1988 ICC Rules of Arbitration

CISG Arts. 53, 54, 74

The dispute concerned the payment of goods ordered within the framework of an 'agency agreement' between Claimant (seller) and Defendant (purchaser). The purchaser refused to take delivery of the goods shipped to it, alleging cancellation of orders by its own customers and proposing alternative terms of payment. The parties failed to reach an agreement on such suggested amendments, following which the seller initiated arbitration proceedings in accordance with the arbitration clause in the 'agency agreement'. It requested payment of the price of the goods, or, as an alternative, coverage of the cost of returning the goods to its factory. Given that the dispute concerned an isolated transaction within a long-term agreement and that the arbitration clause was in the latter, the sole arbitrator first considered the question of her own jurisdiction, before examining the claims laid before her.

With respect to the arbitrator's jurisdiction

'A contract called "Agency Agreement" had been signed between Claimant and Defendant . . . under which Defendant was appointed as an agent for Claimant in the state of Israel. This Agreement purports to be a basis for the whole commercial relationship between the parties, who had been trading together for some time.

Article 6a of the Agreement provides that "all disputes, controversies or differences which may arise between the parties out of or in connection with this agreement or the breach thereof shall be referred and settled by the arbitration court of the International Chamber of Commerce in Paris in accordance with the respective provisions of rules and by laws of the said arbitration court".

"The award to be rendered shall be final and binding upon both parties."

The claim as expressed in the Request for Arbitration filed by Claimant referred to payment related to some goods ordered from Claimant by Defendant on . . .

The initial contract is qualified as an "Agency Agreement", whereas the present dispute relates to payment of a sale of goods. Therefore, the application of the jurisdiction clause of the Agreement to the present dispute must be checked as a preliminary issue.

The disputed order of goods has been signed during the validity of the Agreement and pertains to some goods produced by Claimant to be distributed in Israel by Defendant. It has been handled by the parties as an application of the said Agreement . . .

The Agreement sets out in its Article 7 that "all relations between the parties fall under this agreement".

Therefore, the order sent by Defendant to Claimant on . . . and the subsequent litigation is in connection with this Agreement.

The arbitration clause provided in art. 6 of this Agreement is applicable to the present case. The arbitrator does have jurisdiction to decide on the merits of the claim.'

With respect to the merits

'Performance of the Agreement and consequences

1. The terms of the agreement are binding on the parties. This rule is applicable not only as a general principle in international business ("Pacta Sunt Servanda") but also as a legal obligation, expressed as such in the relevant concerned legal systems, either national or international and the INCOTERMS, to which the parties have expressly referred in agreeing on an "ex-work" sale.

The parties having not expressed any choice of law to govern their contract, the Arbitrator must find in the relevant circumstances which system is applicable.

In this respect, it must be noted that the parties have clearly agreed on an international sale of goods, in which they refer to the "Ex Work" [I]ncoterm.

The choice of the "Ex Work" [I]ncoterm expresses a localisation of the performance of the contract at the place where the seller is established, namely in Italy.

Therefore, it cannot exceed the parties['] expectations to refer to the rules applicable to the international sales of good[s] in Italy, in order to rule on the present dispute.

The Vienna Convention being ratified in Italy, it is therefore decided to apply it where the parties['] agreement does not provide for any solution, in respect of the present disputes.

2. The parties had agreed on an international sale of goods produced and sold by Claimant and bought by Defendant.

Claimant has performed its own obligations, by shipping the goods as per Defendant's instructions. As a buyer, Defendant's obligation has two main branches: payment of the price and taking delivery of the goods.

No payment was received and Defendant did not take delivery of the goods, although they did not express any reserve.

The agreement of the parties does not contain any provision as to sanctions and remedies. However, one can take in consideration the principles of art. 53, 54 and 74 of the Vienna Convention. Especially art. 74 gives right to compensation for all the predictable damages arising out of the fundamental non performance of one party's obligation.

Defendant has refused to pay the price of the goods it had ordered, and not disputed that Claimant had fulfilled its own obligations as per the mutual agreement of the parties.

Defendant will have to compensate Claimant for the loss incurred as a consequence of its fundamental non performance.

Such compensation will include all the damages resulting from Defendant's refusal to take delivery and pay the price of the goods, that is payment of . . ., as a principal amount.

The price of the goods will bear interest for the period from . . ., that being the date on which Defendant was put on notice by Claimant to fulfil its obligation, until full payment; the rate of the said interest will be of 5%, this being the legal rate currently in force in Italy, the country whose legal system is applied to the dispute.

The costs of return will not give rise to any compensation, as they had been claimed for as an alternative point only. Furthermore, no evidence nor information has been provided regarding the actual situation or shipment of the goods, so no compensation is to be ordered in this respect.'