Claimant objects to the termination with immediate effect of an exclusive distribution agreement relating to food products between itself and Respondent. The latter had given as the reasons for termination (i) the change that had occurred in Claimant's management, which in its view came within the causes of termination provided for in the agreement, and (ii) Claimant's lack of sufficient resources to pay the sums due within the agreed time-limits. According to Claimant, such reasons concealed unfair competition, as the change in question was the dismissal of the general manager, who, it alleges, had created a rival undertaking with which Respondent had established commercial relations competing with those existing between Claimant and Respondent. In determining the applicable law, the sole Arbitrator takes into account the nature of the contractual relations between the parties. He decides to apply the United Nations Convention on Contracts for the International Sale of Goods (Vienna Convention) and at the same time draws upon the <b>Unidroit Principles</b> which echo them (namely, in the present case, the force of prior practices between the parties (1.8) and mitigation of harm (7.4.8)). The Arbitrator finds that there was no justification for the termination of the agreement in such conditions and awards Claimant damages for the harm caused by the severance of the agreement and commercial relations of several years standing and by the unfair competition which it had suffered. Interest is added to the damages at the rate applicable to the currency in which the latter are calculated. Respondent is ordered to bear the entire costs of the arbitration, as Claimant had been successful in almost all its claims.

<i>With respect to the applicable law:</i>

'Bearing in mind, firstly, that the contractual relationship between Respondent and Claimant ended in September 1995, and that the task of the arbitrator is limited to judging a dispute, the arbitrator feels there is no need to determine the applicable law as the parties could have done at the start of their relationship.

Bearing in mind, secondly, the provisions of Article 13.3 of the ICC Rules of Conciliation and Arbitration, which invite the arbitrator to determine the law applicable to the merits of the dispute, the sole arbitrator believes that the starting point for determining the applicable law should be the claims and counterclaims made in the dispute. . . .

Analysis of the grounds for this first claim for compensation shows that the part connected with the activity of exclusive distributor represents less than one tenth of the compensation relating to Claimant's loss of profits in trading the goods manufactured by it.

This means that the quality of contract of sale prevails over that of distribution contract, if the contractual relationship is taken as a whole. Claimant's other two claims are a consequence of the cancellation . . . or connected with the circumstances of the cancellation of the contractual relationship . . .

In the presence of a contractual relationship qualified overall as one of sale, the arbitrator must, in order to resolve the dispute, determine an appropriate law, as he is invited to do by Article 13.3 of the ICC Rules of Conciliation and Arbitration. According to widespread case law in arbitration practice, one of the criteria for the appropriate nature of a rule is its presence in the legal systems of both parties. This is the case in the United Nations Convention on Contracts for the International Sale of Goods, signed in Vienna on 11 April 1980. This Convention came into force in Denmark on 1 March 1990 and in Spain on 1 August 1991, which date is after the signature of the contract but sufficiently remote for the text to have been studied and commented on in particular in Spain. . . .

Article 3.2 of said Vienna Convention calls for it to be applied in situations where, as in the present case, there is both a provision of a service and a sale, and the preponderant part of the obligations arise from the sale. The same Convention encourages the choice of a single law, desired by both parties, for dealing with disputes.

Furthermore, 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. . . .

It should also be understood that the provisions of the contract signed in . . . shall apply as the law governing the parties.'

<i>With respect to Claimant's inability to pay the sums due within the time-limit set by Respondent:</i>

'The succession of events highlights the fact that Respondent attempted to change the practices and habits followed by the parties from at least March 1993. The change concerns the time-limit for payment and the requirement of a constant balance between deliveries and their payment.

According to Article 9.1 of the United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980, "the parties are bound by any usage to which they have agreed and by any practices which they have established between themselves". This rule was extended to all international commercial contracts by the Unidroit Principles. Principle 1.8 provides that: "The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves."

The arbitrator considers that such a rule is perfectly suited to resolving the dispute between Claimant and Respondent, even though the cancelled contract is a contract for exclusive distribution. Hence, in order for previous practices to be changed, the proposal made by one of the contracting parties needed to be accepted by the other party. . . .

The changes Respondent wished to make should have been negotiated and accepted. In the absence of agreement between the two parties, the arbitrator considers that the fact of maintaining the practices accepted previously - at least tacitly - by both parties does not constitute "gross negligence" on the part of Claimant.

The arbitrator does not consider the reason given for denouncing the contract, which refers to the lack of means of paying within the time-limit fixed by Respondent, to be properly founded.'

<i>With respect to Claimant's request to be compensated for the interruption in its business resulting from its being unable to use other suppliers' products:</i>

'. . . the arbitrator considers that the sudden, unexpected interruption of deliveries to Claimant caused harm to the company. Such harm took the form of difficulties in adapting to a new situation requiring changes in manufacturing arrangements. The arbitrator notes that Claimant neither provides proof that these difficulties lasted for a year nor indicates what efforts it made and what difficulties it encountered during the stage of adapting to different conditions and products.

Respondent points out pertinently that it is a principle of international commercial law that the party suffering harm must take the necessary steps to mitigate the harm. For contracts of sale, this rule is expressed in Article 77 of the Vienna Convention in the following terms: "A party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss should have been mitigated."

In general, a similar rule is set out in Article 7.4.8. of the Unidroit Principles, which states: "The non-performing party is not liable for harm suffered by the aggrieved party to the extent that the harm could have been reduced by the latter party's taking reasonable steps."

In the absence of indications as to the efforts and attempts made by Claimant during the alleged year of inactivity, the arbitrator considers that this commercial inactivity was caused in part by Claimant's inertia.'