'6.6 Is the contractual penalty of 2 per cent of the total value of the contract applicable?

Article 16.1 of the Contract provides that "in case of a failure to fulfill completely their obligations under this contract, with the exception of force majeure reasons, the sellers hereby undertake to pay a penalty of 0.1% of the contract value per day, but in any case not more than 2% of the total value of the contract".

As the price agreed was . . . per metric ton and the quantity to be delivered was 25.000 metric tons +/- 5 per cent, the Claimant claims payment of an amount of . . . representing 2 per cent of the total value of the contract including the tolerance of 5 per cent.

The sole Arbitrator notes that the quantification of the liquidated damages made by the Claimant in its Statement of Claim . . . is different from the quantification . . . made by the Claimant in the Terms of Reference. However, the sole Arbitrator holds that the new quantification of this claim does not amount to a new claim within the meaning of Article 19 of the ICC Rules and notes that it was made at an early stage of the proceedings (four months before the Final Hearing . . .). The sole Arbitrator further notes that the amount claimed on account of the liquidated damages is the same as the amount claimed in the Request for Arbitration and that the Respondent was fully aware of the quantification of the said claim when it submitted its Response Briefs . . .

The Respondent contends that the calculation of the penalty made by the Claimant is not supported by the documentation submitted which does not indicate the total value of the contract.

As the Vienna Convention does not contain any specific provision regarding liquidated damages, the relevant provisions of Swiss domestic law, i.e. Articles 160.1 and 161.1 of the Swiss Code of Obligations, shall apply.

Article 160.1 of the said Code reads "if liquidated damages are provided for in the case of nonperformance or improper performance of a contract, the creditor is only entitled to claim either the performance or liquidated damages, failing any agreement to the contrary".

Article 161.1 reads "liquidated damages are due even if the creditor suffered no prejudice".

The sole Arbitrator holds that the Claimant is entitled to the penalty foreseen in Article 16.1 of the Contract due to the non-performance of the Respondent and that the price of . . . per metric ton was clearly stipulated in the document titled Amendment n° # 1 to [contract X] . . .

However, in the sole Arbitrator's view, the Claimant is not entitled to claim liquidated damages for the part of the goods included the tolerance of 5 per cent because the Respondent would not have been in default if he had delivered the exact quantity of [products] or only 95 per cent of the said quantity. Consequently, the sole Arbitrator holds that the liquidated damages due to the Claimant amount to 2 per cent of the price of the average quantity of [products] which was to be delivered by the Respondent . . .

The Claimant also claims interest thereon at 7.5 per cent p.a. from the date when the Respondent was put on notice to resolve the matter to the satisfaction of the Claimant . . . until the date of payment in full.

Concerning the Claimant's claim for interest on the liquidated damages, the sole Arbitrator notes that the said claim was made in the Claimant's Statement of Claim submitted on 5 October 2001, i.e. after the Terms of Reference had been signed by the Parties and the sole Arbitrator on 1 August 2001.

Pursuant to Article 19 of the ICC Rules, which provides that no party shall make new claims or counterclaims which fall outside the limit of the Terms of Reference unless it has been authorized to do so by the Arbitral Tribunal, the sole Arbitrator shall decide on the admissibility of the said claim.

The sole Arbitrator holds that the claim for interest on the liquidated damages is an incidental claim directly linked with the principal claim. Therefore, it cannot be considered as a new claim falling outside the limits of the Terms of Reference.

The sole Arbitrator further notes that the claim for interest was made at an early stage of the arbitral proceedings, which allowed the Respondent to comment on the Claimant's claim for interest.

The sole Arbitrator therefore accepts to decide on the Claimant's claim for interest on the liquidated damages and holds that the Claimant is entitled to interest on the liquidated damages due by the Respondent.

However, the sole Arbitrator notes that the contract [X] contains no provision dealing with the interest applicable to the liquidated damages, which deprives the Claimant's claim for an interest rate of 7.5 per cent p.a. of any contractual basis.

Therefore, the interest rate applicable to the liquidated damages is to be determined in accordance with the relevant provisions of Swiss law. In this respect, the applicable material rule is Article 73 of the Swiss Code of Obligations which fixes the rate of the statutory interest at 5 per cent p.a.'