Pursuant to a purchase agreement made in 1996 and governed by Polish law and the 1990 Incoterms rules as supplemented, a European company (Claimant) undertook to sell aircraft to an Asian company (X) that was subsequently succeeded by Respondent. One of the aircraft was to be supplied to a third party to which Respondent had made a tender. Part of the aircraft's equipment had to be changed in order to meet the third party's specifications. As this could not be done immediately, the aircraft was delivered with the original equipment and it was agreed that the replacement equipment would be installed later. Following delays and an extension of the delivery date, the required equipment was eventually installed. During the subsequent test, the aircraft crashed. Claimant sought payment of the price at which it sold the replacement equipment. The parties agreed that this equipment was to be supplied in accordance with the terms of the purchase agreement, but disagreed on amendments to these terms.

'52. On February 24, 1996, Claimant as the seller and [X] as the purchaser entered into the Purchase Agreement for the purchase of [machines], in consideration for a total contractual fixed price of [...]

53. Article 24 of the Purchase Agreement provides:

Any dispute, claim or controversy connected in any manner with or relating to any of the terms or provisions of this Agreement, or to any breach or to the validity thereof, shall be subject to negotiations and settlement by the Parties. In the event the Parties are unable to reach agreement, the disputes, claims or controversy shall be submitted to and finally settled by arbitration. The arbitration shall be conducted in Geneva, Switzerland in accordance with the provisions of the Rules of Conciliation and Arbitration of the International Chamber of Commerce (the I.C.C. Paris). These proceedings shall be conducted in English. The Parties shall appoint each one arbitrator and these two will appoint a third. The award rendered in each such arbitration shall be binding, final and conclusive on the Parties hereto, and judgment upon each such award may be rendered, and each such award may be enforced by any court having jurisdiction thereof.

As stated above, on March 7, 2005, the Parties agreed that the place of the arbitration be Paris, France.

54. Article 25 of the Purchase Agreement provides:

The formation, validity, construction and the performance of this Agreement shall be governed by and construed in all respects in accordance with the laws of the Republic of Poland and INCOTERMS 1990 as supplemented. In the event of a conflict between the [laws of seller's State] and INCOTERMS 1990 as supplemented, the latter shall prevail and govern.

55. Pursuant to the Purchase Agreement, the [machines] together with engines and equipment were to be delivered "FOB, [city], or FOB [city] or [city] as per INCOTERMS 1990." Purchase Agreement, Article 2.2. Article 2.5 of the Purchase Agreement provides that:

Risk of loss and damage to all Products hereunder shall pass on to Buyer upon delivery on board the vessel at the shipping port, or, if requested by Buyer, upon delivery to Buyer's designated freight forwarder or carrier as per Article 2.2 of this Agreement.

56. The Purchase Agreement required Claimant to inspect and test the [machines] during the manufacturing process ("the Inspection Program"). Purchase Agreement, Article 9.1.1. The buyer was entitled to participate in the Inspection Program and review the test records. Purchase Agreement, Article 9.2.1.

57. The Purchase Agreement provided for an acceptance program to be conducted by the buyer at seller's facility ("the Acceptance Program"); prior to the Acceptance Program the seller was required to provide a Final Compliance Report, consisting of the performance compliance file and the airworthiness compliance file, and a certificate of compliance. The seller was further obliged to provide buyer with export airworthiness and noise certificates issued by the competent [seller's State] authorities. The seller also had to notify the buyer of the possible acceptance date of each [machine] 45 days in advance, and confirm the acceptance date or fix a new acceptance date 15 days prior to the notified acceptance date. Purchase Agreement, Article 9.2.1.

58. If no defects were ascertained during the Acceptance Program, the buyer and the seller were required to sign an acceptance certificate as per Exhibit F ("the Acceptance Certificate"), whereupon all items in the Acceptance Certificate were deemed accepted by the buyer. Purchase Agreement, Article 9.2.3. If a [machine] was found to be defective, the buyer, could, in agreement with the seller, rescind the order, accept the [machine] at an equitable reduction in price, demand repair of the defective [machine], or reject the [machine] and request delivery of a replacement [machine]. Purchase Agreement, Article 9.2.4.

59. Article 28.1 of the Purchase Agreement provides:

This Agreement consists of 30 Articles and 6 Exhibits (from A to F) and sets forth the entire agreement and understanding between the Parties hereto, relating to the subject matter hereof, and supersedes any other representations, communications, undertakings or proposal not expressed in this Agreement.

Subsequent modifications to this Agreement shall be valid and binding only if established in writing and signed by duly authorized representatives of both Parties.

60. The Purchase Agreement provided in Article 7 that within 30 days from its signature the parties would conclude a License and Technical Assistance Agreement ("the LTAA"), which was executed on April 13, 1996. . . .

61. The Purchase Agreement was amended and supplemented by six amendments . . .

62. On June 6, 1996, due to [X]'s concerns about third party claims with respect to certain exclusive rights granted under the LTAA, Claimant and [X] entered into the Suspension Agreement . . . which suspended the "effectiveness and performance of the Purchase Agreement and the LTAA" pending resolution of the problems relating to the third party claims. On February 13, 1997, Claimant and [X] "nullified" the suspension of the Purchase Agreement and the LTAA in Amendment No. 2, . . . and agreed that the Purchase Agreement and the LTAA "are valid and binding".

63. As reflected in Amendment No. 5 . . . Respondent succeeded to [X]'s rights and obligations under the Purchase Agreement.

64. Amendment No. 1 . . . replaced Article 26 of the Purchase Agreement with a new article, which reads in relevant part as follows:

26.1 Seller agrees that it will indemnify and hold harmless Buyer and its personnel from and against all liabilities, damages, losses of property and injury to, or death of Seller's personnel or third persons arising out of or in connection with test flights conducted hereunder prior to delivery.

26.2 Buyer agrees that it will indemnify and hold harmless Seller and its personnel from and against all liabilities, damages, losses and judgments related to property loss and/or damage of Buyer or its personnel, as well as injury or even the death of Buyer's personnel, resulting from, or in connection with flights performed prior to delivery, hereunder.

26.3 Seller shall subscribe all necessary insurance policies (including hull and product liability coverage) comprising all ground and flight test risks in connection with test flights performed hereunder.

. . . . . . . . .

66. On December 11, 2000, Respondent, with Claimant's knowledge and approval . . . submitted a bid for the supply of [aircraft] pursuant to [the third party]'s invitation for bids. Pursuant to [the third party]'s requirements, the [aircraft] had to be equipped with [the equipment]. The purchase price was payable as follows: 30% within 15 days after the establishment of a letter of credit, 40% upon presentation of shipping documents after the shipment is made, and 30% after completion of the test flight in [buyer's State]. . . . Section V.5. provides as follows:

Reassembling and test flight

The final reassembly of the [aircraft] should be taken either by the manufacturer's . . . or the supplier's . . . technicians under the supervision and responsibility of manufacturer's and supplier's engineers at the place where the purchaser wants. Additional expenses for this matter should be paid by the supplier. After the completion of the reassembly, the test flight should be performed by the manufacturer's engineers and purchaser's pilots and maintenance technicians together. The helicopter should be delivered to the purchaser without any defects. For accidents that occur in the process of the final reassembly and the test flight, the manufacturer and supplier must bear the responsibility.

. . . . . . . . .

Right to the purchase price of [the equipment]

99. The evidence shows and the Parties are in agreement that the [equipment] was to be supplied pursuant to the terms and conditions of the Purchase Agreement, as amended. The Parties disagree, however, on the amended terms and conditions.

100. Subsequent modifications of the Purchase Agreement are "valid and binding only if established in writing and signed by duly authorized representatives of both Parties". Purchase Agreement, Article 28.1.

101. The Purchase Agreement provides for delivery of the [aircraft], with engines and equipment, and products delivered together with the [aircraft] "FOB, [city], or FOB [city] or [city] as per INCOTERMS 1990". Purchase Agreement, Articles 1 and 2.2.

102. Claimant asserts and Respondent does not contest that the Parties modified the Purchase Agreement and agreed that the [equipment] be sent "DDP, [city]".

103. The Purchase Agreement provides that its construction and performance is governed by the "INCOTERMS 1990 as supplemented". Purchase Agreement, Article 25. The Parties' agreement "DDP, [city]" must be therefore be construed as a reference to INCOTERMS 1990.

104. "DDP," which stands for "Delivery Duty Paid," is one of thirteen International Commercial Terms ("Incoterms") designed to "provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade".1 "Delivery Duty Paid" means that the seller fulfils his obligation to deliver when the goods have been made available at the named place in the country of importation. The seller has to bear the risks and costs, including duties, taxes and other charges of delivering the goods thereto, cleared for importation.2 The buyer must "[p]ay the purchase price as provided in the contract of sale".3

105. The Incoterms only deal with part of the primary obligations of the seller and the buyer in the context of an international sales contract. In particular, they do not define contractual rights and obligations other than for delivery, determine how title to the goods will be transferred, or define the remedies for breach of contract.4 They also do not specify the settlement of the purchase price.5 In addition, it follows from the principle of the autonomy of the parties that they are free to modify the Incoterms and their interpretation through special provisions in their individual contract. Such special provisions supersede or vary the rights and obligations set forth as a rule of interpretation in the various Incoterms.6

106. It is therefore necessary to determine whether the Parties specified and/or modified the rights and obligations set forth as a rule of interpretation in the Incoterm "DDP". The evidence shows that the Parties did specify and modify these rights and obligations with respect to the supply of the [equipment].

107. The Purchase Agreement requires Claimant to inspect and test products delivered under the Purchase Agreement at Claimant's plant in Poland. Purchase Agreement, Article 9.1.1.

108. Prior to the Acceptance Program, Claimant was obliged to provide Respondent with a Final Compliance Report consisting of the Performance Compliance File and Airworthiness Compliance File, a Certificate of Compliance, the Export Airworthiness Certificate and the Noise Certificate issued by the competent [seller's State] authorities. Purchase Agreement, Article 9.2.1. In addition, Claimant was to provide a copy of the Flight Manual and certain other manuals. Purchase Agreement, Article 11.

109. The Purchase Agreement also requires Claimant to provide training and technical assistance as specified in the LTAA. Purchase Agreement, Article 12.

110. After completion of the Acceptance Program, the Purchase Agreement requires Claimant to deliver the products "FOB, [city], or FOB [city] or [city]". Purchase Agreement, Article 2.2.

111. The Purchase Agreement thus imposes five basic obligations on Claimant: (i) production of the [aircraft] with the specified engine and equipment and supply of any additional products, (ii) testing during the Inspection Program, (iii) certification prior to the Acceptance Program, (iv) training and technical assistance, and (v) FOB delivery.

112. Under the Purchase Agreement, Respondent was to make payment as follows: advance payment corresponding to 20% of the first fifteen [aircraft], progressive payment corresponding to 20% of the contract price of the remaining [aircraft], and payment by irrevocable documentary credit in the form of a revolving letter of credit of balance payment corresponding to 80% of each [aircraft] plus the price of any additional equipment. Purchase Agreement, Articles 4.1, 4.2, and 4.3. The documentary credit was to be made payable upon presentation of the commercial invoice, the Acceptance Certificate, the packing list, and a full set of clean bill of lading. Purchase Agreement, Article 4.3. The Acceptance Certificate was to be issued after testing and certification. Thus, pursuant to the Purchase Agreement, the documentary credit was available only after Claimant tested the products, provided Respondent with the required certificates, packed the products, and delivered them free on board.

113. The evidence shows that while the Parties modified the specific terms and conditions of the Purchase Agreement with respect to the supply of the [equipment], they did not change the Parties' basic rights and obligations set forth above.

114. The Parties agree that Respondent's obligation to pay the purchase price is correctly restated . . . as follows:

The amount of . . . shall be payable against final acceptance certificate for the installation of the [equipment] to be issued from the buyer. . . .

115. Thus, pursuant to the Parties' agreement, the purchase price of the [equipment] was not due at the time of its arrival at the warehouse in [city] but "against final acceptance certificate for the installation of the [equipment]" [emphasis added].

116. The evidence shows that already prior to and substantially concurrently with the amendment of the March 2, 2001 Letter of Credit on or about November 5, 2001, the Parties contemplated that Claimant's duties with respect to the [equipment] would be broader than physical delivery and installation. . . .

117. The evidence shows that in the process of specifying Claimant's obligations, the Parties understood the term "installation" as comprising all of Claimant's obligations with respect of the [equipment], namely shipment, installation, certification, testing and training. This understanding is in conformity with the Purchase Agreement, which premises Respondent's obligation to pay the balance and the price of additional equipment on Claimant having inspected and tested the products, provided the required certificates, packed the products and delivered them free on board.

. . . . . . . . .

121. The record thus shows that the Parties premised Respondent's obligation to pay the purchase price on the provision of certain certificates, including the Type Certificate, and training for . . . pilots and engineers, and the performance of test flights, in addition to the physical delivery of the [equipment] and its installation on the [aircraft].

. . . . . . . . .

123. Article . . . of the [seller's State] Civil Code expresses the generally recognized principle that the burden of proof relating to a particular fact rests on the party who attributes legal effects to that fact.7 Claimant therefore has the burden to prove that it fulfilled the contractual requirements for the payment of the purchase price.

124. It is uncontested that Claimant shipped the [equipment] to Changwon and replaced the [original equipment] on the [aircraft] with it. The evidence shows that the [seller's State] Aviation Office issued the Type Certificate . . . The record does not show however that Claimant provided Respondent with the Type Certificate prior to the crash of [the aircraft]. The record also shows and Claimant does not contest that Claimant was required to submit additional certificates and documents, including the Service Bulletin and the revised Flight Manual. . . . The record does not show that such certificates and documents were issued and delivered to Respondent.

125. The Arbitral Tribunal therefore finds that Claimant has failed to carry its burden of proof to show that it fulfilled its obligations with respect to the certification of the [equipment].

126. The record shows and Claimant does not contest that it was required to perform test flights in [the buyer's State] . . . .

127. The evidence therefore shows that Claimant did not complete the test flights that it was required to perform in [the buyer's State]. The Arbitral Tribunal therefore finds that Claimant has not met its obligations with respect to the completion of the testing of the [equipment].

128. It is undisputed that the Acceptance Certificate was not issued prior to the crash of the [aircraft]. . . . Claimant also does not assert that Respondent was required to issue the Acceptance Certificate prior to the test flight . . . Because Claimant did not fulfill its contractual obligations with respect to the certification and testing of the [equipment], Respondent was not required to issue the Acceptance Certificate "for the installation of the [equipment]".

129. Claimant argues that if it did not fulfill its contractual obligations with respect to the [equipment] it was excused under Article 13 of the Purchase Agreement. It is not necessary to determine and the Arbitral Tribunal does not determine whether Claimant was excused from performing its obligations under Article 13.1. of the Purchase Agreement. Article 13 of the Purchase Agreement does not provide a basis for Claimant's claim for the purchase price of the [equipment] even assuming arguendo that Claimant's failure to perform its contractual obligations was excused under 1 of that Article

130. Article 13 of the Purchase Agreement ("Excusable delays") sets forth the legal consequences of an excusable delay in the performance of the obligations under the Purchase Agreement. It does not determine the legal consequences of nonperformance. In case of an excusable delay of delivery of more than 100 days, absent an agreement to the contrary, Respondent may cancel the outstanding delivery. Upon cancellation, Claimant is required to return any payment it received from Respondent for the undelivered items. Purchase Agreement, Article 13.3. Similarly, if Respondent fails to fulfill its payment obligations, Claimant has the right to extend delivery "proportionally to Buyer's delay in fulfilling its obligations." Purchase Agreement, Article 13.4. Article 13 thus aims at restoring the balance in the contractual relationships between the Parties. It does not follow from Article 13 that Respondent is obliged to pay the purchase price if Claimant is excused from performing its obligations under the Purchase Agreement.

131. For all of the reasons set forth above, the Arbitral Tribunal finds that Claimant is not entitled to payment of the purchase price of the [equipment].

. . . . . . . . .

133. Because the Arbitral Tribunal finds that Respondent is not required to pay the purchase price due to Claimant's failure to fulfill its obligations with respect to the certification and testing of the [equipment], the Arbitral Tribunal does not need to and does not determine whether the loss of the [equipment] as a result of the [aircraft]'s crash . . . or Claimant's failure to obtain insurance in respect of the . . . test flight would discharge Respondent from the obligation to pay the purchase price.'

1
ICC Official Rules for the Interpretation of Trade Terms, INCOTERMS 1990 (1990), p. 6.

2
Ibid. p. 92.

3
Ibid. p. 93.

4
See, for instance, J. Ramberg, ICC Guide to Incoterms 2000, (1999) p. 11 et seq.

5
See, for instance, B. Piltz, "INCOTERMS and the UN Convention on Contracts for the International Sale of Goods", in: Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998), p. 41 et seq.: "The INCOTERMS do not contain detailed provisions on delivery times or on the buyer's obligation to pay the price. Also, the INCOTERMS do not regulate the conclusion of the contract of sale, the issue of title, the exemption from a party's obligation to perform, or the consequences of failure of performance."; F. H. Timmermann, INCOTERMS 1990, Hamburg (1992), p. 14.

6
ICC official rules for the interpretation of trade terms, INCOTERMS 1990 (1990) p. 8: "Such special provisions in the individual contract would supersede or vary anything which is set forth as a rule of interpretation in the various Incoterms." Judgment of the Austrian Supreme Court of October 15, 1987, 6 Ob 518/87: "Dem Berufungsgericht ist allerdings zuzustimmen, daß die Parteien die Möglichkeit gehabt hätten, einzelne Wirkungen der vereinbarten Klausel auszuschließen. Dies wird für die "Incoterms" im Punkt 6. der Einleitung ausdrücklich ausgesprochen und ergibt sich auch für die "Trade Terms" ganz allgemein aus der Vertragsfreiheit." ["We agree with the Appellate Court that the parties could have excluded certain effects of the agreed Incoterm. This is explicitly confirmed with respect the 'Incoterms' in item 6 of the Introduction." Unofficial translation from German.] B. Piltz, "INCOTERMS 2000 - ein Praxisüberblick", Recht der Internationalen Wirtschaft vol. 46 p. 487: "Die INCOTERMS sind ihrerseits ebenfalls dispositiv und können demzufolge sowohl durch Individualvereinbarungen zwischen den Parteien wie auch, wenn ihre Geltung auf Art. 9 UN-Kaufrecht beruht, durch wirksam vereinbarte Allgemeine Geschäftsbedingungen modifiziert werden." ["The INCOTERMS are dispositive in nature and therefore may be modified by individual agreement between the parties and, if they apply by virtue of Art. 9 of the UN Convention on International Sales, by validly agreed general terms and conditions." Unofficial translation from German.] D. Le Masson/S. Stenay, "Les Incoterms", in: La Convention de Vienne sur la vente internationale et les Incoterms, Actes du Colloque des 1er et 2 décembre 1989, p. 38: "D'autre part, et du fait même de liberté contractuelle des parties : « toute disposition des règles doit céder le pas aux dispositions particulières insérées par les parties dans leur contrat ». En conséquence, les cocontractants peuvent prévoir toutes modifications ou adjonctions, en fonction de leur commerce particulier, des circonstances, ou de leur commodité personnelle." ["On the other hand, as a result of the parties' contractual freedom: 'any provision of the rules shall give way to the particular provisions inserted by the parties in their agreement'. Consequently, the contracting parties may agree on any changes or additions, according to their specific business, the circumstances, or their personal convenience." Unofficial translation from French.]

7
See, for instance, ICC Award No. 1434/1975, Collection of ICC Arbitral Awards 1974-1985, S. Jarvin/Y. Derains eds. (1990), pp. 267 and 273; ICC Award No. 3344/1981, Collection of ICC Arbitral Awards 1974-1985, S. Jarvin/Y. Derains eds. (1990), pp. 446 and 449; ICC Award 6653/1993, Collection of ICC Arbitral Awards 1991-1995, J.-J. Arnaldez/Y. Derains/D. Hascher eds, (1994) pp. 516 and 523; Report of the United Nations Commission on International Trade Law on the work of its eighteenth session, 3-21 June 1985, Supplement No. 17, UN Doc. A/40/17 (1985) p. 64, ¶ 328: "However, it was a generally recognized principle that reliance of a party on a fact in support of his claim or defense required that party to prove the fact."; B. Cheng, General Principles of Law as Applied by International Courts and Tribunals, London, (1953) p. 334 et seq.; W. L. Craig/W. W. Park/J. Paulsson, International Chamber of Commerce Arbitration, 3rd ed., § 35.02 p. 646.