Source: http://cisgw3.law.pace.edu/cases/031849i1.html
Timestamp: 2019-04-25 07:55:05+00:00

Document:
Published at Yearbook Comm. Arb'n XXXI, Albert Jan van den Berg, ed. (Kluwer 2007) 148-171. Copyright owner: The International Council of Commercial Arbitration (ICCA). Reprinted with permission of ICCA.
[Buyer] and [Seller] concluded an exclusive distributorship agreement (the Agreement) whereby [Buyer] was granted exclusive distributorship rights to a brand of [Seller]'s fashion products. The Agreement provided that [Seller] would deliver the products in one or more instalments for the Fall/Winter and Spring/Summer seasons, respectively. Payment was by means of a letter of credit (L/C). Difficulties arose in the course of the Agreement but the parties continued to do business and to negotiate regarding the various problems.
A new dispute arose between the parties when [Seller] in January sent [Buyer] its price list for that year's Fall/Winter season, indicating that such list was subject to "little changes". This list was subsequently substituted by a second one which included higher prices. In June, [Seller] sent [Buyer] the order confirmations for that year's Fall/Winter season, asking that a letter of credit be opened by [Buyer] ''as soon as possible". The order confirmation was based on the second price list and [Buyer] requested that it be changed to reflect the first price list. [Seller] rejected this request and a dispute arose as to the price of the Fall/Winter season goods. After some attempts to settle this difference, [page 148] [Seller] wrote to [Buyer] on 2 August demanding the opening of the letter of credit for the Fall/Winter season within twenty days of receipt and stating that if [Buyer] failed to do so, the Agreement would be terminated. Following a meeting of the parties to attempt to settle their differences, [Buyer] e-mailed [Seller] on 10 August urging [Seller] to refrain from terminating the Agreement pending the negotiations. [Seller] replied asking [Buyer] to send its proposal for settlement. [Buyer] replied on 10 August stating that "we should follow strictly the letter and intent of the distributorship agreement. In this spirit, please send me the particulars necessary to open a letter of credit for the pending shipments". [Buyer] sent several requests to [Seller] asking for information regarding the letter of credit, but did not receive any reply. On 12 September, [Buyer] informed [Seller] that it had opened a letter of credit. On 19 September, [Seller] terminated the Agreement.
[Buyer] initiated ICC arbitration according to the arbitration clause in the Agreement claiming direct losses, lost profits and harm to its reputation. [Seller] counterclaimed for payment of overdue invoices and other matters.
The sole arbitrator first determined that the Agreement was governed by the 1980 United Nations Convention on the International Sale of Goods (CISG), as agreed by the parties in the Agreement. In doing so, he rejected the [Buyer]'s argument that the termination should be assessed according to Italian law because the CISG did not apply to a long-term contract for distribution of goods. In the view of the arbitrator, the parties had clearly shown that they intended to avoid their respective internal laws and to resort to neutral solutions. The whole agreement was subject to the CISG and its application was not limited to single sales of products as [Buyer] argued.
The sole arbitrator then determined that the applicable provisions of the CISG were Art. 63(1) which allows the seller to fix an additional period for performance by the buyer and Art. 64(1)(b) which allows the seller to terminate the contract if the buyer does not pay within the additional period fixed by the seller. The failure to open the letter of credit was such a failure to pay.
[Buyer] argued that the Agreement had derogated from the CISG because it provided for termination if the [Buyer] failed to meet agreed seasonal goals in three successive seasons or in case of bankruptcy. In the view of the arbitrator this had not been evidenced. Moreover, construing these articles in the Agreement as a renunciation of resort to the remedies in the CISG would be tantamount to a total waiver during the first two years if the seasonal goals were not reached. This would allow a remedy to one party, but none to the other.
The sole arbitrator tested the validity of the termination against the conditions set in Art. 64(1)(b) CISG. Although [Seller] had earlier accepted a wire [page 149] transfer as payment, this did not mean that the Agreement had been amended in respect of means of payment as [Buyer] argued. Hence [Buyer] was not released from its obligation to pay by letter of credit. Also, the disagreement over the price lists did not entitle the [Buyer] to refuse to open the letter of credit. Refusal to open a letter of credit was tantamount to a total refusal to pay, which was a disproportionate reaction in respect of a disagreement. The obligation to open the letter of credit was a fundamental obligation of the Agreement and in the circumstances the [Buyer] could not rely on the exceptio non adimpleti contractus (Art. 71 CISG) as there was no apparent risk of a future breach by the [Seller] of its obligations.
The sole arbitrator then considered whether the [Buyer] had been properly notified. The Agreement provided that all notices be sent to the President or Managing Member of the respective party written in English if to the [Buyer], and in Italian if to the seller. Although the notice was sent in Italian to the New York office of the [Buyer], not expressly addressed to the President or managing director, the sole arbitrator felt that these circumstances did not deprive the notification of its effectiveness. Further, in the opinion of the sole arbitrator, the twenty additional days was a reasonable period. A letter of credit could be opened in a matter of hours and the Agreement provided that the letter of credit had to be opened within fifteen business days following acceptance of the confirmation orders.
The letter of 2 August allowing an additional twenty days for payment did not, however, constitute notice of termination which would have to be done separately according to Art. 26 CISG. After receiving the letter of 2 August on 10 August, the [Buyer] informed the [Seller] that it intended to pay and requested the necessary information. [Seller] did not respond until 23-24 August. In the view of the sole arbitrator, the [Seller] could not be allowed to take advantage of the elapsing of the additional time granted to the [Buyer] when the [Buyer] was prevented from performing by [Seller]'s late response. The [Buyer] had opened the letter of credit on 12 September. Thus, the twenty-day period did not start to run until then. Because the notice of termination was sent on 19 September, the [Seller] was no longer entitled to terminate the Agreement.
The sole arbitrator calculated the damages due to [Buyer] for direct losses, lucrum cessans and damage to its reputation, as well as the amounts owed to [Seller] for unpaid invoices and other expenses. Interest was awarded to [Buyer] at the contractually agreed rate. As no contractually agreed rate of interest applied to the [Seller], the sole arbitrator applied the LIBOR rate as the generally accepted rate in international financial markets. As it appeared that the [Seller] "was seriously considering closing down and transferring its business to a newly formed company" the sole arbitrator granted the [Buyer]'s request to declare the award provisionally enforceable.
 "... [Buyer] has taken the view that a distribution agreement should not be considered as a mere sale of goods, and that the Vienna Convention on International Sale of Goods (hereinafter CISG) would consequently be inappropriate to govern the termination of such a complex and long-term contract. [Buyer] has therefore submitted that the termination of the Agreement by [Seller] should be assessed according to Italian law, and in particular to Art. 1564 of the Italian Civil Code, rather than by the CISG.
'the Vienna Convention provides answers to the points in debate, as the termination of the agreement and the issue of damages'.
a. Is the CISG applicable to the assessment of the Agreement's termination?
 "[Buyer]'s submission that the CISG should be disregarded is based on the assumption that such instrument does not materially regulate the assessment of the correctness of a long-term distribution contract termination. More precisely, [Buyer]'s assumption is that the reference to the CISG in the Agreement should be construed as governing only the single sales taking place between the parties (e.g. possible disputes relating to defaults of the goods), and not to the general framework of the parties' relationship.
 "The Arbitrator does not share this view. First of all, by submitting the Agreement to the CISG (when such instrument does not, in principle apply to a long term distribution contract), and also by referring to the ICC Uniform Customs and Practices for Documentary Credits, the parties have clearly indicated their intention to avoid their respective internal law rules, and to resort to neutral solutions. Secondly, the way Art. 11.2 of the Agreement has been drafted shows that the parties did not intend to limit the application of the CISG to possible disputes related to single sales of products, but did rather submit the whole Agreement to its rules, with the only exception of what 'is not expressly [page 153] or implicitly provided' by it. The intention of the parties to apply the CISG rules to their possible disputes has therefore been clearly expressed.
'questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of international private law'.
In this case, according to Art. 17(1) of the Rules, Art. 7(2) of the CISG would in case of gaps lead to the subsidiary application of the appropriate rules of law. The same reasoning should apply whether a given CISG rule could practically not be applied to a particular disputed issue, due to the nature of a contract not falling within the material scope of the uniform law (such as a long-term distribution agreement), but to which it would nonetheless have been submitted by the parties.
 "The pertinent question is therefore, in the present case, whether it is practically possible to apply the CISG to the assessment of the Agreement's termination by [Seller]. The answer to that question should be positive, as the CISG provide rules which can easily be applied to the termination of a distribution agreement. Pursuant to Art. 17(1) of the Rules, the parties' will to apply the CISG to their dispute should therefore be obeyed. It remains to be seen, still, which of the CISG rules should be applied in the present case."
 "[Seller] has relied upon Sect. III, Chapter III of the CISG ('Remedies in case of breach of the contract by buyer'). Sect. III, Chapter III provides for two different rules in case of termination of the contract by the seller in case of breach of the purchaser's obligations.
 "In its submission no. 1, [Seller] relied upon Art. 64(1) but referred to both paragraphs (a) and (b) of such article. [Seller] has not been more specific in its submission no. 2. In its additional notes, it referred generically to 'Arts. 61 to 64' of the uniform law. During the oral pleadings, [Seller] responded to a question from the Arbitrator, and stated that the rule to be relied upon would be Art. 64(1)(a) and not Art. 64(1)(b). It clearly appears, however, that [Seller] has always considered the alleged breach of [Buyer]'s obligation to open a letter of credit as a breach of its obligation to pay the price of the goods.
'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'.
Such proviso refers, in particular, to the opening of a letter of credit when the contract provides for such an obligation.
 "It can therefore be concluded that the purported breached obligation, upon which termination was justified, is the obligation to pay the price of the goods. The rule applicable to the assessment of the correctness of the termination is therefore the one which is specifically meant to sanction a breach of such obligation (i.e. Art. 64(1)(b)).
 "This conclusion is reinforced by the fact that [Seller] in its 2 August letter, granted [Buyer] an additional period of time to perform its obligation to open the letter of credit. The granting of such an additional period of time, in the CISG system, falls under Art. 63(1). Such 2 August notification can therefore not be construed as a termination declaration pursuant to Art. 64(1)(a), which would be incompatible with granting an additional period of time for performance, but as the notification provided by Art. 63(1). This circumstance also leads to identify Art. 64(1)(b) as the applicable rule, as such rule specifically provides for termination after the elapsing of the additional period of time granted under Art. 63(1).
 "It is therefore clear that, while correctly referring to Chapter III, Sect. III of the CISG as being applicable to the assessment of the Agreement's termination, [Seller] in fact made reference to Art. 64(1)(b) of the CISG (and not Art. 64(1)(a), in combination with Art. 63(1)."
c. Article 64(1)(b) of the CISG derogated by the Agreement?
 "The Arbitrator does not share this view. As a matter of fact, although parties may implicitly derogate CISG, some evidence should be provided of their will to do so. In the instant case, there is no such evidence.
 "It should, in this regard, be highlighted that the scope of Art. 10 is limited to one single cause of termination (bankruptcy of a party), while Art. 3.4.3 is not applicable during the first two years of the Agreement (period during which no seasonal goals were provided).
 "Construing such articles as a renunciation to resort to the remedies provided by the CISG would be tantamount to a total waiver (albeit for the first two years only if the breach is related to the seasonal goals) of the right to terminate the Agreement for breach of the other party's obligations. Such a renunciation would lock a party in the contract while the other party would have totally ceased to perform, which is an unreasonable situation the parties have certainly not looked for, in particular regarding a breach consisting in a default of payment.
 "It should therefore be considered that Arts. 3.4.3 and 10 of the Agreement were meant to supplement the remedies provided by the CISG, to which the parties did not renounce."
 "[Seller]'s position is that, in refusing to open a letter of credit as required by the Agreement, [Buyer] has violated its obligation to pay the price, which justified the termination of the contract. Art. 64(1)(b) of the CISG sets several conditions on a valid termination of a contract. First of all, [Buyer] needs to have been in breach of its obligation to pay the price when the additional period of time was granted (1). Second, the additional period of time granted for performance of the debtor's obligation must have been of reasonable length (2). Finally, [Seller] must have properly terminated the Agreement after the expiration of such additional period (3)."
1. Was [Buyer] in Breach of its Obligation to Pay the Price When the Additional Period of Time Was Granted?
- [Seller] would have breached its own obligations by its 'continuous and material delay in carrying out the delivery of goods under the terms of the Agreement'.
- any delay in the delivery of goods by [Seller] has been caused by [Buyer]'s own delays in purchasing the samples and in processing the orders."
b. Did the parties accept to amend the Agreement in respect of the means of payment?
 "The Arbitrator does not share [Buyer]'s view that [Seller] has accepted to vary Art. 3.6.3 of the agreement in respect of the requirement that the payments be made by means of a letter of credit. In this respect, it should first be noted that the Agreement provides, in its Art. 12.4, that 'no addition or modification to this agreement shall be valid unless made in writing'. This clause [page 159] reflects the parties' will to make sure that their behaviour in the course of their relationship may not be construed as a waiver of any of their rights.
 "In this case, it cannot be considered that [Seller]'s behaviour led [Buyer] to believe that the letter of credit requirement would be irrevocably abandoned. On the contrary, it seems quite clear that the demand by [Seller] to [Buyer], made in July of the previous year that the payment be made by wire transfer rather than by letter of credit, was determined by the exceptional circumstances prevailing at that time, and in particular by its difficulties with its manufacturer M with Mr. N.
 "It should, furthermore, be noted that Art. 8(3) of the CISG provides that, in drawing legal consequences from the conduct of a party, due consideration should be given to their pre-contractual negotiations. In this regard, it has to be noted that [Seller] heavily insisted, while negotiating the Agreement, on the importance of the opening of letters of credit. As a matter of fact, the parties have exchanged a number of different drafts, and each time the letter of credit was not provided as the sole means of payment, [Seller] insisted that it be so.
 "It should therefore be considered that [Buyer] has not been released by [Seller] from its obligation to pay the goods by means of a letter of credit."
c. Was [Buyer] entitled to refuse the opening of the letter of credit?
 "The question is therefore whether this disagreement released [Buyer] from its duty to open the letter of credit. The Arbitrator does not believe so. It is true that the Agreement did not allow [Seller] to modify its price list after it was sent to [Buyer] according to Art. 3.6.1 of the Agreement. In this regard, the Arbitrator does not share the view, expressed by [Seller] that by advising that the [first] price list was subject to 'little changes', it reserved its right to issue a different price list. As a matter of fact, an increase in the range of 10-15% can certainly not be considered as 'little changes' in prices.
 "It is also true that [Buyer] immediately protested after receiving the second price list. ... Nevertheless, the disagreement on the prices did not prevent [Buyer] from opening the letter of credit. [Buyer] could, as a matter of fact, perfectly have opened a letter of credit on the basis of the first price list.
 "A refusal to open any letter of credit is, pursuant to Art. 54 of the CISG, tantamount to a total refusal to pay the price, which was an excessive and disproportionate reaction in respect of a disagreement related to 10 or 15% only of the prices."
d. Was the obligation to open a letter of credit a fundamental obligation of the Agreement?
 "The Arbitrator believes that the question of whether the opening of letters of credit by [Buyer] was fundamental or not in the parties' intention is totally irrelevant for the assessment of the correctness of the contract's termination. As a matter of fact, it has been determined that the correctness of the termination of the Agreement by [Seller] should be assessed according to Arts. 63(1) and 64(1)(b) of the CISG, and not to Art. 64(1)(a).
 "In Art. 64(1)(b) of the CISG, there is no requirement related to the fundamental nature of the breach. Such article allows the seller to terminate the contract, in case of breach of the other party's obligation to pay the price, under the sole condition that an additional period of time of reasonable length has been granted to the debtor. In this case, as it has been said, the obligation to open the letters of credit is tantamount to the obligation to pay the price (Art. 54 of the CISG).
[44 ] "Art. 71 of the CISG might be applied only in respect of the risk of a future breach of a party's obligations, in the light of the conduct of such party, or of its ascertained inability to comply with its obligations. It should therefore be seen whether [Buyer] had serious reasons to believe, at the time when the opening of the letter of credit for the Fall/Winter collection was requested that [Seller] would not perform its future obligations. It should also be assessed whether the formal requirements set by Art. 71 have been met by [Buyer].
 "In this regard, it should first of all be stressed that the circumstance that [Buyer] disagreed on the prices for the collection does not in itself justify the application of Art. 71 of the CISG. As a matter of fact, such disagreement does not relate to the performance of one of [Seller]'s obligations, but to the performance of [Buyer]'s own obligation to pay the price.
 "Leaving that issue aside, it appears that [Buyer] had no particular reason to believe, in June, that [Seller] would fail to comply with its obligation of timely delivery of the orders. ... In any event, [Buyer] has failed to justify compliance with Art. 71(3) of the CISG, which provides that' A party suspending performance, whether before or after dispatch of the goods, must immediately give notice of the suspension to the other party ...'.
 "[Buyer]'s submission that it was entitled to resort to the exceptio non adimpleti contractus to justify its refusal to open the requested letter of credit shall therefore be rejected."
 "It appears from the above developments that [Seller] was entitled, in August, to resort to the remedy provided by Art. 63(1) of the CISG in the perspective of a termination of the Agreement pursuant to Art. 64(1)(b) of the CISG. [Buyer], however, has submitted that its failure -- at the time the 2 [page 162] August notification was sent -- to open the letter of credit was caused by [Seller]'s own failure to comply with the Agreement. Consequently, according to [Buyer], Art. 80 of the CISG prevented [Seller] from summoning [Buyer] to open the letter of credit within 20 days, as it did on 2 August.
To be successful in its submission, [Buyer] must provide evidence that its failure to open a letter of credit for the Fall/Winter season collection was -- at the time the 2 August notification was sent -- determined by an act or omission of [Seller].
 "In other words, [Buyer] must prove that [Seller]'s behaviour has, at that time, made the opening of the required letter of credit impossible or almost impossible. The Arbitrator does not find in the file any such evidence. On the contrary, as it has been said, the parties' disagreement on the Fall/Winter season price list did not prevent [Buyer] from opening a letter of credit on the basis of the first price list. Given that [Buyer] does not bring evidence that its failure to open the letter of credit was at that time due to an impediment caused by [Seller], its submission based upon Art. 80 of the CISG shall be rejected."
 "It has been ascertained that, at the beginning of August, [Buyer] found itself in breach of the obligation, provided by Art. 3.6.3, to pay for the Fall/Winter season collection by means of a letter of credit. [Seller] was therefore entitled to resort to the remedy provided by Art. 63(1) of the CISG, in the perspective of termination pursuant to Art. 64(1)(b) of the CISG. ..."
According to such letter, [Seller] granted to [Buyer] 20 additional days to comply with its obligation to open the letter of credit, and advised [Buyer] that, failing to do so within such period of time, the Agreement would be terminated. By doing so, [Seller] resorted to the remedy provided by Art. 63(1) of the CISG, according to which 'the seller may fix an additional period of time of reasonable length for performance by the buyer of his obligation'.
 "As to the argument related to the fact that the notification was not sent to the President or to a managing director of the company, the Arbitrator notes that the letter was sent to the New York office of [Buyer] at the address indicated in the Agreement. The circumstance that the notification was not expressly addressed to the President or managing director of [Buyer] is irrelevant as long as the letter was sent to the proper address indicated in the Agreement for this kind of communication. The letter was therefore, under this profile, compliant with Art. 12.5 of the Agreement.
 "There is, conversely, no doubt that, in sending to [Buyer] a notification drafted in Italian language, [Seller] did not comply with Art. 12. 5 of the Agreement. The Arbitrator, however, does not believe that such circumstance should deprive the notification of its effectiveness.
 "The Arbitrator believes ... that the letter was properly understood by the managers of [Buyer]. In this regard, it should be recalled that Mr. C speaks Italian. It should also be added that, even if the letter was not immediately understood by the person who received it, it was certainly not difficult to immediately translate it, which was certainly done (or, in any event, should have been done by a diligent party) given the highly contentious context of the relationship between the parties at that time. Besides, we must stress that Mr. [page 164] CC [another manager] was informed of the notification by an e-mail received the same day when the registered letter was received at [Buyer]'s New York offices.
Such article sets a general principle of effectiveness of notifications, which prevents [Buyer] from prevailing itself of a mishap in the communication of the summons such as its drafting in the Italian language."
b. Additional period granted of reasonable length?
 "[Buyer] has submitted that the 20 days additional period granted in [Seller]'s letter dated 2 August to open the letter of credit was not reasonable in light of the circumstances. The Arbitrator does not share that view.
 "Once again, [Buyer] could perfectly, given the disagreement on the second price list, have opened a letter of credit on the basis of the first price list. In the normal course of business, a letter of credit can be opened within a few hours from request. In granting an additional period of 20 days, when Art. 3.6.3 of the Agreement provides that letters of credit have to be opened within 15 business days following acceptance of the confirmation orders, [Seller] complied with the requirement set forth by Art. 63(1) of the CISG that the additional delay be of reasonable length."
3. Is Agreement Properly Terminated?
a. When was the Agreement terminated?
 "In the CISG system, termination of a contract is only triggered by a notice to the other party. In this regard, Art. 26 of the CISG provides that '[a] declaration of avoidance of the contract is effective only if made by notice to the other party'.
 "The 2 August letter cannot be regarded as having terminated the Agreement. As a matter of fact, such letter granted [Buyer] an additional period of time to comply with its obligation, as provided by Art. 63(1) of the CISG, which is not compatible with immediate termination. Nor can it be considered that the 2 August letter terminated the Agreement automatically after the expiration of such additional period of time. As a matter of fact, according to Art. 26 of the CISG, termination needs a specific notification to the other party.
 "Therefore, when an additional period of time has been granted for performance of the other party's obligation, termination needs a second, specific, notification to be sent after the elapsing of such additional period of time. In this case, such second notification was sent by [Seller] to [Buyer] on 19 September. It is consequently at such date that the Agreement was terminated by [Seller]. We must therefore verify whether, on 19 September, [Seller] was still entitled to terminate the Agreement."
b. Was [Seller] still entitled to terminate the Agreement?
'in cases where the buyer has paid the price, the seller loses the right to declare the contract avoided unless he does so (a) in respect of late performance by the buyer, before the seller has become aware that performance has been rendered'.
The combined system of Arts. 63(1), 64(1)(b) and 64(2)(a) of the CISG is therefore that, when seller has granted purchaser an additional period of time for payment of the price (Art. 63(1)), and when purchaser has not complied within such indicated additional period, seller has the right to declare the Agreement terminated (Art. 64(1)(b)), provided that he does so before becoming aware that purchaser has performed late (Art. 64(2)(a)). This means that the CISG allows purchaser to avoid termination by complying before seller has notified the contract's termination, even if compliance is late in respect of the additional period of time granted pursuant to Art. 63(1). In other words, contrary to the situation prevailing in Italian law (Art. 1454 of the Civil Code), and contrary to [Seller]'s view ... the expiration of the additional period of time granted to purchaser (Art. 63(1) of the CISG) does not in itself trigger an ipso facto termination, but only allows seller to notify termination, provided that compliance did not take place before he does so (Art. 64(1)(b)) of the CISG). In [page 166] such a case, termination is triggered by such second notification, and not by the elapsing of the additional period of time fixed by the first notification (Art. 26 of the CISG).
 The sole arbitrator reviewed the contacts between the parties following the granting of the additional period of time, noting that [Buyer] had opened a letter of credit and that [Seller] was aware of it before sending the termination letter. He concluded that: "[p]ursuant to Art. 64(2)(a) of the CISG, [Seller] had therefore lost the right to terminate the Agreement. We shall therefore rule that the Agreement was wrongfully terminated by [Seller]. Such conclusion is reinforced by three further considerations.
 "First of all, it should be reminded that, according to Art. 63(2) of the CISG, the seller cannot avoid the contract before the additional period of time granted pursuant to Art. 63(1) has elapsed.
 The sole arbitrator determined that the 2 August letter was received on 10 August and continued: "Nevertheless, it cannot be ignored that, on the very same day, Mr. C [of Buyer] informed Mr. J [of [Seller]] that he intended to comply, and required to be sent 'the particulars necessary to open a letter of credit for the pending shipments'. Such information was provided by [Seller].
 "The Arbitrator does not share [Seller]'s view that such information was unnecessary to [Buyer]. Is was certainly not improper, in the litigious context of the parties' relationship at that time, to make sure that the letter of credit would be compliant with [Seller]'s requirements. Furthermore, if the required information was so easily available, [Seller] could have provided it immediately, instead of waiting until 23 and 24 August. [Buyer] therefore found itself in the situation of having to wait for the requested information before complying.
 "This means that, in any event, termination could not have been validly notified on 19 September, as the letter of credit had already been opened at such date. Termination was therefore irregular both under Art. 64(1)(b) and (assuming such rule would be applicable) Art. 64(1)(a) of the CISG.
 "Finally, a general principle of good faith (also recalled in Art. 7 of the CISG) prevents a party from taking undue advantage of the remedies provided in case of breach of the other party's obligations. In this case, there are a number of indications that [Seller] did not act in good faith when it decided to terminate the Agreement. The delay in responding to [Buyer]'s request for information (see above) is one of these indications. Reference can also be made to the fact that, in the 19 September termination letter, [Seller] pretended not to be aware of the opening of any letter of credit, while this information had been provided by [Buyer] twice. An e-mail from Mr. R ... also shows that [Seller] had decided to terminate the Agreement even before the expiration of the additional period of time granted to for performance, and that its real scope was to use termination to renegotiate new contract terms, which is contrary to the principle of good faith and fair dealing in international trade.
Art. 7.4.2 of the Unidroit principles also provides, as an expression of a generally accepted principle of law, that the harm suffered by the aggrieved party includes any gain of which such party has been deprived.
 Having quantified the sums due to each party, the sole arbitrator ruled on the issue of interest as follows: "The CISG does not provide for any indication as to the interest to be applied to sums due by a party to another. The Agreement provides, in Art. 3.6.4, that in case of delay of payment of the price due to [Seller], the interest rate applicable shall be the Italian Prime Rate increased by two points. ..."
 "Art. 3.6.4 of the Agreement is applicable only to the payment of the price of the goods to [Seller]. It shall therefore be applied to [Seller]'s credit against [Buyer]. The Italian Prime Rate is provided by the Associazione Bancaria Italiana (A.B.I) once every two weeks. At the date of the present award, the latest published rate was 7.375%. ... Interest will therefore accrue, at the rate of [page 169] 9.375% (i.e. the latest Italian Prime Rate known at the date of the present award plus two points), from 9 August until payment."
 "The Agreement does not contain any indication as to the interest rate applicable to the sums due by [Seller] to [Buyer]. [Buyer] has submitted that the legal rate applicable in the State of Washington should apply because this is the place where it is registered. The Arbitrator does not believe such solution, to be appropriate. As a matter of fact, by submitting the Agreement to the CISG, the parties have clearly indicated their intention to avoid their respective internal law rules, and to resort to neutral solutions. This will should be respected also regarding interest.
 "In international arbitration, arbitrators have the broadest powers to determine interest on the basis of the most appropriate rate, without resorting to any rule of conflict. As indicated above, the interest rate to be applied should correspond to a generally accepted rate, applied on the international financial markets to the currency in which the damages shall be paid. In this regard, the London Inter Bank Offered Rate (LIBOR) on the US$ at 12 months (around 1.5%), increased of a spread of two points, constitutes a correct reference. An interest of 3.5% per year shall therefore be applied to all amounts due by [Seller] to [Buyer] from the date of the present award until payment."
 "[Buyer] has asked the Arbitrator to declare the Award provisionally enforceable. Such a request falls within the powers of an international arbitrator sitting in France. As a matter of fact, Art. 1479 of the French Nouveau Code de Procedure Civile expressly grants to arbitral tribunals the power to declare their awards provisionally enforceable.
 "In the instant case, there is evidence that [Seller] is seriously: considering closing down and transferring its business to a newly formed, company. ... The declared intention of [Seller] to close down shortly is, in itself, a circumstance which justifies that the present award be declared provisionally enforceable.
 "Regarding legal costs and the costs of the arbitration, reference should be made to Art. 11.1 of the Agreement, which provides that 'Fees and expenses of the arbitration shall be allocated by the arbitrator in favour of the substantially prevailing party'. As [Buyer] is the substantially prevailing party, [Seller] shall bear its own legal costs for the arbitration proceedings, for other proceedings before State courts in Italy and in the United States, and for the costs of the arbitration.
"Where one of the parties fails to perform (Art. 1218) in respect of individual performances, the other party may request termination of the contract if the non-performance is noticeably important (Art. 1455) and is such as to lessen [that party's] trust in the correctness of successive performances."

References: Art. 63
 Art. 64
 Art. 64
 Art. 26
 Art. 1564
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 Art. 17
 Art. 7
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 Art. 64
 Art. 64
 Art. 64
 Art. 64
 Art. 63
 Art. 64
 Art. 63
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 Art. 10
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 Art. 64
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 Art. 12
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 Art. 54
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 Art. 71
 Art. 71
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 Art. 80
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 Art. 26
 Art. 63
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 Art. 7

Art. 7
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 Art. 11