There is much to be gained from studying the role of the UNIDROIT Principles of International Commercial Contracts1 in arbitration in general. Parties never (or practically never) make their contracts subject to the UNIDROIT Principles and the courts do not see it as their job to apply them unasked. So it is arbitrators who are likely to ensure their success, so much so that they become a true lex mercatoria, albeit of a different kind from that imagined forty years ago. At the other extreme, arbitrators could frustrate the potentiality of the Principles in this field by applying them only when they have been expressly chosen by the parties.

ICC arbitration is a mine of information, as it is the kind most widely used for non-specialized international commercial contracts (as opposed to maritime trade or sales of goods, which give rise to corporative arbitration).

The Uniform Law Review has published summaries of some of these awards. In its Fall 1999 issue (Vol. 10/No. 2), the ICC International Court of Arbitration Bulletin published a list of 23 ICC awards that had either applied or refused to apply the Principles. 2 As some of these had been previously published elsewhere, the Bulletin chose to publish extracts from 18 of these awards. 3 It subsequently published extracts from a second series of 14 awards in its Fall 2001 issue (Vol. 12/No. 2). 4

What kind of information can be gleaned from studying these awards? Answers are likely to be found to the following five questions:

1. How frequently - in absolute terms, but above all relatively - are the Principles applied or, more generally, taken into consideration in one way or another?

2. Which of the Principles' articles do arbitrators apply?

3. In what situations are the Principles applied? A distinction will no doubt need to be drawn between the following three possibilities: the parties have decided to make their contract subject to lex mercatoria or general principles of law; they have not included any provisions relating to applicable law; or they have chosen a municipal law.

4. What arguments are put forward to support the applicability of the Principles?

5. Is it necessary to distinguish between different ways in which the Principles may be applied or taken into consideration? [Page106:]

Questions 3, 4 and 5 relate to the applicability of the UNIDROIT Principles and will be examined together. The ways in which the Principles are applied, the arguments in support of their application and the various contractual situations are inseparable, as they all form part of the general question of applicability. This, moreover, is by far the most interesting issue and will be the main focus of our attention.

However, I shall begin by briefly considering the first two questions.

1. Frequency with which the Principles are applied

The conclusions that may be drawn are somewhat different depending on whether one only looks at awards that have been published because they mentioned the UNIDROIT Principles, or whether one considers all ICC awards made since the Principles were published.

In the first case, one may distinguish between those awards which, in a given situation - such as the absence of any choice-of-law clause in the contract at issue -, decide to apply the Principles and those that do not. It will be found that, on the whole, most published awards apply the Principles or take them into consideration.

In the second case, which is equally revealing, besides the above-mentioned 37 ICC awards that refer to the UNIDROIT Principles, how many awards during the same period do not include any reference to them? It is difficult to give precise figures, but we can at least give an idea of the relative proportions.

Let us take the awards made between the start of 1996 and the end of 1998, i.e. a period of three years during which the Principles were beginning to become better known. According to ICC statistics, approximately 720 awards were made during this period, of which just less than 20 in fact applied the UNIDROIT Principles in one way or another. Of the 600 or so awards made during the period 1999-2000, only 14 were found to have applied the Principles. These figures say much about the situation at the moment. The question remains as to whether the proportions will change in the coming years.

2. Articles applied or taken into account

It would be a tedious exercise to list all the articles of the UNIDROIT Principles that have been applied by arbitral tribunals. Instead, the following remarks will be made:

a) None of Principles' seven chapters has been ignored. Each has provided arbitrators with rules, from the general provisions of chapter 1, through those on formation, validity, interpretation, etc., to those on non-performance in chapter 7.

b) The provisions most frequently applied are those of chapter 7 on non-performance, which seems natural. Over a third of the articles that have been applied belong to this chapter. [Page107:]

c) Certain articles have met with particular success, namely:

- article 1.7 (good faith and fair dealing),

- articles 4.1 to 4.5 (main principles of contract interpretation),

- article 5.3 (co-operation between the parties),

- articles 6.2.1 to 6.2.3 (hardship),

- article 7.1.3 (withholding performance),

- article 7.4.3 (certainty of harm),

- article 7.4.8 (mitigation of harm),

- article 7.4.9 (interest for failure to pay money).

The records for frequency of application are held by articles 1.7 (applied eight times) and 7.4.9 (applied six times).

d) The principle of good faith and fair dealing is sometimes used to fill gaps in the Principles. For instance, they contain no rules on barring by lapse of time, including the duration of any time bars. According to two arbitral tribunals - those in cases 7110 and 7375 (which are examples of early and important applications to which we shall return) -, the principle of good faith and fair dealing (article 1.7) prevents a claimant from acting so late that the respondent is likely no longer to have the evidence necessary for its defence and to have let the harm for which compensation is claimed get worse. This principle would be a way of determining in each case whether or not the claim is time-barred.

3. The applicability of the UNIDROIT Principles

We must treat separately those awards which, after determining the solution pursuant to the applicable national law (or international convention), then additionally invoke the relevant article of the UNIDROIT Principles to confirm the reasoning upon which it is based and show that this could not be a surprise to the parties. At least nine awards illustrate this process - in cases 7819, 8240, 8540, 8908, 9029, 9594, 9561, 10335 and 10346. In case 8908, for example, the interpretation of a settlement agreement, expressly subject to Italian law, was at issue. The arbitral tribunal applied the rules of the Italian Civil Code relating to contract interpretation and added:

The rules relating to interpretation and good faith contained in the UNIDROIT Principles (in particular, articles 1.7 and from 4.1 to 4.8), which are in all events a useful reference framework for applying and judging a contract of an international nature, also confirm what has been said. 5

Use of the Principles in this way has an educational purpose: it reassures any party that may have been opposed to the application of the municipal law applied (especially where such law had not been chosen by both parties), and it promotes the UNIDROIT Principles as a body of rules whose role is naturally to apply to international contracts.

Yet much more important are obviously those awards that use the Principles as the sole or main basis for the decision reached.

The UNIDROIT Principles are applied and taken into consideration in many different ways. Two broad categories may be distinguished however. In a [Page108:] relative minority of cases, the Principles are applied as lex contractus. This implies that even before the dispute arises the contract has been set within the framework of a system of law likely to be reflected in the Principles, either because the parties have chosen this system or because such system may be considered as objectively applicable (I). In a larger and more varied number of cases, the Principles are not regarded as lex contractus, but merely constitute a body of rules available to arbitrators - rather like lex fori in the case of state courts - coming into play, for instance, when there are shortcomings in the applicable national law (II).

I. The UNIDROIT Principles as lex contractus

The ease with which the UNIDROIT Principles can be considered as lex contractus will depend upon the attitude adopted by the parties when contracting with each other. The parties may have chosen them explicitly, or indicated a preference for transnational rules. Alternatively, they may have been completely silent on the question of applicable law, or have chosen a municipal law or an international convention as lex contractus.

A. Express choice of the Principles by the parties in their contract

There is as yet no ICC award illustrating this situation. Although there may be contracts that parties have made subject to the UNIDROIT Principles, given the fact that the Principles were only published quite recently, these contracts have not yet given rise to disputes or, if they have, the disputes have not reached the stage at which an award is made and subsequently published.

When an arbitral tribunal comes to be faced with such a situation, one can hardly imagine its refusing to apply the chosen rules. However, the 1998 award in case 9419 contains an obiter dictum that suggests that their role is likely to be limited. In the words of the sole arbitrator in this case,

the UNIDROIT Principles could certainly be used for reference by the parties involved for the voluntary regulation of their contractual relationship, in addition to helping the arbitrator in confirming the existence of particular trade usages, but they cannot constitute a normative body in themselves that can be considered as an applicable supranational law to replace a national law, at least as long as the arbitrator is required to identify the applicable law by choosing the rule of conflict that he considers most appropriate, in accordance with the provisions laid down by the international conventions and as provided for in the rules of arbitration within the scope of which he operates. 6

The stance taken here is highly questionable. Even if the UNIDROIT Principles do not constitute a legal system, they form a set of legal rules and there is no theoretical reason why arbitrators should not apply them, as they do the rules of state laws.

This having been said, it should be noted that parties show little enthusiasm for non-national rules. Either they choose a national legal system (which they do in around 80% of contracts), or they say nothing. A total of only 0.8% of the arbitration requests filed with the ICC International Court of Arbitration in 2000 related to contracts subject to general principles of law (0.2%), lex mercatoria (0.2%) or the general practice of international trade (0.4%). [Page109:]

To what extent are the UNIDROIT Principles applied in these rare cases?

B. Reference to transnational principles in the parties' contract

In ICC case 7110, an unnamed state and a British company had entered into nine contracts relating to the sale, maintenance and operation of equipment. Most of these contracts contained the following clause: 'Disputes to be finally settled according to natural justice [alternatively: according to the laws, or the rules, of natural justice] by ICC arbitration in Paris'.

In the words of the arbitral tribunal,

references to 'natural justice' and 'laws' or 'rules' of 'natural justice' found in the majority of the Contracts should be consistently and uniformly interpreted as referring not only to procedural justice but to the special type of substantive justice the parties had in mind, based on the neutrality of the applicable law to the merits and of the means of dispute resolution mechanisms selected by the parties to effectuate substantive neutrality . . . 7

This consideration, together with several others noted by the arbitral tribunal, led the latter to conclude that

the reasonable intention of the parties regarding the substantive law applicable to the Contracts was to have all of them governed by general legal rules and principles in matter of international contractual obligations such as those arising out of the Contracts, which, though not necessarily enshrined in any specific national legal system, are specially adapted to the needs of international transactions like the Contracts and enjoy wide international consensus. 8

It remained to define these general legal rules and principles. The tribunal found that:

general legal rules and principles enjoying wide international consensus, applicable to international contractual obligations . . . are primarily reflected by the Principles of International Commercial Contracts, adopted by UNIDROIT . . . in 1994. 9

This second stage in the tribunal's reasoning, i.e. the step from general principles of law to the UNIDROIT Principles, could be considered too abrupt. A similar remark may be made, as we shall see, when the situation in which the parties have not expressed any choice is contemplated. However, it should be said that when the parties' intention was clearly to exclude any national law - whether by referring to rules of natural justice, lex mercatoria, general principles of law or, as in case 9474, fairness - resorting to the UNIDROIT Principles cannot be other than worthwhile, as the award in case 7110 points out:

rather than vague principles or general guidelines, the UNIDROIT Principles are mostly constituted by clearly enunciated and specific rules coherently organized in a systematic way . . . 10

This possibility is expressly foreseen in the Preamble to the UNIDROIT Principles, which states that they 'may be applied when the parties have agreed that their contract be governed by "general principles of law", the "lex mercatoria", or the like'.

On the other hand, where there is doubt over the parties' intention to exclude any municipal law, this argument in favour of applying the UNIDROIT Principles loses all force. [Page110:]

C. No mention at all of the applicable law in the contract

This is the most interesting situation as far as the status of the UNIDROIT Principles is concerned. It calls for reflection on the following two questions:

1. Should one seek a national system of law by applying conflict-of-laws rules, or forgo this approach and apply transnational rules or principles?

2. If the second alternative is preferred, to what extent do the UNIDROIT Principles reflect transnational law?

1. As regards the first question, the aforementioned award in case 7110 states very clearly as follows:

In respect of transactions like the Contracts, in which (i) there is no express choice-of-law stipulation designating the law of any of the parties or of a third country and where neutrality regarding the applicable laws was a paramount concern denoted by the parties' rejection of each other's law and the absence of any explicit or implicit reference to the laws of a third country ; and (ii) the parties have buttressed neutrality as to the applicable law by agreeing to submit their contractual disputes to international commercial arbitration, albeit without empowering the Tribunal to act ex æquo et bono or as amiable compositeur, it can only be concluded that no national law was judged adequate or adapted to govern such transactions without the risk of disturbing the balance of neutrality between the parties. In consequence, when the parties negotiated and finally entered into the Contracts they only left room for the application of general legal rules and principles adequate enough to govern the Contracts but not originated in a specific municipal legal system. 11

For good measure, it uncompromisingly condemns the conflict-of-laws method:

Such interpretation is particularly appropriate if the only alternative left in absence of express or implied choice-of-law stipulations would be resorting to supposedly choice-of-law neutral and dispassionate criteria, such as a talismanic notion of the localization of the characteristic obligation or an amorphous grouping of contacts or the closest connection noticeable in some national legal systems, which would, by the rule-of-thumb and without taking into account the parties' concerns and expectations as to substantive justice, including neutrality as to the applicable law, impose the law of one of the parties or of a third state which would or might defeat the parties' intentions. 12

Lastly, it notes that the contracts at issue were state contracts and that legislative and judicial delocalization is appropriate to such contracts and in keeping with the parties' expectations.

In June 1996 a similar stance was taken by the arbitral tribunal in case 7375. A United States company had sold goods to a government agency in a Middle Eastern country. There was no choice-of-law clause in the contract. The seller, against whom a claim was brought by the buyer, contended that the claim was time-barred, pursuant to the law of Maryland which it deemed applicable. The buyer relied on its own domestic law, under which the action would not be time-barred.

The arbitral tribunal found that, in the circumstances of the case, the absence of a choice-of-law clause revealed that neither party was prepared to accept the other party's domestic law. There was therefore an implied negative choice, which left the tribunal with three alternatives. It rejected two of them - including the choice of a neutral national law - and, referring expressly to award 7110, decided to apply 'truly international standards as reflected in, and forming part of, the so-called "general principles of law"'. This, it argued, would maintain the equilibrium between the parties and meet the reasonable expectations of both of them. [Page111:]

Case 8261 involved a contract between an Italian company and a government agency in a Middle Eastern country. There was no choice-of-law clause in the contract. In its preliminary award of September 1996, the arbitral tribunal declared that it would base its decision on the terms of the contract, supplemented by general principles of trade as embodied in lex mercatoria.

It is probably no coincidence that in these three cases one of the parties was a state or government agency. This tendency to interpret the silence of the parties as a negative choice is not found in awards relating to ordinary commercial contracts. If one just takes the awards that mention the UNIDROIT Principles, it will be seen that three of them - in cases 5835, 9117 and 9419, relating to contracts without a choice-of-law clause - held that arbitrators had a duty to determine an applicable municipal law. In cases 5835 and 9117, the arbitral tribunal determined this by objective means, taking particular account of the place of business of the party which had to carry out the characteristic performance of the contract. In case 9419, the arbitral tribunal deduced, from the circumstances of the case, an implied choice of the applicable law. Indeed, the lack of an agreement between the parties to choose the law of one or other of them, or the law of a third state, does not in fact amount to an agreement to exclude any municipal law. If there had been such an agreement, why had it not been mentioned? And if it is believed that when no positive agreement has been expressed, this amounts to the agreed exclusion of any national law, why is there no similar inference that when general principles of law are not mentioned this is because the parties wished to exclude them too? The reality is that when the parties do not agree on the applicable law, they simply leave the task of determining it to the arbitrator.

The argument based on the absence of an objective reason for preferring the law of one of the parties to that of the other, in order to decide on the appropriateness of applying rules that do not belong to any municipal legal system, is more acceptable. In case 9875, for instance, the arbitral tribunal considered that 'the difficulties to find decisive factors qualifying either Japanese or French law as applicable to the contract reveal the inadequacy of the choice of a domestic legal system to govern a case like this'. It concluded that '[t]he most appropriate "rules of law" to be applied to the merits of this case are those of the lex mercatoria'. 13

Yet other awards - such as that in case 9479 - simply infer automatically from the lack of choice of a municipal law the need to supplement the provisions of the contract, if required, by resorting to 'usages of international trade'.

2. The five awards discussed above in cases 7110, 7375, 8261, 9479 and 9875, which initially inferred the exclusion of any municipal law and an implied or necessary choice of international trade usages, then went on to state that the UNIDROIT Principles should be applied.

Awards 8261 and 9875 did not go to the trouble of justifying the inclusion of the UNIDROIT Principles in lex mercatoria, which they deemed to be applicable. However, this could not be taken for granted. The UNIDROIT Institute is not the acknowledged legislator of the societas mercatorum. It is not, and does not claim to be, a source of lex mercatoria. Thus, the Principles it has drawn up form part of lex mercatoria only if they coincide with the rules which emanate from a true source of lex mercatoria, namely general principles of law or usages.

The other three awards, as it happens, contain direct references to general principles of law (cases 7110 and 7375) and usages (case 9479). Here, the problem was therefore to establish the link between the UNIDROIT Principles and these sources. [Page112:]

In case 7110, the arbitral tribunal set out five reasons why, in its view, the UNIDROIT Principles are 'the central component of the general rules and principles regarding international contractual obligations'. The first and main reason is as follows:

The reasons why this Tribunal considers the UNIDROIT Principles to be the central component of the general rules and principles regarding international contractual obligations and enjoying wide international consensus, which constitute the proper law of the Contracts, are manifold: (1) The UNIDROIT Principles are a restatement of international legal principles applicable to international commercial contracts made by a distinguished group of international experts coming from all prevailing legal systems of the world, without the intervention of states or governments, both circumstances redounding to the high quality and neutrality of the product and its ability to reflect the present stage of consensus on international legal rules and principles governing international contractual obligations in the world, primarily on the basis of their fairness and appropriateness for international commercial transactions falling within their purview . . . 14

The award in case 7375 is more reserved. Here, the tribunal decided to 'take into account the UNIDROIT Principles, as far as they can be considered to reflect generally accepted principles and rules'. It considered that, although this was more often than not the case, there may be certain articles in the Principles that do not reflect an international consensus.

The award in case 9479 affirms for its part that the UNIDROIT Principles are 'an accurate representation, although incomplete, of the usages of international trade'. 15

In case 9029, on the other hand, application of the UNIDROIT Principles was refused on the ground that they 'are only partly valid, and in many ways are innovative':

In other words, although the UNIDROIT Principles constitute a set of rules theoretically appropriate to prefigure the future lex mercatoria if they are consistent with international commercial practice, at present there is no necessary connection between the individual Principles and the rules of the lex mercatoria, so that recourse to the Principles is not purely and simply the same as recourse to an actually existing international commercial usage. 16

It is sometimes difficult to decide whether or not a given rule in the Principles is in accordance with general principles of law or usages over which there is an international consensus. This is notably the case with regard to the rule on hardship (arts. 6.2.1 to 6.2.3). Although the Principles are declared to be generally applicable in case 7110, it is said in the second award rendered in this case, although without actually mentioning these articles, that 'the theory of changed circumstances does not form part of widely recognised and generally accepted legal principles'17 (see also case 8873 referred to below in section D). This position is consistent with the majority tendency amongst arbitrators that emerged previously. In cases 7365 and 9479, on the other hand, articles 6.2.1 and following of the Principles are applied unhesitatingly.

Given these conceptual and practical difficulties, there is reason to pause before encouraging arbitrators to declare the UNIDROIT Principles applicable on the sole ground that the parties have not included a choice-of-law clause in their contract. Such a solution could be reserved for state contracts. [Page113:]

D. Presence in the contract of a clause designating a municipal law

No award, of course, has tried fully to substitute the UNIDROIT Principles for the law chosen by the parties. The parties' choice is respected. The question is to know whether the UNIDROIT Principles are to be added to or occasionally substituted for the national law chosen as lex contractus.

The reasoning that could lead to a positive answer is based on the rule found in certain national laws, the 1961 Geneva Convention and in arbitration rules, according to which '[i]n all cases the Arbitral Tribunal shall take account of . . . the relevant trade usages' (art. 17(2), ICC Rules of Arbitration.).

On the basis of this rule, the award in case 9593 considered that the obligation to cooperate in good faith referred to in article 5.3 of the UNIDROIT Principles should apply as a usage of international trade. As the arbitral tribunal noted, it so happened that an identical solution was to be found in the national law chosen by the parties. One may wonder, however, if this had not been so, whether the UNIDROIT Principles would have prevailed over the national law.

While noting that the UNIDROIT Principles 'are not of mandatory but only of persuasive nature', 18 the arbitral tribunal in case 10022 likened them to the trade usages mentioned in article 17 of the ICC Rules, which this provision says are to be applied '[i]n all cases'.

On the basis, not of the ICC Rules, but of the reference to trade usages found in Czech law applicable to the contract, the award in case 9753 also gave a broad meaning to the concept, under which it included the principle of pacta sunt servanda and the duty to cooperate in good faith laid down in articles 1.3 and 1.7 of the UNIDROIT Principles.

On the other hand, at least two awards have interpreted the concept of usage more narrowly.

According to the award in case 9029,

international commercial usages are of strictly interpretative and integrative value, to the extent that there are gaps in national regulations usages . . . all the more so when the parties have chosen national law as the law applicable to their relationship, it being certainly not possible, in such a case, to substitute international commercial usages for the national law chosen by the parties with regard to institutions, actions, and effects, for which the latter makes special provision. 19

For this reason, the award excludes the rules of the UNIDROIT Principles relating to gross disparity and hardship.

The award in case 8873, for its part, limits the complementary or divergent role of usages to 'true usages, that is to say usages widely known and regularly observed in the branch concerned'. Here, the arbitral had to decide upon the application of articles 6.2.1 relating to hardship and in so doing expressed the view that hardship 'constitutes a quite exceptional principle that is accepted only in the context of contractual clauses'. 20 This award therefore rules out the possibility of considering the provisions on hardship in the UNIDROIT Principles as trade usages.

In conclusion, it is extremely unusual for the UNIDROIT Principles to be adopted as lex contractus, if this is taken to mean, as it should, a law that is applicable independently of the arbitrator, who merely uncovers its pre-existing applicability. [Page114:]

It is more common to find cases where arbitrators decide to use the UNIDROIT Principles as they would a body of rules capable of helping them to settle the dispute.

II. The UNIDROIT Principles as an equivalent to lex fori

An arbitral tribunal does not have a lex fori, insofar as its decisions are not made on behalf of any state. Nevertheless, it sometimes needs one, particularly when it would seem to be impossible or inappropriate to apply certain rules of the lex contractus. In such cases, the UNIDROIT Principles may serve the purpose.

Sometimes the parties invoke the Principles during the arbitration proceedings. Sometimes arbitrators resort to them because the applicable municipal law does not provide the answer to the question at hand. Sometimes they are used to fill the gaps in an international convention chosen as lex contractus. And lastly, arbitrators sometimes draw upon them when seeking guidelines for interpreting the contract at issue.

A. Express agreement by the parties to the application of the UNIDROIT Principles by the arbitral tribunal

Under French law, parties may ask a court to apply French law (lex fori), even though the lex contractus is a foreign law. Similarly, it is conceivable that at the start of arbitration proceedings the parties agree to ask the arbitral tribunal to apply general principles of law, or even specifically the UNIDROIT Principles, despite the fact that the contract is subject to a municipal law.

At least two ICC awards illustrate this situation. It may be assumed that in both cases this option was suggested to the parties by the arbitral tribunal.

In case 8264, the terms of reference contained the following clause:

With reference to article . . . of the agreement, the arbitral tribunal shall take into account:

a) the applicable laws in Algeria that govern this agreement and the performance of the agreements that follow it or result from it,

b) the parties' reasonable predictions in light of the aims and objectives of the agreement and its underlying causes, and

c) general principles of law and international trade usages. 21

In case 8331, the arbitral tribunal recalls that, according to the parties' agreement,

the Arbitral Tribunal shall apply the relevant agreements between the parties and, to the extent that the Arbitral Tribunal finds it necessary and appropriate, the UNIDROIT Principles of International Commercial Contracts of May 1994 shall be applied by the Arbitral Tribunal. 22

Given that the legal issues are already obvious when the terms of reference are drafted, the risk of gaps, which is the main impediment to choosing the UNIDROIT Principles as lex contractus when contracting, can be assessed with sufficient security. [Page115:]

B. No answer in the applicable municipal law to the legal question raised

In many instances, the applicable municipal law - whether chosen by the parties or by the arbitral tribunal - does not provide the arbitrators with a solution to the legal question before them.

1. Lack of proof of the relevant rule of the applicable municipal law

International arbitrators are not familiar with the rules of the applicable law, nor, moreover, is this expected of them. The parties are required to prove this law in one way or another. However, sometimes they fail to do so, or the information they provide is incomplete or too uncertain.

In case 8502, French and Dutch buyers brought a claim against the Vietnamese exporter that had failed to deliver the rice as set down in the sales contract. There was no applicable law clause in the contract, but it is nowadays accepted that when the parties have not specified their wishes, the applicable law is that of the seller. However, the Vietnamese seller failed to take part in the arbitration. Rather than ask the claimants unilaterally to prove the content of Vietnamese law on compensation for harm caused by the non-performance of the contract, the arbitrator - justifiably it would seem - applied article 7.4.6 of the Principles (proof of harm by current price).

In other cases, the relevant statute of the applicable law is produced, but its interpretation remains unclear. Some arbitral tribunals have assumed that in such cases the correct interpretation is that which corresponds to the UNIDROIT Principles.

In case 5385 the arbitral tribunal interpreted several articles of the applicable Kuwaiti civil code in the light of the corresponding articles of the UNIDROIT Principles. There is no reason to criticize this approach, insofar as it would have been impossible or simply too difficult to establish the prevailing interpretation under Kuwaiti law. However, the tribunal went too far in respect of gross mistake when, after stating that '"[g]ross mistake" under Kuwaïti law is not different from [the] generally accepted definition [to be found in article 7.1.6 of the Principles]', it added: 'Had a narrower definition of "gross mistake" been established under Kuwaïti law, the Tribunal would have had to follow "principles generally applicable in international commerce" . . ., i.e. the definition recorded hereinabove.' 23 The arbitral tribunal had itself declared Kuwaiti law to be applicable and could not therefore take it upon itself to decide, according to its own preferences, that at certain times the rules of this law would apply and at others the UNIDROIT Principles. An award made under such conditions loses all credibility.

In this respect, the position of the arbitral tribunal in case 7365 (Cubic Defense Systems v. Ministry of Defence of Iran) is to be preferred. The two contracts at issue were subject to Iranian law 'in effect at the date of [the] contract', but both parties had agreed during the arbitration proceedings that 'general principles of international law and trade usages' would be taken into consideration. The arbitral tribunal was required to decide from when interest was to be awarded. Although it noted a tendancy in international commercial law to award interest from the time when the payment has become due (UNIDROIT Principles, art. 7.4.9), it stated that it could not apply this principle 'as a rule in clear contradiction to an unambiguous provision of the Iranian law chosen by the parties', since article 721 of the Iranian [Page116:] code of civil procedure expressly provided that interest should be calculated as from the date on which it is formally claimed.

2. Incompleteness or inadequacy

According to at least one award - in case 9029 -, 'international commercial usages are of strictly interpretative and integrative value, to the extent that there are gaps in national regulations that could usefully be filled by the aforesaid usages'. 24 This remark could also apply to the UNIDROIT Principles.

In actual fact, national laws are not incomplete. Even if a question has not been expressly addressed or settled in a statute or in case law, a court can always determine the solution to be inferred from the context of the other rules of the legal system, in keeping with its underlying values. On the pretext that there are gaps in the law, arbitrators in fact exclude a rule of the applicable law because they consider it to be unsuited to an international context.

In case 8486, a Turkish party had ordered a sugar-cube production plant from a Dutch company. The Turkish party failed to make the payments which had been agreed upon, relying mainly on unforeseen economic changes in the Turkish sugar-cube market. Under Dutch law, which was applicable to the contract, a court may modify or terminate a contract when, due to unforeseen circumstances, it is unreasonable or unfair to perform it. However, the sole arbitrator held that, when the provision is applied in an international context, regard must be had to the legal convictions valid in international contract law. In this context the principle of pacta sunt servanda should prevail. Article 6.2.1 of the UNIDROIT Principles provides that '[w]here the performance of a contract becomes more onerous for one of the parties, that party is nevertheless bound to perform its obligations subject to the . . . provisions on hardship'. This is the provision that in the end the arbitrator applied.

Such reasoning is acceptable when the inadequacy is obvious. This is for instance the case where national laws set a legal rate for interest for failure to pay money, without any differentiation according to the currency of the contract. Yet if the international nature of contracts is systematically invoked in order to exclude the provisions of the chosen law in favour of the principles applicable to international contracts, the parties' forecasts will be undermined without any real justification.

C. Gaps in the international convention chosen by the parties as lex contractus

In case 8547, the arbitral tribunal decided that, as the Convention relating to a Uniform Law on the International Sale of Goods (The Hague, 1 July 1964), named as the governing law in the contract, did not cover all questions, it was 'appropriate to turn to the UNIDROIT Principles which provide useful complement to fill the lacuna and allow to find proper solutions'. 25 The tribunal applied in particular article 7.1.3 , according to which a party may withhold its performance until performance has been effected or tendered by the other party.

It is nowadays more common for parties to refer to the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980). It also contains gaps, in which case, pursuant to its article 7(2), questions must be settled 'in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law'. [Page117:]

Although it would be ill-considered to contend that the Vienna Convention is based on the UNIDROIT Principles (which had not been formulated when the Vienna Convention was negotiated), arbitrators are inclined to use the UNIDROIT Principles to fill gaps in the Convention. In case 8817, for instance, the arbitrator found that 'the provisions of the Convention and its general principles, now contained in the UNIDROIT Principles of International Commercial Contracts, are perfectly suited to resolving the dispute'. 26 In another case - 8769 - the arbitrator stated that since there was no rule in the Vienna Convention on the rate of interest for failure to pay money, he would determine such rate by applying article 7.4.9 of the Principles.

D. A pure problem of contract interpretation for arbitrators

Although in theory the rules of interpretation should be found in the proper law of the contract, in an international contract it is probably unrealistic to determine what is supposed to be the real and common will of both parties by reference to a single national law which may be found to be applicable, especially if such law was not expressly chosen by the parties at the time of contracting. A broader approach is preferable, and the UNIDROIT Principles can provide it.

In a number of cases (e.g. 8908, 9117, 9651 and 9759), the arbitral tribunal directly referred to chapter 4 of the UNIDROIT Principles (entitled 'interpretation') without seeking to identify the law applicable to the contract. In cases 9651 and 9759 this approach was particularly justified because it was the choice-of-law clause in the first case and the arbitration clause in the second that required interpretation. For obvious reasons, a conflict-of-laws approach ill suits such clauses.

* * *

There is a tendency for awards made in the context of ICC arbitration to declare the UNIDROIT Principles applicable as lex contractus when the parties have stipulated that the arbitrators should apply 'general principles of law', 'international trade usages', 'rules of natural justice' or 'principles of equity and fairness'. As a body of written rules, endowed with considerable scholarly authority, the UNIDROIT Principles may help arbitrators to fill out the vague concepts to which the parties have referred.

When parties have not included in their contract any provisions relating to the choice of applicable law, there is also a tendency to resort to the UNIDROIT Principles, but it concerns only a small minority of cases. Indeed, it is difficult to regard the UNIDROIT Principles as embodying the law naturally applicable to international contracts when most users of arbitration do not even know that they exist and given that they are not the same thing as either international trade usages or rules that have been accepted by all or, in certain cases, most national legal systems. It is certainly too early to analyse the parties' silence as a wish to reject any municipal system of law in favour of the UNIDROIT Principles.

The most convincing applications of the UNIDROIT Principles are probably those that allow arbitrators to resolve specific difficulties, such as lack of proof of the relevant rule in the applicable national law, problems relating to the interpretation of this rule, a gap in the international convention chosen by the parties as lex contractus, problems of contract interpretation, for which chapter 4 of the Principles offers a simpler solution than the more roundabout conflict-of-laws approach, etc. For arbitrators, the UNIDROIT Principles may represent a kind of lex fori and be put to similar uses as lex fori in state courts.

1
Hereafter referred to as the UNIDROIT Principles or the Principles.

2
F. Marrella & F. Gélinas, 'The UNIDROIT Principles of International Commercial Contracts in ICC Arbitration' (1999) 10:2 ICC ICArb. Bull. 26 at 27-29.

3
(1999) 10:2 ICC ICArb. Bull. 33-109.

4
(1999) 12:2 ICC ICArb. Bull. 56-115.

5
(1999) 10:2 ICC ICArb. Bull. 83 at 86 [English translation from original Italian].

6
(1999)10:2 ICC ICArb. Bull. 104 at 106 [English translation from original Italian].

7
(1999) 10:2 ICC ICArb. Bull. 39 at 48.

8
Ibid.

9
Ibid. at 49.

10
Ibid.

11
Ibid. at 46.

12
Ibid.

13
(2001) 12:2 ICC ICArb. Bull. 95 at 97.

14
Ibid. at 49.

15
(2001) 12:2 ICC ICArb. Bull. 67 at 69.

16
(1999) 10:2 ICC ICArb. Bull. 88 at 90 [English translation from original Italian].

17
Cited in F. De Ly, 'Netherlands' in M.J. Bonell, ed., A New Approach to International Commercial Contracts: the UNIDROIT Principles of International Commercial Contracts (London: Kluwer, 1999) 203 at 231.

18
(2001) 12:2 ICC ICArb. Bull. 100 at 100.

19
(1999) 10:2 ICC ICArb. Bull. 88 at 91.

20
(1999) 10:2 ICC ICArb. Bull. 78 at 7980 [original in French].

21
(1999) 10:2 ICC ICArb. Bull. 62 at 63 [original in French].

22
(1999) 10:2 ICC ICArb. Bull. 65 at 65.

23
(1999) 10:2 ICC ICArb. Bull. 33 at 36.

24
(1999) 10:2 ICC ICArb Bull. 88 at 91.

25
(2001) 12:2 ICC ICArb. Bull. 57 at 58.

26
(1999) 10:2 ICC ICArb. Bull. 75 at 77 [English translation from original Spanish].