case study. the international chamber of commerce (icc)

CASE STUDY

•

• THE INTERNATIONAL CHAMBER OF COMMERCE

(ICC)

Introduction

• What is the International Court of Arbitration of the International Chamber of Commerce?

• Internet address: http://www.iccwbo.org/index_court.asp

• Legal basis: Rules of Arbitration

Vienna Rules and ICCRules

• What is different in the ICC Rules from the Vienna Rules (Main items):

• Terms of Reference (Art 18 ICC Rules)• Procedural Timetable (Art 18 ICC Rules)• Times limit for the Terms of Reference and

for the award (Art 18 and 24 ICC Rules)• Approval of Terms of Reference and of the

award by the Court of Arbitration (Art 18/3 and 27 ICC Rules)

THE PERSONS INVOLVED

The Claimant

• Pesante & Grosso, Padova, Italy• Distributor of food and beverages• Abbreviation: „P & G“

• Attorney (Avvocato):• Prof. Dott. Paolo Sapiente• Studio Sapiente & Montasio, Padova

• Arturo Vivarini, sales manager

The Respondent

• King´s Department Stores Ltd., London• Owner of department stores• Abbreviation: King's

• Attorney (Barrister):• Mr. George Wise, Queen's Counsel• London, England

• John Brown, sales manager

The Tribunal

Co arbitrator, appointed by the Claimant:• Avv. Maurizio Castellani, Milano, Italy

• Co arbitrator, appointed by the Respondent:

• Mr. Anthony Ferguson, Q.C., London, Engl.• Chairman, appointed by the Secretary

General of the International Court of Arbitration:

• Hon. Prof. Dr. Kurt Heller, Vienna, Austria

Other firm involved

• Alimentari di Parma S.r.l., Parma, Italy• Producer of food, in particular of the famous

Parma ham• Abbreviation: Parma

• Carlo Quinto, amministratore delegato (general manager, president)

• Francesco Secondo, sales manager

THE CONTRACTUAL RELATIONS

Contracts

• 05.11.2006:

• Sales Contract between King's and Parma

Main conditions of the contract of 5.11.2001

• Parma to deliver to King's 15000 kg of ham for EUR 250.000, CIF Dover 22.2.06

• Advance payment of EUR 50.000 within 2 weeks after signing

• EUR 100.000: 3 day after receipt of goods• EUR 100.000: 60 days thereafter• Arbitration clause• No extension of delivery date (disputed by Claimant)• Change of payment conditions (disputed by Claimant)

by telephone on 10.02.2007

Arbitration Clause

” Any dispute arising of this contract will be resolved by reconciliation. If the reconciliation would fail, the contracting parties agreed upon that arbitration will be done by the International Chamber of Commerce in Paris, in Vienna. Austrian law shall apply."

•

Further Contracts

• 20.12.2006: Parma sells its distributionbusiness to P&G

• 03.01.2007: P&G informs King's oftaking over of distributionbusiness

• 10.02.2007: Telephone conference: Change of paymentconditions (disputed)

• Febr. 2007:Order for Whisky (disputed)

PERFORMANCE

Performance of the Sales Contract

• January: Claimant hands over goods to railway

• 22/2/07: Agreed delivery date in Dover

• 25/2/07: King's declares contract avoided (cancelled)

• 2/3/07: Goods arrive in Dover with a delay of delivery of one week

• 10/3/07: King's request that goods shall be taken back

SUBMISIONS OF THE PARTIES

Claimant's submissions

• Delivery of ham, but Respondent did not pay the remaining 200.000 EURO.

• The parties agreed to postpone the delivery• We did not place any order for whiskey• Even if we had placed such order the

Respondent is not allowed to set of the purchase price for the whiskey against our claim

• The payment conditions never were changed

Defendant's submission

• The tribunal has not jurisdiction• There does not exist any valid arbitration

agreement in writing between the parties• The strike of the Italian railway falls within the

sphere of responsibility of the Claimant• We purchased the ham for the „Italian week“

of our department stores. Because of the delayed delivery we could not sell it any more

Set off

• The Claimant ordered 18.000 bottles of whiskey by telephone on 5/2/2007 but refused to take it over and to pay the purchase price.

• We set off the purchase price of 2 Millions English Pounds against the claim of the Claimant.

PROCEDURE

Procedure before the constitution of the tribunal

• Filing of request for arbitration (2/6/07)• Service of request to respondent• Filing of answer to request for arbitration

(28/8/2007)• Appointment of chairmen and handing over of

the file to the tribunal, fixing of advance on costs (5/9/2007)

Procedure of the tribunal before the taking of evidence

• Claimant and Respondent pay half of the advance on cost (or Claimant pays on behalf of Respondent)

• Drawing up of the „Terms of Reference“ and drawing up of a “Procedural Timetable” (in writing or in a hearing)

• Tribunal decides procedural issues still in dispute (language, place of arbitration)

• Further exchange of submissions by the parties (possibly)

Terms of Reference (Art. 18 of the ICC Rules)

• Full name and descriptions of the parties• Notification and communication• Summary of the parties respective claims• Issues to be determined• Arbitrators full names, descriptions and addresses• Place of arbitration• Particulars of the applicable procedural rules (rules of

evidence, applicable law, minutes, filing of submissions and documents, copies, translations etc.)

Further procedure

Taking of evidence (Hearing etc.) Conclusion of taking of evidence Final pleadings Deliberations of the arbitrators Draft award sent to Secretariat Secretariat determines amount of arbitrator's fees

and expenses to be mentioned in the award Award in final form sent to the Secretariat Award approved by Court of Arbitration Award sent to the parties

MAIN ISSUES OF THE CASE

The procedural issues

• Law applicable to the arbitration clause• Law applicable to the procedure• The Tribunal's jurisdiction

Law applicable to the arbitration clause

• Does arbitration have a lex fori ?• Law of the contract and of the arbitration

clause• Choice of law possible also for arbitration

clauses

The Tribunal's jurisdiction

• Does a valid arbitration agreement exist for the claims raised by the parties?• No written arbitration agreement between

the parties.• Signing authority • Valid set off• Contract was avoided (principle of

separability) • Why is the arbitration clause badly drafted ?

Why is the arbitration clause badly drafted ?

"Any dispute arising of this contract will be resolved by reconciliation. If the reconciliation would fail, the contracting parties agreed upon that arbitration will be done by the International Chamber of Commerce in Paris, in Vienna. Austrian law shall apply."

Why is the arbitration clause badly drafted ?

• Description of dispute to narrow (see standard clause: “All disputes arising out of or in connection with the present contract ...”.

• Description of institution unclear• Place of arbitration unclear (Paris of Vienna)• Language not determined•

Arbitration Clause

"Any dispute arising of this contract will be resolved by reconciliation. If the reconciliation would fail, the contracting parties agreed upon that arbitration will be done by the International Chamber of Commerce in Paris, in Vienna. Austrian law shall apply."

Language of arbitration

• Claimant: Italian• Respondent: English

• Who chooses language ?– Parties– Tribunal

• Criteria for determination of language:– Language of the contract– Language used during the performance under the

contract– Fair language

Place of arbitration

• Claimant: Vienna• Respondent: Paris

• Who chooses the place of arbitration?– Parties– Tribunal

Place of Arbitration

Why is the place of arbitration important?• Enforceability (New York Convention, bilateral

treaties)• Applicable law (choice of law rules)• Nationality of the award (jurisdiction of

ordinary courts regarding arbitration - setting aside of awards, legal assistance)

• Services on the place of arbitration • Travelling problems (Visa etc.)

Issues of substantive law

• Applicable substantive law• CIF Dover ?• Avoidance of the contract• Set off of claims

Applicable substantive law

• Choice of law: Austrian law

• Applicable law: CISG (Vienna Sales Convention or Austrian law ?)

CIF Dover ?

• What are incoterms ?

• CIF (cost, insurance, freight)means:• Dover is the port of destination• Sphere or responsibility (risks) of the seller

passes on to the purchaser when the goods pass the ship's rail at the port of shipment (handing over to railway or to the ship in Genova ?)

Avoidance of the contract

• Claimant: • Application of § 918 ABGB

• Respondent: • Purchased for „Italian weeks“

(Fixgeschäft)• Art 45 and 49 CISG

Set off

• Can Respondent set off with claims that are not subject to the same arbitration clause ?

• OGH 25. 6. 1956, JBl 1957, 80

THE RESULT OF THE CASE

The result of the case

• The Tribunal shall take jurisdiction regarding the purchase price for the ham but may not allow the set off.

• The taking of evidence shall concentrate on the following issues:– Intention of the parties regarding the use of

the incoterm CIF (handling over of ham to the railway or passing of the ship rail)

– Nature of the contract regarding fix day of delivery (Fixgeschäft?)

The End