The respondent manufactured and sold to A propulsion devices to be installed on machines manufactured by A. These devices included engines, which were to be inserted into casing manufactured by B pursuant to a contract between B and the respondent. A fire broke out in the engine of a machine supplied by A to C, which was equipped with such a propulsion device. C claimed damages from A and the two companies came to a settlement. A was subsequently indemnified by its insurer, for part of the settlement amount. The insurer then initiated this arbitration as A's subrogee, in order to seek indemnification from the engine manufacturer.

'3. Place of Arbitration

The place of arbitration and the making of this Interim Award, is Paris, France, as agreed between the parties and as confirmed by the International Court of Arbitration of the ICC (the "ICC Court").

4. Jurisdiction of the Arbitral Tribunal

The Arbitral Tribunal derives its jurisdiction from Article XXXIII of the "Basic Agreement" made between . . . (hereinafter referred to as [A]) and [Defendant] . . . (herein called "The Basic Agreement") which states :

In the event of a dispute between the parties hereto with respect to the interpretation, performance, or breach of this Agreement and if the parties are unable to resolve the dispute by mutual agreement, the matter shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the said Rules. The place of arbitration shall be Paris, France.

[Claimant] is an insurance company and asserts that it is acting under a right arising under such Basic Agreement to which it has succeeded by way of subrogation as result of the indemnification of a loss to its insured, [A].

. . . . . . . . .

7. Preliminary Issues

7.1 Based on the claims of the Parties, as reflected in the Terms of Reference, and the respective written Submissions of the Parties . . ., a number of Preliminary Issues are to be determined. Those Preliminary Issues, as identified in the Terms of Reference and in Procedural Order No. 1, are the following:

- Jurisdiction: Does the Arbitral Tribunal have jurisdiction with respect to [Claimant]'s claim?

- Basis for Claim: Does [A] have a claim against [Defendant] arising out of the supply of the propulsion system and the Basic Agreement?

- Subrogation: Does [Claimant] have a right of subrogation to any claim which [A] may have or had against [Defendant]?

- Applicable Law: Is the applicable law governing the substance of the dispute (and/or the Preliminary Issues) the law of New York, or should some or all aspects be governed by French law?

- Limitation: Are any or all of [Claimant]'s claims by barred by Statute of Limitation?

7.2 It is these Preliminary Issues which this Preliminary Award now addresses, although, for ease of comprehension, in a somewhat revised sequence.

8. Subrogation

Does [Claimant] have a right of subrogation to any claim which [A] may have or had against [Defendant] arising out of the above events?

8.1 It is uncontested that [Claimant]'s only right, if any, to bring this action is as an insurer, subrogated to the rights, if any, of its insured. As such, [Claimant] has no independent rights against [Defendant], and has no rights greater than or different from those of its insured.

8.2 Moreover, it does not appear to be contested that, if [Claimant] was bound to [A] under a valid insurance contract and indemnified [A] for a claim under such insurance contract, [Claimant] has a right by way of subrogation under French law to any related claims which its insured may have had against third parties (Insurance Code, Art. 121-12, para. 1). French law must control the rights and obligations as between a French insurer and a French insured.

. . . . . . . . .

8.4 The Arbitral tribunal concludes that, under French law, as applicable between a French insurer and a French insured, the indemnifying insurer is subrogated to such claims as the insured may have, if any, against third parties up to the amount of any indemnity paid (See Code des Assurances, Art. 121-12; and see para. 8.5 below). The Arbitral Tribunal further concludes that, in the present circumstances, the existence of the payment "Quittance" (receipt) . . . even though it does not specifically refer to [Claimant] as such, is adequate evidence of the payment of an indemnity . . . by [Claimant] as the lead underwriter for the co-insurers under the policy . . . referred to. The Arbitral Tribunal further accepts the copy of the insurance policy between [A] and the group of co-insurers, of which [Claimant] is shown as lead . . . as adequate evidence of the existence of such insurance coverage. While the copy of the policy attached as an exhibit is not executed, the Arbitral Tribunal recognizes, as argued by the Claimant, the common practice in the insurance field, whereby coverage is frequently and automatically continued while final negotiations and formalities for annual policies are still pending. The Arbitral Tribunal also notes that the insurance policy . . . specifically refers to the same policy number . . . as does the Quittance and that the policy specifically confirms the right of subrogation . . . up to the amount paid.

. . . . . . . . .

9. Jurisdiction and Basis for Claim

Does the Arbitral Tribunal have jurisdiction with respect to [Claimant]'s claim; and does [A] have a claim against [Defendant] arising out of the supply of the propulsion system and the Basic Agreement . . .?

9.1 The Arbitral Tribunal considers these two issues, while stated separately in the Terms of Reference, to be so closely inter-related that they must be considered together.

9.2 The position of the Defendant . . . can be summarized as follows:

The Defendant asserts that if there is a claim (initially by [A]) to be brought against [Defendant], and if the Arbitral Tribunal is to have jurisdiction over any such claim, it can only be on the basis of the Basic Agreement, which contains the arbitration clause.

- to the extent such claim involves a design or manufacturing effect, Defendant maintains it must be based on Art. XVI.1 of the Basic Agreement, setting out various warranty provisions;

. . . . . . . . .

9.3 The Claimant contends, to the contrary, that its claims (formerly those of [A]) are based on the Basic Agreement but not only on the warranty provisions of Art. XVI.1. In particular, the Claimant argues that Art. XX expressly foresees the possibility of a buyer, here [A], bringing a claim against [Defendant] for damages paid by [A] to a customer. That, Claimant maintains, is precisely the case at hand and gives rise to a claim subject to arbitration. The Claimant also alludes to some more general principles of liability . . . although it does not go into detail and does not explain how such principles would lead to an arbitrable claim.

. . . . . . . . .

9.4 Having reviewed the submissions of the Parties, and the applicable exhibits, the Arbitral Tribunal concludes as follows:

9.4.1 The Basic Agreement is less than clear in the intended relationship between Arts. XVI.1 and XX.1.1. To some degree, at first blush, those Articles seem contradictory.

The Defendant has attempted to offer an explanation, in arguing that Art. XX.2, at least, is intended to relate only to liability for delays in delivery by [Defendant] as contemplated in Art. XXIV . . . While such an interpretation cannot be excluded, the Arbitrators believe, on balance, that such interpretation is not warranted by the wording of Art. XX and that it is not logical or reasonable to give such a narrow reading, either to Art. XX.1.1 or to Art. XX.2.

The Arbitrators note that Art. XX.1.1 refers expressly to liability for damages paid by the buyer (i.e., [A]) to one of its customers because of "inexcusable failure" by [Defendant] to meet its " obligations, warranties or guaranties" under the Basic Agreement (emphasis added). Such language is broad, and can hardly be intended to refer to delays only. Instead, the Arbitrators conclude, such language must be read to cover all "inexcusable failures" by [Defendant], which result in a damages claim by a customer, and thus to override or provide an exception to the pure warranty provisions of Art. XVI.1.

9.4.2 The precise basis of [Claimant]'s claim is also not as clear as it might be, and has evolved in the course of the submissions. [Claimant] has clearly stated that its claim is based on the Basic Agreement, and on Art. XVI.1 thereof . . . But [Claimant] has also relied on Art. XX.1.1.

The Arbitrators conclude that [Claimant] has based its claim on Art. XVI.1 and on Art. XX.1.1 of the Basic Agreement, as well as some general theories of liability . . . or some combination of all three. For largely the same reasons as set out in the preceding section, the Arbitrators conclude that [A]-and thus [Claimant] as its subrogee-does have a basis for a claim against [Defendant] primarily under Art. XX.1.1. of the Basic Agreement. Such claim is a claim for damages paid by [A] to its customer, allegedly because of an inexcusable failure by [Defendant] to meet its "obligations, warranties or guaranties". In referring to, e.g., "warranties" this provision necessarily refers back to Art. XVI.1, which may explain [Claimant]'s repeated references to that Article as well.

. . . . . . . . .

9.4.3 On the basis of the foregoing the Arbitral Tribunal finds that [A]-and hence [Claimant]-does have a basis for a claim, primarily based on Article XX.1 of the Basic Agreement. Because such claim is founded on the provisions of the Basic Agreement, which contains the Arbitration clause (Art. XXXIII), the Arbitrators also conclude that they have jurisdiction to determine the merits of the claim.

10. Applicable law

10.1 Article XXXII of the Basic Agreement provides that the Agreement, and purchase orders issued pursuant thereto, shall be construed, interpreted and applied in accordance with the laws of the State of New York. However, Art. XX.2 provides an exception to this, in excluding from the application of New York law any "claim for damages paid by [A] to [A's] customer . . .".

For the reasons already set out in sections 9.4.1 and 9.4.2 above, the Arbitrators believe that Art. XX.2, as well as Art. XX.1.1, must applied to claims resulting from claims for damages by customers of [A], based on alleged failures of [Defendant] to meet its obligations under the Basic Agreement generally.

Neither Art. XX.1.1 nor Article XX.2 can, by their very language, be limited only to claims by customers for delay under Art. XXIV, as [Defendant] would contend. Had the Parties intended so to limit Art. XX.2, one would have expected them to have made an express reference to Art. XXIV.

The present case falls squarely within this exception. As a result, by the express language of Art. XX.2, New York law does not necessarily apply. Nor is this surprising; the parties to the agreement no doubt recognized that such a damage claim might be based on some other law-notably the law applicable to relations between [A] and its customer-and did not want to create an inevitable conflict.

10.2 Art. XX.2 does not specify which law should apply in such circumstances. The Arbitrators find that the appropriate applicable law should be the law of the place having the greatest contact with the transaction involved. Here that place is France-the place of business of [A], the place where the propulsion system was installed, and the place where the [machine] was delivered to [C].

10.3 Accordingly, the Arbitral Tribunal holds that the applicable substantive law to be applied in determining the present dispute is the law of France.

11. Limitations (or Time bar)

. . . . . . . . .

11.3 According to the most widely held view in conflict of laws today, questions of time limitations (or "prescription") are governed by the substantive law applicable to the contract or tort action involved (here between [A] and [C]) (see, e.g., EC Convention of Rome, Art. 10). The arbitrators have previously determined that the proper substantive law to be applied is the law of France (section 10.3 above). The Arbitrators simply note that, even if procedural law were applied, it would also be the law of the situs of the arbitration, i.e., France, leading to the same result. The Defendant does not appear to contest the conclusions that, if French law is indeed applicable, the relevant period of limitations is 10 years, and that, under the present circumstances, the claim has properly been brought within such 10 year period however measured. In view of the above, there is no need to determine the various questions relating to limitation periods under New York law raised by the Parties.

11.4 The Arbitral Tribunal accordingly holds that the claims of the Claimant are not time-barred.

. . . . . . . . .

On the basis of the foregoing, and by way of an Interim Award, the Arbitrators hold as follows with respect to the Preliminary Issues:

- The Arbitral Tribunal does have jurisdiction with respect to [Claimant]'s claim;

- [A] does have a basis for a claim against [Defendant] arising out of the supply of the propulsion system under the Basic Agreement;

- [Claimant] has a right of subrogation to any claim which [A] may have or had against [Defendant] up to the amount actually paid by [Claimant] under the insurance policy;

- the applicable law governing the substance of all aspects of the dispute is French law;

- [Claimant]'s claims are not barred by a Statute of Limitations.'