Case number: 104
Article number: sales convention / 1(1)(b); 7(2); 54; 61 (1)(a); 61(2); 62; 63(1); 64(2); 69; 77; 78; 79; 85 to 88
Thessaurs issue:
Country of decision:
Year of decision: 1993
Type of decision: Arbitral award

Case 104: CISG 1(1)(b); 7(2); 54; 61 (1)(a); 61(2); 62; 63(1); 64(2); 69; 77; 78; 79; 85 to 88
International Chamber of Commerce, International Court of Arbitration
Arbitral award published in 1993, case No. 7197
Extracts published in French Journal de Droit International, 1993, 1028

(Abstract prepared by S. Picard, ICC International Court of Arbitration)

The dispute concerned the failure of the Bulgarian buyer to pay the Austrian seller within the time period agreed in the sales contract.

The arbitral tribunal found that, while the parties did not specify any applicable law, the application of Austrian and Bulgarian rules of private international law led to the application of Austrian law. In view of the fact that CISG had been incorporated into the Austrian legal system, the tribunal decided to apply CISG, in accordance with article 1(1)(b) of the Convention. The tribunal also noted that, as the applicable rules of private international law led to the application of the law of Austria, where the seller had its place of business, it was immaterial that Bulgaria, where the buyer had its place of business, was not a party to the Convention at the time the contract was concluded.

The tribunal found that the buyer committed a breach of contract in that it failed to open the irrevocable and divisible letter of credit provided for in the contract, despite the additional period of time allowed by the seller (articles 54, 62 and 63(1) CISG). The tribunal also found that the seller was entitled to demand performance (article 64 CISG), without loosing its right to request compensation since no force majeure was involved (articles 61(1)(a), 61(2) and 79 CISG). The tribunal, applying Austrian law pursuant to article 7(2) CISG, held that the exercise of the seller's right to demand compensation was not contrary to the penalty clause contained in the contract.

The tribunal awarded the seller interest on the amount due (article 78 CISG). As the Convention does not specify the interest rate, the tribunal determined the interest rate in accordance with the substantive law applicable to the relationship between creditors and debtors (article 7(2)). The tribunal held that the interest rate to be awarded may be higher than the legal rate since the entitlement to interest under article 78 CISG was independent of any claim for damages under article 74 CISG. In the case in question, the tribunal found that the seller operated on the basis of credit for which it had to pay interest at the rate of 12% and applied that rate since the seller would have to obtain credit in order to replace the funds missing due to the non-payment by the buyer.