'1. The sole arbitrator hereby informs the parties of his decision regarding the scope of the Mexican Law applicable to the merits of this controversy, in connection with the applicability of the United Nations Convention on Contracts for the International Sale of Goods ("CISG") and the UNIDROIT Principles of International Commercial contracts ("UNIDROIT Principles").

Procedural background

2. The procedural background of this decision is as follows:

(i) on September 21st, 2004, the sole arbitrator dictated Procedural Order 9 stating that a decision would be rendered concerning the scope of the Mexican Law applicable to this case;

(ii) on September 27th, 2004, Respondent . . . submitted a brief addressing this issue;

(iii) on October 5th, 2004, Claimant . . . submitted its respective reply.

3. The sole arbitrator points out the following considerations concerning the applicability of the CISG and the UNIDROIT Principles.

Applicability of the CISG

4. The sole arbitrator confirms the applicability of the CISG to this dispute.

5. The agreement entered into by the parties deals with a sale of goods (machinery), which falls within the scope of application of the CISG. The fact that the agreement includes provisions regarding other sort of obligations does not deprive the CISG from its application as these obligations are related to the sale of goods as one of the main cores of the contractual among the parties. The application of the CISG results, among other considerations, from Article 1 of the Convention1.

Applicability of the UNIDROIT Principles

6. The parties can refer to the UNIDROIT Principles in support to its [sic] case.

7. The UNIDROIT Principles can be taken into consideration by an arbitrator and by disputing parties, with no need of previous agreement among such parties. Certainly, such reference to the UNIDORIT Principles, when no specific application has been agreed, cannot be contrary to default rules incorporated within Mexican legislation. Nevertheless, the UNIDROIT Principles can be a valuable instrument to interpret the will of the parties when such interpretation is needed.

8. UNIDROIT Principles are an expression of lex mercatoria and, consequently, are useful for the interpretation of commercial obligations. For that reason, such principles are consistent with Mexican law as a complementary set of rules in accordance with trade usages (Article 17.2 of the ICC Rules and Article 1445, par. 4 of the Commercial Code2).

General considerations

9. These decisions are expected to serve as guidance to the parties regarding the sole arbitrator's criteria on the applicability of the CISG and the UNIDROIT Principles.

10. The sole arbitrator's assertions do not pretend to interpret, at this time, the scope and effects of the obligations entered into by the parties to this controversy.'

1
Article 1.1 of the CISG: "La presente Convención se aplicará a los contratos de compraventa de mercaderías entre partes que tengan sus establecimientos en Estados diferentes: ..." The CISG is in effect in Mexico as well as in Canada and is part of Mexican law according to Article 133 of the Federal Constitution.

2
Article 17.2 of the ICC Rules: "In all cases the Arbitral Tribunal shall take account of the provisions of the contract and the relevant trade usages." Article1445, par. 4 (Comercial Code): "En iodos los casos, el tribunal arbitral decidirá con arreglo a las estipulaciones del convenio y tendrá en cuenta los usas mercantiles aplicables al caso."