Respondent, a Turkish shipping company, was commissioned to transport goods sold by Claimant, a Panamanian company, to a third company for resale to another company. Payment for the sale was to be made by letter of credit. The bank that issued the letter of credit refused to pay, alleging that the documents presented to it, including bills of lading, were inaccurate. The goods were in the end delivered directly by Respondent's agent to the end-purchaser. Claimant tried unsuccessfully to obtain payment for the goods. It sought the arrest of the shipper's vessel and initiated arbitration proceedings, accusing Respondent of breach of contract by delivering the goods to persons not entitled or authorized to take possession of them.

'2. Applicable Law to the Merits

2.1 The arbitration agreement referred to in section III above includes an express choice of Swiss law in the following terms:

The arbitration shall in all respects (i.e. both as regards the procedure, and the merits and substance of the dispute) be governed by Swiss law.

2.2 Swiss law includes the Code of Obligations (CO) as well as the "Loi fédérale sur la navigation maritime sous pavillon suisse" (LNM) of September 23, 1953 (RS 747.30), the private law provisions of which also apply to vessels with non-Swiss flags (ATF 115 II 108/109).

2.3 Moreover, Switzerland is a party to the so-called Hague Rules (Convention internationale pour l'unification de certaines règles en matière de connaissement, signed in Brussels on August 25, 1924 and entered into force in Switzerland on November 28, 1954; RO 1954 p. 776) and Hague-Visby Rules (Protocole portant modification de la Convention internationale pour l'unification de certaines règles en matière de connaissement, signed in Brussels on February 23, 1968 and entered into force in Switzerland on June 23, 1977; RO 1977 p. 1077).

To what extent these rules apply to and are of relevance in the present case will be discussed below in the context of the statute of limitation.

3. Statute of Limitation

3.1 Relevant Facts

The goods were discharged between February 23 and March 3, 1988 and delivered on or before March 14, 1988 . . . [Claimant] arrested the vessel and entered into the arbitration agreement in September 1988. It initiated this arbitration in June 1989.

3.2 Article 87(2) LNM

3.2.1 Article 87(2) LNM provides for a one-year limitation except in the event of gross negligence and wilful misconduct in the following terms:

Toutes les actions dérivant de la location d'un navire, d'un contrat d'affrètement et de transport maritime se prescrivent, sous réserve des cas de dol et de faute grave, par une année, en cas de location ou d'affrètement, à; partir de l'expiration du contrat, et, dans le contrat de transport, à; partir du jour où la marchandise a été livrée au destinataire ou aurait dû lui être livrée.

In English translation this provision in pertinent part reads as follows:

All actions arising out of [...] a contract for carriage by sea are barred, except in cases of wilful misconduct and gross negligence, by a statute of limitation of one year commencing for contracts of carriage from the day on which the cargo has been or should have been delivered.

3.2.2 The same rule is contained in Article 454(1) and (3) CO, which also provides for a one-year limitation for actions against the carrier subject to gross negligence or wilful misconduct.

3.2.3 The rationale underlying this rule-whether embodied in Article 87(2) LNM or in Article 454(1) and (3) CO-expresses a more general principle arising out of Article 2(2) CC pursuant to which a party should not benefit from a short limitation period to avoid liability for its intentional or at least grossly negligent misconduct.

3.2.4 The question then arises whether delivery without presentation of the bill of lading amounts to such intentional or grossly negligent misconduct, i.e. to a "dol" or "faute grave". For the reasons set forth below in connection with [Respondent]'s liability (4.2 below), the arbitral tribunal is of the opinion that wrongful delivery amounts to "faute grave".

3.2.5 As a result, the one year limitation of Article 87(2) LNM does not apply and one must resort to the general provisions of the CO, which provide a ten-year limitation (Art. 127).

3.3 Hague Rules

3.3.1 The broad choice of law provision found in the arbitration agreement (covering "the procedure, and the merits of the dispute") indicates a straightforward intention to be bound by the limitation period provided by Swiss law. This led the tribunal to apply Articles 87(2) LNM and 127 CO (3.2 above) and to find that the action was not time-barred. Notwithstanding such finding, one should, however, further consider whether the limitation provisions of the Hague or Hague-Visby Rules also apply.

3.3.2 Article 4 paragraph 6(4) Hague Rules reads as follows:

In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.

The internal logic of Article 3 paragraph 6 shows that this limitation does not cover delivery without presentation of the bill of lading :

Article 3 paragraph 6(1) requires that a written "notice of loss or damage" be given to the carrier at the port of discharge before or at the time of removal of the goods; in a case of wrongful delivery such as the present one, the shipper is obviously not in a position to meet this requirement;

this same rule provides that the notice of loss or damage must be given at the time of removal of the goods "into the custody of the person entitled to delivery thereof under the contract of carriage", i.e. to the person entitled to the rights arising out of the bill of lading;

Article 3 paragraph 6(2) (to the extent it refers to hidden defects) and Article 3 paragraph 6(5) (to the extent it requires that the carrier and the receiver grant each other all reasonable facilities for inspecting and tallying the goods) show that Article 3 paragraph 6 refers to claims with respect to the goods and their defects and not to the circumstances of the delivery.

3.3.4 This seems to have been the general understanding of Article 3 paragraph 6(4) of the Hague Rules. Such understanding is especially clear from the Travaux préparatoires for the Hague-Visby Rules (which are discussed and quoted in the lower court's decision in re Captain Gregos [1989] 2 All ER 54, 58; see also the passage referred to by [Respondent] in [Respondent] 4).

3.3.5 As a result, the one year limitation of the Hague Rules not applying, one must again look to the general provisions of the law chosen by the parties, i.e. specifically to Article 127 CO, and the result achieved is the same as that by way of application of Article 87 LNM.

3.4 Hague-Visby Rules

3.4.1 The Hague-Visby Rules amended Article 3 paragraph 6(4) Hague Rules and substituted the words "all liability whatsoever in respect of the goods" for "all liability in respect of loss or damage". The legislative intent behind such substitution was undoubtedly to cover claims for wrongful delivery (Travaux préparatoires, quoted in [1989] 2 All ER 54, 58-59).

3.4.2 Although in the matter of the Captain Gregos the English Court of Appeals clearly took the position that a claim for wrongful delivery (in that case theft) was subject to the one year limitation of Article 3 paragraph 6(4) Hague-Visby Rules, the arbitrators would have some doubts as to whether to follow such case law, were the Hague-Visby Rules to apply in the present case.

3.4.3 Indeed, the internal logic of the HagueVisby Rules (including the aspects referred to above in connection with the Hague Rules, and the interaction between Articles 2 and 3 paragraph 6(4)) would rather tend to indicate that wrongful delivery is outside the scope of Article 3 paragraph 6.

Moreover, several writers consider that despite the rationale underlying the amendment and expressed in the Travaux préparatoires, it is at least doubtful whether the words used in the new version are broad enough to cover delivery without presentation of bills of lading (Scrutton on Charterparties, 19th Ed., p. 441 footnote 32; Carver, Carriage by Sea, 13th Ed., vol. 1, p. 370, footnote 47; Wilson, Carriage of Goods by Sea, 1988, p. 196; Mustill, Carriage of Goods by Sea Act 1971 (1972) 11 Arkiv Sjorett 684, 706 quoted by the Queen's Bench Division in the Captain Gregos, [1989] 2 All E.R. 54, 61).

Finally, although the legislative intent was clear, the history of the amendment to Article 3 paragraph 6(4) provides ground for divergent conclusions (Report of the Subcommittee of the 1963 Stockholm Conference, quoted in the Captain Gregos, [1989] 2 All ER 54, 12).

3.4.4 This being so, the issue can remain open as the arbitrators in any event determine that the Hague-Visby limitations period do not apply on the basis of the following considerations:

a) Article 10 Hague-Visby Rules states that the rules apply whenever (i) a bill of lading was issued in a member state, (ii) the carriage was from a port of a member state, or (iii) the contract contained in or evidenced by the bill of lading provides that these rules or legislation of any state giving effect to them are to govern the contract.

b) To the best knowledge of this tribunal, Yugoslavia, i.e. the country of the loading port, is a party to the Hague (RO 1973 I 590), but not to the Hague-Visby Rules (RO 1977 II 1077; 1981 II 1354; 1983 I 420; 1984 I 273; 1985 II 1770; 1987 II 1151 and oral updating information received from the "Office fédéral de la navigation maritime"; [Claimant]'s contention that Yugoslavia has ratified the Hague Visby-Rules in 1959 appears in any event erroneous considering the date of these rules . . .). Accordingly the conditions for the application of (i) and (ii) above do not apply.

c) The paramount clause of the Bill of Lading . . . does not provide for the application of the Hague-Visby Rules, but does provide that whenever the Hague-Visby Rules apply compulsorily they are deemed incorporated into the bill of lading. Accordingly, the two conditions for application of the Hague-Visby Rules set forth in (iii) above are to be determined by the same test: does Swiss law provide for the compulsory application of the Hague-Visby Rules with respect to the statute of limitation?

d) Article 101(2) LNM provides that the Hague and Hague-Visby Rules must be "taken into consideration" for the application and the interpretation of the articles of Chapter IV LNM entitled "Du contrat de transport maritime". However, Chapter IV does not deal with the issue of statute of limitation, while a general and compulsory limitation period is provided in Article 87 of Chapter I LNM ("Dispositions générales"), which applies to "toutes les actions dérivant de la location d'un navire, d'un contrat d'affrètement et de transport maritime".

e) Hence, at the least insofar as the limitations period of the Hague-Visby Rules is concerned, Swiss legislation does not give effect to the Rules and a provision to "take into consideration" those rules in the interpretation and application of the LNM's provisions on contracts for carriage by sea does not constitute compulsory legislation providing for the application of the Rules' limitation period. As a consequence, the Hague-Visby Rules do not apply to the issue at hand whether as a result of the scope of application provided by Swiss legislation or as a result of an incorporation agreed upon by the parties by way of the paramount clause.

f) Moreover, even if, contrary to such conclusion, it could be argued that the limitation periods of the Hague-Visby Rules apply and if there were a conflict between these limitations period and that of Article 87 LNM, the arbitrators would feel constrained to apply Article 87 LNM, including its exceptions. Indeed, Article 87 sets forth the limitation period of the law chosen by the parties to govern in the broadest fashion the claim brought before this tribunal. Moreover, the exceptions set out in Article 87 for "dol" and "faute grave" can be deemed to represent Swiss policy in respect of limitations of actions within the ambit of the LNM.

3. Conclusion

On the basis of the foregoing reasons, the tribunal holds that [Claimant]'s claim is not time-barred.

The present holding makes it unnecessary to consider the parties' arguments with respect to the extension or interruption of the limitation period.

4. [Respondent]'s Liability

4.1 On the Basis of the Bill of Lading

4.1.1 The arbitrators hold that [Claimant] is not entitled to bring any claims on the basis of the Bill of Lading, because, although it physically holds it, it is not the lawful holder of the Bill.

4.1.2 In view of this conclusion it is not necessary to decide whether the Bill of Lading is a true negotiable instrument (or "papier-valeur" which, incidentally, the arbitrators are inclined to believe primarily because of the usage of the trade considered relevant for maritime bills of lading; see in particular Jäggi, Kommentar zum Schweizerischen Zivilgesetzbuch, 7. Teil, Die Wertpapiere, nrs. 42 and 46 ad Vorbemerkungen zu Art. 1153 ff OR; Meier-Hayoz/von der Crone, Wertpapierecht, Bern 1985, p. 360). Whether the Bill of Lading is a "papier-valeur" or not does not make any difference once it is established that in any event [Claimant] cannot derive any rights from the Bill of Lading as such.

4.1.3 Under the heading "consignee" the Bill of Lading bears the mention "[Bank A]" . . . Hence, the Bill of Lading would be a commercial paper to order, i.e. a "papier-valeur nominatif" (Art. 974 CO) issued to [Bank A].

4.1.4 It can be left open for what purpose [Bank A] was entered as "consignee" on the Bill of Lading (to secure a lien over the goods or to secure fiduciary title; Thévenoz, Propriété et gage sur la marchandise et son titre représentatif dans le crédit documentaire, SAS 1985, p. 7), as in any event it appears as the holder of the Bill of Lading.

4.1.5 Admittedly, [Bank A] never acquired possession of the Bill of Lading, which after being rejected by [Bank B] . . . was returned to [Bank C] . . . However, the mere issuance of a bill of lading to a stated person entitles such person to the rights of a lawful holder (Meier-Hayoz/von der Crone, op. cit., p. 361 s; Schönle/Thévenoz, La lettre de garantie pour connaissement (letter of indemnity) dans les opérations de crédit documentaire, RDS 1986 I, p. 53).

4.1.4 In summary, [Bank A], not [Claimant], would be the lawful holder of the Bill of Lading if it were a "papier-valeur" and [Claimant]'s claim in this respect must be dismissed.

4.2 On the Basis of the Carriage Contract

4.2.1 Despite the reference to a charter-party in the Bill of Lading, both parties regard the contract as a carriage contract. The arbitrators share this view.

4.2.2 [Respondent] submits that [Claimant] is not a party to the carriage contract, because the Bill of Lading refers to [Company X] as shipper. Thus, the first question to review is that of the identity of the shipper: [Company X] or [Claimant]?

4.2.3 The arbitrators come to the conclusion that [Claimant] is the shipper for the following reasons:

a) the sales contract between [Claimant] and [Company X] was on C&F [port] terms . . . In a C&F port of discharge sale, it is the seller's, i.e. [Claimant]'s, obligation to arrange for the shipment;

b) the letter of credit issued by [Company X]'s bank in [Claimant]'s favor . . . provides that the freight must be deducted from the amount payable to the beneficiary ([Claimant]) and paid to [Company Y]. Although admitted unusual, this provision shows that [Claimant] was to bear the cost of the shipment;

c) even though not in accordance with the payment procedure provided in the letter of credit (see b above), [Claimant] effectively paid the freight . . .; which freight was then apparently paid-in a lower amount-through . . . and possible other agents - to [Respondent] . . .;

d) the same letter of credit expressly required that [Company X] be shown as shipper on all documents. This explains the reference to [Company X] on the Bill of Lading as the expression of a special arrangement made by the parties for one reason or another despite the fact that [Claimant] was responsible for the shipment, which responsibility clearly arises out of the other terms of the letter of credit (see a and b above);

e) the shipment was arranged by [Company Y] . . . The written evidence shows that [Company Y] acted for [Claimant]. There is a number of communications on record from or to [Company Y]. They all either emanate or are addressed to [Claimant] (or its bank); they never involve [Company X] . . .;

f) this written evidence was confirmed by the oral evidence given by . . . a witness called by [Respondent]. [This witness] stated that, although it was [Company X] which had recommended the services of [Company Y] to [Claimant], [Claimant] arranged for the shipment, gave related instructions, and paid the freight.

4.2.4 The fact that [Respondent] may not have known that the actual shipper was [Claimant] not [Company X] is of no relevance. If [Respondent] knew that [Claimant] was the shipper, then the rights and obligations under the carriage contract arose directly between [Respondent] and [Claimant] (Art. 32 (1) CO). If [Respondent] did not know that [Claimant] was the shipper, which appears likely, then the contract first bound only [Respondent] and [Company Y], as undisclosed agent of [Claimant]. But from the time [Claimant] has performed its obligations under the contract, i.e. paid the freight, it is subrogated in its agent's rights (R. Zäch, Berner Kommentar, vol. VI 1.2.2., Berne 1990, n. 178 ad art. 32).

4.2.5 Being established that there is privity of contract between [Claimant] and [Respondent], the question is whether [Respondent] breached its obligations under the carriage contract. In the arbitrators' opinion, there is no question that it did.

If the Bill of Lading is a commercial paper, [Respondent] was bound not to deliver the goods without the presentation of the document (Art. 116 al. 2 LNM; Art. 965 CO). This is a general rule of maritime law known also under English law. It is not disputed that [Respondent] has delivered the goods to [Company Z] without presentation of the Bill of Lading, but against delivery of a letter of guarantee issued by [Bank A] . . .

4.2.6 One should note in this context that, even if [Company Z] had acquired title to the goods, which in the tribunal's opinion it did not, [Respondent] would not have been entitled to deliver the goods without presentation of the document (Schoenle/Thévenoz, op. cit., p. 54).

4.2.7 If the Bill of Lading does not qualify as a negotiable instrument, [Respondent] also breached its obligation not to deliver without presentation of the document. Such obligation does not arise out of the Bill of Lading, but out of the contract of carriage, the terms of which are evidenced by the "bill of lading" (Art. 115 para. 2 LNM). The fact that the carrier issues a bill of lading and that the shipper accepts it-even if it fails to meet all formal requirements of a negotiable instrument-shows a common intent that the goods are delivered against presentation of such document or else a different document would have been used.

4.2.8 Moreover, the fact that [Respondent] delivered the goods against a bank guarantee shows that it was aware at least of the risk that the delivery was not lawful and that it may incur liability as a result.

4.2.9 Delivery without presentation of a bill of lading is generally regarded as grossly negligent conduct (Carver, Carriage by Sea, 13th ed., vol. 2, p. 1111; implied Meier-Hayoz/von der Crone, Wertpapierrecht, Berne 1985, p. 369).

4.2.10 Such conduct entails liability on the basis of Article 103 (1) LNM (see ATF 47 II 327/330 likely to be applicable by analogy to Art. 103 LNM) or Articles 440(2), 398(1), 321e(1), and 97(1) CO.

4.2.11 Since [Claimant]'s claim can be based on the carriage contract it is not necessary to decide whether such claims would also arise out of the title to or a lien over the goods.

5. Measure of Damages

5.1 General Rule

Damages should be equal to the market value of the goods at the time and place of the wrongful delivery (Müller, Droit maritime IV, Les contrats d'utilisation du navire, FJS 1031, pp. 15 and 16; see also ATF 47 II 327/331 f. in connection with Art. 447 CO).

5.2 Weight of Goods

5.2.1. [Claimant] claims that it shipped 1019,138 [sic] mt [goods]. [Respondent] submits that only 872,950 [sic] mt were shipped.

5.2.2 There is contradictory documentary evidence on record in this respect. The Bill of Lading . . ., the certificate of origin . . , the packing list . . ., the freight invoice issued by [Respondent] . . . and a number of other documents . . . refer to 1019,138[sic] mt. The mate's receipt . . ., the manifest of goods . . ., the statement of facts at the loading port . . . and some other documents . . . refer to 872,950 [sic] mt or to a tonnage smaller than 1039,138 [sic] mt. Where it appears, the quantity is always shown as 228 pieces (except for [an exhibit produced by Respondent] which refers to 288, which is probably a typographical error).

5.2.3 There is no persuasive oral evidence on this issue.

5.2.4 The primary question is thus whether, as a matter of law, the Bill of Lading should prevail over the statements of different weight in other documents. As a general rule, a bill of lading is prima facie evidence that the goods were shipped and the burden of disproving it lies with the shipowner (Scrutton, op. cit., p. 115; Art. 112 LNM which however seems to indicate that only the receiver can rely on the presumption).

Without quantifying the short delivery, the end receivers appear to have claimed a shortfall . . .

5.2.5 In the present case, however, the Bill of Lading bears the following wording in small print: "Weight, measure, quality, quantity, condition, contents and value unknown". It is a now well-settled rule that, as a consequence of such language, the Bill of Lading is not even prima facie evidence of the weight shipped and that the burden of proving the weight is on the shipper (Scrutton, op. cit., p. 116; Carver, op. cit., pp. 75-76; New Chinese Co. v. Ocean SS. Co. [1917] 2 K.B. 664).

5.2.6 [Claimant] opposes this clear rule by relying on Carver's statement that "... where, however, the bill of lading states the number of bags shipped, 'weight and contents unknown' that number remains prima facie evidence of the number of bags shipped" (Carver, Article 104) . . . This is not conclusive, as in the present case the number of parcels (228) is not disputed (and, if it were, it would in any event be covered by the broad reservation language in the Bill of Lading).

5.2.7 Since as a matter of law no presumption arises from the Bill of Lading, the arbitral tribunal will assess the weight on the basis of all elements on record.

5.2.8 [Claimant] explains the discrepancies between the documents by stating that the cargo was supplied from two different lots, one of 872,950 [sic] mt and one of 155.38 mt . . . Although this may be an explanation, it fails to fully convince. How can it be reconciled with the fact that the addition of the two amounts totals 1028.330 mt, not 1019.138 mt, or with the fact that there exists only one packing list for 1019.138 mt, when the goods were handled in two separate lots or that the mate's receipt for 872.950 mt shows the same number of parcels, i.e. 228, as the Bill of Lading?

5.2.9 In a telex of September 1988, [Respondent] alleged that a first bill of lading for the smaller quantity effectively loaded was issued and then replaced because it showed the wrong consignee. The new bill of lading corrected the consignee and showed the higher quantity pursuant to a letter from [Claimant] . . . Such letter was not produced and this explanation has not been satisfactorily substantiated.

5.2.10 Without quantifying the short delivery, [Company X] has claimed a shortfall . . .

After the Comittee [sic] inspect the goods they found the weight of the [items] not 1019.138 ton. Your weight is less so much and you are responsible about this shortage.

The inspection report to which this exhibit refers, rather seems to question the weight of each different [item], rather than the overall weight of all [items] . . . None of the other documents dealing with the end receiver's claims allows a different conclusion . . .

5.2.11 When reviewing the main documents showing conflicting weights, the tribunal first notes that the handwritten note of 873 mt on statement of facts . . . hardly carries any evidentiary weight as it could have been inserted by anyone at any time. It further considers that the signature on the packing list gives rise to some doubts (see [witness]'s examination . . .) and, therefore, such document is of little, or no weight.

5.2.12 However, the tribunal then notes that some of the documents referring to 1019.138 mt emanate from [Respondent] itself, i.e. the Bill of Lading and the freight invoice, or from third parties, as for instance the certificate of origin.

5.2.13 Finally, by its very nature, the (undated) mate's receipt was issued before the Bill of Lading, which should be given more credit being the later-updated-document. This is the more so true as [Respondent] has provided no satisfactory explanation why the same master would have signed two conflicting documents within a very short time, when the weight difference (14.34%) was not insignificant. Nor has [Respondent] produced the master . . . as witness.

5.2.14 For these reasons, the arbitrators consider that the weight actually shipped must be deemed to be 1019.138 mt.

5.3 Quality of Goods

5.3.1 [Respondent] alleges that the goods shipped were defective. It bases its allegations primarily on the fact that [Company Z] voiced complaints about quality, that [Claimant] had difficulties bringing together the required tonnage within the available time, and that [Claimant] itself offered [Company X] a price discount. [Respondent] does not state to what extent the defects affect the goods' value, as it in any event disputes any loss. [Claimant] denies such allegations of defects and in particular relies on the inspection carried out at the steel factory . . . before transportation to the port of shipment.

5.3.2 From the evidence on record, this inspection does not warrant any conclusion on the condition and specification conformity of the goods. According to . . ., only 3 to 5 [items] were physically inspected and the inspection was otherwise limited to ascertaining that the labels on the [items] corresponded with the specification . . . According to [principal of Company X], there was no individualization of the goods and the purpose of the meeting was mainly to agree on the specifications. [Claimant's representative], although present at the factory at the time, states that he never inspected this very cargo . . .

5.3.3 [Respondent] has filed a set of photographs showing defective [items]. . . It has stated that these photographs showed the goods at issue, that they dated from the summer of 1988 and were given by . . . of [Company Z], since then deceased, to . . . counsel to [Respondent] . . . Upon reconsideration, the tribunal has accepted the production of these photographs subject to assessing their evidentiary weight in its discretion (Procedural Order nr. 2 of October 16, 1990, section 2.1).

5.3.4 In the course of his examination, [principal of Company X] presented a number of photographs to the tribunal, part of which were identical with those of [Respondent]'s Exhibit 36. He stated that he had received them from his local . . . representative, who in turn had received them from . . . of [Company Z]. He further said that he did not know when they had been taken, in particular whether or not it was promptly after delivery . . . Thus, even if the arbitrators were to assume that the photographs of [Respondent]'s Exhibit 36 indeed show the cargo at issue, such photographs would constitute no proof that the cargo was delivered in the condition they picture.

5.3.5 In the arbitrators' view there are, however, other indications of quality problems on record. Although it disputed that the goods were defective (except for some differences in diameter or thickness, which are said to be irrelevant . . .), [Claimant] nevertheless offered a price discount. It did so in a telex of April 4, 1988 to [Company Z] "in case that you have any interest to keep this material" . . . In his written statement . . . stated that [Company X] asked for a 30% discount and that he agreed to grant 10% . . .

On the other hand in a telex of July 5, 1988, . . . confirmed to [Company X] "agreement on discussion of 50/50" . . . [Respondent] alleges that this telex refers to a 50 % discount on this cargo. [Claimant] argues that it relates to a contemplated joint venture between [Company X] and itself. As a consequence, this document cannot be taken into account for the present purposes.

5.3.6 The contract specifications required an inside diameter of 50.8 cm, a thickness of 0.5, 0.6 or 0.7, a galvanization of 275 gr zink/m2, and a width of 1 m . . . When inspecting the goods on March 7, 1988, [Company Z] found an inside diameter of 53 to 60 cm, a thickness of 0.4 to 2, a galvanization (estimated without measuring instruments) at 50% of the requirement, a width varying between 1 and 1.25 m. It also found the wrapping inadequate, which allegedly caused damage to the [goods] and complained about internal welded joints . . . Whatever the accuracy of [Company Z] findings, they at least indicate the existence of quality claims problems. Other documents on record refer to the same or part of the same alleged defects . . .

5.3.7 [Claimant's representative] also stated in his oral evidence and written statement that upon his first visit in [city] in late March 1988, [Company Z] claimed that the goods were not in conformity with the order . . .

5.3.8 On the basis of the foregoing paragraphs, the arbitrators come to the conclusion that the existence of some defects must be regarded as established, which justifies a reduction of the value of the goods. It also accepts that sufficient notice of defects was given (see 5.3.7 above).

5.3.9 The extent of the reduction is, however, difficult to assess. [Company X] and [Company Z] appear to have agreed on a usable quantity of 275 mt . . . Such a substantial reduction can obviously not be opposed to [Claimant]. [Company X] may have reasons to defer to [Company Z's] demands to an extent which does not reflect the quality of the goods. [Company X]'s conduct in this respect is in particular evidenced by its telex of March 9, 1988 . . . pursuant to which it will accept just any settlement offer of [Company Z] "without negotiation", including acceptance of the goods at "very low price". As a more significant fact for present purposes, the tribunal takes notice that the parties have discussed a possible price discount in a range of 10 to 30%.

5.3.9 Therefore, on the basis of the available evidence and of its powers under Articles 99(3) and 42(2) CO, the arbitral tribunal holds that the defects should be deemed to reduce the market value by 20%.

5.4 Mitigation of Damages: No Loss

5.4.1 The arbitrators find that there is no reason to hold that [Claimant] failed to mitigate its damages. To the extent delivery without the Bill of Lading was not permitted, [Claimant] cannot be required to issue specific instructions to the carrier or its agent to this very effect.

5.4.2 Considering that [Claimant] paid for goods of which it never took delivery, there is further no reason to hold that [Claimant] incurred no loss.'