'12. With respect to the governing law, the Contract provides as follows:

Any legal issue relating to this contract and each and every provision incorporated in this contract or further contracts resulting of this contract shall be governed by the United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980 (CISG) and to the extent not covered by the CISG, by reference to the UNIDROIT Principles of International Commercial Sales Contracts of 1994 and if not covered by the foregoing sets of rules or the provisions in this contract, by internationally accepted general trade practices, and in final instance by the law of the country where the Seller has his principal place of business.

...

E. The letter of credit (L/C)

27. The Contract required payment to be "effected by irrevocable Letter of Credit, opened by a first class bank, acceptable to the Seller, fully workable, covering 100% of the invoice value".

28. The letter of credit that was provided by [Respondent] is at Exhibit C-5 and carries reference number ... (the L/C). The Contract required that the L/C be provided on 30 March ... It was ultimately issued on 6 April ..., by ... (the Issuing Bank). The L/C recited that it was valid until 30 June ..., although in fact it expired on 6 July ..., i.e. three months after being opened (see further below).

29. The L/C was issued in the amount of ... and the advising bank was ... (the Advising Bank). The L/C provided a list of the documents required to be submitted to the Advising Bank in order for payment to be effected. As initially framed, these included a "DUPLICATE OF RAIL WAYBILL CIM DULY STAMPED IN THE STATION OF DEPARTURE CONSIGNED TO ... [RESPONDENT]" (item 2) ...

30. On 10 April ... [Claimant] requested via e-mail to [Respondent] a number of amendments to the L/C ... Included were the following amendments: "ITEM 2: PLS ADD: RAIL WAYBILL CIM ACCEPTABLE AS PRESENTED" ...

31. [Respondent] has stated that the amendments to the L/C requested by [Claimant] were made on the same day. The record indicates that they were conveyed to the Advising Bank on 10 April ... and acknowledged on 11 April ... The revised L/C stated that the documents required to be presented under it included: "RAIL WAYBILL CIM ACCEPTABLE AS PRESENTED" ...

32. In early May ... after delivery of the Goods to the border ... [Claimant] attempted to collect the Contract Price via the L/C. However, the Advising Bank refused to allow [Claimant] to draw down on the L/C. In an Advice of Discrepancy dated 3 May ... the Advising Bank listed the discrepancy as "PHOTOCOPY OF DUPLICATE OF RAIL WAYBILL SMGS PRESENTED INSTEAD OF RAIL WAYBILL CIM."1

33. On 14 June ... [Claimant]'s legal representative sent an e-mail to [law firm] (the 14 June Communication), believing [said law firm] to be [Respondent]'s attorney. [Respondent] has stated that [said law firm] was previously his legal representative, but no longer was by 14 June 2006 ...

34. On 16 June ... [Claimant]'s legal representative sent a copy of the 14 June Communication to [Respondent] directly, by fax and e-mail ... In the covering fax, [Claimant]'s attorney noted that he had yet to receive a reply to the 14 June Communication.

35. The 14 June Communication read:

We understand that since the Railway bill presented was not stated as being a Railway bill, the bank treated this document as not L/C conform according to UCP and therefore discrepant. However, as the presented document was the actual Railway bill, the (alleged) discrepancy was only a technical discrepancy and the documents were in fact fully in compliance with the contract and the L/C.

It went on to demand that [Respondent] cooperate by arranging for payment to be effected under the L/C, "i.e. ultimately by tomorrow, 15 June ..." (which deadline was later extended to 19 June ...). The 14 June Communication "requested but also urged [Respondent] to send a message to the issuing bank that the alleged discrepancy of the presented railway bill is to be considered waived, or, alternatively, to confirm to me in writing its agreement to a further amendment of the [L/C] as set out above". In the event, [Respondent] did not act to waive the discrepancy or amend the L/C.

36. On 22 June ... [Claimant] contacted [Respondent] by fax and e-mail, informing him that [Claimant] saw no prospect for an amicable resolution of the dispute ... [Claimant] also explained that it had handed the file to its lawyer for further action.

37. On 3 July ... [Respondent]'s legal representative ... sent a fax to [Claimant]'s legal representative ... acknowledging receipt of the 14 June Communication and informing [the latter] that he was acting on behalf of [Respondent] ...

38. As is explained further below, the L/C expired on 6 July 2006, without [Claimant] having been able to draw down under it.

..........

VI. Analysis of issues for decision

A. Termination of the Contract by [Claimant]

99. As outlined above, [Claimant] purported to terminate the Contract on 27 July ... by means of a letter to [Respondent]'s attorney ... copying [Respondent] ... The first issue for determination is whether [Claimant]'s purported termination on 27 July ... was effective. The parties' respective obligations in relation to the L/C are central to this issue and are therefore considered in the discussion below.

(a) The Claimant's position

100. [Claimant] asserts that [Respondent] was in multiple breach of contract, so that [Claimant] was entitled to terminate the Contract on 27 July ... The breaches cited by [Claimant] in its letter of 27 July ... as entitling it to terminate were (i) non-payment of the Invoice Price and/or (ii) failure to cooperate with its request for an amendment to the L/C .... In the RfA and SoC, [Claimant] focuses on [Respondent]'s conduct with regard to the L/C as constituting a breach of contract, in particular asserting the following three arguments.

101. First, [Claimant] contends that [Respondent] was in breach of the Contract because he was late in arranging for the L/C to be opened: the Contract required the L/C to be opened by 30 March ... but [Respondent] only opened the L/C on 6 April ... This, argues [Claimant], provided it with less time to attempt to obtain payment under the L/C and less time to request [Respondent]'s assistance in making the necessary amendments to the L/C or waiving the discrepancy relating to the railway bills (SoC ...).

102. Second, [Claimant] notes that the Contract provided that "[r]efusal or non­timely acceptance of the Buyer to arrange necessary L/C amendments as requested by the Seller will be considered as breach of contract" (RfA ...). [Claimant] contends that, despite various informal requests and the formal written request provided in the 14 June Communication, [Respondent] did not amend the L/C or waive the immaterial discrepancy as to the railway bills, so as to allow the bank to accept SMGS railway bills in lieu of CIM railway bills. [Claimant] argues that in refusing or failing to implement [Claimant]'s request for an amendment or waiver, [Respondent] breached the Contract.

103. In support of this argument, [Claimant] points to the UNIDROIT Principles of International Commercial Contracts 1994 (the UNIDROIT Principles). As discussed at paragraph 12 above, the Contract provides for the application of the UNIDROIT Principles as a subsidiary source of legal rules, where the issue in question is not covered by the United Nations Convention on the International Sale of Goods 1980 (CISG). Article 1.7 of the UNIDROIT Principles requires the parties to transact in good faith and uphold standards of fair dealing. Furthermore, the UNIDROIT Principles place on each party the duty to cooperate with its contractual counterparty (Article 5.1.3) and to use its best efforts to work towards the "common project" of the parties, represented by the Contract (Article 5.1.4). These Principles, in [Claimant]'s view, mean that [Respondent] was obliged to be proactive and cooperative in amending the L/C at [Claimant]'s request (SoC ...).

104. The third L/C-based argument for breach asserted by [Claimant] is that the Contract required the L/C to be "fully workable", which, [Claimant] argues, it was not: the bank was able to refuse to make payment under the L/C because it contained a requirement for CIM railway bills, rather than the SMGS railway bills that were provided with the Goods (RfA ...).

105. [Claimant] further argues that [Respondent] was not entitled to withhold and/or deduct any monies due to [Claimant] under the Contract, because the Contract specifically forbids this. The Contract provides (at page 3): "In no circumstance, Buyer shall be entitled to withhold and/or deduct any monies due to the Seller." Thus, in failing to make full payment to [Claimant], via the L/C or otherwise, [Respondent] breached the Contract.

106. For any or all of these reasons, [Claimant] contends, it was entitled to terminate the Contract on 27 July ... [Claimant] cites to page 3 of the Contract, which states: "Seller explicitly reserves the right to terminate the contract failing full and timely compliance of the payment terms of this contract as per the termination clause" (RfA ...).

(b) The Respondent's position

107. [Respondent]'s position is that he fulfilled his obligations under the Contract in full, so that [Claimant] had no right to terminate it. This is because he arranged the opening of the L/C on 6 April ...; the L/C was irrevocable and for 100% of the Invoice Price. The content of the L/C, [Respondent] maintains, was accepted by [Claimant]'s bank (Answer ...).

108. In relation to payment for the Goods, [Respondent] has referred to the CISG. He contends that he fulfilled all his obligations as to payment for the Goods by complying with Article 54 CISG (Answer ... and SoD ...). Article 54 CISG provides:

The buyer's obligation to pay the price includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made.

[Respondent]'s position is that he fulfilled his obligations to [Claimant] by arranging the opening of the L/C on the terms required by the Contract. According to [Respondent], that is all he had to do in order to satisfy his payment obligation with respect to the Goods. Article 54 CISG, [Respondent] argues, does not necessarily require a buyer to succeed in its efforts to comply with all contractual formalities ...

109. In relation to [Claimant]'s failure to obtain payment under the L/C, [Respondent] contends that [Claimant] has only itself to blame, because it was [Claimant] that requested the reference to CIM railway bills in the L/C ... [Respondent] contends that [Claimant] cannot raise a claim for breach against him on the basis of the L/C not being workable, since it was only made unworkable by [Claimant]'s own request to amend it (Answer ...). The Sole Arbitrator notes here that the reference to CIM railway bills was contained in the L/C as originally opened by the Issuing Bank on 6 April ..., described at paragraph 29 above, and not in the first instance as a result of [Claimant]'s later request, as [Respondent] seems to suggest. However, the reference was also contained in [Claimant]'s e-mail of 10 April ... seeking various amendments to the L/C ... The parties have traded arguments as to the reason that this reference was included. Per [Claimant], it was a "slip of the pen", while [Respondent] alludes to a conscious drafting decision: on the evidence, [Claimant]'s position is the more persuasive.

110. [Respondent] also contends that by including the reference to CIM pursuant to [Claimant]'s request, he complied with his obligation under the Contract to amend the L/C at the seller's request, and therefore [Claimant] cannot properly contend that he failed in this obligation (Answer ...). With regard to the 14 June Communication in which [Claimant] requested that the L/C be amended to permit presentation of SMGS railway bills or that the discrepancy be waived, [Respondent] argues that the letter was ineffective to communicate a requested L/C amendment to him. The reasons put forth for this position are that: (1) the letter was sent on 14 June ... not to [Respondent] himself but to his former legal representative, and therefore it did not reach [Respondent] until later; (2) his actual legal representatives were not able to consider it until they were retained on 29 June ...; (3) unlike previous correspondence, which had been sent directly by [Claimant], the 14 June Communication was sent by [a person] of whom [Respondent] had never heard (and in relation to whom no power of attorney was provided by [Claimant]); and (4) the requests to amend the L/C or waive the discrepancy were expressed in vague and general terms, which were ineffective to impose on [Respondent] an obligation to carry them out (these arguments are detailed in [Respondent]'s Answer ... and his SoD ...).

111. In sum, [Respondent] contends that he complied with all his obligations under the Contract so that [Claimant] had no right to terminate the Contract. As such, its purported termination by letter of 27 July ... was ineffective (Answer ...).

(c) The Sole Arbitrator's conclusion - breach and termination

112. The Contract provides that its governing law is the CISG. To the extent that an issue is not covered by the CISG, the Contract lists a hierarchy of additional norms:

• The UNIDROIT Principles;

• Internationally accepted general trade practices; and

• The law of the place where the Seller has his principle place of business ...2

The first source for applicable legal rules - the CISG - concerns itself primarily with contract formation and avoidance, although Article 8 thereof underscores the importance of the intent of the parties in interpreting their statements or conduct. The UNIDROIT Principles provide that a contract "shall be interpreted according to the common intention of the parties".3 The contract itself is the foremost expression of the parties' intention, and the Sole Arbitrator has accordingly analysed the issues beginning with the language of the Contract, and seeking insofar as possible to give the Contract's terms their plain and ordinary meaning. Specialized or trade specific terms - e.g., the delivery clause, which provides for "DAF [border town]" - have been given their specialized meaning.

113. In accordance with the Contract, [Claimant]'s core obligation was to deliver the Goods, while [Respondent]'s core obligation was to pay for them as provided in the Contract. Payment was to be secured by the L/C that [Respondent] was required to open and, as necessary, amend so as to render it effective.

114. The payment clause in the Contract provides as follows:

Payment has to be effected by irrevocable Letter of Credit (L/C), payable as per terms above, opened by a first class bank, acceptable to the Seller, fully workable, covering 100% of the invoice value, and to have full T/T (Tested Telex) reimbursement instructions and payable in the country where the L/C is being advised.

***

Refusal or non-timely compliance of the Buyer to arrange necessary L/C amendments as requested by the Seller will be considered as breach of contract. Seller explicitly reserves the right to terminate this contract failing full and timely compliance of the payment terms of this contract as per the termination clause. Buyer remains liable for payment of the full invoice value in case the L/C required under this contract would for whatever reason not lead to payment. In no circumstance, Buyer shall be entitled to withhold and/or deduct any money due to the Seller. ...

115. In essence, this clause placed upon [Respondent] the obligation to pay for the Goods and specified the L/C as the method by which payment would be made. To ensure that the payment method would be functional, the Contract required [Respondent] to comply with [Claimant]'s requests to amend the L/C, in order to ensure that it was and would remain "fully workable". [Respondent] did not pay for the Goods via the L/C or through any other mechanism. Furthermore, the record shows that he did not respond to [Claimant]'s request to amend the L/C to make it workable.

116. On the evidence presented, [Claimant] made a valid request in the 14 June Communication ... for amendments to the L/C so as to enable [Claimant] to obtain payment. The 14 June Communication was received by [Respondent] on 16 June ... It explained to [Respondent] that a discrepancy had been identified in relation to the railway bills presented under the L/C. It then "kindly requested but also urged [Respondent] to [send] a message to the issuing bank that the alleged discrepancy of the presented railway bill is to be considered waived, or, alternatively, to confirm to me in writing its agreement to a further amendment of the L/C as set out above". The previously quoted language of the Contract obliged [Respondent] to comply with this request to arrange an amendment.

117. Even had the contractual language been less explicit, [Respondent] would have been required to comply with [Claimant]'s request by the principles of good faith and fair dealing, as enshrined in Article 1.7 of the UNIDROIT Principles. It is, moreover, evident that [Respondent] was aware of his obligation to amend the L/C upon request by [Claimant], because he had previously carried out such amendments ...

118. Despite the 14 June Communication, [Respondent] refused to arrange the amendments requested by [Claimant]. This was both a breach of contract and a violation of [Respondent]'s duty of good faith. In these circumstances, the clear language of the Contract allowed [Claimant] to treat [Respondent]'s refusal as a breach of contract. The payment clause in the Contract, quoted above, permits termination in the absence of ''full and timely compliance" by [Respondent]. Furthermore, the Contract's termination provision, referenced in the payment clause, provides that, "without prejudice to its rights to indemnification", [Claimant] may terminate the Contract "when the buyer [Respondent] fails to comply with any of its obligations under this Contract". Accordingly, on the basis of both provisions, [Claimant] was entitled to terminate the Contract, as it did.

119. [Respondent] has made a number of arguments as to the ineffectiveness of the 14 June Communication. In the opinion of the Sole Arbitrator, none of these arguments undermine the conclusion that [Respondent] was provided with a valid request to amend the L/C on 16 June ... It is no answer for [Respondent] to state that he had never before heard of [the person from whom it was received]. [That person] introduced himself clearly in the opening sentence of the 14 June Communication as a lawyer representing [Claimant]; and if any doubt remained, [Respondent] could have inquired. Nor is it an answer to say that the 14 June Communication was unclear or vague. It related to an issue with which [Respondent] was already familiar: his own evidence ... shows his involvement in the L/C and the payment problems at that time. Having been provided with the 14 June Communication, [Respondent] was obliged by the Contract and by his legal duty of good faith to act to amend the L/C.

...

(d) The Sole Arbitrator's conclusion - termination by [Claimant]

123. In sum, the Contract required [Respondent] to amend the L/C upon [Claimant]'s reasonable request. Moreover, the Contract explicitly allowed [Claimant] to treat [Respondent]'s refusal or untimeliness in arranging necessary L/C amendments "as breach of contract" and to terminate the Contract on that basis. Accordingly, as the evidence shows that [Respondent] breached the Contract in this regard, the Sole Arbitrator finds that [Claimant] validly terminated the Contract on 27 July ...'

1
The abbreviations "CIM" and "SMGS" are used to refer to different types of international railway consignment notes. CIM notes are used under the Convention Concerning International Carriage by Rail 1980 (known as the COTIF), to which [the buyer's country] and most other European countries are parties. SMGS notes are those used under the Agreement on International Freight Traffic by Rail (first established in 1956 and known as the SMGS), which applies to members of the Organization for the Collaboration of Railways (known as the OSJD), including both the [rail company's country and the buyer's country]. See further the website of the International Rail Transport Committee (CIT), http://www.cit-rail.org.

2
Governing law provision quoted in full at paragraph 12 above.

3
UNIDROIT Principles, Art. 4.1(2).