknowledgement of the orders together with the arbitration clause contained therein that were sent to it by the claimant. That did not prevent the respondent from relying on that specific arbitration clause and from entrusting the Arbitral centre of the Federal Economic Chamber of Austria specified therein with the settlement of a dispute concerning the second of the three contracts. To rely on one occasion on the arbitration clause signed only by the opposing party in order to assert one's own claims and, on a second occasion, when the opposing party goes to law, to dispute the validity of an arbitration clause agreed upon in exactly the same form, would not be compatible with the requirement of the observance of good faith and fair business dealings, which is also fully valid within the scope of the New York Convention (see also A.J. VAN DEN BERG, loc. cit., 182 ff.).

4. According to both contracts, the applicable law was Austrian law. That means that - in so far as the issues involved fall within this scope - the United Nations Sales Convention (Vienna) of 11 April 1980 (CISG) applies. In fact, that convention entered into force in Austria on 1 January 1989, with the consequence that, from that date onwards, all international contracts of sale of goods within the meaning of Article 1 have been subject to the CISG, provided that the conditions stipulated for that purpose in the Convention itself are met, i.e. that either both parties are established in Contracting States or that the rules of private international law lead to the application of the law of a Contracting State. In the present case, the first condition was not met because Germany (at that time, the FRG, without the new 'Länder') was not yet a Contracting State at the time of conclusion of the contract. On the other hand, however, the second prerequisite for application of the CISG was met, i.e. the rules of private international law led to the application of the law of a Contracting State (Austria). In fact, according to the predominant view in international legal writings, the parties' choice of the law of a Contracting State is understood as a reference to the corresponding national law, including the CISG as the international sales law of that State and not merely to the - non-unified - domestic sales law (see also, for further reference, M.J. BONELL in BIANCA-BONELL, Commentary on the International Sales Law, 1987, 56 ff.; R. HERBER in v. CAEMMERER-SCHLECHTRIEM, Kommentar zum Einheitlichen UN-Kaufrecht 1990, Anm. 38 on Art. 1 and Anm. 16 on Article 5; with reservations, R. LOEWE, Internationales Kaufrecht, 24 ff.).

5. [...] The claimant's claim for payment of the outstanding invoices covering the goods delivered by it and taken delivery of by the respondent is justified. However, the corresponding entitlement to interest should be reduced, with respect either to the due dates or to the interest rate to be applied. The claim for reimbursement of the storage costs incurred as a result of the lateness in taking delivery of the goods or refusal to take delivery, as well as the entitlement to payment of the difference between the contractually agreed price and the proceeds of the substitute sale of the residual goods of which delivery was not taken should also be regarded as justified.

5.1 The goods invoiced by the claimant in a total quantity of 650,090 tons form part of two consignments of cold-rolled sheet, which the claimant had sold to the respondent on the basis of the two contracts No. 19038 and No. 19101, parts of which had been taken delivery of by the latter. It may be disputed between the parties whether the respondent always requested the delivery of the goods by the warehouse keeper in Hamburg in agreement with the claimant or whether the respondent had taken delivery of at least a partial consignment of 350,090 tons without the claimant's knowledge. It is a fact that the respondent in its [...] letter of 19 January 193 [...] expressly confirmed taking delivery of this partial consignment and/or requested submission of the relevant invoices and had also never raised objections to the three invoices of 16 January 1992, which had already been submitted. The fact that the respondent did not settle the invoices [...] in question should be regarded as an infringement of its obligation under Art. 53 of the CISG to pay the price for the goods, for which it is fully answerable in accordance with Art. 61 of the CISG in the absence of justified notice of lack of conformity or other objections.

5.2 In accordance with Art. 78 of the CISG, the seller is entitled to interest in the event of arrears in payment of the price by the buyer.

5.2.1. The interest is payable from the effective date of the obligation for payment of the purchase price. According to Art. 58(1) of the CISG, this time is primarily determined by the agreements between the parties themselves; only in the absence of such a special agreement is it the time when the seller places the goods at the buyer's disposal in accordance with the contract. In the present case, the parties had derogated from the payment modalities and time limits originally laid down in the contract by subsequently agreeing that the respondent could take delivery of and pay for the goods in partial consignments according to its possibilities of reasale, provides that it bore the storage costs incurred thereby [...]. Accordingly, the invoices in question here stipulate 'Payment: immediately on receipt of the invoice'. It was therefore at that time, and not earlier, that the respondent was under the obligation to pay the amount invoiced at the time, and it is only from that time that the claimant was entitled to interest [...].

5.2.2. Article 78 of the CISG, while granting the right to interest, says nothing about the level of the interest rate payable. In international legal writings and case law to date it is disputed whether the question is outside the scope of the Convention - with the result that the interest rate is to be determined according to the domestic law applicable on the basis of the relevant conflict-of-laws rules (see inter alia HERBER/CYERWENKA, Internationales Kaufrecht, 1991, 347; Oberlandesgericht Frankfurt, 13 June 1991 in Recht für internationale Wirtschaft 1991, 591) - or whether there is a true gap in the Convention within the meaning of Article 7(2) so that the applicable interest rate should possibly be determined autonomously in conformity with the general principles underlying the Convention (see in this sense, for example, J.O. HONNOLD, Uniform Sales Law, 2nd edition, Denver-Boston 1991, 525-526; ICC arbitral award No. 6653 (1993), Clunet 1993, 1040). This second view is to be preferred, not least because the immediate recourse to a particular domestic law may lead to results which are incompatible with the principle embodied in Art. 78 of the CISG, at least in the cases where the law in question expressly prohibits the payment of interest. One of the general legal principles underlying the CISG is the requirements of 'full compensation' of the loss caused (cf. Art. 74 of the CISG). It follows that, in the event of failure to pay a monetary debt, the creditor, who as a business person must be expected to resort to bank credit as a result of the delay in payment, should therefore be entitled to interest at the rate commonly practiced in its country with respect to the currency of payment, i.e. the currency of the creditor's country or any other foreign currency agreed upon by the parties (cf. Art. 7.4.9 of the Principles of International Commercial Contracts prepared by the International Institute for the Unification of Private Law (UNIDROIT), on which see M.J. BONELL, An International Restatement of Contract Law. The UNIDROIT Principles of International Commercial Contracts, Transnational Juris Publications, Irvington - N.Y., 1994, 114-115). The information received from the leading Austrian banks is that the average 'prime borrowing rates' for US dollars and DM in Austria in the period in question were 4.5 % and 8 %, respectively. The interest due from the respondent should be calculated at those rates.

5.3 The claimant's claim for reimbursement of the storage costs also appears to be justified.

5.4 After unsuccessfully demanding that the respondent take delivery of the remaining goods by 31 March 1993, the claimant was fully entitled to carry out a substitute sale; in view of the obligation for mitigation of the loss of the party entitled to damages, that might even have been a necessary measure (see on this point H. STOLL in v. CAEMMERER/SCHLECHTRIEM, loc. cit., Anm. 11 on Art. 77). The claim for payment of the difference between the contractually agreed price and the proceeds of the substitute sale is also justified.

[...]

[Original in German]}}

Source

Recht der Internationalen Wirtschaft (RIW), 1995, 591-92 (in German)

Rivista dell'Arbitrato, 1995, 543-47 (in Italian)

Commented on by:
P. Schlechtriem, Recht der Internationalen Wirtschaft (RIW), 1995, 592-594
I. Seidl-Hohenveldern, Journal du droit international, 1995, 1055-1056
A. Veneziano, La Convenzione sulla vendita internazionale e i Principi UNIDROIT dei contratti commerciali internazionali in due recenti lodi della Corte arbitrale della Camera di Commercio di Vienna, Rivista dell'Arbitrato, 1995, 547-560

Abstract published in English and French:
- Uniform Law Review / Revue de droit uniforme, 1997, 180-181}}