- Arbitral Award
- International Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation
SALES CONTRACT - BETWEEN A RUSSIAN PARTY AND AN ENGLISH PARTY - SILENT AS TO THE APPLICABLE LAW – REFERENCE TO UNIDROIT PRINCIPLES AS ONE OF RELEVANT LEGAL SOURCES
PENALTY CLAUSE – PAYMENT OF PENALTY FOR DELAY IN PAYMENT OF PRICE – PENALTY GROSSLY EXCESSIVE IN RELATION TO HARM SUFFERED BY AGGRIEVED PARTY (ART. 7.4.13(2) UNIDROIT PRINCIPLES)
A sales contract between a Russian and an English party provided that in case of delayed payment of the price the buyer should pay a penalty in addition to interest at the LIBOR rate. When the buyer actually delayed the payment of the price, the seller asked for the payment of both the interest on the sum not paid in time and the agreed penalty.
The Arbitral Tribunal awarded the interest at the agreed LIBOR rate and rejected the claim for the payment of the penalty. In doing so it referred to Article 7.4.13(2) of the UNIDROIT Principles, according to which the agreed sum to be paid in case of failure to perform may be reduced if turns out to be grossly excessive in relation to the harm resulting from the non-performance and to the other circumstances.
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