- Arbitral Award
- ICC International Court of Arbitration, Paris 9593
LONG-TERM CONTRACTS - DISTRIBUTION AGREEMENT - PLURALITY OF PARTIES OF DIFFERENT NATIONALITIES (ENGLISH, JAPANESE, IVORIAN) - PARTIES' CHOICE OF DOMESTIC LAW (IVORIAN LAW) AS LAW GOVERNING THE CONTRACT - ARBITRAL TRIBUNAL TO CONSIDER TRADE USAGES (ART. 13 (5) ICC RULES) - REFERENCE TO UNIDROIT PRINCIPLES
PARTIES' DUTY TO COOPERATE IN PERFORMANCE OF CONTRACT (ARTS. 1134(3) AND 1135 IVORIAN CIVIL CODE; ART. 5.3 [ART. 5.1.3 OF THE 2004 EDITION] UNIDROIT PRINCIPLES)
An Anglo-Japanese supplier and an Ivorian distributor entered into a number of exclusive distribution agreements. In view of the distributor's failure to make payment, the supplier decided to terminate the agreements. During the dispute, each party accused the other of bad faith and lack of cooperation in the contractual performance.
The contracts contained a choice of law clause in favour of a particular domestic law (Ivorian law).
The Arbitral Tribunal held that, in addition to applying Ivorian law as the chosen law (Art. 13(3) ICC Rules), it would also take into account, pursuant to Art. 13(5) of the ICC Rules, the relevant trade usages.
The Arbitral Tribunal pointed out that, under Art. 1134(3) and Art. 1135 of the Ivorian Civil Code, parties must cooperate in good faith in the course of performance in order to achieve their contractual purposes. In order to confirm its conclusion that "[t]he obligation to cooperate in good faith in the performance of a contract [amounts] to a general principle applicable to international trade", the Arbitral Tribunal referred, without further explanation, to Art. 5.3 [Art. 5.1.3 of the 2004 edition] of the UNIDROIT Principles.
As stated in Clause 1.2 of the Dealer Agreement and Clause 13.1 of the Supplementary Agreement [...], the law governing the Agreements and their interpretation is the law of the Republic of the Ivory Coast.
Thus, according to Article 13(3) of the ICC Rules, the Arbitral Tribunal must apply the laws of the Ivory Coast in order to decide the merits of this dispute.
Pursuant to Article 13(5) of the ICC Rules, the Arbitral Tribunal shall also take into account the provisions of the contract and the relevant trade usages. In doing so, the Arbitral Tribunal will pay particular attention to the specific nature of the Agreements and to the context within which they were entered into. As requested by Article 1156 of the Civil Code of the Ivory Coast, the Arbitral Tribunal will look for the real intent of the parties and not only the literal wording of the Agreements.
Article 1134, paragraph 3 of the Ivorian Civil Code stresses that contracts must be performed in good faith. Furthermore, Article 1135 of the same code recalls that a contract binds the parties not only according to its wording, but also to the consequences thereof resulting from equity custom and the law. In a contractual relationship which is the extension in time of previous relations between a Japanese group and an Ivorian group, constitutes the result of negotiations between English, Japanese and Ivorian parties and deals with the distribution in the Ivory Coast of Japanese products, the custom to be taken into consideration by the Arbitral Tribunal within the framework of Article 1135 of the Ivorian Civil Code is to be found within the usages of international trade.
One consequence of the principle recalled by Article 1134, paragraph 3 of the Ivorian Civil Code, according to which contracts must be performed in good faith, is that the parties must cooperate in good faith to reach the common goals contractually agreed upon. It is on the basis of the identical text of Article 1134, paragraph 3 of the French Civil Code that French courts have decided that good faith and loyalty oblige a party to a contract to facilitate the performance of its obligation by the other party […] Indeed, as written years ago by the French lawyer Demogue: " les contrats forment une sorte de microcosme [...] une petite société où chacun doit travailler dans un but commun, qui est la somme des buts individueis, poursuivis par chacun, absolument comme dans la société civile ou commerciale " (R. Demogue, Traité des Obligations, 1927, [vol] 1'V~ p. 191). Such obligation to cooperate in good faith in the performance of the contract has also become a fundamental element of the usages of international trade applicable to this case through Article 1135 of the Ivorian Civil Code and Article 13(5) of the ICC Rules. Such usage was pointed out by several awards rendered under the aegis of the International Court of Arbitration of the ICC [...].
Further in a comparative study, Unidroit came in the conclusion that the obligation to cooperate in good faith in the performance of a contract amounted to a general principle applicable to international trade. Accordingly, this principle was reflected under Article 5.3 of the Unidroit Principles of International Commercial Contracts : " Each party shall cooperate with the other party when such cooperation may reasonably be expected for the performance of that party's obligations."
In conclusion, the Arbitral Tribunal will make its decision on the validity of the termination of the Agreement on the basis of the text thereof, in the light of the law of the Ivory Coast which requires good faith in the performance of contracts, such requirement also deriving from the usages of international trade.
Original in English (excerpt):
- ICC International Court of Arbitration Bulletin, Vol. 10, No. 2, Fall 1999, 107-109}}