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De toute Cvidence, un Tribunal arbitral est prive des moyens dont dispose

la Commission de la Communaute (ainsi que, au-dessus d'elle, la Cour de


Justice dans sa fonction de contrble) pour se livrer a ces apprkciations
Cconomiques complexes et ces etudes de marche. On se bornera a constater ici
l'existence de cette difficult6 considerable, qui semble avoir CchappC a
l'attention du Tribunal federal en son arrCt du 28 avril 1992 ainsi, d'ailleurs, qu'a
un savant commentateur de cette decision (prof. L. Idot, Revue de I'arbitrage
1993, no 1, pp. 128-136); dans une interessante note a la suite de I'arrCt, l'auteur
observe d'abord que si le Tribunal fCdCral a justement observi. que rien
n'emdchait les arbitres d'appliquer le droit communautaire, le vrai problbme
Ctait de savoir s'il y avait obligation pour eux d'appliquer ce droit, ce que I'arrCt
semble admettre implicitement sans en expliquer les raisons. Quant a la
question de savoir si l'application du droit communautaire de la concurrence
"reprksente pour les arbitres une charge excessive", question negligee par I'arrCt,
l'auteur y rCpond succinctement par la nCgative, de la faqon suivante : "il est
evident qu'un arbitre ne dispose pas des mCmes moyens que la DG IV, mais on
ne lui demande pas d'Ctablir la preuve de pratiques anticoncurrentielles
complexes, requkrant des mois d'enquCte et il lui suffit de se prononcer sur la
liceit6 d'un contrat".

3.2 Sentence finale dans I'arbitrage CCI no 7047lJJA du 28 fkvrier


1994'
Security for costs Procedural Rules to be applied by the Arbitral Tribunal New Claims - Right to be heard: ('No) right to demand an interim or
prelirninaly award; Refusal to hear a witness; right to the last word
Admissible evidence (telefax letters) - Applicable Law (to the substance)
Mandatory Rules of other laws Authority of representatives (validity of
agreement) - Brokerage contract - (no) Corruption or bribery -Interest.
-

Final Award between W., a Corporation organized and existing under the
laws of the Republic of X. (Claimant) and F.,a State agency (Defendant I).
and
a bank authorized and existing under Y. law (Defendant 2), rendered
by the Arbitral Tribunal consisting of Messrs. Hilmar Raeschke-Kessler
(Chairman). Me. Jean Patry and Prof. Dr. Dobrosav Mitrovic.

a,

The place of Arbitration was Geneva, Switzerland.


A.

FACTS

1.1)

The Claimant is a corporation organized and existing under the laws


of X. ...

PAR CES MOTIFS


Le Tribunal arbitral
Statuant a l'unanimiti

1.

Dit que, en vertu de l'art. 21 du contrat du 23 octobre 1986 et de 1'Acte de


mission des 23,27 et 30 octobre 1989 et suite a llarrCt du Tribunal fCdCral
du 28 avril 1992, il est compCtent pour trancher le litige;

2.

Dit que le contrat du 23 octobre 1986 est compatible avec le droit


communautaire, et rejette en consequence la demande de S. S.p.A.
tendant au prononce de la nullite, totale ou partielle, de ce contrat;

On ...., the parties concluded a contract under the heading


"Agreement", in which Defendant 1) is referred to as "Principal",
Defendant 2) as "Guarantor" and the Claimant as "Consultant". The
Amendments I - IV are part of the .... Agreement.

'

See also above, p. 222, the decision on appeal of the Swiss Federal Tribunal of 30.12.1994

De toute Cvidence, un Tribunal arbitral est prive des moyens dont dispose
la Commission de la Communaute (ainsi que, au-dessus d'elle, la Cour de
Justice dans sa fonction de contrble) pour se livrer a ces apprkciations
Cconomiques complexes et ces etudes de marche. On se bornera a constater ici
l'existence de cette difficult6 considerable, qui semble avoir CchappC a
l'attention du Tribunal federal en son arrCt du 28 avril 1992 ainsi, d'ailleurs, qu'a
un savant commentateur de cette decision (prof. L. Idot, Revue de I'arbitrage
1993, no 1, pp. 128-136); dans une interessante note a la suite de I'arrCt, l'auteur
observe d'abord que si le Tribunal fCdCral a justement observi. que rien
n'emdchait les arbitres d'appliquer le droit communautaire, le vrai problbme
Ctait de savoir s'il y avait obligation pour eux d'appliquer ce droit, ce que I'arrCt
semble admettre implicitement sans en expliquer les raisons. Quant a la
question de savoir si l'application du droit communautaire de la concurrence
"reprksente pour les arbitres une charge excessive", question negligee par I'arrCt,
l'auteur y rCpond succinctement par la nCgative, de la faqon suivante : "il est
evident qu'un arbitre ne dispose pas des mCmes moyens que la DG IV, mais on
ne lui demande pas d'Ctablir la preuve de pratiques anticoncurrentielles
complexes, requkrant des mois d'enquCte et il lui suffit de se prononcer sur la
liceit6 d'un contrat".

3.2 Sentence finale dans I'arbitrage CCI no 7047lJJA du 28 fkvrier


1994'
Security for costs Procedural Rules to be applied by the Arbitral Tribunal New Claims - Right to be heard: ('No) right to demand an interim or
prelirninaly award; Refusal to hear a witness; right to the last word
Admissible evidence (telefax letters) - Applicable Law (to the substance)
Mandatory Rules of other laws Authority of representatives (validity of
agreement) - Brokerage contract - (no) Corruption or bribery -Interest.
-

Final Award between W., a Corporation organized and existing under the
laws of the Republic of X. (Claimant) and F.,a State agency (Defendant I).
and
a bank authorized and existing under Y. law (Defendant 2), rendered
by the Arbitral Tribunal consisting of Messrs. Hilmar Raeschke-Kessler
(Chairman). Me. Jean Patry and Prof. Dr. Dobrosav Mitrovic.

a,

The place of Arbitration was Geneva, Switzerland.


A.

FACTS

1.1)

The Claimant is a corporation organized and existing under the laws


of X. ...

PAR CES MOTIFS


Le Tribunal arbitral
Statuant a l'unanimiti

1.

Dit que, en vertu de l'art. 21 du contrat du 23 octobre 1986 et de 1'Acte de


mission des 23,27 et 30 octobre 1989 et suite a llarrCt du Tribunal fCdCral
du 28 avril 1992, il est compCtent pour trancher le litige;

2.

Dit que le contrat du 23 octobre 1986 est compatible avec le droit


communautaire, et rejette en consequence la demande de S. S.p.A.
tendant au prononce de la nullite, totale ou partielle, de ce contrat;

On ...., the parties concluded a contract under the heading


"Agreement", in which Defendant 1) is referred to as "Principal",
Defendant 2) as "Guarantor" and the Claimant as "Consultant". The
Amendments I - IV are part of the .... Agreement.

'

See also above, p. 222, the decision on appeal of the Swiss Federal Tribunal of 30.12.1994

"Dear Sirs,

It was the purpose of the Agreement that Claimant was to assist


Defendant 1) in the sale of military products and armaments to the
State of Z., represented by the Ministry of Defence - MOD - among
others of M-84-tanks manufactured in Y.
The Defendants signed the
2)

Due to its impact on implementation of the contract signed on


......... between W, and F., with U. as Guarantor, please find
enclosed hereto a copy of the Circular. At the time of signing
the contract we were not aware of the content of the Circular.
You were surely acquainted, at the time of contract signature,
with the limitations imposed by this legal enactment."

... Agreement in B.

On ... Defendant 1) and MOD signed a contract on the delivery of 215


different M-84-tanks at the total sales price of US-$ 500.546.004,and UKE 11.440.326,29 - the M-84-contract.
Prior to conclusion of the M-84 contract, the MOD supplied to
Defendant 1) a circular - the MOD-circular - containing the request
that contracts on the delivery of arms, ammunition and spare parts be
made directly with the MOD without the participation of an agent or
intermediary.

On ......, Defendant 1) sent another letter to Claimant, reading as


follows:
"Dear Sirs,
Since the Agreement, signed on ..... between W. and F., is not
in accordance with the compulsory laws and regulations of
both the State of Z. and Y., we are ready to negotiate with you
the terms and conditions of termination of the said Agreement.

We are prepared to start the discussion on the termination by


the end of July and would very much appreciate your
information on the date of your arrival to B.... to that end.

The MOD also handed circular Nr. 4 A188 to Defendant 1). Circular
Nr. 4 A188 u.a. obliges the partners to contracts with MOD to refrain
from paying moneys to an agent. The partner also has to assure to the
MOD that his prices do not contain commissions for agents or similar
moneys. It is disputed between the parties whether Defendant 1)
already knew of the MOD-circular and of circular Nr. 4 A188 when
concluding the ...... Agreement with Claimant, and whether the MoDcircular is applied by the Z. authorities.
3)

Defendant 1) was instigated by the MOD-circular to send the


following letter to Claimant on ...:

In respect of the aforementioned, we do not expect you to


proceed with the activities regarding the matter you are
referring to in your letter dated...."
Defendant 1) considers the letter of ....., to constitute the termination
of the Agreement of. ....... The request to Claimant to cease its
activities on behalf of Defendant 1) has been repeated in other letters
subsequently.
4)

On ....... , Defendant 1) and the MOD concluded a contract on the


construction of M-84-training-facilities - construction-contract.
(According to Amendment I to that contract, the construction price
payable by the MODto Defendant 1) was to be US-$39.109.528,00.

"Dear Sirs,

It was the purpose of the Agreement that Claimant was to assist


Defendant 1) in the sale of military products and armaments to the
State of Z., represented by the Ministry of Defence - MOD - among
others of M-84-tanks manufactured in Y.
The Defendants signed the
2)

Due to its impact on implementation of the contract signed on


......... between W, and F., with U. as Guarantor, please find
enclosed hereto a copy of the Circular. At the time of signing
the contract we were not aware of the content of the Circular.
You were surely acquainted, at the time of contract signature,
with the limitations imposed by this legal enactment."

... Agreement in B.

On ... Defendant 1) and MOD signed a contract on the delivery of 215


different M-84-tanks at the total sales price of US-$ 500.546.004,and UKE 11.440.326,29 - the M-84-contract.
Prior to conclusion of the M-84 contract, the MOD supplied to
Defendant 1) a circular - the MOD-circular - containing the request
that contracts on the delivery of arms, ammunition and spare parts be
made directly with the MOD without the participation of an agent or
intermediary.

On ......, Defendant 1) sent another letter to Claimant, reading as


follows:
"Dear Sirs,
Since the Agreement, signed on ..... between W. and F., is not
in accordance with the compulsory laws and regulations of
both the State of Z. and Y., we are ready to negotiate with you
the terms and conditions of termination of the said Agreement.

We are prepared to start the discussion on the termination by


the end of July and would very much appreciate your
information on the date of your arrival to B.... to that end.

The MOD also handed circular Nr. 4 A188 to Defendant 1). Circular
Nr. 4 A188 u.a. obliges the partners to contracts with MOD to refrain
from paying moneys to an agent. The partner also has to assure to the
MOD that his prices do not contain commissions for agents or similar
moneys. It is disputed between the parties whether Defendant 1)
already knew of the MOD-circular and of circular Nr. 4 A188 when
concluding the ...... Agreement with Claimant, and whether the MoDcircular is applied by the Z. authorities.
3)

Defendant 1) was instigated by the MOD-circular to send the


following letter to Claimant on ...:

In respect of the aforementioned, we do not expect you to


proceed with the activities regarding the matter you are
referring to in your letter dated...."
Defendant 1) considers the letter of ....., to constitute the termination
of the Agreement of. ....... The request to Claimant to cease its
activities on behalf of Defendant 1) has been repeated in other letters
subsequently.
4)

On ....... , Defendant 1) and the MOD concluded a contract on the


construction of M-84-training-facilities - construction-contract.
(According to Amendment I to that contract, the construction price
payable by the MODto Defendant 1) was to be US-$39.109.528,00.

5)

In performance of the M-84-contract, Defendant 1) delivered tanks,


ammunition, and spare parts to Z. The tanks were used by Z. in the
war against I. The scope of deliveries and the considerations received
by Defendant 1) from the MODare disputed between the parties.
Defendant 1) has received an advance payment of US-$6.000.000,on the construction-contract. It is disputed between the parties whether
the construction-contract continues to exist and whether Defendant 1)
has performed its obligations due to the MODunder that contract.
The payments made by the MOD to Defendant 1) were not transacted
by Defendant 2) but by the National Bank of Y.

6)

After the Agreement of ...... was concluded the Claimant sent


numerous telefax letters to Defendant I), relating mainly to the M-84project between Defendant 1) and the MOD, but also to other projects
between Defendant 1) and the MOD. All letters are unsigned. The
Claimant continued to send such letters after ....... Prior to ......, Col. S.,
who was in charge of the M-84-project for Defendant I), confirmed
the receipt of several such letters. The same was done by Mr. D., at the
time Y's ambassador to Z.
Defendant 1) alleges that the information contained in the letters was
useless and did not promote its projects with the MOD, and that they
were the only activities performed by Claimant.
There is no dispute that Claimant was not directly involved in the
negotiations between Defendant 1) and the MOD. It is disputed,
however, whether Claimant was engaged in any activities involving
the MOD in favour of Defendant I), other than writing the letters. The
nature of Claimant's activities is also disputed.

11.

Claimant requested the Defendants to pay the "Consultant's fees"


pursuant to sect. 4 of the Agreement of ...... , and demanded Defendant
2) to open the letters of guarantee, pursuant to sect. 6 of the Agreement, for the M-84-contract and for the construction-contract. Those
issues were negotiated between Claimant and Defendant 1) at B.....,
L ...... and C ....., without result.

By letter of ......., Defendant 1) directed Defendant 2) to make no


payments whatsoever to Claimant.

B.

Arbitration Procedure

C.

REASONS

I.

Procedural Issues

1.

Valid Arbitration Clause

iI
I

(...I
I

2.

Power of Attorney for Claimant's Counsels

(...I

3.

Sufficient Address of Claimant


(..

4.

No Security on Costs

,
I

Defendants are of the opinion that they are entitled to demand from
Claimant a security for the procedural costs. Defendant 1) moved the
Arbitral Tribunal to order Claimant to deposit US-$600.000,- as
security for procedural costs Defendant 2) made the same motion. The
Arbitral Tribunal dismissed the motions in Order No. 5 sect. 3 of .....,
and announced that the reasons will be given in the Arbitral Award.
The decision is based on the following considerations:
Defendant 1) gave as the main reason for its motion that Claimant is
an off-shore-company in X. without any assets, except US-$ 10.000,distributed as the share capital. X. is the Claimant's state of domicile,
and Y. has no bilateral convention of securing the costs of arbitral
procedures. If Defendant were to win the case, Art. 26 of the ICCrules could not be implemented and respected.

5)

In performance of the M-84-contract, Defendant 1) delivered tanks,


ammunition, and spare parts to Z. The tanks were used by Z. in the
war against I. The scope of deliveries and the considerations received
by Defendant 1) from the MODare disputed between the parties.
Defendant 1) has received an advance payment of US-$6.000.000,on the construction-contract. It is disputed between the parties whether
the construction-contract continues to exist and whether Defendant 1)
has performed its obligations due to the MODunder that contract.
The payments made by the MOD to Defendant 1) were not transacted
by Defendant 2) but by the National Bank of Y.

6)

After the Agreement of ...... was concluded the Claimant sent


numerous telefax letters to Defendant I), relating mainly to the M-84project between Defendant 1) and the MOD, but also to other projects
between Defendant 1) and the MOD. All letters are unsigned. The
Claimant continued to send such letters after ....... Prior to ......, Col. S.,
who was in charge of the M-84-project for Defendant I), confirmed
the receipt of several such letters. The same was done by Mr. D., at the
time Y's ambassador to Z.
Defendant 1) alleges that the information contained in the letters was
useless and did not promote its projects with the MOD, and that they
were the only activities performed by Claimant.
There is no dispute that Claimant was not directly involved in the
negotiations between Defendant 1) and the MOD. It is disputed,
however, whether Claimant was engaged in any activities involving
the MOD in favour of Defendant I), other than writing the letters. The
nature of Claimant's activities is also disputed.

11.

Claimant requested the Defendants to pay the "Consultant's fees"


pursuant to sect. 4 of the Agreement of ...... , and demanded Defendant
2) to open the letters of guarantee, pursuant to sect. 6 of the Agreement, for the M-84-contract and for the construction-contract. Those
issues were negotiated between Claimant and Defendant 1) at B.....,
L ...... and C ....., without result.

By letter of ......., Defendant 1) directed Defendant 2) to make no


payments whatsoever to Claimant.

B.

Arbitration Procedure

C.

REASONS

I.

Procedural Issues

1.

Valid Arbitration Clause

iI
I

(...I
I

2.

Power of Attorney for Claimant's Counsels

(...I

3.

Sufficient Address of Claimant


(..

4.

No Security on Costs

,
I

Defendants are of the opinion that they are entitled to demand from
Claimant a security for the procedural costs. Defendant 1) moved the
Arbitral Tribunal to order Claimant to deposit US-$600.000,- as
security for procedural costs Defendant 2) made the same motion. The
Arbitral Tribunal dismissed the motions in Order No. 5 sect. 3 of .....,
and announced that the reasons will be given in the Arbitral Award.
The decision is based on the following considerations:
Defendant 1) gave as the main reason for its motion that Claimant is
an off-shore-company in X. without any assets, except US-$ 10.000,distributed as the share capital. X. is the Claimant's state of domicile,
and Y. has no bilateral convention of securing the costs of arbitral
procedures. If Defendant were to win the case, Art. 26 of the ICCrules could not be implemented and respected.

5.

These considerations are not conclusive. The ICC-Rules do not


provide for security on costs. However, Art. 9 ICC-Rules states that in
principle, Claimant and Defendant pay the advance on costs fixed by
the ICC Court of Arbitration in equal shares, therefore the defendant
has to pay half of the advance on costs. The provision expresses the
mutual obligations of the parties who contractually agreed to submit to
arbitration,

In the Terms of Reference, Defendant 1) objected to the Arbitral


Tribunal's applying procedural rules, including the mandatory
provisions of the Swiss Statute on International Private Law
- LDIP -, in addition to the ICC-Rules. However, already at the
hearing of ......, Defendant 1) invoked several provisions of LDIP, and
continued to do so in the course of the procedure. The Arbitral
Tribunal therefore decided, in accordance with Art. 11 ICC-Rules, that
on specific issues it must apply mandatory rules of the LDIP.

Craig/Park/Paulsson, loc. cit., p. 245.


In the present case, the Defendants preferred not to follow the ICCCourt of Arbitration's invitation to pay their share in the advance on
costs. Therefore the burden to pay the total advance on costs or to
provide a bank-guarantee fell to Claimant alone, who had no other
way of continuing the arbitration procedure, pursuant to Art. 9 sect. 3
ICC-Rules. Under these circumstances, the Arbitral Tribunal holds
that Claimant would be unduly burdened if requested to provide an
additional security to the Defendants for their costs.
Nor do the special circumstances of the case, in the opinion of the
Arbitral Tribunal, justify to grant the Defendants' motion. The
Defendants knew that Claimant is a corporation domiciled in X. on
conclusion of the Agreement of ........ , as stated on page 1 of the
Agreement. The Defendants were also aware, or should have been,
that there is no bilateral convention securing the costs of arbitral
procedures between Y. and X. Defendant 1) is a large state-owned Y.
enterprise, whose director is appointed directly by the President of the
Republic of Y., as the present director Lt. General J. informed the
Tribunal at his hearing. Defendant 2) is a bank who is also owned by
the Y. State. The Defendants signed the Agreement of .......
voluntarily, thereby accepting the arbitration clause in Art. 9 of the
Agreement. If the Defendants were concerned about the enforceability
of potential claims against the Claimant awarded to them in an
arbitration procedure, it was up to them to ascertain this possibility
before signing the Agreement. Having omitted this examination on
conclusion of the Agreement of ...., this determines their position in
the ensuing arbitration procedure.

Procedural Rules to be Applied by Arbitral Tribunal

The dispute is an international arbitration procedure within the


meaning of Art. 176 sect. 1 LDIP. In sect. 9 of the Agreement of ......,
the Parties expressly agreed on Geneva as the venue of arbitration. It
is generally agreed that the provisions of chapter 12 of LDIP are to be
applied to arbitration procedures which meet the definitions of Art.
176 LDIP,

'I

Lalive/PoudretReymond, Le droit de l'Arbitrage, Lausanne


1989, Art. 176, ann. 12; WalterlBoscW Brijnnimann,
Internationale Schiedsgerichtsbarkeit in der Schweiz, Bern
1991, p.35 et seq.
6.

Admissibility of Claimant's Motion under Sect. F 1 3 TOR

7.

Admissibility of Claimant's Prayer for Relief as in its Replica


(...)

cc)

The majority of the Tribunal deems the motions for payment


contained in the Replica to be admissible against Defendant 2), and
within the limits of Art. 16 ICC-Rules. These motions were also
contained in nuce in the Request for Arbitration, where Claimant
alleged that Defendant 2) was obligated under clause 6 of the ....Agreement to immediately open an irrevocable letter of guarantee in
W.'s favour for the entire amount of W.'s fees. It specified

5.

These considerations are not conclusive. The ICC-Rules do not


provide for security on costs. However, Art. 9 ICC-Rules states that in
principle, Claimant and Defendant pay the advance on costs fixed by
the ICC Court of Arbitration in equal shares, therefore the defendant
has to pay half of the advance on costs. The provision expresses the
mutual obligations of the parties who contractually agreed to submit to
arbitration,

In the Terms of Reference, Defendant 1) objected to the Arbitral


Tribunal's applying procedural rules, including the mandatory
provisions of the Swiss Statute on International Private Law
- LDIP -, in addition to the ICC-Rules. However, already at the
hearing of ......, Defendant 1) invoked several provisions of LDIP, and
continued to do so in the course of the procedure. The Arbitral
Tribunal therefore decided, in accordance with Art. 11 ICC-Rules, that
on specific issues it must apply mandatory rules of the LDIP.

Craig/Park/Paulsson, loc. cit., p. 245.


In the present case, the Defendants preferred not to follow the ICCCourt of Arbitration's invitation to pay their share in the advance on
costs. Therefore the burden to pay the total advance on costs or to
provide a bank-guarantee fell to Claimant alone, who had no other
way of continuing the arbitration procedure, pursuant to Art. 9 sect. 3
ICC-Rules. Under these circumstances, the Arbitral Tribunal holds
that Claimant would be unduly burdened if requested to provide an
additional security to the Defendants for their costs.
Nor do the special circumstances of the case, in the opinion of the
Arbitral Tribunal, justify to grant the Defendants' motion. The
Defendants knew that Claimant is a corporation domiciled in X. on
conclusion of the Agreement of ........ , as stated on page 1 of the
Agreement. The Defendants were also aware, or should have been,
that there is no bilateral convention securing the costs of arbitral
procedures between Y. and X. Defendant 1) is a large state-owned Y.
enterprise, whose director is appointed directly by the President of the
Republic of Y., as the present director Lt. General J. informed the
Tribunal at his hearing. Defendant 2) is a bank who is also owned by
the Y. State. The Defendants signed the Agreement of .......
voluntarily, thereby accepting the arbitration clause in Art. 9 of the
Agreement. If the Defendants were concerned about the enforceability
of potential claims against the Claimant awarded to them in an
arbitration procedure, it was up to them to ascertain this possibility
before signing the Agreement. Having omitted this examination on
conclusion of the Agreement of ...., this determines their position in
the ensuing arbitration procedure.

Procedural Rules to be Applied by Arbitral Tribunal

The dispute is an international arbitration procedure within the


meaning of Art. 176 sect. 1 LDIP. In sect. 9 of the Agreement of ......,
the Parties expressly agreed on Geneva as the venue of arbitration. It
is generally agreed that the provisions of chapter 12 of LDIP are to be
applied to arbitration procedures which meet the definitions of Art.
176 LDIP,

'I

Lalive/PoudretReymond, Le droit de l'Arbitrage, Lausanne


1989, Art. 176, ann. 12; WalterlBoscW Brijnnimann,
Internationale Schiedsgerichtsbarkeit in der Schweiz, Bern
1991, p.35 et seq.
6.

Admissibility of Claimant's Motion under Sect. F 1 3 TOR

7.

Admissibility of Claimant's Prayer for Relief as in its Replica


(...)

cc)

The majority of the Tribunal deems the motions for payment


contained in the Replica to be admissible against Defendant 2), and
within the limits of Art. 16 ICC-Rules. These motions were also
contained in nuce in the Request for Arbitration, where Claimant
alleged that Defendant 2) was obligated under clause 6 of the ....Agreement to immediately open an irrevocable letter of guarantee in
W.'s favour for the entire amount of W.'s fees. It specified

One party had brought forward a claim for damages against the other
at the beginning of the arbitration, and had added the claim for
consequential damages after the Terms of Reference had taken effect.
The Arbitral Tribunal awarded damages and consequential damages.
The US Court of Appeal held that the Arbitral Tribunal did not
thereby exceed its authority.

US-$ 89.081.900,60 as the amount in which the credit facility was to


be opened by Defendant 2) relating to the M-84-contract. The same
applies to the construction-contract.
In the Request for Arbitration, Claimant alleged with respect to
Defendant 2) that "the Guarantor breached its contractual
commitment". In view of this, the damage claim against Defendant 2)
mentioned in the Replica, pursuant to Art. 111 CO, is not basically
new but is merely a legal conclusion drawn from facts communicated
earlier in the Request for Arbitration. Sect. G I 12 Terms of Reference
was to allow the Parties this.

8.

(...>

a)

aa)

However, this was clearly not final, as shown by the following


sect. 12.
Claimants' claims resulting from Defendant's 2) breach of contract are
discussed in detail in sect. 2.37 and sect. 5.4 of the Replica.
dd)

A motion filed in arbitration is a procedural act and also a party's


unilateral declaration of intent. As such, it is subject to and may be in
need of interpretation, as are other declarations of intent. It is
generally agreed that the interpretation rule in Art. 18 CO is applicable
to unilateral declarations of intent,
KramerISchmidlin, Berner Kommentar, Art.18 CO, ann. 50;
von TuhrPeter, Allgemeiner Teil des Schweizerischen
Obligationenrechts, Ziirich 1979, p. 286, fn 6.

A claim is new and not within the limits of Art. 16 ICC-Rules only if
it raises issues of fact andlor law which are completely new compared
with the issues in dispute so far,

As the real intent is to be elicited, "falsa demonstratio non nocet",


KramerISchmidlin, loc.cit., Art. 18 CO, ann. 83.

Reiner, loc.cit., p. 178.

All circumstances in the entire context which may serve to detect or


clear up the intentions of the parties must be taken into account,

If, however, a claim is subsequently based on different legal


reasoning, but still on the same facts, it is within the limits of Art. 16
ICC-Rules. An example is the Carte Blanche Arbitration. The ICCaward rendered there was confirmed by the US Court of Appeals, 2nd
circuit,

KramerISchmidlin, loc.cit., Art. 18 CO, ann. 16.


bb)

Carte Blanche (Singapore) v. Carte Blanche International, USCourt of Appeals, 2nd cir. (1989) p. 6297 et seq.; cf.
CraigParkIPaulsson, loc.cit., p. 255 et seq..

Prayer for Relief against Defendant 1)


The Arbitral Tribunal deems the Prayer for Relief as presented by
Claimant in its Final Brief against Defendant 1) to be admissible under
the Terms of Reference.

The Terms of Reference state as "Issues to be Decided by the Arbitral


Tribunal" under sect. G I 6:
"Is Defendant(2) also liable for the fees due to Claimant under
the Agreement?"

Admissibility of Claimant's Prayer for Relief in its Final Brief

In the hearing of ....., Claimant declared that "there are absolutely no


new allegations, no new claims ..." and "... we have not changed
anything from the Replica".

One party had brought forward a claim for damages against the other
at the beginning of the arbitration, and had added the claim for
consequential damages after the Terms of Reference had taken effect.
The Arbitral Tribunal awarded damages and consequential damages.
The US Court of Appeal held that the Arbitral Tribunal did not
thereby exceed its authority.

US-$ 89.081.900,60 as the amount in which the credit facility was to


be opened by Defendant 2) relating to the M-84-contract. The same
applies to the construction-contract.
In the Request for Arbitration, Claimant alleged with respect to
Defendant 2) that "the Guarantor breached its contractual
commitment". In view of this, the damage claim against Defendant 2)
mentioned in the Replica, pursuant to Art. 111 CO, is not basically
new but is merely a legal conclusion drawn from facts communicated
earlier in the Request for Arbitration. Sect. G I 12 Terms of Reference
was to allow the Parties this.

8.

(...>

a)

aa)

However, this was clearly not final, as shown by the following


sect. 12.
Claimants' claims resulting from Defendant's 2) breach of contract are
discussed in detail in sect. 2.37 and sect. 5.4 of the Replica.
dd)

A motion filed in arbitration is a procedural act and also a party's


unilateral declaration of intent. As such, it is subject to and may be in
need of interpretation, as are other declarations of intent. It is
generally agreed that the interpretation rule in Art. 18 CO is applicable
to unilateral declarations of intent,
KramerISchmidlin, Berner Kommentar, Art.18 CO, ann. 50;
von TuhrPeter, Allgemeiner Teil des Schweizerischen
Obligationenrechts, Ziirich 1979, p. 286, fn 6.

A claim is new and not within the limits of Art. 16 ICC-Rules only if
it raises issues of fact andlor law which are completely new compared
with the issues in dispute so far,

As the real intent is to be elicited, "falsa demonstratio non nocet",


KramerISchmidlin, loc.cit., Art. 18 CO, ann. 83.

Reiner, loc.cit., p. 178.

All circumstances in the entire context which may serve to detect or


clear up the intentions of the parties must be taken into account,

If, however, a claim is subsequently based on different legal


reasoning, but still on the same facts, it is within the limits of Art. 16
ICC-Rules. An example is the Carte Blanche Arbitration. The ICCaward rendered there was confirmed by the US Court of Appeals, 2nd
circuit,

KramerISchmidlin, loc.cit., Art. 18 CO, ann. 16.


bb)

Carte Blanche (Singapore) v. Carte Blanche International, USCourt of Appeals, 2nd cir. (1989) p. 6297 et seq.; cf.
CraigParkIPaulsson, loc.cit., p. 255 et seq..

Prayer for Relief against Defendant 1)


The Arbitral Tribunal deems the Prayer for Relief as presented by
Claimant in its Final Brief against Defendant 1) to be admissible under
the Terms of Reference.

The Terms of Reference state as "Issues to be Decided by the Arbitral


Tribunal" under sect. G I 6:
"Is Defendant(2) also liable for the fees due to Claimant under
the Agreement?"

Admissibility of Claimant's Prayer for Relief in its Final Brief

In the hearing of ....., Claimant declared that "there are absolutely no


new allegations, no new claims ..." and "... we have not changed
anything from the Replica".

"... and we have stated that in our Final Plea, that we are not
asking for a double award. That is an award of $83-something
million against the bank and of $63-odd million against the
first defendant.

b)

Prayer for Relief against Defendant 2)


The majority of the Arbitral Tribunal deems the Prayer for Relief in
Claimant's Final Brief against Defendant 2) admissible under the
Terms of Reference.

On page 47 of our Brief we have clearly stated, however, as a


matter of law any amount of fees effectively received by W.
from the S., in part or in whole execution of the arbitration
award, shall be deducted from the amounts hereby claimed
from the guarantor."

The Arbitral Tribunal is unanimous that Claimant did not intend to


double its claim by demanding separate Arbitral Awards against the
Defendants in its Prayer for Relief. If this is so, the majority can see
no relevant reasons barring the admissibility of the Prayer for Relief
against Defendant 2).

In the pleading of ....., Claimant writes:


In its Replica, the Claimant invoked sect. 6 of the .... Agreement "Guarantor's liability" - to support its claims against Defendant 2).
Claimant argued i.a., that Defendant 2) had undertaken to furnish
Claimant with a bank guarantee for the entire amount of fees due to
Claimant from Defendant 1); and that Defendant 2) had violated this
obligation. The Claimant relied on Art. 111 CO for its claim against
Defendant 2). Art. 111 CO secures the claim for damages in the
amount of the interest in the performance of the contract,

"Thus, for the reasons discussed above, Claimant in its Final


Brief was able to formulate the amount of its claim against the
S. with more precision than in the Replica.
As a practical matter, this has resulted in a reduction in the
amount claimed from Defendant(1) in Claimant's final Prayer
for Relief. Nevertheless, the substance of W.'s claim against
payment of its wrongfullythe S. remains the same - k,
withheld fees based upon the S.'s receipt of payments from
MODunder the M-84 and construction contracts."

Becker in Berner Kommentar, Art. 111, ann. 4; HonsellNogtI


WiegandPestalozzi, loc.cit., Art. 111, ann. 18.

To the Arbitral Tribunal' understanding the Claimant did not mean to


extend its claims against Defendant 1) in its Final Brief but rather to
withdraw and reduce them to the amounts specified in the Final Brief.
Withdrawal of a complaint is possible at any time.
In its Final Brief, the Claimant requested separate Arbitral Awards
against the Defendants, whereas it had moved for one Arbitration
Award in the Replica. This does not bar admissibility. There was no
intent to double the claim. Whether the Claimant is entitled to separate
awards is an issue of merits.

In its Final Brief, Claimant also relied on the claim derived from Art.
11 1 CO. Therefore there is no substantial change of the basis of claims
directed against Defendant 2). As against Defendant I), the Claimant
slightly reduced the claims against Defendant 2), as compared with the
Replica, and to this extent withdrew the claim. This does not affect the
admissibility.
9.

No Violation of Defendants' Right to be Heard or Right of Defence

a)

During the arbitration procedure Defendant 1) made several motions


on mixed procedural and substantive issues, among others, that:

"... and we have stated that in our Final Plea, that we are not
asking for a double award. That is an award of $83-something
million against the bank and of $63-odd million against the
first defendant.

b)

Prayer for Relief against Defendant 2)


The majority of the Arbitral Tribunal deems the Prayer for Relief in
Claimant's Final Brief against Defendant 2) admissible under the
Terms of Reference.

On page 47 of our Brief we have clearly stated, however, as a


matter of law any amount of fees effectively received by W.
from the S., in part or in whole execution of the arbitration
award, shall be deducted from the amounts hereby claimed
from the guarantor."

The Arbitral Tribunal is unanimous that Claimant did not intend to


double its claim by demanding separate Arbitral Awards against the
Defendants in its Prayer for Relief. If this is so, the majority can see
no relevant reasons barring the admissibility of the Prayer for Relief
against Defendant 2).

In the pleading of ....., Claimant writes:


In its Replica, the Claimant invoked sect. 6 of the .... Agreement "Guarantor's liability" - to support its claims against Defendant 2).
Claimant argued i.a., that Defendant 2) had undertaken to furnish
Claimant with a bank guarantee for the entire amount of fees due to
Claimant from Defendant 1); and that Defendant 2) had violated this
obligation. The Claimant relied on Art. 111 CO for its claim against
Defendant 2). Art. 111 CO secures the claim for damages in the
amount of the interest in the performance of the contract,

"Thus, for the reasons discussed above, Claimant in its Final


Brief was able to formulate the amount of its claim against the
S. with more precision than in the Replica.
As a practical matter, this has resulted in a reduction in the
amount claimed from Defendant(1) in Claimant's final Prayer
for Relief. Nevertheless, the substance of W.'s claim against
payment of its wrongfullythe S. remains the same - k,
withheld fees based upon the S.'s receipt of payments from
MODunder the M-84 and construction contracts."

Becker in Berner Kommentar, Art. 111, ann. 4; HonsellNogtI


WiegandPestalozzi, loc.cit., Art. 111, ann. 18.

To the Arbitral Tribunal' understanding the Claimant did not mean to


extend its claims against Defendant 1) in its Final Brief but rather to
withdraw and reduce them to the amounts specified in the Final Brief.
Withdrawal of a complaint is possible at any time.
In its Final Brief, the Claimant requested separate Arbitral Awards
against the Defendants, whereas it had moved for one Arbitration
Award in the Replica. This does not bar admissibility. There was no
intent to double the claim. Whether the Claimant is entitled to separate
awards is an issue of merits.

In its Final Brief, Claimant also relied on the claim derived from Art.
11 1 CO. Therefore there is no substantial change of the basis of claims
directed against Defendant 2). As against Defendant I), the Claimant
slightly reduced the claims against Defendant 2), as compared with the
Replica, and to this extent withdrew the claim. This does not affect the
admissibility.
9.

No Violation of Defendants' Right to be Heard or Right of Defence

a)

During the arbitration procedure Defendant 1) made several motions


on mixed procedural and substantive issues, among others, that:

After the briefs were submitted, a hearing was scheduled for .... to .....,
for taking evidence and possibly for the Parties' Final Pleadings .

The Arbitral Tribunal shall

aa)

bb)

preliminary decide that the claims as in the Replica


are not in the limits of the Terms of Reference and
to reject them.

to decide on the applicable law as a preliminary


issue in order not to infringe Defendant's right
to defence.

The Arbitral Tribunal reserved decision on these motions until the


Final Award. Defendant 1) thought this infringed its right to be heard
and right to defence. La., it argued that it was deprived of defence
against the claims raised in the Replica because they were not decided
on by the Arbitral Tribunal.

Defendant 1) has in fact used its defences extensively at the hearing of


....., as documented by the nearly 200 pages of transcripts of the two
days.

In the Arbitral Tribunal's opinion, Defendant's 1) right to be heard or


right of defence has not been infringed during the arbitral procedure.
Under the Terms of Reference, the Parties have no right to demand an
interim or preliminary award. Therefore, the Arbitral Tribunal's
response to a Party's request for an interim or preliminary award is
governed by Art. 11, 26 ICC-Rules, which leave it to the sole
discretion of the Arbitral Tribunal to grant or to reject such a request,

Any interim or preliminary award automatically tends to delay the


procedure. It is therefore the exception rather than the rule,
Reiner, loc.cit., p. 248 et seq.
Therefore a Party's right to be heard or right to defence is not infringed
if the Arbitral Tribunal refuses such a motion.
cc)

At the beginning of that session Defendant 1) reminded the Arbitral


Tribunal to decide on its motion. The Arbitral Tribunal thereupon
informed the Parties that it had discussed Defendant's 1) motion on
....., and would decide on it during or after the hearings. At the next
hearing on ......, the Arbitral Tribunal issued its Order No. 5. Under
sect. 5, it fixed ...... for the Final Pleadings. It was evident to
Defendant 1) from the Order that the Arbitral Tribunal would not
change its position as communicated. It therefore was or should have
been aware that ....... was the last opportunity to present to the Arbitral
Tribunal any arguments supporting its opinion.

In the present case, the Arbitral Tribunal never left Defendant 1) in


any doubt that its motion would be rejected.

b)

Defendant 1) deems its right to be heard and right to defence infringed


if an Arbitral Award were rendered without hearing Mr. D. whom it
called as a witness. The Arbitral Tribunal does not share this view.

aa)

Mr. D. was Y's ambassador to Z. The Arbitral Tribunal has granted


Defendant 1) sufficient time to present the witness at the hearing.
Order No. 5 sect.2 made Defendant 1) aware that it was obliged to
present the witness. The Arbitral Tribunal granted this opportunity on
......... by fixing a new hearing for ........ Defendant 1) thus had more
than six weeks to produce the witness.
There is no procedural objection against the Claimant's renouncing the
witness whom it had originally named itself. Each party to an
arbitration procedure is free to name and to renounce witnesses as it
deems fit. This does not infringe the equal chances of litigation of the
respectively other party.

After the briefs were submitted, a hearing was scheduled for .... to .....,
for taking evidence and possibly for the Parties' Final Pleadings .

The Arbitral Tribunal shall

aa)

bb)

preliminary decide that the claims as in the Replica


are not in the limits of the Terms of Reference and
to reject them.

to decide on the applicable law as a preliminary


issue in order not to infringe Defendant's right
to defence.

The Arbitral Tribunal reserved decision on these motions until the


Final Award. Defendant 1) thought this infringed its right to be heard
and right to defence. La., it argued that it was deprived of defence
against the claims raised in the Replica because they were not decided
on by the Arbitral Tribunal.

Defendant 1) has in fact used its defences extensively at the hearing of


....., as documented by the nearly 200 pages of transcripts of the two
days.

In the Arbitral Tribunal's opinion, Defendant's 1) right to be heard or


right of defence has not been infringed during the arbitral procedure.
Under the Terms of Reference, the Parties have no right to demand an
interim or preliminary award. Therefore, the Arbitral Tribunal's
response to a Party's request for an interim or preliminary award is
governed by Art. 11, 26 ICC-Rules, which leave it to the sole
discretion of the Arbitral Tribunal to grant or to reject such a request,

Any interim or preliminary award automatically tends to delay the


procedure. It is therefore the exception rather than the rule,
Reiner, loc.cit., p. 248 et seq.
Therefore a Party's right to be heard or right to defence is not infringed
if the Arbitral Tribunal refuses such a motion.
cc)

At the beginning of that session Defendant 1) reminded the Arbitral


Tribunal to decide on its motion. The Arbitral Tribunal thereupon
informed the Parties that it had discussed Defendant's 1) motion on
....., and would decide on it during or after the hearings. At the next
hearing on ......, the Arbitral Tribunal issued its Order No. 5. Under
sect. 5, it fixed ...... for the Final Pleadings. It was evident to
Defendant 1) from the Order that the Arbitral Tribunal would not
change its position as communicated. It therefore was or should have
been aware that ....... was the last opportunity to present to the Arbitral
Tribunal any arguments supporting its opinion.

In the present case, the Arbitral Tribunal never left Defendant 1) in


any doubt that its motion would be rejected.

b)

Defendant 1) deems its right to be heard and right to defence infringed


if an Arbitral Award were rendered without hearing Mr. D. whom it
called as a witness. The Arbitral Tribunal does not share this view.

aa)

Mr. D. was Y's ambassador to Z. The Arbitral Tribunal has granted


Defendant 1) sufficient time to present the witness at the hearing.
Order No. 5 sect.2 made Defendant 1) aware that it was obliged to
present the witness. The Arbitral Tribunal granted this opportunity on
......... by fixing a new hearing for ........ Defendant 1) thus had more
than six weeks to produce the witness.
There is no procedural objection against the Claimant's renouncing the
witness whom it had originally named itself. Each party to an
arbitration procedure is free to name and to renounce witnesses as it
deems fit. This does not infringe the equal chances of litigation of the
respectively other party.

bb)

cc)

dd)

c)

Defendant 1) requested the opportunity to trace Mr. D's address.


Defendant 1) did not communicate any such address, but only the telephone number under which the Arbitral Tribunal tried to reach Mr. D.,
without success.
The Arbitral Tribunal was unable to have Mr. D. examined as witness
by letters rogatory, which would have been at its discretion under
Art. 184 LDIP. The Claimant alleged, undisputedly, that there is at
present no possibility between Switzerland and former Y. to obtain
letters rogatory.
Violation of the Defendants' right to be heard is ruled out also because
they did not communicate what facts they expected Mr. D. to state. In
addition, the decision of the Arbitral Tribunal is not based on facts
submitted by Claimant and alleged to be confirmed by this witness.
The Defendants' right to be heard and right of defence is not infringed
by the Arbitral Tribunal's Order of ....... concerning the sequence of
written pleadings on the admissibility of Claimant's Final Prayer for
Relief.
In order to defend itself adequately against Defendants' pleading that
Claimant's Final Brief contained inadmissible new claims, Claimant
first had to know the details of Defendants' allegations. The right to be
heard and the right of defence is also due to Claimant, therefore it
would be unreasonable to request that Claimant rebut the Defendants'
allegations without knowing them, and then to allow the Defendants to
comment on Claimants' defence. The Arbitral Tribunal has
communicated its deliberations to the Parties. Its Order relies on Art.
11.26 ICC-Rules.

10.

Admissible Evidence

a)

During the inspection of documents the Defendants recognized only


part of the exhibits presented by Claimant, such as the telefax letters
whose receipt was confirmed by Col. S., in charge for Defendant I),
or by Mr. D. then Y.'s ambassador. Exhibits recognized by Defendant
I) are undoubtedly admissible evidence.

b)

Defendant 1) deems Claimant's telefax letters presented in copy


inadmissible evidence except for those it expressly recognized as
originals during the inspection of documents. The Arbitral Tribunal
does not share this opinion. It holds that all unsigned telefax letters of
which Claimant presented copies are admissible evidence.
This is obvious for the telefax letters to which Defendant 1) itself
referred as evidence during the arbitration procedure. For example, it
rejected Claimant's telefax letter of ........, presented as exhibit (...), but
nevertheless referred to exhibit (...) to prove that it had received wrong
information from the Claimant. Nor did Defendant 1) recognize the
telefax letter of .......;but relied on exhibit to support its allegation that
the information received from Claimant was self-explanatory and
therefore useless.
The principle of good faith, as a governing concept of private law,
also applies to procedural law,
BGE 84 I 62; 83 I1 348 et seq.; Merz in Berner Kommentar,
Art. 2 cc, ann. 69.
It naturally governs the entire arbitration procedure,
cf. Yearbook Commercial Arbitration XVII 1992, p. 42, 52.

A defendant is generally entitled to the last word provided that the


attack has come from the claimant. In the reverse situation, where the
attack comes from the defendant, and the claimant has to plead
defence, fair trial requires to grant the last word to the claimant.
Fairness demands in this situation that defendant state his argument
first and claimant be given the opportunity of defence.

Defendant 1) would misuse its procedural rights by rejecting as


evidence such exhibits presented by Claimant to which it has referred
itself to support its own position.

bb)

cc)

dd)

c)

Defendant 1) requested the opportunity to trace Mr. D's address.


Defendant 1) did not communicate any such address, but only the telephone number under which the Arbitral Tribunal tried to reach Mr. D.,
without success.
The Arbitral Tribunal was unable to have Mr. D. examined as witness
by letters rogatory, which would have been at its discretion under
Art. 184 LDIP. The Claimant alleged, undisputedly, that there is at
present no possibility between Switzerland and former Y. to obtain
letters rogatory.
Violation of the Defendants' right to be heard is ruled out also because
they did not communicate what facts they expected Mr. D. to state. In
addition, the decision of the Arbitral Tribunal is not based on facts
submitted by Claimant and alleged to be confirmed by this witness.
The Defendants' right to be heard and right of defence is not infringed
by the Arbitral Tribunal's Order of ....... concerning the sequence of
written pleadings on the admissibility of Claimant's Final Prayer for
Relief.
In order to defend itself adequately against Defendants' pleading that
Claimant's Final Brief contained inadmissible new claims, Claimant
first had to know the details of Defendants' allegations. The right to be
heard and the right of defence is also due to Claimant, therefore it
would be unreasonable to request that Claimant rebut the Defendants'
allegations without knowing them, and then to allow the Defendants to
comment on Claimants' defence. The Arbitral Tribunal has
communicated its deliberations to the Parties. Its Order relies on Art.
11.26 ICC-Rules.

10.

Admissible Evidence

a)

During the inspection of documents the Defendants recognized only


part of the exhibits presented by Claimant, such as the telefax letters
whose receipt was confirmed by Col. S., in charge for Defendant I),
or by Mr. D. then Y.'s ambassador. Exhibits recognized by Defendant
I) are undoubtedly admissible evidence.

b)

Defendant 1) deems Claimant's telefax letters presented in copy


inadmissible evidence except for those it expressly recognized as
originals during the inspection of documents. The Arbitral Tribunal
does not share this opinion. It holds that all unsigned telefax letters of
which Claimant presented copies are admissible evidence.
This is obvious for the telefax letters to which Defendant 1) itself
referred as evidence during the arbitration procedure. For example, it
rejected Claimant's telefax letter of ........, presented as exhibit (...), but
nevertheless referred to exhibit (...) to prove that it had received wrong
information from the Claimant. Nor did Defendant 1) recognize the
telefax letter of .......;but relied on exhibit to support its allegation that
the information received from Claimant was self-explanatory and
therefore useless.
The principle of good faith, as a governing concept of private law,
also applies to procedural law,
BGE 84 I 62; 83 I1 348 et seq.; Merz in Berner Kommentar,
Art. 2 cc, ann. 69.
It naturally governs the entire arbitration procedure,
cf. Yearbook Commercial Arbitration XVII 1992, p. 42, 52.

A defendant is generally entitled to the last word provided that the


attack has come from the claimant. In the reverse situation, where the
attack comes from the defendant, and the claimant has to plead
defence, fair trial requires to grant the last word to the claimant.
Fairness demands in this situation that defendant state his argument
first and claimant be given the opportunity of defence.

Defendant 1) would misuse its procedural rights by rejecting as


evidence such exhibits presented by Claimant to which it has referred
itself to support its own position.

c)

The Arbitral Tribunal admits as evidence the unsigned telefax-letters


which were neither presented in the original by the Claimant nor
referred to by Defendant 1) in support of its own position.

shareholder, about the Memorandum, and it is referred to in the


Agreement of ....... whose sect.6 subsect. 2 implies that the Parties
know the dept-swap-agreement.

Undisputedly, the Claimant's main shareholder Mr. A. is the author of


the telefax-letters. Until the taking of evidence, the Defendant 1) did
not deny having received the unsigned telefax-letters, but on the
contrary alleged in its briefs that "Claimant was sending purported
information on his own initiative without Defendant's 1) instructions
or requests". Defendant 1) merely argued that the unsigned letters
could not be accepted "as a form of performance", not being "valid
information".

Exhibit (...) concerns the M-84-contract of ....... The counsel of


Defendant 1) questioned Lt. General J. for details of the M-84contract and about the construction-contract. Lt. General J. has given
details on both contracts. Upon question of Claimant's counsel,
Lt. General J. confirmed Claimant's allegation as to the value of the
M-84-contract and of the deliveries made until then. The figures
contained in the M-84-contract therefore are now undisputed.
The principle of fair trial demands to admit not only those questions
and answers at the hearing of evidence which relate to these
documents, but also the photocopies presented as exhibits by the
Claimant. Any conclusions to be drawn from the Defendant's 1)
allegation that Claimant gained access to these copies illegally
concern the merits of the claims raised by Claimant. Besides, it has not
been established by the Defendants that those copies have in fact been
obtained illegally.

The taking of evidence established that the Defendant 1) received the


unsigned telefax-letters. Col. S. stated that he received telexes or
telefaxes from L. Questioned what he had done with the "about
40 letters" sent by Claimant to Defendant 1) , he declared that he
studied the letters and grouped them. The director of Defendant I), Lt.
General J., also confirmed the receipt of the letters in his statement.
Therefore, the copies presented by the Claimant are admissible
evidence.
d)

The majority of the Arbitral Tribunal holds, contrary to Defendant's 1)


opinion, that those of Claimant's exhibits are admissible evidence
where Claimant was not a party, which Defendant 1) calls "top state
secret", allegedly obtained by Claimant through illegal or secret
channels, and of which Claimant did not present originals at the inspection of documents. Defendant 1) deems those documents
inadmissible.

aa)

Defendant 1) did not assert that the copies presented by Claimant


differ from the pertaining originals, and has referred to those exhibits
itself.
For instance, Defendant 1) deems exhibit (...), a Memorandum of
Understanding of ........ on dept-swapping between the states of Y. and
Z., a state secret. The director of Defendant I), Lt. General J., has
expressly referred to the dept-swap-agreement in his statement. The
legal counsel of Defendant I) questioned Mr. A., the Claimants' main

bb)

Further, the majority of the Arbitral Tribunal hold that those exhibits
presented by Claimant are admissible without restrictions to which
Defendant 1) is a party. This follows from sect. H IV 3 of the Terms
of Reference and from Order No. 5 sect. 1, of .......
Order No. 5 is directed not only to the Claimant but to all Parties. As
the conclusion of the M-84-contract and of the construction-contract
between the MODand Defendant 1) is undisputed, it was Defendant 1)
who had to present the originals of the contracts, which it possesses.
Any obligations to secrecy it may have towards the MOD cannot be
held against the Claimant because Defendant 1) in sect. 7 of the
Agreement of ....... agreed to full cooperation, and to "exchange all
information and documents necessary or desirable to enable each other
to fulfill their duties under this Agreement".

c)

The Arbitral Tribunal admits as evidence the unsigned telefax-letters


which were neither presented in the original by the Claimant nor
referred to by Defendant 1) in support of its own position.

shareholder, about the Memorandum, and it is referred to in the


Agreement of ....... whose sect.6 subsect. 2 implies that the Parties
know the dept-swap-agreement.

Undisputedly, the Claimant's main shareholder Mr. A. is the author of


the telefax-letters. Until the taking of evidence, the Defendant 1) did
not deny having received the unsigned telefax-letters, but on the
contrary alleged in its briefs that "Claimant was sending purported
information on his own initiative without Defendant's 1) instructions
or requests". Defendant 1) merely argued that the unsigned letters
could not be accepted "as a form of performance", not being "valid
information".

Exhibit (...) concerns the M-84-contract of ....... The counsel of


Defendant 1) questioned Lt. General J. for details of the M-84contract and about the construction-contract. Lt. General J. has given
details on both contracts. Upon question of Claimant's counsel,
Lt. General J. confirmed Claimant's allegation as to the value of the
M-84-contract and of the deliveries made until then. The figures
contained in the M-84-contract therefore are now undisputed.
The principle of fair trial demands to admit not only those questions
and answers at the hearing of evidence which relate to these
documents, but also the photocopies presented as exhibits by the
Claimant. Any conclusions to be drawn from the Defendant's 1)
allegation that Claimant gained access to these copies illegally
concern the merits of the claims raised by Claimant. Besides, it has not
been established by the Defendants that those copies have in fact been
obtained illegally.

The taking of evidence established that the Defendant 1) received the


unsigned telefax-letters. Col. S. stated that he received telexes or
telefaxes from L. Questioned what he had done with the "about
40 letters" sent by Claimant to Defendant 1) , he declared that he
studied the letters and grouped them. The director of Defendant I), Lt.
General J., also confirmed the receipt of the letters in his statement.
Therefore, the copies presented by the Claimant are admissible
evidence.
d)

The majority of the Arbitral Tribunal holds, contrary to Defendant's 1)


opinion, that those of Claimant's exhibits are admissible evidence
where Claimant was not a party, which Defendant 1) calls "top state
secret", allegedly obtained by Claimant through illegal or secret
channels, and of which Claimant did not present originals at the inspection of documents. Defendant 1) deems those documents
inadmissible.

aa)

Defendant 1) did not assert that the copies presented by Claimant


differ from the pertaining originals, and has referred to those exhibits
itself.
For instance, Defendant 1) deems exhibit (...), a Memorandum of
Understanding of ........ on dept-swapping between the states of Y. and
Z., a state secret. The director of Defendant I), Lt. General J., has
expressly referred to the dept-swap-agreement in his statement. The
legal counsel of Defendant I) questioned Mr. A., the Claimants' main

bb)

Further, the majority of the Arbitral Tribunal hold that those exhibits
presented by Claimant are admissible without restrictions to which
Defendant 1) is a party. This follows from sect. H IV 3 of the Terms
of Reference and from Order No. 5 sect. 1, of .......
Order No. 5 is directed not only to the Claimant but to all Parties. As
the conclusion of the M-84-contract and of the construction-contract
between the MODand Defendant 1) is undisputed, it was Defendant 1)
who had to present the originals of the contracts, which it possesses.
Any obligations to secrecy it may have towards the MOD cannot be
held against the Claimant because Defendant 1) in sect. 7 of the
Agreement of ....... agreed to full cooperation, and to "exchange all
information and documents necessary or desirable to enable each other
to fulfill their duties under this Agreement".

The Claimant needed the information on the contracts between MOD


and Defendant 1) to advise Defendant 2) of its payment obligation, as
is demonstrated by Defendant's 2) allegation, i.a., that it was unable to
perform its contractual obligations because Claimant had failed to
supply the necessary information to Defendant 2).
f)

cf.

The parties' free choice of law is expressly recognized for Switzerland


in Art. 187 LDIP,
Lalive/Poudret/Reymond, loc.cit., Art. 187 LDIP, a m . 2, 5.

The majority of the Arbitral Tribunal does not share Defendant's 1)


opinion that its right of defence might be violated if the exhibits in
question were admitted as evidence. This cannot be so, because the
director of Defendant l), Lt. General J., confirmed the relevant figures
submitted by Claimant on the value of the MOD-contracts and of the
deliveries performed until then.

The Arbitral Tribunal need not clear up whether different opinions on


the scope of applicable Swiss law exist among the counsels of
Defendant 1). It agrees with the opinion stated by Me R. that "Swiss
law has to be applied without any restrictions to the contract" and "this
contract is intimately related to Swiss law".
b)

11.

Substantive Issues

1)

Avvlicable Law to Agreement of ......

a)

It is standing practice in arbitration to recognize the choice of law


made by the parties of their own free will even if the contract has no
other connection with the law chosen,

The Defendants asserted that the mandatory laws of Y. must also be


applied. As communicated in the Terms of Reference, the Arbitral
Tribunal was willing to decide on this issue. However, the Defendants
failed to inform the Arbitral Tribunal which mandatory rules of Y.
they deem violated.
It is contrary to all experience that a state-owned institution such as
Defendant I), whose director is appointed directly by the Head of
State, engages in activities contrary to the mandatory laws of that
country. The Arbitral Tribunal therefore saw no reason to investigate,
without further evidence, whether mandatory rules of the Y. law could
be violated. Besides, Defendant 1) did not even allege that the
violation of the mandatory laws of Y. would be considered a violation
of the international ordre public.

Pursuant to sect. 9, the Agreement between the Parties is "to be


governed by and construed under the laws of Switzerland". The
Arbitral Tribunal deems this clear and unequivocal. Both Parties
desired that Swiss law should be applied to the Agreement in case of a
legal dispute.
The Defendants' state of origin, Y., has joined the European
Convention on International Commercial Arbitration in .... pursuant to
Art. 7 of the Convention the parties are free to determine by
agreement the law to be applied by the arbitrators to the substance of
the dispute. Therefore internal Y. law did not hinder the Defendants to
subject the Agreement to Swiss law as a neutral legal system,
especially as it is undisputed that the Claimant originally wished to
subject the contractual relationship to the law of Z.

last ICC case No. 4629, Yearbook Commercial


Arbitration XVIII 1993, p. 11, 16.

c)

The Defendants also allege that mandatory laws of the State of Z. are
violated; this will be discussed separately under 111.

2.

Ageement of ..... Validly Signed by Claimant


In Defendant's 1) opinion, the Agreement of ...... is null because it was
not validly signed by the Claimant. The power of attorney for H. who
signed the Agreement on behalf of the Claimant was dated .....
whereas the Claimant did not exist as a corporation until ..... The
Claimant has asserted that the date given as ...... in the letter of ...... by

The Claimant needed the information on the contracts between MOD


and Defendant 1) to advise Defendant 2) of its payment obligation, as
is demonstrated by Defendant's 2) allegation, i.a., that it was unable to
perform its contractual obligations because Claimant had failed to
supply the necessary information to Defendant 2).
f)

cf.

The parties' free choice of law is expressly recognized for Switzerland


in Art. 187 LDIP,
Lalive/Poudret/Reymond, loc.cit., Art. 187 LDIP, a m . 2, 5.

The majority of the Arbitral Tribunal does not share Defendant's 1)


opinion that its right of defence might be violated if the exhibits in
question were admitted as evidence. This cannot be so, because the
director of Defendant l), Lt. General J., confirmed the relevant figures
submitted by Claimant on the value of the MOD-contracts and of the
deliveries performed until then.

The Arbitral Tribunal need not clear up whether different opinions on


the scope of applicable Swiss law exist among the counsels of
Defendant 1). It agrees with the opinion stated by Me R. that "Swiss
law has to be applied without any restrictions to the contract" and "this
contract is intimately related to Swiss law".
b)

11.

Substantive Issues

1)

Avvlicable Law to Agreement of ......

a)

It is standing practice in arbitration to recognize the choice of law


made by the parties of their own free will even if the contract has no
other connection with the law chosen,

The Defendants asserted that the mandatory laws of Y. must also be


applied. As communicated in the Terms of Reference, the Arbitral
Tribunal was willing to decide on this issue. However, the Defendants
failed to inform the Arbitral Tribunal which mandatory rules of Y.
they deem violated.
It is contrary to all experience that a state-owned institution such as
Defendant I), whose director is appointed directly by the Head of
State, engages in activities contrary to the mandatory laws of that
country. The Arbitral Tribunal therefore saw no reason to investigate,
without further evidence, whether mandatory rules of the Y. law could
be violated. Besides, Defendant 1) did not even allege that the
violation of the mandatory laws of Y. would be considered a violation
of the international ordre public.

Pursuant to sect. 9, the Agreement between the Parties is "to be


governed by and construed under the laws of Switzerland". The
Arbitral Tribunal deems this clear and unequivocal. Both Parties
desired that Swiss law should be applied to the Agreement in case of a
legal dispute.
The Defendants' state of origin, Y., has joined the European
Convention on International Commercial Arbitration in .... pursuant to
Art. 7 of the Convention the parties are free to determine by
agreement the law to be applied by the arbitrators to the substance of
the dispute. Therefore internal Y. law did not hinder the Defendants to
subject the Agreement to Swiss law as a neutral legal system,
especially as it is undisputed that the Claimant originally wished to
subject the contractual relationship to the law of Z.

last ICC case No. 4629, Yearbook Commercial


Arbitration XVIII 1993, p. 11, 16.

c)

The Defendants also allege that mandatory laws of the State of Z. are
violated; this will be discussed separately under 111.

2.

Ageement of ..... Validly Signed by Claimant


In Defendant's 1) opinion, the Agreement of ...... is null because it was
not validly signed by the Claimant. The power of attorney for H. who
signed the Agreement on behalf of the Claimant was dated .....
whereas the Claimant did not exist as a corporation until ..... The
Claimant has asserted that the date given as ...... in the letter of ...... by

lawyers M. is an error in writing, and has offered proof for this by


another letter of the same lawyers.

3.

The Agreement of ...... is not invalidated for the reason that the Parties
agreed to give merely the Claimant's mailing address in L. rather than
the corporation's domicile in X.

Whether the date of the power of attorney given in exhibit (...) is a


typographical error is irrelevant. In the Arbitral Tribunal's opinion, the
Agreement is valid even if the Defendants' allegation is correct.
a)
a)

It is undisputed that Mr. A. and Mr. G. are the owners of Claimant.


The hearing of evidence has convinced the Arbitral Tribunal that
nobody at the Claimant's could oppose or act against their orders and
directions. Mr. H. signed the Agreement of ...... in the presence of
Mr. A. in Geneva. Mr. G. stated that he was not involved in the negotiations with Defendant 1) about the Agreement .
Since Mr. H. signed in Mr. A.'s presence, the signature is, at the least,
implicitly authorized. The Defendant 1) did not object when the
Agreement, thus signed, was sent from Geneva to B. It protested for
the first time during the arbitration procedure. Even if at the time
when Mr. H. signed the Agreement, he was not formally authorized,
the Arbitral Tribunal is satisfied that the Agreement has been ratified
by Claimant's shareholders and officers.

b)

The Arbitral Tribunal follows the practice in international arbitration


to interpret questions of authority of representatives liberally.
International trade usages demand that one overlooks formal flaws in
corporate action if, as a matter of fact, corporate consent is evident,

There is no need to decide whether, as Defendant 1) alleged, under X.


law only a written power of attorney is valid. Under sect. 9 of the
Agreement of ...... , the valid conclusion of the Agreement is to be judged according to Swiss law. Under Swiss law, the power of attorney
granted by a business man to a representative requires no specific
form and may even be implied,
BGE 94, I1 117; GuhllMerzlKummer, Das Schweizerische
Obligationenrecht, 7. Aufl., p. 145 ff..

Mailing Address of Claimant does not invalidate Agreement

Pursuant to Art. 11 CO agreements are generally informal unless a


specific form is required by law. Art. 11 CO reflects the principle of
freedom of contract. This includes that the parties are entirely free to
agree upon any contractual contents, within the limits of mandatory
law, Art. 19,20 CO.,
Bucher in HonsellNogtlWiegand, loc.cit., Vorbemerkungen
vor Art. 1-40, ann. 10.
Therefore the Parties were free to use merely the Claimant's L. mailing
address for identification purposes in the Agreement of .... .

b)

Under sect. 16 of the Agreement the Claimant merely gave a telefaxor telex-number for the notices to be sent, but did not name a person
as Defendant 1) named "Col. S.". The Tribunal holds that this does not
affect the Agreement.
If anything, this might be a lack of consent in a minor issue, which
does not invalidate an agreement,
BGE 103 I1 190, 194.
Art. 2 sect. 1 CO expresses the general legal concept of favor
contractus if the parties have agreed on all contractual issues of
objective relevance,
KramerISchmidlin, Berner Kommentar, Art.2 Co, ann. 17 et
seq.; Bucher, loc.cit., p. 126.
The Arbitral Tribunal is convinced that any incompleteness in sect. 16
of the Agreement did not prevent Defendant 1) from making contact
with the Claimant while the Agreement was in force, as documented
by its letter of ..... on whose legal effects Defendant 1) relies. Col. S.,

lawyers M. is an error in writing, and has offered proof for this by


another letter of the same lawyers.

3.

The Agreement of ...... is not invalidated for the reason that the Parties
agreed to give merely the Claimant's mailing address in L. rather than
the corporation's domicile in X.

Whether the date of the power of attorney given in exhibit (...) is a


typographical error is irrelevant. In the Arbitral Tribunal's opinion, the
Agreement is valid even if the Defendants' allegation is correct.
a)
a)

It is undisputed that Mr. A. and Mr. G. are the owners of Claimant.


The hearing of evidence has convinced the Arbitral Tribunal that
nobody at the Claimant's could oppose or act against their orders and
directions. Mr. H. signed the Agreement of ...... in the presence of
Mr. A. in Geneva. Mr. G. stated that he was not involved in the negotiations with Defendant 1) about the Agreement .
Since Mr. H. signed in Mr. A.'s presence, the signature is, at the least,
implicitly authorized. The Defendant 1) did not object when the
Agreement, thus signed, was sent from Geneva to B. It protested for
the first time during the arbitration procedure. Even if at the time
when Mr. H. signed the Agreement, he was not formally authorized,
the Arbitral Tribunal is satisfied that the Agreement has been ratified
by Claimant's shareholders and officers.

b)

The Arbitral Tribunal follows the practice in international arbitration


to interpret questions of authority of representatives liberally.
International trade usages demand that one overlooks formal flaws in
corporate action if, as a matter of fact, corporate consent is evident,

There is no need to decide whether, as Defendant 1) alleged, under X.


law only a written power of attorney is valid. Under sect. 9 of the
Agreement of ...... , the valid conclusion of the Agreement is to be judged according to Swiss law. Under Swiss law, the power of attorney
granted by a business man to a representative requires no specific
form and may even be implied,
BGE 94, I1 117; GuhllMerzlKummer, Das Schweizerische
Obligationenrecht, 7. Aufl., p. 145 ff..

Mailing Address of Claimant does not invalidate Agreement

Pursuant to Art. 11 CO agreements are generally informal unless a


specific form is required by law. Art. 11 CO reflects the principle of
freedom of contract. This includes that the parties are entirely free to
agree upon any contractual contents, within the limits of mandatory
law, Art. 19,20 CO.,
Bucher in HonsellNogtlWiegand, loc.cit., Vorbemerkungen
vor Art. 1-40, ann. 10.
Therefore the Parties were free to use merely the Claimant's L. mailing
address for identification purposes in the Agreement of .... .

b)

Under sect. 16 of the Agreement the Claimant merely gave a telefaxor telex-number for the notices to be sent, but did not name a person
as Defendant 1) named "Col. S.". The Tribunal holds that this does not
affect the Agreement.
If anything, this might be a lack of consent in a minor issue, which
does not invalidate an agreement,
BGE 103 I1 190, 194.
Art. 2 sect. 1 CO expresses the general legal concept of favor
contractus if the parties have agreed on all contractual issues of
objective relevance,
KramerISchmidlin, Berner Kommentar, Art.2 Co, ann. 17 et
seq.; Bucher, loc.cit., p. 126.
The Arbitral Tribunal is convinced that any incompleteness in sect. 16
of the Agreement did not prevent Defendant 1) from making contact
with the Claimant while the Agreement was in force, as documented
by its letter of ..... on whose legal effects Defendant 1) relies. Col. S.,

in charge of the M-84-project for Defendant I), stated that "I sent
faxes confirming that I received the letter, that the delegation is going,
or that the delegation will be accepted or this sort of thing" .
4.

5.

Sect. 2 4 of Agreement are Valid


Defendant 1) contests the claims on the grounds that sect. 2, 3 of the
Agreement is invalid. The Arbitral Tribunal holds that the objection is
unfounded.

W. = Mr. A. and Mr. G.


Defendant 1) thinks Claimant an "international paper vehicle" and the
Agreement of ...... therefore invalid. The Arbitral Tribunal does not
share this view.

Both Claimant and Defendant 1) referred to the Agreement as


"brokerage-contract". This legal evaluation does not bind the Arbitral
Tribunal. The majority holds that the Agreement combines elements
of various types of contracts. Such "mixed" agreements are admissible
and frequent under Swiss law,

It is undisputed under Swiss law that a foreign corporation's legal


capacity is governed by the law of its place of registration so that a
foreign corporation has fill legal capacity as granted to it by its
domestic laws (art. 154 LDIP).

Krarner in Berner Kommentar, Art. 19-20, ann. 58; Schluep in


HonsellNogtlWiegand,loc.cit., Einleitung vor Art. 184 ff.,
ann. 7 et seq.; GuhlIMerzlKummer, a.a.O., p. 297 et seq.

The taking of evidence has satisfied the Arbitral Tribunal that


Claimant serves the purposes of Mr. A. and Mr. G. Their actions are
therefore deemed Claimant's actions. Mr. A. is also undoubtedly the
author of the letters sent by Claimant, which Defendant 1) no longer
denies.

Sect. 3 sentence 1 lists the services to be rendered by Claimant under


the Agreement. They include elements of a mandate. The Agreement
therefore consists of brokerage and mandate elements. The services to
be rendered by the Claimant are consistent with both. As a brokerage
agreement is indeed a qualified mandate,

An agreement concluded with a nominee is valid unless some reason


for nullity pursuant to Art. 19, 20 CO exists. It is sufficient if the
business transacted between the nominee and the third party is
actually intended and not void for other reasons. Indirect
representation does not necessarily imply improper intentions of concealment,

Gautschi in Berner Kommentar, vor Art. 412, ann. 1 c),

a)

Bucher in Schweizerisches Obligationenrecht, Allgemeiner


Teil, Zurich 1979, p. 544; ZacWKunzle in Bemer Kommentar,
Art. 32, ann. 178 et seq.
Whether the Agreement of ...... is invalid under ordre public
international aspects will be discussed later, (below 111) where
appropriate. The following considerations exclude the question of
invalidity under Art. 19,20 CO.

it is justified to apply also the provisions on mandates to the


relationship between Claimant and Defendant 1).
b)

The Arbitral Tribunal considers valid the "exclusive appointment" in


sect. 2 of the Agreement, including the stipulation that any contract
concluded between Defendant 1) and a third party is held conclusively
and irrebuttably the result of the efforts of Claimant.
The language of the Agreement is unequivocal and in no need of
interpretation. Contractual stipulations of this nature are admissible,

in charge of the M-84-project for Defendant I), stated that "I sent
faxes confirming that I received the letter, that the delegation is going,
or that the delegation will be accepted or this sort of thing" .
4.

5.

Sect. 2 4 of Agreement are Valid


Defendant 1) contests the claims on the grounds that sect. 2, 3 of the
Agreement is invalid. The Arbitral Tribunal holds that the objection is
unfounded.

W. = Mr. A. and Mr. G.


Defendant 1) thinks Claimant an "international paper vehicle" and the
Agreement of ...... therefore invalid. The Arbitral Tribunal does not
share this view.

Both Claimant and Defendant 1) referred to the Agreement as


"brokerage-contract". This legal evaluation does not bind the Arbitral
Tribunal. The majority holds that the Agreement combines elements
of various types of contracts. Such "mixed" agreements are admissible
and frequent under Swiss law,

It is undisputed under Swiss law that a foreign corporation's legal


capacity is governed by the law of its place of registration so that a
foreign corporation has fill legal capacity as granted to it by its
domestic laws (art. 154 LDIP).

Krarner in Berner Kommentar, Art. 19-20, ann. 58; Schluep in


HonsellNogtlWiegand,loc.cit., Einleitung vor Art. 184 ff.,
ann. 7 et seq.; GuhlIMerzlKummer, a.a.O., p. 297 et seq.

The taking of evidence has satisfied the Arbitral Tribunal that


Claimant serves the purposes of Mr. A. and Mr. G. Their actions are
therefore deemed Claimant's actions. Mr. A. is also undoubtedly the
author of the letters sent by Claimant, which Defendant 1) no longer
denies.

Sect. 3 sentence 1 lists the services to be rendered by Claimant under


the Agreement. They include elements of a mandate. The Agreement
therefore consists of brokerage and mandate elements. The services to
be rendered by the Claimant are consistent with both. As a brokerage
agreement is indeed a qualified mandate,

An agreement concluded with a nominee is valid unless some reason


for nullity pursuant to Art. 19, 20 CO exists. It is sufficient if the
business transacted between the nominee and the third party is
actually intended and not void for other reasons. Indirect
representation does not necessarily imply improper intentions of concealment,

Gautschi in Berner Kommentar, vor Art. 412, ann. 1 c),

a)

Bucher in Schweizerisches Obligationenrecht, Allgemeiner


Teil, Zurich 1979, p. 544; ZacWKunzle in Bemer Kommentar,
Art. 32, ann. 178 et seq.
Whether the Agreement of ...... is invalid under ordre public
international aspects will be discussed later, (below 111) where
appropriate. The following considerations exclude the question of
invalidity under Art. 19,20 CO.

it is justified to apply also the provisions on mandates to the


relationship between Claimant and Defendant 1).
b)

The Arbitral Tribunal considers valid the "exclusive appointment" in


sect. 2 of the Agreement, including the stipulation that any contract
concluded between Defendant 1) and a third party is held conclusively
and irrebuttably the result of the efforts of Claimant.
The language of the Agreement is unequivocal and in no need of
interpretation. Contractual stipulations of this nature are admissible,

BGE 72 I1 422; 100 11 361 ff.; 103 I1 133 ff.; Ammann in


HonselINogtlWiegand, loc.cit., Art. 412, ann. 13; GuhliMerzi
Kummer, loc.cit., p. 477; against the established practice of the
Swiss Federal Court only Gautschi in Berner Kommentar, Art.
412, ann. 3 e).

Defendant 2). On the other hand, the director of Defendant l),


Lt. General J., stated when examined: "M.B. had put a lot of remarks
on this contract". Lt. General J. took office on ....... He stated hrther:
"when I got the post of the director, I must say that I was
astonished with the contract you mentioned in your question."

The requirement of a causal connection between the efforts of the


agent and the contract concluded between principal and third party
may be waived. If an exclusive clause is combined with the waiver of
causal connection, the agent retains his claim to compensation even if
his activity has no connection at all with the contract concluded by the
principal. The compensation clause in this case constitutes a
commission guarantee,

Upon question by the Arbitral Tribunal, he declared that he tried to get


information from M.B. and General T. Lt. General T. preceded
Lt. General J. in the office of director of Defendant 1); he had signed
the Agreement of ..... on behalf of Defendant 1).
The Arbitral Tribunal is therefore convinced that Defendant I ) knew
the contents of the Agreement.

BGE 100 I1 365.

d)
The text of sect. 2 of the Agreement does not require the Claimant to
prove its activities in favour of Defendant 1). The Arbitral Tribunal
considers this to exonerate Claimant from the burden of proof.
However, the dispute does not depend on this question since the
Claimant did in fact establish its activities to the satisfaction of the
Arbitral Tribunal.

c)

Defendant 1) has challenged the validity of sect. 2 4 of the Agreement


on the further grounds that it had not understood their significance.
The Agreement had been drawn up by Claimant's counsel Mr. A.B.
Defendant 1) had been represented by M. B. in the negotiations, who
did not speak English. The Arbitral Tribunal holds the objection to be
irrelevant. Defendant 1) failed to challenge the Agreement on the
grounds of error, Art.23, 3 1, sect. 1 CO.
Defendant 1) also failed to offer proof for its allegation. Mr. A.B. has
stated that not only M.B. but also Mr. D. participated in the
negotiations, most of which had taken place at the offices of
Defendant 2). Defendant 1) did not call M.B. as a witness, and did not
question Mr. D. about these allegations, neither during the taking of
evidence nor at any other time of the hearings, although Mr. D.
was present at all hearings of the Arbitral Tribunal representing

The last sentence of sect. 2 of the Agreement provides that under


special circumstances the exclusiveness may be rescinded for
"particular products". Defendant 1) holds that the provision applies to
the M-84-contract, and that it exercised the rights arising herefrom by
sending the letter of ....
The Arbitral Tribunal differs from this opinion. The last sentence of
sect. 2 obliges the Parties to follow a certain procedure when
exclusiveness is to be rescinded. Defendant I) has to request a writing
from the Claimant exceptionally waiving its exclusive appointment.
The Arbitral Tribunal does not see such a request in the Defendant's 1)
letter of ......

6.

Services Rendered by Claimant


Defendant 1) contests the Claimant's right to fees from the M-84contract on the grounds that Defendant I) did not require any services.
This defence is not valid. The Arbitral Tribunal deems it sufficient that
the Claimant did in fact render services to Defendant 1) in connection
with the M-84-contract and other projects of Defendant 1) related to
the sale of arms to Z., and that Defendant 1) never refused the services
before its letter of ...... These facts are established to the satisfaction of
the Arbitral Tribunal.

BGE 72 I1 422; 100 11 361 ff.; 103 I1 133 ff.; Ammann in


HonselINogtlWiegand, loc.cit., Art. 412, ann. 13; GuhliMerzi
Kummer, loc.cit., p. 477; against the established practice of the
Swiss Federal Court only Gautschi in Berner Kommentar, Art.
412, ann. 3 e).

Defendant 2). On the other hand, the director of Defendant l),


Lt. General J., stated when examined: "M.B. had put a lot of remarks
on this contract". Lt. General J. took office on ....... He stated hrther:
"when I got the post of the director, I must say that I was
astonished with the contract you mentioned in your question."

The requirement of a causal connection between the efforts of the


agent and the contract concluded between principal and third party
may be waived. If an exclusive clause is combined with the waiver of
causal connection, the agent retains his claim to compensation even if
his activity has no connection at all with the contract concluded by the
principal. The compensation clause in this case constitutes a
commission guarantee,

Upon question by the Arbitral Tribunal, he declared that he tried to get


information from M.B. and General T. Lt. General T. preceded
Lt. General J. in the office of director of Defendant 1); he had signed
the Agreement of ..... on behalf of Defendant 1).
The Arbitral Tribunal is therefore convinced that Defendant I ) knew
the contents of the Agreement.

BGE 100 I1 365.

d)
The text of sect. 2 of the Agreement does not require the Claimant to
prove its activities in favour of Defendant 1). The Arbitral Tribunal
considers this to exonerate Claimant from the burden of proof.
However, the dispute does not depend on this question since the
Claimant did in fact establish its activities to the satisfaction of the
Arbitral Tribunal.

c)

Defendant 1) has challenged the validity of sect. 2 4 of the Agreement


on the further grounds that it had not understood their significance.
The Agreement had been drawn up by Claimant's counsel Mr. A.B.
Defendant 1) had been represented by M. B. in the negotiations, who
did not speak English. The Arbitral Tribunal holds the objection to be
irrelevant. Defendant 1) failed to challenge the Agreement on the
grounds of error, Art.23, 3 1, sect. 1 CO.
Defendant 1) also failed to offer proof for its allegation. Mr. A.B. has
stated that not only M.B. but also Mr. D. participated in the
negotiations, most of which had taken place at the offices of
Defendant 2). Defendant 1) did not call M.B. as a witness, and did not
question Mr. D. about these allegations, neither during the taking of
evidence nor at any other time of the hearings, although Mr. D.
was present at all hearings of the Arbitral Tribunal representing

The last sentence of sect. 2 of the Agreement provides that under


special circumstances the exclusiveness may be rescinded for
"particular products". Defendant 1) holds that the provision applies to
the M-84-contract, and that it exercised the rights arising herefrom by
sending the letter of ....
The Arbitral Tribunal differs from this opinion. The last sentence of
sect. 2 obliges the Parties to follow a certain procedure when
exclusiveness is to be rescinded. Defendant I) has to request a writing
from the Claimant exceptionally waiving its exclusive appointment.
The Arbitral Tribunal does not see such a request in the Defendant's 1)
letter of ......

6.

Services Rendered by Claimant


Defendant 1) contests the Claimant's right to fees from the M-84contract on the grounds that Defendant I) did not require any services.
This defence is not valid. The Arbitral Tribunal deems it sufficient that
the Claimant did in fact render services to Defendant 1) in connection
with the M-84-contract and other projects of Defendant 1) related to
the sale of arms to Z., and that Defendant 1) never refused the services
before its letter of ...... These facts are established to the satisfaction of
the Arbitral Tribunal.

a)

1) answering letters and acknowledgements of receipt otherwise.


Defendant 1) therefore is barred under the principle of good faith,

The Arbitral Tribunal qualifies the letters sent by Claimant to


Defendant 1) until ...... as proof of services rendered under the
Agreement of .......

cf.
Col. S., in charge of the M-84-project for Defendant I), stated that he
studied the letters and arranged them in three groups. Most letters had
contained information on the exchange of delegations; these he kept to
himself. The second group was saying "you must try to convince your
partners or you must do everything to accept them nicely or so on".
The third group he sent on to the higher intermediary if they contained
something new such as the rocket launcher. He sent faxes to the
Claimant confirming receipt of letters, or relating to the delegations.
Col. S. also stated, upon question by the Arbitral Tribunal, that he
confirmed the receipt of some of Claimant's letters by his signature
and that he saw some letters by Claimant to Defendant 1) whose
receipt had been confirmed by Mr. D., then Y. ambassador to Z.
The statements of Col. S. and of Lt. General J. the director of
Defendant l), also establish that Defendant 1) did not object to the
contents of the Claimant's letters it received until ..... did not inform
Claimant until then that its services were not desired, considered
irrelevant or unvaluable.
b)

The legal relevance of the telexes sent by Col. S. to Claimant


confirming the receipt of letters, or relating to the expected
delegations, and of his acknowledgement of receipt put on the
Claimant's letters, is to be assessed according to the understanding of
the Claimant as the recipient party,
cf.

BGE 102 I1 234, 246; 101 I1 329, 331; 105 I1 16, 18;
KramerISchmidlin in Berner Kommentar, Art. 1,
ann. 102; GuhllMerzlKummer, loc.cit., p. 91.

Defendant's 1) behaviour must also be seen in the light of sect. 2 of the


Agreement, exonerating the Claimant from proof of its activities.
To the Claimant, Defendant's 1) unreserved acceptance of services
signified approval. The Claimant could not understand the Defendant's

Guhl/Merz/Kummer, loc.cit., p. 91; Bucher, loc.cit.,


p. 104 et seq.,

from objecting that the services rendered by Claimant were not desired
and had no value.
c)

The statement of Col. S. concerning the Claimant's technical


consultation is contrary to the Claimant's letters. The Arbitral Tribunal
therefore holds that the witness is not credible on this point.
Col. S. said that Claimant recommended the high-frequency-radioequipment by the American manufacturer HA., or by an other
American manufacturer, whereas the MOD wanted equipment by R.,
an English manufacturer. This is incompatible with Claimant's letter of
......where it says:
"Finally, please be advised that the M.O.D. is insisting to have
the Communication System of the type J. RQ3 16HGlHP from
R. (British) Company."
Col. S. further said that W. did not comment on the time required by
MOD to take the engine off. This is contrary to the Claimant's letter of
...... which says, i.a.:
"... As we informed you, in the very near future the Directorate
will be sending sample tanks to Z. to be tested. After the
testing is completed, the Ministry of Defence wishes once
again to determine the length of time it would take to remove
the tank's engine and replace it with another one. In the interest
of all parties involved, we would rather not see a repetition of
the same experience Z. had with the above-mentioned
personnel carrier. Therefore, please send with the sample tanks
a professional mechanical team that is capable of removing
and replacing a tank's engine in the fastest time possible. ..."

a)

1) answering letters and acknowledgements of receipt otherwise.


Defendant 1) therefore is barred under the principle of good faith,

The Arbitral Tribunal qualifies the letters sent by Claimant to


Defendant 1) until ...... as proof of services rendered under the
Agreement of .......

cf.
Col. S., in charge of the M-84-project for Defendant I), stated that he
studied the letters and arranged them in three groups. Most letters had
contained information on the exchange of delegations; these he kept to
himself. The second group was saying "you must try to convince your
partners or you must do everything to accept them nicely or so on".
The third group he sent on to the higher intermediary if they contained
something new such as the rocket launcher. He sent faxes to the
Claimant confirming receipt of letters, or relating to the delegations.
Col. S. also stated, upon question by the Arbitral Tribunal, that he
confirmed the receipt of some of Claimant's letters by his signature
and that he saw some letters by Claimant to Defendant 1) whose
receipt had been confirmed by Mr. D., then Y. ambassador to Z.
The statements of Col. S. and of Lt. General J. the director of
Defendant l), also establish that Defendant 1) did not object to the
contents of the Claimant's letters it received until ..... did not inform
Claimant until then that its services were not desired, considered
irrelevant or unvaluable.
b)

The legal relevance of the telexes sent by Col. S. to Claimant


confirming the receipt of letters, or relating to the expected
delegations, and of his acknowledgement of receipt put on the
Claimant's letters, is to be assessed according to the understanding of
the Claimant as the recipient party,
cf.

BGE 102 I1 234, 246; 101 I1 329, 331; 105 I1 16, 18;
KramerISchmidlin in Berner Kommentar, Art. 1,
ann. 102; GuhllMerzlKummer, loc.cit., p. 91.

Defendant's 1) behaviour must also be seen in the light of sect. 2 of the


Agreement, exonerating the Claimant from proof of its activities.
To the Claimant, Defendant's 1) unreserved acceptance of services
signified approval. The Claimant could not understand the Defendant's

Guhl/Merz/Kummer, loc.cit., p. 91; Bucher, loc.cit.,


p. 104 et seq.,

from objecting that the services rendered by Claimant were not desired
and had no value.
c)

The statement of Col. S. concerning the Claimant's technical


consultation is contrary to the Claimant's letters. The Arbitral Tribunal
therefore holds that the witness is not credible on this point.
Col. S. said that Claimant recommended the high-frequency-radioequipment by the American manufacturer HA., or by an other
American manufacturer, whereas the MOD wanted equipment by R.,
an English manufacturer. This is incompatible with Claimant's letter of
......where it says:
"Finally, please be advised that the M.O.D. is insisting to have
the Communication System of the type J. RQ3 16HGlHP from
R. (British) Company."
Col. S. further said that W. did not comment on the time required by
MOD to take the engine off. This is contrary to the Claimant's letter of
...... which says, i.a.:
"... As we informed you, in the very near future the Directorate
will be sending sample tanks to Z. to be tested. After the
testing is completed, the Ministry of Defence wishes once
again to determine the length of time it would take to remove
the tank's engine and replace it with another one. In the interest
of all parties involved, we would rather not see a repetition of
the same experience Z. had with the above-mentioned
personnel carrier. Therefore, please send with the sample tanks
a professional mechanical team that is capable of removing
and replacing a tank's engine in the fastest time possible. ..."

apparent for Claimant what, if any, legal consequences Defendant 1)


wished to draw from these allegations.

On question by the Arbitral Tribunal, Col. S. declared that he has seen


the letter exhibit (...).
d)

The Arbitral Tribunal is also convinced that Claimant has rendered


services to Defendant 1) as specified in sect. 3 of the Agreement
relating to the construction-contract between Defendant 1) and MOD.
This is shown by the Claimant's letters of ...... and of ......, both written
prior to ...... .

b)

The language of the letter:

"... we are ready to negotiate with you the terms and


conditions of termination of the said Agreement.

The construction-contract between the Defendant 1) and the MOD was


concluded on ....., after Defendant 1) had terminated the Agreement of
...... on ...... (the termination will be considered under No. 7).
However, the termination of an agreement does not affect an agent's
claim for compensation already accrued. If the agent has rendered his
services before the termination, he is entitled to his fee if the contract
between the principal and the third party is concluded after termination of the agent's contract, provided there is psychologically a causal
connection,

We are prepared to start the discussion on the termination


by the end of July. ..."
could not, by a neutral recipient, be construed merely as an
announcement of termination yet to come. Defendant's I) intent to
terminate the Agreement is also evident from the request that Claimant
stop its activities.
Contracts for services and brokerage contracts are subject to
termination by the principal at any time even if a fixed term has been
agreed upon, Art. 404 CO. This provision is compulsory,

BGE 57 11 192 et seq.; 76 11 386; Ammann in HonsellNogti


Wiegand, Art. 413 CO, ann. 8

7)

Agreement of ..... Validly Terminated


Defendant 1) argues that it had terminated the Agreement of .... before
the end of the initial term of 3 years set forth in sect. 12; Claimant
objects to this. The Arbitral Tribunal deems the objection unfounded.
Defendant 1) effectively terminated the Agreement of ....... by letter of

a)

The language of Defendant's 1) letter of ...... to Claimant does not


amount to termination. Nor can it be construed, in the opinion of the
Arbitral Tribunal, as to communicate such an intention.
To the Claimantirecipient the letter merely conveyed the information
that Defendant 1) had received the MOD-circularattached in copy, and
the allegation that Claimant had known the limitations imposed by the
MOD-circular when concluding the Agreement of. ..... It was not

However, Defendant's 1) letter of ..... must be interpreted as


termination of the Agreement of ......

BGE 98 I1 307 et seq.; 109 I1 467; 115 I1 466.

111.

In Particular: Agreement of
Activities of Claimant

..... not Invalid due to Alleged Illicit

Since the beginning of the arbitration procedure, Defendant 1)


has argued that the Agreement of .... is null, relying particularly on
Art. 19 LDIP and Art. 19, 20 CO. Defendant 2), however, did not
plead that the Agreement is void due to illicit activities of the Claimant. It pleaded so for the first time in its final oral pleadings on .....,
the last day of the arbitration procedure .

apparent for Claimant what, if any, legal consequences Defendant 1)


wished to draw from these allegations.

On question by the Arbitral Tribunal, Col. S. declared that he has seen


the letter exhibit (...).
d)

The Arbitral Tribunal is also convinced that Claimant has rendered


services to Defendant 1) as specified in sect. 3 of the Agreement
relating to the construction-contract between Defendant 1) and MOD.
This is shown by the Claimant's letters of ...... and of ......, both written
prior to ...... .

b)

The language of the letter:

"... we are ready to negotiate with you the terms and


conditions of termination of the said Agreement.

The construction-contract between the Defendant 1) and the MOD was


concluded on ....., after Defendant 1) had terminated the Agreement of
...... on ...... (the termination will be considered under No. 7).
However, the termination of an agreement does not affect an agent's
claim for compensation already accrued. If the agent has rendered his
services before the termination, he is entitled to his fee if the contract
between the principal and the third party is concluded after termination of the agent's contract, provided there is psychologically a causal
connection,

We are prepared to start the discussion on the termination


by the end of July. ..."
could not, by a neutral recipient, be construed merely as an
announcement of termination yet to come. Defendant's I) intent to
terminate the Agreement is also evident from the request that Claimant
stop its activities.
Contracts for services and brokerage contracts are subject to
termination by the principal at any time even if a fixed term has been
agreed upon, Art. 404 CO. This provision is compulsory,

BGE 57 11 192 et seq.; 76 11 386; Ammann in HonsellNogti


Wiegand, Art. 413 CO, ann. 8

7)

Agreement of ..... Validly Terminated


Defendant 1) argues that it had terminated the Agreement of .... before
the end of the initial term of 3 years set forth in sect. 12; Claimant
objects to this. The Arbitral Tribunal deems the objection unfounded.
Defendant 1) effectively terminated the Agreement of ....... by letter of

a)

The language of Defendant's 1) letter of ...... to Claimant does not


amount to termination. Nor can it be construed, in the opinion of the
Arbitral Tribunal, as to communicate such an intention.
To the Claimantirecipient the letter merely conveyed the information
that Defendant 1) had received the MOD-circularattached in copy, and
the allegation that Claimant had known the limitations imposed by the
MOD-circular when concluding the Agreement of. ..... It was not

However, Defendant's 1) letter of ..... must be interpreted as


termination of the Agreement of ......

BGE 98 I1 307 et seq.; 109 I1 467; 115 I1 466.

111.

In Particular: Agreement of
Activities of Claimant

..... not Invalid due to Alleged Illicit

Since the beginning of the arbitration procedure, Defendant 1)


has argued that the Agreement of .... is null, relying particularly on
Art. 19 LDIP and Art. 19, 20 CO. Defendant 2), however, did not
plead that the Agreement is void due to illicit activities of the Claimant. It pleaded so for the first time in its final oral pleadings on .....,
the last day of the arbitration procedure .

The majority of the Arbitral Tribunal does not share the Defendants'
opinion. The Agreement of ..... is not invalid due to an infringement of
bona mores, Art. 19 LDIP, 19, 20 CO. It should be added that
numerous decisions of the Arbitral Tribunal regarding this section I11
of the Reasons were unanimous.
1)

Agreement not Invalid due to MOD-circular or Z. Law

a)

Agreement follows from


To the Defendants, the invalidity of the
its infringement of the MOD-circular, which they deem to formulate
the mandatory law of Z. The Arbitral Tribunal does not adopt this
view.

aa)

The Arbitral Tribunal holds that it is up to the Defendants to


substantiate and prove that the MOD-circular is part of the mandatory
law of Z., and to specify the mandatory provisions of Z. law on which
the MOD-circular is based. The Defendants have said nothing in this
respect. The Arbitral Tribunal therefore did not consider any potential
effects of the MOD-circularon sect. 9 of the Agreement of .....

bb)

b)

The majority of the Arbitral Tribunal holds that the law of Z. is not to
be considered in this context. In sect. 9 of the Agreement the Parties
expressly chose Swiss law, thereby expressing that any laws of third
states conflicting with this Agreement should not be taken into
account by the Arbitral Tribunal.
aa)

Defendant 1) mainly alleged that the MOD-circular was handed over


by the MOD shortly before conclusion of the M-84-contract, and was
unknown to Defendant 1) before that time. Its director, Lt. General J.,
had to sign the MOD-circular in connection with the M-84-contract.
Had he known the document earlier, he would have acted differently.
The Defendants' argument and the evidence taken establish to the
Arbitral Tribunal nothing more than that the MOD-circularwas part of
the M-84-contract and the construction-contract concluded between
Defendant 1) and MOD. It is therefore a contractual condition imposed
by one contracting party - MOD- on the other party - Defendant 1) -.
This does not suggest, however, that the MOD-circular expresses
compulsory law of the State of Z.
The Claimant's objection that the MOD-circular was never applied in
Z., and has been rescinded in the meantime anyway, is therefore
irrelevant.

Defendant 1) also argues that the Agreement of ..... is void because the
Claimant, a corporation domiciled in X., was unable to perform the
services stipulated in sect. 3 of the Agreement in Z. due to compulsory
provisions of Z. law. Under Art. 1 of the "Law No ... of .... Regulating
Commercial Agencies" only such legal or natural persons may engage
in commercial agency in Z. who are nationals of Z. The Claimant
objects that Z. law is not applicable to it because its shareholders Mr.
A. and Mr. G. are Z. nationals, which satisfies Z. law.

Even if Swiss law is chosen, Art. 19 LDIP allows to consider such


provisions of other laws which are compulsory in their own system, if
this is demanded by such interests of one party which are held worth
protecting and predominant by the Swiss law, and if the matter is closely related to that other law.
It is disputed in arbitration whether Art. 19, belonging to chapter 1) of
the LDIP, is applicable if the parties have contractually agreed on a
specific law, and only the arbitration procedure is governed by chapter
12) of the LDIP due to the fact that Switzerland is the venue of arbitration. Pursuant to Art. 187 LDIP, the arbitral tribunal decides the
dispute according to the rules of the law chosen by the parties, that is,
the tribunal is bound by the parties' choice of law if they have agreed
on a specific law,
cf. Lalive/Poudret/Reymond, loc.cit., Art. 187, ann. 2 et seq.

bb)

It is generally agreed that the arbitral tribunal has to apply the


mandatory rules of the private law governing the agreement. In the
present case, the mandatory rules of the lex contractus include Art. 19,
20 CO. Any rules of Z. law, concerning details of agency, cannot
come under Art. 19,20 CO.

The majority of the Arbitral Tribunal does not share the Defendants'
opinion. The Agreement of ..... is not invalid due to an infringement of
bona mores, Art. 19 LDIP, 19, 20 CO. It should be added that
numerous decisions of the Arbitral Tribunal regarding this section I11
of the Reasons were unanimous.
1)

Agreement not Invalid due to MOD-circular or Z. Law

a)

Agreement follows from


To the Defendants, the invalidity of the
its infringement of the MOD-circular, which they deem to formulate
the mandatory law of Z. The Arbitral Tribunal does not adopt this
view.

aa)

The Arbitral Tribunal holds that it is up to the Defendants to


substantiate and prove that the MOD-circular is part of the mandatory
law of Z., and to specify the mandatory provisions of Z. law on which
the MOD-circular is based. The Defendants have said nothing in this
respect. The Arbitral Tribunal therefore did not consider any potential
effects of the MOD-circularon sect. 9 of the Agreement of .....

bb)

b)

The majority of the Arbitral Tribunal holds that the law of Z. is not to
be considered in this context. In sect. 9 of the Agreement the Parties
expressly chose Swiss law, thereby expressing that any laws of third
states conflicting with this Agreement should not be taken into
account by the Arbitral Tribunal.
aa)

Defendant 1) mainly alleged that the MOD-circular was handed over


by the MOD shortly before conclusion of the M-84-contract, and was
unknown to Defendant 1) before that time. Its director, Lt. General J.,
had to sign the MOD-circular in connection with the M-84-contract.
Had he known the document earlier, he would have acted differently.
The Defendants' argument and the evidence taken establish to the
Arbitral Tribunal nothing more than that the MOD-circularwas part of
the M-84-contract and the construction-contract concluded between
Defendant 1) and MOD. It is therefore a contractual condition imposed
by one contracting party - MOD- on the other party - Defendant 1) -.
This does not suggest, however, that the MOD-circular expresses
compulsory law of the State of Z.
The Claimant's objection that the MOD-circular was never applied in
Z., and has been rescinded in the meantime anyway, is therefore
irrelevant.

Defendant 1) also argues that the Agreement of ..... is void because the
Claimant, a corporation domiciled in X., was unable to perform the
services stipulated in sect. 3 of the Agreement in Z. due to compulsory
provisions of Z. law. Under Art. 1 of the "Law No ... of .... Regulating
Commercial Agencies" only such legal or natural persons may engage
in commercial agency in Z. who are nationals of Z. The Claimant
objects that Z. law is not applicable to it because its shareholders Mr.
A. and Mr. G. are Z. nationals, which satisfies Z. law.

Even if Swiss law is chosen, Art. 19 LDIP allows to consider such


provisions of other laws which are compulsory in their own system, if
this is demanded by such interests of one party which are held worth
protecting and predominant by the Swiss law, and if the matter is closely related to that other law.
It is disputed in arbitration whether Art. 19, belonging to chapter 1) of
the LDIP, is applicable if the parties have contractually agreed on a
specific law, and only the arbitration procedure is governed by chapter
12) of the LDIP due to the fact that Switzerland is the venue of arbitration. Pursuant to Art. 187 LDIP, the arbitral tribunal decides the
dispute according to the rules of the law chosen by the parties, that is,
the tribunal is bound by the parties' choice of law if they have agreed
on a specific law,
cf. Lalive/Poudret/Reymond, loc.cit., Art. 187, ann. 2 et seq.

bb)

It is generally agreed that the arbitral tribunal has to apply the


mandatory rules of the private law governing the agreement. In the
present case, the mandatory rules of the lex contractus include Art. 19,
20 CO. Any rules of Z. law, concerning details of agency, cannot
come under Art. 19,20 CO.

The parties' authority of free choice of law is confirmed as an


internationally valid principle by Art. 7 of the European Convention of
1961. The parties are to be enabled to subject their legal relations to
the law they choose, and to exclude the national law which would
otherwise apply. Therefore, provisions of the law which is excluded
can only be recognized within the chosen law to the extent that they
are part of the ordre public international,

did. Defendant I) was aware before signing the M-84-contract that the
Agreement of ...... was subject to immediate termination, as is evident
from its letter of ...... to the Claimant and the termination of ......,
shortly after.
a)

Examples of this are provisions to fight corruption and bribery.


In the permanent practice of international arbitration, national
provisions governing the law of agency are not considered to belong
to the ordre public international,

Defendant I) was therefore fully aware of the risks possibly arising in


its relation with the MOD when signing the M-84-contract. However,
this does not deprive Defendant 1) of its right to terminate the
Agreement, which right it exercised on .... . This follows from Art.404
sect. 1 CO. As the termination was effected after signing the M-84contract, it can not retroactively annul the claims accrued under the
Agreement in favour of Claimant prior to the termination, for these
had arisen automatically and simultaneously with the signature of the
M-84-contract.

Northrop Corp v. Triad Intern. Marketing S.A., 81 1 F.2d 1265


(9th Cir. 1987); Swiss Fed. Court, ASA Bulletin 1993, 253 et
seq.
cc)

The majority of the Arbitral Tribunal is also inclined to believe


Claimant's allegation that the provisions of Z. law are not compulsory.
Undisputedly, the Writ of Attachment of ..... ,obtained by the Claimant
in Z. from a state court, has not been set aside. The "Request for issuing Writ of Attachment" describes the Claimant as a "X. Company".
A state judge issuing a preliminary injunction has to make a full legal
examination of the case. The majority of the Arbitral Tribunal does
not suppose that the judge of Z. who issued the Writ of Attachment in
favour of the Claimant failed to do so. Therefore it may be concluded
that the Z. law invoked by Defendant 1) is not compulsory and even
less belongs to the ordre public international .

2)

Right of Defendant 1) to Terminate the Agreement after having


Received the MOD-Circular

Undisputedly, Defendant I) knew the MOD-circular before signing the


M-84-contract on... ... Defendant 1) thus could decide freely whether to
terminate the Agreement of ..... before signing the M-84-contract, to
eliminate any risk the MOD-circular might create with regard to the
MOD, or to sign the M-84-contract without prior termination of the
Agreement. Defendant 1) opted for the second alternative by signing
the M-84-contract on ..... without having terminated the Agreement.

b)

The Arbitral Tribunal deems irrelevant whether Defendant 1) sold,


with the assistance of an agent, 20-mm anti-aircraft-guns to the MOD
prior to the Agreement of ..... The Arbitral Tribunal was called to
decide on this issue according to sect. G I 7 a) Terms of Reference.
However, the question became obsolete and, in the opinion of the
Arbitral Tribunal, irrelevant to the decision of the dispute when the
Replica and the Duplica with their respective offers of proof were
submitted later. The question was replaced by numerous new issues
not contained in the Terms of Reference but rendering obsolete some
problems raised there. The Arbitral Tribunal therefore makes no
decision on this point.
The same considerations apply to sect. G I 7 b) Terms of Reference.

The Arbitral Tribunal holds that Defendant 1) had the right to


terminate the Agreement of ..... immediately, regardless of whether
Defendant 1) knew the MOD-circularearlier, as Claimant undisputedly

The parties' authority of free choice of law is confirmed as an


internationally valid principle by Art. 7 of the European Convention of
1961. The parties are to be enabled to subject their legal relations to
the law they choose, and to exclude the national law which would
otherwise apply. Therefore, provisions of the law which is excluded
can only be recognized within the chosen law to the extent that they
are part of the ordre public international,

did. Defendant I) was aware before signing the M-84-contract that the
Agreement of ...... was subject to immediate termination, as is evident
from its letter of ...... to the Claimant and the termination of ......,
shortly after.
a)

Examples of this are provisions to fight corruption and bribery.


In the permanent practice of international arbitration, national
provisions governing the law of agency are not considered to belong
to the ordre public international,

Defendant I) was therefore fully aware of the risks possibly arising in


its relation with the MOD when signing the M-84-contract. However,
this does not deprive Defendant 1) of its right to terminate the
Agreement, which right it exercised on .... . This follows from Art.404
sect. 1 CO. As the termination was effected after signing the M-84contract, it can not retroactively annul the claims accrued under the
Agreement in favour of Claimant prior to the termination, for these
had arisen automatically and simultaneously with the signature of the
M-84-contract.

Northrop Corp v. Triad Intern. Marketing S.A., 81 1 F.2d 1265


(9th Cir. 1987); Swiss Fed. Court, ASA Bulletin 1993, 253 et
seq.
cc)

The majority of the Arbitral Tribunal is also inclined to believe


Claimant's allegation that the provisions of Z. law are not compulsory.
Undisputedly, the Writ of Attachment of ..... ,obtained by the Claimant
in Z. from a state court, has not been set aside. The "Request for issuing Writ of Attachment" describes the Claimant as a "X. Company".
A state judge issuing a preliminary injunction has to make a full legal
examination of the case. The majority of the Arbitral Tribunal does
not suppose that the judge of Z. who issued the Writ of Attachment in
favour of the Claimant failed to do so. Therefore it may be concluded
that the Z. law invoked by Defendant 1) is not compulsory and even
less belongs to the ordre public international .

2)

Right of Defendant 1) to Terminate the Agreement after having


Received the MOD-Circular

Undisputedly, Defendant I) knew the MOD-circular before signing the


M-84-contract on... ... Defendant 1) thus could decide freely whether to
terminate the Agreement of ..... before signing the M-84-contract, to
eliminate any risk the MOD-circular might create with regard to the
MOD, or to sign the M-84-contract without prior termination of the
Agreement. Defendant 1) opted for the second alternative by signing
the M-84-contract on ..... without having terminated the Agreement.

b)

The Arbitral Tribunal deems irrelevant whether Defendant 1) sold,


with the assistance of an agent, 20-mm anti-aircraft-guns to the MOD
prior to the Agreement of ..... The Arbitral Tribunal was called to
decide on this issue according to sect. G I 7 a) Terms of Reference.
However, the question became obsolete and, in the opinion of the
Arbitral Tribunal, irrelevant to the decision of the dispute when the
Replica and the Duplica with their respective offers of proof were
submitted later. The question was replaced by numerous new issues
not contained in the Terms of Reference but rendering obsolete some
problems raised there. The Arbitral Tribunal therefore makes no
decision on this point.
The same considerations apply to sect. G I 7 b) Terms of Reference.

The Arbitral Tribunal holds that Defendant 1) had the right to


terminate the Agreement of ..... immediately, regardless of whether
Defendant 1) knew the MOD-circularearlier, as Claimant undisputedly

3)

No Joint Illicit Intentions of the Parties at the Time of the Closing of


the Agreement

BGE 83 I1 152; 88 I1 5 15; Gautschi in Berner Kommentar, Art.


417, ann. 3 b).

The Arbitral Tribunal holds that the Agreement of ..... would be null if
the Parties, when closing the Agreement, had intended that Claimant
was to effect the conclusion of a contract between MOD and the
Defendant 1) by illicit means, such as bribery. The Defendants did not
allege that the Parties jointly had such intentions, nor did the taking of
evidence convince the Arbitral Tribunal of such intentions.
a)

Art. 417 CO only applies to agency agreements concerning


employment contracts or real estate purchase contracts. It is an
exceptional provision, expressing in particular the political intention
of Swiss law to prevent unjustified profits which would have
undesirable effects on the real estate market of Switzerland,

The Arbitral Tribunal has given special attention to this point because
the language of sect. 2 of the Agreement exonerates the Claimant from
any proof of its services. Combined with other circumstances, this
provision might imply joint illicit intentions of the Parties. However,
the copies of the Claimant's telefax letters to Defendant 1) establish
that Claimant did indeed render services.

BGE 111 I1 366 ff.; Ammann in HonsellNogt/Wiegand,


Art. 41 7, ann. 2.
The nature of exceptional provisions forbids their analogous
application to other matters.
bb)

The Defendants did not allege other circumstances which might


constitute illicit intentions of the Parties on conclusion of the
Agreement. The Arbitral Tribunal holds that sect. 2 of the Agreement
of ..... is not sufficient to prove joint illicit intentions.
b)

The Arbitral Tribunal further holds that the amounts of fees agreed
upon in sect. 4 and 5 of the Agreement and the pertaining Amendment
I11 do not imply joint illicit intentions of the Parties. This does not
prejudice the question whether the fees are justified by Claimant's
services rendered, which will be discussed below.
Defendant 1) asserted that the stipulated fees are disproportionately
high and unusual. The Arbitral Tribunal holds that this circumstance
as such is not sufficient to invalidate the Agreement.

aa)

Principal and agent are free to stipulate the fees due to the agent. A
brokerage agreement is not invalid merely because an unusually high
commission is agreed upon. Excessive fees may be cut back to the
appropriate amount by the court at the principal's motion, under the
conditions specified in Art. 417 CO. The reduction is not effected ex
officio but only at the principal's request. If the principal pays the
excessive fee without reservation it cannot be reclaimed,

Mr. A.B, the lawyer who conducted the negotiations with the
Defendants for the Claimant, explained, concerning the amount of
fees, that he commenced the negotiations at 25% and went back to
15%, and to 20% for the spare parts. M.B. and Mr. D. , negotiating on
behalf of Defendant I), could not decide on this. The decision was
made by General T., then director of Defendant I), who accepted the
15% within 5 minutes. For Z., there were no "standard-commissions";
for "you don't get what you deserve, you get what you negotiate". He
had signed contracts with 25% commissions on huge amounts. Mr. A.
also stated that he took "whatever I could get".
The Claimant may have got the better of the Defendant 1) in
negotiating the fees. However, Art. 21 CO shows that this does not
invalidate the Agreement. Defendant 1) raised no substantiated
objections to the statements of Mr. AB. and Mr. A. concerning the
course of the negotiations and the amount of fees agreed upon. Neither
M.B. nor Lt. General T. or Mr. D., who was present during the
examination of Mr. AB, were called as witnesses.
The statements of Mr. AB. and Mr. A. do not point to illicit intentions
of the Parties on conclusion of the Agreement especially as Defendant
1) asserted that until receipt of the MOD-circularit had no reason to be
suspicious towards Claimant's intentions. The Arbitral Tribunal also

3)

No Joint Illicit Intentions of the Parties at the Time of the Closing of


the Agreement

BGE 83 I1 152; 88 I1 5 15; Gautschi in Berner Kommentar, Art.


417, ann. 3 b).

The Arbitral Tribunal holds that the Agreement of ..... would be null if
the Parties, when closing the Agreement, had intended that Claimant
was to effect the conclusion of a contract between MOD and the
Defendant 1) by illicit means, such as bribery. The Defendants did not
allege that the Parties jointly had such intentions, nor did the taking of
evidence convince the Arbitral Tribunal of such intentions.
a)

Art. 417 CO only applies to agency agreements concerning


employment contracts or real estate purchase contracts. It is an
exceptional provision, expressing in particular the political intention
of Swiss law to prevent unjustified profits which would have
undesirable effects on the real estate market of Switzerland,

The Arbitral Tribunal has given special attention to this point because
the language of sect. 2 of the Agreement exonerates the Claimant from
any proof of its services. Combined with other circumstances, this
provision might imply joint illicit intentions of the Parties. However,
the copies of the Claimant's telefax letters to Defendant 1) establish
that Claimant did indeed render services.

BGE 111 I1 366 ff.; Ammann in HonsellNogt/Wiegand,


Art. 41 7, ann. 2.
The nature of exceptional provisions forbids their analogous
application to other matters.
bb)

The Defendants did not allege other circumstances which might


constitute illicit intentions of the Parties on conclusion of the
Agreement. The Arbitral Tribunal holds that sect. 2 of the Agreement
of ..... is not sufficient to prove joint illicit intentions.
b)

The Arbitral Tribunal further holds that the amounts of fees agreed
upon in sect. 4 and 5 of the Agreement and the pertaining Amendment
I11 do not imply joint illicit intentions of the Parties. This does not
prejudice the question whether the fees are justified by Claimant's
services rendered, which will be discussed below.
Defendant 1) asserted that the stipulated fees are disproportionately
high and unusual. The Arbitral Tribunal holds that this circumstance
as such is not sufficient to invalidate the Agreement.

aa)

Principal and agent are free to stipulate the fees due to the agent. A
brokerage agreement is not invalid merely because an unusually high
commission is agreed upon. Excessive fees may be cut back to the
appropriate amount by the court at the principal's motion, under the
conditions specified in Art. 417 CO. The reduction is not effected ex
officio but only at the principal's request. If the principal pays the
excessive fee without reservation it cannot be reclaimed,

Mr. A.B, the lawyer who conducted the negotiations with the
Defendants for the Claimant, explained, concerning the amount of
fees, that he commenced the negotiations at 25% and went back to
15%, and to 20% for the spare parts. M.B. and Mr. D. , negotiating on
behalf of Defendant I), could not decide on this. The decision was
made by General T., then director of Defendant I), who accepted the
15% within 5 minutes. For Z., there were no "standard-commissions";
for "you don't get what you deserve, you get what you negotiate". He
had signed contracts with 25% commissions on huge amounts. Mr. A.
also stated that he took "whatever I could get".
The Claimant may have got the better of the Defendant 1) in
negotiating the fees. However, Art. 21 CO shows that this does not
invalidate the Agreement. Defendant 1) raised no substantiated
objections to the statements of Mr. AB. and Mr. A. concerning the
course of the negotiations and the amount of fees agreed upon. Neither
M.B. nor Lt. General T. or Mr. D., who was present during the
examination of Mr. AB, were called as witnesses.
The statements of Mr. AB. and Mr. A. do not point to illicit intentions
of the Parties on conclusion of the Agreement especially as Defendant
1) asserted that until receipt of the MOD-circularit had no reason to be
suspicious towards Claimant's intentions. The Arbitral Tribunal also

Ex-Ambassador D. is mentioned only once again in the Duplica in


connection with exhibit, the Claimant's letter of .... to the Ambassador
of Y. in Z. The Defendants have alleged nothing else concerning Ambassador D.

considers that Defendant 2), who had participated in the negotiations,


still assumed in its Final Statement of ..... that the Agreement of .....
was valid. Defendant 2) said that if supplied by the Claimant with all
relevant elements, subject to its obligations under the Agreement it
would have issued the required letter of guarantee. The Final
Statement was submitted after the taking of evidence in preparation of
the Final Pleadings.
4)

The statement of Mr. S. heard as witness has satisfied the Arbitral


Tribunal that Ex-Ambassador D. acknowledged the receipt of letters
from Claimant to Defendant I), and that Defendant 1) indeed received
those letters. The Arbitral Tribunal does not hold this to be illicit
activities of Ex-Ambassador D., which could nullify the Agreement.
As Defendant 1) failed to submit substantiated facts, the Tribunal need
not decide whether Ex-Ambassador D. was authorized to accept
Claimant's services on behalf of Defendant 1).

No Sufficient Allepations Concerning Illicit Activities of ExAmbassador D.


The Arbitral Tribunal holds that the Defendants have to prove that the
Y. ex-ambassador to Z., D., was engaged with Claimant's approval in
such illicit activities as to nullify the Agreement of ..... There is no
conclusive statement of facts to that effect.

a)

Neither Defendant's 1) Answer to the Request for Arbitration of ....,


nor Defendant's 2) Answer of ....., mention Ex-Ambassador D. In the
Replica, the Claimant wrote concerning Ex-Ambassador D.:
"The Y. ambassador to Z. served as a conduit for
communications between W. and the S. As he had no personal
stake in the Agreement and was trusted by both parties, Mr.
AO. frequently delivered information obtained by Mr. A. (or
Mr. G.) directly to Ambassador H. Indeed, the Ambassador
often acknowledged receipt of these communications with his
signature ...".
To this, Defendant 1) replied in its Duplica of ....., merely :
"... However, Claimant itself states that quires were
communicated from Y. Ambassador or CPI employee Mr. N.
This unsupported statement is the only one which should have
to explain that Claimant was demanded for his services.

Indeed this statement can not be accepted,

.I1.

b)

1
I

Defendant 1) was advised by written Order of the Chairman of .... that


it would be excluded from presenting new facts after the extension
granted for its Duplica had expired. The Order says:
"The deadline fixed for Defendant (1) to submitting his
Duplica is hereby extended according to the request by
Defendant (I) until

The Defendant (1) is advised that no additional extensions will


be granted and he will be excluded from presenting new facts
or evidence not contained in his Duplica posted on or before
...... .

!!

5)

Agreement not Invalid due to High Fees in Relation to Services


Actually Rendered
The majority of the Arbitral Tribunal holds that the Agreement is not
invalidated by the circumstance that the fees according to sect. 4 of the
Agreement are disproportionately high for the services actually
rendered by Claimant. The majority opinion is based on the following
considerations:

Ex-Ambassador D. is mentioned only once again in the Duplica in


connection with exhibit, the Claimant's letter of .... to the Ambassador
of Y. in Z. The Defendants have alleged nothing else concerning Ambassador D.

considers that Defendant 2), who had participated in the negotiations,


still assumed in its Final Statement of ..... that the Agreement of .....
was valid. Defendant 2) said that if supplied by the Claimant with all
relevant elements, subject to its obligations under the Agreement it
would have issued the required letter of guarantee. The Final
Statement was submitted after the taking of evidence in preparation of
the Final Pleadings.
4)

The statement of Mr. S. heard as witness has satisfied the Arbitral


Tribunal that Ex-Ambassador D. acknowledged the receipt of letters
from Claimant to Defendant I), and that Defendant 1) indeed received
those letters. The Arbitral Tribunal does not hold this to be illicit
activities of Ex-Ambassador D., which could nullify the Agreement.
As Defendant 1) failed to submit substantiated facts, the Tribunal need
not decide whether Ex-Ambassador D. was authorized to accept
Claimant's services on behalf of Defendant 1).

No Sufficient Allepations Concerning Illicit Activities of ExAmbassador D.


The Arbitral Tribunal holds that the Defendants have to prove that the
Y. ex-ambassador to Z., D., was engaged with Claimant's approval in
such illicit activities as to nullify the Agreement of ..... There is no
conclusive statement of facts to that effect.

a)

Neither Defendant's 1) Answer to the Request for Arbitration of ....,


nor Defendant's 2) Answer of ....., mention Ex-Ambassador D. In the
Replica, the Claimant wrote concerning Ex-Ambassador D.:
"The Y. ambassador to Z. served as a conduit for
communications between W. and the S. As he had no personal
stake in the Agreement and was trusted by both parties, Mr.
AO. frequently delivered information obtained by Mr. A. (or
Mr. G.) directly to Ambassador H. Indeed, the Ambassador
often acknowledged receipt of these communications with his
signature ...".
To this, Defendant 1) replied in its Duplica of ....., merely :
"... However, Claimant itself states that quires were
communicated from Y. Ambassador or CPI employee Mr. N.
This unsupported statement is the only one which should have
to explain that Claimant was demanded for his services.

Indeed this statement can not be accepted,

.I1.

b)

1
I

Defendant 1) was advised by written Order of the Chairman of .... that


it would be excluded from presenting new facts after the extension
granted for its Duplica had expired. The Order says:
"The deadline fixed for Defendant (1) to submitting his
Duplica is hereby extended according to the request by
Defendant (I) until

The Defendant (1) is advised that no additional extensions will


be granted and he will be excluded from presenting new facts
or evidence not contained in his Duplica posted on or before
...... .

!!

5)

Agreement not Invalid due to High Fees in Relation to Services


Actually Rendered
The majority of the Arbitral Tribunal holds that the Agreement is not
invalidated by the circumstance that the fees according to sect. 4 of the
Agreement are disproportionately high for the services actually
rendered by Claimant. The majority opinion is based on the following
considerations:

a)

"Of course, W. did in fact lobby MOD on the S.'s behalf and
supply the S. with information on the status of its bids as well
as the bids of its competitors. W.'s activities were in perfect
accord with the laws of Switzerland, did not violate the laws of
Z., and were well-received by the S. during the first year of the
Agreement."

The Arbitral Tribunal is unanimous that unusually high fees do not as


such invalidate the Agreement. From the beginning, the Agreement
was intended to bring about the M-84-contract between Defendant 1)
and the MOD (inter alia), by means of services rendered by Claimant.
The purpose of the Agreement has been achieved in that Defendant 1 )
has concluded the M-84-contract with the MOD. Therefore the validity
of the Agreement does not depend on the quantity of services the
Claimant had to perform. It is sufficient that it did render services to
Defendant 1) under the Agreement. Of this the Arbitral Tribunal is
satisfied.

b)

Defendant 1) deems the activities thus described illegal. The evidence


obtained did not convince the majority of the Arbitral Tribunal that
this is so.
a)

Lobbying as such is not an illegal activity. Lobbying by private


enterprises to obtain public contracts in third countries is frequently
carried on with active support from the state, as witnessed by
numerous visits of heads of government or heads of state, who are
normally accompanied by representatives of commercial enterprises
from the visitor's country, in the hope that they will secure public
contracts for their enterprises from the country they visit.

b)

Mr. A. described to the Arbitral Tribunal the Claimant's understanding


of lobbying as follows :

A principal may plead the agent's faulty performance of the contract,


which may reduce the agent's fee or extinguish the claim altogether,
BGE 108 I1 198 f.; BGE 108 I1 64; BGE 110 I1 379; Weber in
HonsellNogtIWiegand, Art. 394, Rz. 43.
This requires, however, that the contract has failed in part or
altogether, or that the principal has sustained damages due to the
agent's faulty performance.
Such circumstances do not exist here. The M-84-contract was
concluded as intended by Defendant 1). Defendant 1) may not hold
against Claimant that a price reduction of 13% was granted to the
MOD. This was due to Defendant's own decision and not to any
alleged lack of performance by Claimant. There is also no indication
that Claimant infringed the interests of Defendant 1) by its services.

6)

Agreement not Invalid because of Lobbying by Claimant


The Defendants plead that the Agreement of .... is void because of the
Claimant's illicit lobbying activities. The majority of the Arbitral
Tribunal does not share this view.
The Claimant stated in its Replica

"Lobbying for the S.; let me explain to you that Z. is a small


community, and the people who work in the Ministry of
Defence or in Ministry of Finance, those are officers, and some
of them, we go together to the beach, we are friends, we went
to school together, they come to our house, we go to their
house. We are a small community, we are only ...... Z.'s,
everyone knows each other. Lobbying means that when you
have been trying to sell your equipment for more than 10 or 12
years, I lobby for the S. and convince the people in the
committee face to face that why don't you try this M84, this is
a very good tank, this is a tank which is virtually a T72 restructured from inside to meet your requirements? On the other
side you would get a better buy from that, why don't you give
a chance for them to do that?

a)

"Of course, W. did in fact lobby MOD on the S.'s behalf and
supply the S. with information on the status of its bids as well
as the bids of its competitors. W.'s activities were in perfect
accord with the laws of Switzerland, did not violate the laws of
Z., and were well-received by the S. during the first year of the
Agreement."

The Arbitral Tribunal is unanimous that unusually high fees do not as


such invalidate the Agreement. From the beginning, the Agreement
was intended to bring about the M-84-contract between Defendant 1)
and the MOD (inter alia), by means of services rendered by Claimant.
The purpose of the Agreement has been achieved in that Defendant 1 )
has concluded the M-84-contract with the MOD. Therefore the validity
of the Agreement does not depend on the quantity of services the
Claimant had to perform. It is sufficient that it did render services to
Defendant 1) under the Agreement. Of this the Arbitral Tribunal is
satisfied.

b)

Defendant 1) deems the activities thus described illegal. The evidence


obtained did not convince the majority of the Arbitral Tribunal that
this is so.
a)

Lobbying as such is not an illegal activity. Lobbying by private


enterprises to obtain public contracts in third countries is frequently
carried on with active support from the state, as witnessed by
numerous visits of heads of government or heads of state, who are
normally accompanied by representatives of commercial enterprises
from the visitor's country, in the hope that they will secure public
contracts for their enterprises from the country they visit.

b)

Mr. A. described to the Arbitral Tribunal the Claimant's understanding


of lobbying as follows :

A principal may plead the agent's faulty performance of the contract,


which may reduce the agent's fee or extinguish the claim altogether,
BGE 108 I1 198 f.; BGE 108 I1 64; BGE 110 I1 379; Weber in
HonsellNogtIWiegand, Art. 394, Rz. 43.
This requires, however, that the contract has failed in part or
altogether, or that the principal has sustained damages due to the
agent's faulty performance.
Such circumstances do not exist here. The M-84-contract was
concluded as intended by Defendant 1). Defendant 1) may not hold
against Claimant that a price reduction of 13% was granted to the
MOD. This was due to Defendant's own decision and not to any
alleged lack of performance by Claimant. There is also no indication
that Claimant infringed the interests of Defendant 1) by its services.

6)

Agreement not Invalid because of Lobbying by Claimant


The Defendants plead that the Agreement of .... is void because of the
Claimant's illicit lobbying activities. The majority of the Arbitral
Tribunal does not share this view.
The Claimant stated in its Replica

"Lobbying for the S.; let me explain to you that Z. is a small


community, and the people who work in the Ministry of
Defence or in Ministry of Finance, those are officers, and some
of them, we go together to the beach, we are friends, we went
to school together, they come to our house, we go to their
house. We are a small community, we are only ...... Z.'s,
everyone knows each other. Lobbying means that when you
have been trying to sell your equipment for more than 10 or 12
years, I lobby for the S. and convince the people in the
committee face to face that why don't you try this M84, this is
a very good tank, this is a tank which is virtually a T72 restructured from inside to meet your requirements? On the other
side you would get a better buy from that, why don't you give
a chance for them to do that?

They are refusing, they don't want even to look at those


products from those countries at all, they were concentrating
on the Americans and Europeans; but lobbying means
convincing the people to agree to have the chance for the Y., to
see their products and to test it, and if it goes through the test
and the trial, they will be the ones who get the job.

activities but as trying not to disclose their professional know how to


third persons. This is neither illicit nor illegal.
c)

"All the above is very valuable and confidential information to


you. Please mention to your delegation coming to Z. that if
they are questioned about any knowledge of an agent or
consultant here in Z. or otherwise to reply as they know of no
such thing."

The other one, I also lobbied the Minister of Finance that they
talk to the people in the Ministry of Defence also to give them
a chance, because Z. will really get benefit from that, they will
reduce their debts. This is a part of lobbying, gathering
information for them. It's not secret information to know what
would be the number of tanks they want, how much
ammunition they want, what would be the training procedures,
what would be the best for the Y. to work, to bring their people
to Z., to bring the people? This is part of the lobbying."
This describes some of the activities which the Claimant had
undertaken in sect. 3 of the Agreement in favour of Defendant 1). The
majority of the Arbitral Tribunal does not qualify this and the further
statements of Mr. A. as illicit activities.

Mr. A., credibly, explained this as protecting the Claimant's know how
against other agents, of British or American companies. The majority
of the Arbitral Tribunal does not see this as malicious intent or illicit
activities.

7)

"Mr. Chairman, there are questions that you cannot give


answers to; you want me to give them my secrets, the details of
my contacts with the Ministry?"

To the majority of the Arbitral Tribunal, these and other statements of


Mr. A. and Mr. G., which might imply secret activities, do not seem
illegal. The statements must be considered in their context. Mr. G. also
said he had acted "on behalf of the company", that is, he openly
represented the Claimant. The majority of the Arbitral Tribunal
qualifies the answers of Mr. A. and Mr. G. as not suggesting secret

No Evidence of Briberv by Claimant


The Defendants deduce from the amount of fees stipulated that on
conclusion of the Agreement Claimant intended to use part of the
expected fees to bribe officials of the MOD, without the Defendants'
knowledge. The majority of the Arbitral Tribunal does not think so.

Upon question by the counsel of Defendant I), Mr. G. said, i.a. :

To the question "do you do that work publicly or not" he answered


"no". Mr. A. made similar statements.

The Defendant 1) sees specific evidence of illicit lobbying activities in


the Claimant's letter of ....., which runs:

Defendant 1) put its suspicion forward for the first time in its Final
Brief of ....., after the hearing of evidence, and repeated it in the oral
Final Pleadings held on .... and .... .
a)

These are new allegations of Defendant 1) not submitted within the


time granted for stating facts, and contrary to Order No.5 sect.5 of .....,
which said that the written submissions in preparation of the Final
Pleadings must not contain new facts or allegations.
During the hearing of evidence the Defendants also refrained from
asking one of the witnesses clearly whether the Agreement of ..... had
anything to do with bribery.

They are refusing, they don't want even to look at those


products from those countries at all, they were concentrating
on the Americans and Europeans; but lobbying means
convincing the people to agree to have the chance for the Y., to
see their products and to test it, and if it goes through the test
and the trial, they will be the ones who get the job.

activities but as trying not to disclose their professional know how to


third persons. This is neither illicit nor illegal.
c)

"All the above is very valuable and confidential information to


you. Please mention to your delegation coming to Z. that if
they are questioned about any knowledge of an agent or
consultant here in Z. or otherwise to reply as they know of no
such thing."

The other one, I also lobbied the Minister of Finance that they
talk to the people in the Ministry of Defence also to give them
a chance, because Z. will really get benefit from that, they will
reduce their debts. This is a part of lobbying, gathering
information for them. It's not secret information to know what
would be the number of tanks they want, how much
ammunition they want, what would be the training procedures,
what would be the best for the Y. to work, to bring their people
to Z., to bring the people? This is part of the lobbying."
This describes some of the activities which the Claimant had
undertaken in sect. 3 of the Agreement in favour of Defendant 1). The
majority of the Arbitral Tribunal does not qualify this and the further
statements of Mr. A. as illicit activities.

Mr. A., credibly, explained this as protecting the Claimant's know how
against other agents, of British or American companies. The majority
of the Arbitral Tribunal does not see this as malicious intent or illicit
activities.

7)

"Mr. Chairman, there are questions that you cannot give


answers to; you want me to give them my secrets, the details of
my contacts with the Ministry?"

To the majority of the Arbitral Tribunal, these and other statements of


Mr. A. and Mr. G., which might imply secret activities, do not seem
illegal. The statements must be considered in their context. Mr. G. also
said he had acted "on behalf of the company", that is, he openly
represented the Claimant. The majority of the Arbitral Tribunal
qualifies the answers of Mr. A. and Mr. G. as not suggesting secret

No Evidence of Briberv by Claimant


The Defendants deduce from the amount of fees stipulated that on
conclusion of the Agreement Claimant intended to use part of the
expected fees to bribe officials of the MOD, without the Defendants'
knowledge. The majority of the Arbitral Tribunal does not think so.

Upon question by the counsel of Defendant I), Mr. G. said, i.a. :

To the question "do you do that work publicly or not" he answered


"no". Mr. A. made similar statements.

The Defendant 1) sees specific evidence of illicit lobbying activities in


the Claimant's letter of ....., which runs:

Defendant 1) put its suspicion forward for the first time in its Final
Brief of ....., after the hearing of evidence, and repeated it in the oral
Final Pleadings held on .... and .... .
a)

These are new allegations of Defendant 1) not submitted within the


time granted for stating facts, and contrary to Order No.5 sect.5 of .....,
which said that the written submissions in preparation of the Final
Pleadings must not contain new facts or allegations.
During the hearing of evidence the Defendants also refrained from
asking one of the witnesses clearly whether the Agreement of ..... had
anything to do with bribery.

b)

Although the letters sent to Defendant 1) are unsigned, and merely


indicate that Claimant sent them but do not identify Mr. A. as the
author, the majority of the Arbitral Tribunal does not see this as
substantive evidence of bribery or other illicit intentions of the Claimant.
Mr. A. has satisfied the Tribunal as to his motives. He said that an address was given, which was the fax of his L. lawyer.
This is in conformity with sect. 16 of the Agreement and therefore not
to be construed as malicious intent, especially as Defendant 1) did not
allege that its own purposes pursued with the Agreement were illicit.
As Mr. A. said also, uncontestedly, Defendant 1) never protested that
the letters were unsigned.

c)

The Claimant has presented exhibits called "top state secrets" by


Defendant 1). This does not point to bribery or other illicit activities. It
merely shows that the Claimant had good contacts with the people
making the decisions for Z., which was probably why Defendant 1)
secured Claimant's services. Defendant's 1) director, Lt. General J.,
said that Defendant 1) had a special procedure "how to choose agents
and consultants".

d)

Defendant 1) sees the Claimant as an "international paper vehicle"


because of its X. domicile. The majority of the Arbitral Tribunal holds
that this also does not indicate any secret intentions of the Claimant,
such as bribery or other illicit activities, on conclusion of the
Agreement.
The Defendants failed to submit their suspicions in their written briefs
before the hearing of witnesses. Their subsequent allegations must be
regarded as speculative, and insufficient to convince the majority of
the Arbitral Tribunal.

e)

The majority also holds that bribery renders an agreement invalid. In


arbitration proceedings, however, bribery is a fact which has to be
alleged and for which evidence has to be submitted, and at the same
time constitutes a defence, nullifying the claims arising from a
contract. The consequences of this are decisive.

If a claimant asserts claims arising from a contract, and the defendant


objects that the claimant's rights arising from the contract are null due
to bribery, it is up to the defendant to present the fact of bribery and
the pertaining evidence within the time limits allowed to him for
presenting facts. The statement of facts
the burden of proof are
therefore upon the defendant. The word "bribery" is clear and
unmistakable. If the defendant does not use it in his presentation of
facts an Arbitral Tribunal does not have to investigate. It is exclusively
the parties' presentation of facts that decides in what direction the
arbitral tribunal has to investigate,
cf.

Lionnet, Festschrift Ottoamdt Glossner, 1994, p. 209,


2 16 et seq.

If the claimant's claim based on the contract is to be voided by the


defence of bribery, the arbitral tribunal, as any state court, must be
convinced that there is indeed a case of bribery. A mere "suspicion"
by any member of the arbitral tribunal, communicated neither to the
parties nor to the witnesses during the phase to establish the facts of
the case, is entirely insufficient to form such a conviction of the
Arbitral Tribunal.

The majority of the Arbitral Tribunal is therefore convinced that


neither the Agreement as such infringes the ordre public international,
nor that Claimant's activity as performed in the particular
circumstances violates the bona mores. The Claimant is therefore
entitled to the fees stipulated in the Agreement from the Defendants,
or the respective damages, to the extent these are due. This includes
the fees and damages resulting from the M-84-contract and those
resulting from the construction-contract.

b)

Although the letters sent to Defendant 1) are unsigned, and merely


indicate that Claimant sent them but do not identify Mr. A. as the
author, the majority of the Arbitral Tribunal does not see this as
substantive evidence of bribery or other illicit intentions of the Claimant.
Mr. A. has satisfied the Tribunal as to his motives. He said that an address was given, which was the fax of his L. lawyer.
This is in conformity with sect. 16 of the Agreement and therefore not
to be construed as malicious intent, especially as Defendant 1) did not
allege that its own purposes pursued with the Agreement were illicit.
As Mr. A. said also, uncontestedly, Defendant 1) never protested that
the letters were unsigned.

c)

The Claimant has presented exhibits called "top state secrets" by


Defendant 1). This does not point to bribery or other illicit activities. It
merely shows that the Claimant had good contacts with the people
making the decisions for Z., which was probably why Defendant 1)
secured Claimant's services. Defendant's 1) director, Lt. General J.,
said that Defendant 1) had a special procedure "how to choose agents
and consultants".

d)

Defendant 1) sees the Claimant as an "international paper vehicle"


because of its X. domicile. The majority of the Arbitral Tribunal holds
that this also does not indicate any secret intentions of the Claimant,
such as bribery or other illicit activities, on conclusion of the
Agreement.
The Defendants failed to submit their suspicions in their written briefs
before the hearing of witnesses. Their subsequent allegations must be
regarded as speculative, and insufficient to convince the majority of
the Arbitral Tribunal.

e)

The majority also holds that bribery renders an agreement invalid. In


arbitration proceedings, however, bribery is a fact which has to be
alleged and for which evidence has to be submitted, and at the same
time constitutes a defence, nullifying the claims arising from a
contract. The consequences of this are decisive.

If a claimant asserts claims arising from a contract, and the defendant


objects that the claimant's rights arising from the contract are null due
to bribery, it is up to the defendant to present the fact of bribery and
the pertaining evidence within the time limits allowed to him for
presenting facts. The statement of facts
the burden of proof are
therefore upon the defendant. The word "bribery" is clear and
unmistakable. If the defendant does not use it in his presentation of
facts an Arbitral Tribunal does not have to investigate. It is exclusively
the parties' presentation of facts that decides in what direction the
arbitral tribunal has to investigate,
cf.

Lionnet, Festschrift Ottoamdt Glossner, 1994, p. 209,


2 16 et seq.

If the claimant's claim based on the contract is to be voided by the


defence of bribery, the arbitral tribunal, as any state court, must be
convinced that there is indeed a case of bribery. A mere "suspicion"
by any member of the arbitral tribunal, communicated neither to the
parties nor to the witnesses during the phase to establish the facts of
the case, is entirely insufficient to form such a conviction of the
Arbitral Tribunal.

The majority of the Arbitral Tribunal is therefore convinced that


neither the Agreement as such infringes the ordre public international,
nor that Claimant's activity as performed in the particular
circumstances violates the bona mores. The Claimant is therefore
entitled to the fees stipulated in the Agreement from the Defendants,
or the respective damages, to the extent these are due. This includes
the fees and damages resulting from the M-84-contract and those
resulting from the construction-contract.

IV.

Fees Due to Claimant from Defendant 1)

1)

The Arbitral Tribunal need not decide on Claimant's motions made in


the Request for Arbitration and in the Replica because they were
withdrawn and replaced by the motions in the Claimant's Final Brief
of ......

2)

aa)

As payments received by Defendant 1) under the M-84-contract, the


Tribunal qualifies payments in cash or by set-off against Y.'s debts to
Z. (sect.6 subsect.2 of the Agreement). The Tribunal also sees as cash
payments from MOD to Defendant 1) the moneys destined for
Defendant 1) and attached by Claimant in Z. prior to ....., which are
US-$ 7 Mio. as stated undisputedly by Lt. General J.

Payment Claim Against Defendant 1) under the Agreement


Defendant 1) holds that any payment claims are directed exclusively
against Defendant 2) as provided in sect.6 of the Agreement. The
majority of the Arbitral Tribunal does not share this opinion.
bb)

No fees are due to Claimant on ..... from Defendant 1) for the 66 M84-tanks not yet delivered. The claim for fees and damages concerning
the 66 M-84-tanks does not become due until, and to the extent that,
Defendant 1) receives payment for its outstanding deliveries as
provided in the Agreement of.. ....

c)

The Arbitral Tribunal holds that Claimant has to prove what moneys
Defendant 1) received under the Agreement for the delivery of the 149
tanks until ...... The Arbitral Tribunal is satisfied that 60% of the total
value of the M-84-contract has been paid to Defendant 1). As Lt.
General J. stated the Defendant 1) so far has received about 60% of
the "total contract price". The Claimant has not proven its allegation
that Defendant 1) had received 75% of the total contract value, while
Mr. A. stated that he was "in a position to give to the exact cent" the
amount paid to Defendant 1).

aa)

The Claimant's motion in the Replica :

Defendant 1) mainly relies on sect. 6 sentence 1 of the Agreement.


Under this, however, Defendant 2) is merely a paying agent, leaving
the Defendant 1) as the Party liable for the fees. Sect.4 subsect.2 of the
Agreement says unequivocally: "said fees shall be payable by Principal to Consultant.. .".
The majority opinion is confirmed by the Defendant's 2) expressly
agreeing with Claimant's allegation that Defendant 2) acted merely "as
a paying agent for fees".
3)

Fees Due under the MOD-Contract for M-84-Tanks Delivered and


Paid for

a)

The hearing of evidence has confirmed the relevant figures of the


contracts between Defendant 1) and MOD on which the Claimant's
fees are based.
The Arbitral Tribunal is convinced that Defendant 1) until now has
delivered 149 of the 215 M-84-tanks to the MOD under the M-84contract, leaving 66 tanks still to be delivered. The Claimant has
accepted the pertaining statements of Lt. General J., director of
Defendant 1).

b)

Pursuant to sect. F I 3 Terms of Reference and Order No.1 sect.2, the


decisive date to fix the sums due to Claimant is ....., the day on which
Claimant has submitted the Replica.

The Arbitral Tribunal holds that Claimant is entitled to the 15%


stipulated in sect.4 of the Agreement as fees from Defendant 1) for the
149 M-84-tanks delivered until now as far as Defendant 1) has been
paid for the deliveries as provided in the Agreement.

"that the Arbitral Tribunal invite Defendant (1) to supply in a


reasonable time all information and documents enabling
Claimant to precisely establish the exact time, amounts and
manner of payments made by MOD pursuant to the M-84 and
construction contracts."
was to be dismissed as out of time.

IV.

Fees Due to Claimant from Defendant 1)

1)

The Arbitral Tribunal need not decide on Claimant's motions made in


the Request for Arbitration and in the Replica because they were
withdrawn and replaced by the motions in the Claimant's Final Brief
of ......

2)

aa)

As payments received by Defendant 1) under the M-84-contract, the


Tribunal qualifies payments in cash or by set-off against Y.'s debts to
Z. (sect.6 subsect.2 of the Agreement). The Tribunal also sees as cash
payments from MOD to Defendant 1) the moneys destined for
Defendant 1) and attached by Claimant in Z. prior to ....., which are
US-$ 7 Mio. as stated undisputedly by Lt. General J.

Payment Claim Against Defendant 1) under the Agreement


Defendant 1) holds that any payment claims are directed exclusively
against Defendant 2) as provided in sect.6 of the Agreement. The
majority of the Arbitral Tribunal does not share this opinion.
bb)

No fees are due to Claimant on ..... from Defendant 1) for the 66 M84-tanks not yet delivered. The claim for fees and damages concerning
the 66 M-84-tanks does not become due until, and to the extent that,
Defendant 1) receives payment for its outstanding deliveries as
provided in the Agreement of.. ....

c)

The Arbitral Tribunal holds that Claimant has to prove what moneys
Defendant 1) received under the Agreement for the delivery of the 149
tanks until ...... The Arbitral Tribunal is satisfied that 60% of the total
value of the M-84-contract has been paid to Defendant 1). As Lt.
General J. stated the Defendant 1) so far has received about 60% of
the "total contract price". The Claimant has not proven its allegation
that Defendant 1) had received 75% of the total contract value, while
Mr. A. stated that he was "in a position to give to the exact cent" the
amount paid to Defendant 1).

aa)

The Claimant's motion in the Replica :

Defendant 1) mainly relies on sect. 6 sentence 1 of the Agreement.


Under this, however, Defendant 2) is merely a paying agent, leaving
the Defendant 1) as the Party liable for the fees. Sect.4 subsect.2 of the
Agreement says unequivocally: "said fees shall be payable by Principal to Consultant.. .".
The majority opinion is confirmed by the Defendant's 2) expressly
agreeing with Claimant's allegation that Defendant 2) acted merely "as
a paying agent for fees".
3)

Fees Due under the MOD-Contract for M-84-Tanks Delivered and


Paid for

a)

The hearing of evidence has confirmed the relevant figures of the


contracts between Defendant 1) and MOD on which the Claimant's
fees are based.
The Arbitral Tribunal is convinced that Defendant 1) until now has
delivered 149 of the 215 M-84-tanks to the MOD under the M-84contract, leaving 66 tanks still to be delivered. The Claimant has
accepted the pertaining statements of Lt. General J., director of
Defendant 1).

b)

Pursuant to sect. F I 3 Terms of Reference and Order No.1 sect.2, the


decisive date to fix the sums due to Claimant is ....., the day on which
Claimant has submitted the Replica.

The Arbitral Tribunal holds that Claimant is entitled to the 15%


stipulated in sect.4 of the Agreement as fees from Defendant 1) for the
149 M-84-tanks delivered until now as far as Defendant 1) has been
paid for the deliveries as provided in the Agreement.

"that the Arbitral Tribunal invite Defendant (1) to supply in a


reasonable time all information and documents enabling
Claimant to precisely establish the exact time, amounts and
manner of payments made by MOD pursuant to the M-84 and
construction contracts."
was to be dismissed as out of time.

total value M-84-contract:

The motion was submitted in the Replica of ....., the last day on which
Claimant was allowed to introduce new facts, allegations and means
of evidence into the arbitration procedure. Had the motion been
granted, Claimant could have exceeded the term of preclusion ending
on ....
bb)

15% thereof =

The majority of the Arbitral Tribunal emphasizes however, that its


decision refers only to the 149 tanks proved to be delivered and the
sums received by Defendant 1) from MOD so far, in the amount of
60%.

e)

US$ 46.099.140,36

-----------------------------------

The majority of the Arbitral Tribunal holds that Claimant is also


entitled to the fees of 15% for the deliveries under the M-84-contract
which the Defendant I) calculated in Pound Sterling. The text of
sect.4 sentence 1 of the Agreement is unequivocal in that "the total
value of all contracts entered into" is to be considered.
The allegation of Defendant 1) that the contract was restricted to
military products manufactured in Y. and excludes components
purchased in other western countries is contrary to the clear language
and reasonable interpretation of the Agreement.

The Claimant demands the fees of 20% of the contract value for the
spare parts and ammunition stipulated in the M-84-contract and in
Amendment 111. The Arbitral Tribunal dismisses this claim.
Amendment 111 is subject to reasonable interpretation in the principle
Agreement. Both
of good faith. Amendment 111 alters sect.5 of the
provisions show that they concern separate agreements on spare parts
etc., as apparent from the language "value of all contracts". This
obviously means subsequent contracts but not the original M-84contract which was the object of the .....-Agreement.

US$300.327.602,40
US$ 7.000.000,00
US$ 307.327.602,40

Claimant therefore is entitled to fees and damages from Defendant 1)


of US$ 46.099.140.36 for the deliveries of M-84-tanks which are
calculated in US-Dollars.

This Arbitral Award therefore does not preclude the Claimant from
raising new claims in a new procedure against Defendant 1) if more
M-84-tanks are delivered to the MOD and/or Defendant 1) receives
more payments for the delivery of M-84-tanks, in addition to the 60%
decided on herein, under the Agreement of ..... Any payments to
Defendant 1) which exceed 60% do not become res judicata by this
Award.
d)

60% thereof =
attachment =
total

US$ 500.546.004,-

The value of the deliveries under the M-84-contract calculated in


Pound Sterling is UKE 11.440.326.29 of which the Claimant has
received 60% = UKE 6.864.195,77. The fees and damages of 15% due
to Claimant are UKE 1.029.629.37.
4)

Fees and Damages Related to Construction Contract

The Claimant's claim concerning spare parts, ammunition and the


training aids which are part of the M-84-contract is limited to fees and
damages of 15% pursuant to sect.4 of the Agreement.

The majority of the Arbitral Tribunal holds that Claimant is also


entitled to fees and damages of 10% under the construction-contract
pursuant to sect.4 of the Agreement.

The majority of the Arbitral Tribunal holds that the following amounts
are due to Claimant from Defendant 1) for the M-84-tanks delivered
and paid for under the M-84-Agreement:

Defendant 1) did not substantively contest Claimant's allegation that


the construction-contract results from direct negotiations between
Defendant 1) and MOD and not from a tender. The applicable amount

total value M-84-contract:

The motion was submitted in the Replica of ....., the last day on which
Claimant was allowed to introduce new facts, allegations and means
of evidence into the arbitration procedure. Had the motion been
granted, Claimant could have exceeded the term of preclusion ending
on ....
bb)

15% thereof =

The majority of the Arbitral Tribunal emphasizes however, that its


decision refers only to the 149 tanks proved to be delivered and the
sums received by Defendant 1) from MOD so far, in the amount of
60%.

e)

US$ 46.099.140,36

-----------------------------------

The majority of the Arbitral Tribunal holds that Claimant is also


entitled to the fees of 15% for the deliveries under the M-84-contract
which the Defendant I) calculated in Pound Sterling. The text of
sect.4 sentence 1 of the Agreement is unequivocal in that "the total
value of all contracts entered into" is to be considered.
The allegation of Defendant 1) that the contract was restricted to
military products manufactured in Y. and excludes components
purchased in other western countries is contrary to the clear language
and reasonable interpretation of the Agreement.

The Claimant demands the fees of 20% of the contract value for the
spare parts and ammunition stipulated in the M-84-contract and in
Amendment 111. The Arbitral Tribunal dismisses this claim.
Amendment 111 is subject to reasonable interpretation in the principle
Agreement. Both
of good faith. Amendment 111 alters sect.5 of the
provisions show that they concern separate agreements on spare parts
etc., as apparent from the language "value of all contracts". This
obviously means subsequent contracts but not the original M-84contract which was the object of the .....-Agreement.

US$300.327.602,40
US$ 7.000.000,00
US$ 307.327.602,40

Claimant therefore is entitled to fees and damages from Defendant 1)


of US$ 46.099.140.36 for the deliveries of M-84-tanks which are
calculated in US-Dollars.

This Arbitral Award therefore does not preclude the Claimant from
raising new claims in a new procedure against Defendant 1) if more
M-84-tanks are delivered to the MOD and/or Defendant 1) receives
more payments for the delivery of M-84-tanks, in addition to the 60%
decided on herein, under the Agreement of ..... Any payments to
Defendant 1) which exceed 60% do not become res judicata by this
Award.
d)

60% thereof =
attachment =
total

US$ 500.546.004,-

The value of the deliveries under the M-84-contract calculated in


Pound Sterling is UKE 11.440.326.29 of which the Claimant has
received 60% = UKE 6.864.195,77. The fees and damages of 15% due
to Claimant are UKE 1.029.629.37.
4)

Fees and Damages Related to Construction Contract

The Claimant's claim concerning spare parts, ammunition and the


training aids which are part of the M-84-contract is limited to fees and
damages of 15% pursuant to sect.4 of the Agreement.

The majority of the Arbitral Tribunal holds that Claimant is also


entitled to fees and damages of 10% under the construction-contract
pursuant to sect.4 of the Agreement.

The majority of the Arbitral Tribunal holds that the following amounts
are due to Claimant from Defendant 1) for the M-84-tanks delivered
and paid for under the M-84-Agreement:

Defendant 1) did not substantively contest Claimant's allegation that


the construction-contract results from direct negotiations between
Defendant 1) and MOD and not from a tender. The applicable amount

of fees is therefore 10% and not 6%, pursuant to sect.4 of the


Agreement.

a)

The value of the construction-contract is US$ 39.109.528,OO. The


circumstance that it was concluded between Defendant 1) and MOD
after termination of the Agreement is irrelevant. 10% of
US$ 39.109.528,OO is US$ 3.910.952,80.
Defendant 1) has received an advance payment on the constructioncontract of US$ 6 million from MOD. The Claimant's claim is
therefore governed by Amendment 11 which replaced sect.6 subsect.5
of the Agreement. Under sect.6 subsect.4, the due date set forth in
sect.6 subsect.1 does not apply to advance payments under the
construction-contract. Amendment I1 provides that the fees on the
construction-contract are due in full when the first payment received
by Defendant 1) from MOD under the construction-contract exceeds
the fees due to Claimant.
This is the case, as Defendant 1) has received US$ 6 million from
MOD, and the fees due to Claimant from the construction-contract are
less. Since Defendant 1) did receive payment its objection that the
contract has by now been terminated by the MOD is irrelevant, sect. 4,
subsect.2 of the Agreement.
The Claimant therefore is entitled to fees and damages of
US$ 3.910.952.80 from Defendant 1).
5)

Interest
The Claimant demands 10% interest on the due claims calculated in
US$ and 15% on those calculated in Pound Sterling. To prove the
interest rates it has submitted an excerpt from the "Economist" of
October 20126, 1990. Exhibit .... shows the interest rates for prime
lending in the ..... and ....... valid on ......
The Claimant has maintained the interest claims in the Replica and in
the Final Brief. Although the Defendants contested the interest rates,
Claimant failed to specify its allegations or to offer hrther evidence.

The interest rates shown in exhibit ...... are daily interest rates which
the Arbitral Tribunal knows to have become invalid long since.
Claimant had to prove the applicable rate of interest for the entire
period of time and failed to do so.
The Claimant is therefore entitled only to the statutory interest rate of
5% pursuant to Art. 104 sect.1 CO, proof of higher damages lacking.

b)

Interest on monetary debts is payable upon default, Art. 104 sect.1


CO, default requiring the creditor's demand for payment, Art. 102
sect. 1 CO.
The Claimant put Defendant in default of its due claims from the
M-84-contract by letter of ....., and by letter of .... for the fees resulting
from the construction-contract.
The Claimant demanded interests on the M-84-contract from .... and
on the construction-contract from ...... This is correct.

c)

The Claimant is entitled to 5% interest from the dates of default on the


amounts it first claimed in the Prayer for Relief in its Request for
Arbitration.
Concerning the payments of MODto the Defendant 1) from the M-84contract, the Claimant alleged in the Request for Arbitration that
Defendant 1) had "to date" received 25% of the M-84-contract value.
The Request for Arbitration is dated ......
In the Replica of ....., the Claimant alleged that Defendant 1) had "to
date" received about 75% of the total contract value, but failed to
specify the dates of the alleged payments.
Claimant has to prove the amounts and due dates of its interest claim.
It failed to supply the facts establishing the due date of interest on the
fees exceeding the claims put forward in the Prayer for Relief in the
Request for Arbitration. As it is now undisputed that the Defendant 1)
has received 60% of the M-84-contract value the Claimant is entitled
to interest on the higher amounts awarded only from .... .

of fees is therefore 10% and not 6%, pursuant to sect.4 of the


Agreement.

a)

The value of the construction-contract is US$ 39.109.528,OO. The


circumstance that it was concluded between Defendant 1) and MOD
after termination of the Agreement is irrelevant. 10% of
US$ 39.109.528,OO is US$ 3.910.952,80.
Defendant 1) has received an advance payment on the constructioncontract of US$ 6 million from MOD. The Claimant's claim is
therefore governed by Amendment 11 which replaced sect.6 subsect.5
of the Agreement. Under sect.6 subsect.4, the due date set forth in
sect.6 subsect.1 does not apply to advance payments under the
construction-contract. Amendment I1 provides that the fees on the
construction-contract are due in full when the first payment received
by Defendant 1) from MOD under the construction-contract exceeds
the fees due to Claimant.
This is the case, as Defendant 1) has received US$ 6 million from
MOD, and the fees due to Claimant from the construction-contract are
less. Since Defendant 1) did receive payment its objection that the
contract has by now been terminated by the MOD is irrelevant, sect. 4,
subsect.2 of the Agreement.
The Claimant therefore is entitled to fees and damages of
US$ 3.910.952.80 from Defendant 1).
5)

Interest
The Claimant demands 10% interest on the due claims calculated in
US$ and 15% on those calculated in Pound Sterling. To prove the
interest rates it has submitted an excerpt from the "Economist" of
October 20126, 1990. Exhibit .... shows the interest rates for prime
lending in the ..... and ....... valid on ......
The Claimant has maintained the interest claims in the Replica and in
the Final Brief. Although the Defendants contested the interest rates,
Claimant failed to specify its allegations or to offer hrther evidence.

The interest rates shown in exhibit ...... are daily interest rates which
the Arbitral Tribunal knows to have become invalid long since.
Claimant had to prove the applicable rate of interest for the entire
period of time and failed to do so.
The Claimant is therefore entitled only to the statutory interest rate of
5% pursuant to Art. 104 sect.1 CO, proof of higher damages lacking.

b)

Interest on monetary debts is payable upon default, Art. 104 sect.1


CO, default requiring the creditor's demand for payment, Art. 102
sect. 1 CO.
The Claimant put Defendant in default of its due claims from the
M-84-contract by letter of ....., and by letter of .... for the fees resulting
from the construction-contract.
The Claimant demanded interests on the M-84-contract from .... and
on the construction-contract from ...... This is correct.

c)

The Claimant is entitled to 5% interest from the dates of default on the


amounts it first claimed in the Prayer for Relief in its Request for
Arbitration.
Concerning the payments of MODto the Defendant 1) from the M-84contract, the Claimant alleged in the Request for Arbitration that
Defendant 1) had "to date" received 25% of the M-84-contract value.
The Request for Arbitration is dated ......
In the Replica of ....., the Claimant alleged that Defendant 1) had "to
date" received about 75% of the total contract value, but failed to
specify the dates of the alleged payments.
Claimant has to prove the amounts and due dates of its interest claim.
It failed to supply the facts establishing the due date of interest on the
fees exceeding the claims put forward in the Prayer for Relief in the
Request for Arbitration. As it is now undisputed that the Defendant 1)
has received 60% of the M-84-contract value the Claimant is entitled
to interest on the higher amounts awarded only from .... .

V.

Fees and Damages Due to Claimant from Defendant 2)

1)

Obligation to Issue Bank Guarantee in Favour of Claimant

2)

Defendant 2) objected that neither Claimant nor Defendant 1) gave the


necessary directions to issue the letter of guarantee; the majority of the
Arbitral Tribunal deems this unfounded.

In the opinion of the majority of the Arbitral Tribunal the Defendant


2) was not only obliged under sect.6 of the Agreement of ..... to open
bank guarantees in Claimant's favour after the M-84-contract and the
construction-contract between Defendant I) and MOD were concluded. Defendant 2) did also guarantee all payments due to Claimant, as
follows from sect. 6 sentence 2 of the Agreement.

The Claimant's request in its letter of ...., and even more in the
lawyer's letter of ..... was clear. Claimant unequivocally demanded to
open an irrevocable letter of guarantee pursuant to sect.6 of the
Agreement and advised Defendant 2) that it was held to be in breach
of the Agreement and "fully responsible for all damages and legal
consequences arising from that breach".

A guarantee agreement is void if the performance it guarantees is


illegal or immoral,

Any bank active in international commerce, having assumed an


obligation as described in sect.6 of the Agreement, is aware of the
necessary steps when it is requested to conform with the contract and
to open the letter of guarantee as promised to the beneficiary. If the
bank thinks it needs more information, it has, as a collateral obligation, to inform the beneficiary accordingly and to obtain it from him,

BGE 76 I1 37 et seq.; 113 I1 436; Pestalozzi in HonsellNogtl


Wiegandt, loc.cit., Art. 111, ann. 2 1.
The majority of the Arbitral Tribunal sees no grounds of nullity, for
which the deliberations supra sect. 11,111, are referred to. Defendant 2)
itself, in its Final Statement of ...., maintained its obligation to issue
the required letter of guarantee.
a)

cf. Bucher, 1oc.cit. p. 416.


Defendant 2) did not allege that it acted in such a way when receiving
the Claimant's letters of .... and ...., and there is no evidence to that
effect.

The majority of the Arbitral Tribunal qualifies sect. 6 of the


Agreement of .... as an independent promise of guarantee of Defendant
2) which is governed by Art. I11 CO. It does not agree with
Defendant 2) that Art. 492 CO. et seq. are applicable.
3)

b)

Clear Instruction of Claimant to Open Letter of Guarantee

Directions of Defendant 1) to Defendant 2) Irrelevant

The clear language of the heading and the entire contents of sect. 6
show that it is not merely an accessory surety. In international
commerce, guaranty promises are regularly given by letter of
guarantee.

Defendant 2) asserted that Defendant 1) had forbidden by letter of ....


to make payments to Claimant:

By letter of guarantee, the guarantor's obligation is created solely by


the promise itself, independent of the performance of the third party,

"Concerning the Agreement of the ..., concluded between this


Direction and Your Bank for W.. we are informing you that we
have undertaken the necessary steps to break this Agreement,
since it is contrary to the forced regulations of Z.

BGE 75 IT 49.
This is the intent expressed by the Parties in sect.6 of the Agreement.

V.

Fees and Damages Due to Claimant from Defendant 2)

1)

Obligation to Issue Bank Guarantee in Favour of Claimant

2)

Defendant 2) objected that neither Claimant nor Defendant 1) gave the


necessary directions to issue the letter of guarantee; the majority of the
Arbitral Tribunal deems this unfounded.

In the opinion of the majority of the Arbitral Tribunal the Defendant


2) was not only obliged under sect.6 of the Agreement of ..... to open
bank guarantees in Claimant's favour after the M-84-contract and the
construction-contract between Defendant I) and MOD were concluded. Defendant 2) did also guarantee all payments due to Claimant, as
follows from sect. 6 sentence 2 of the Agreement.

The Claimant's request in its letter of ...., and even more in the
lawyer's letter of ..... was clear. Claimant unequivocally demanded to
open an irrevocable letter of guarantee pursuant to sect.6 of the
Agreement and advised Defendant 2) that it was held to be in breach
of the Agreement and "fully responsible for all damages and legal
consequences arising from that breach".

A guarantee agreement is void if the performance it guarantees is


illegal or immoral,

Any bank active in international commerce, having assumed an


obligation as described in sect.6 of the Agreement, is aware of the
necessary steps when it is requested to conform with the contract and
to open the letter of guarantee as promised to the beneficiary. If the
bank thinks it needs more information, it has, as a collateral obligation, to inform the beneficiary accordingly and to obtain it from him,

BGE 76 I1 37 et seq.; 113 I1 436; Pestalozzi in HonsellNogtl


Wiegandt, loc.cit., Art. 111, ann. 2 1.
The majority of the Arbitral Tribunal sees no grounds of nullity, for
which the deliberations supra sect. 11,111, are referred to. Defendant 2)
itself, in its Final Statement of ...., maintained its obligation to issue
the required letter of guarantee.
a)

cf. Bucher, 1oc.cit. p. 416.


Defendant 2) did not allege that it acted in such a way when receiving
the Claimant's letters of .... and ...., and there is no evidence to that
effect.

The majority of the Arbitral Tribunal qualifies sect. 6 of the


Agreement of .... as an independent promise of guarantee of Defendant
2) which is governed by Art. I11 CO. It does not agree with
Defendant 2) that Art. 492 CO. et seq. are applicable.
3)

b)

Clear Instruction of Claimant to Open Letter of Guarantee

Directions of Defendant 1) to Defendant 2) Irrelevant

The clear language of the heading and the entire contents of sect. 6
show that it is not merely an accessory surety. In international
commerce, guaranty promises are regularly given by letter of
guarantee.

Defendant 2) asserted that Defendant 1) had forbidden by letter of ....


to make payments to Claimant:

By letter of guarantee, the guarantor's obligation is created solely by


the promise itself, independent of the performance of the third party,

"Concerning the Agreement of the ..., concluded between this


Direction and Your Bank for W.. we are informing you that we
have undertaken the necessary steps to break this Agreement,
since it is contrary to the forced regulations of Z.

BGE 75 IT 49.
This is the intent expressed by the Parties in sect.6 of the Agreement.

For these reasons we consider that according to this


Agreement you do not bear any obligations. Because of all of
the above said kindly refuse any eventual demands for
payment based on this Agreement.

5)

Y. Law not Applicable

Defendant 2) cannot be heard with the defence that under Y. law the
contract between the guarantor (Defendant 2) and his principal
(Defendant I) must be in writing.

To speak in favor of the above we are sending a copy of the


letter of the ....., directed to W. and a notice which we have
received from the Ministry of Defence of Z."

In the opinion of the majority, sect. 9 of the Agreement of ......


effectively excludes Y. law. Under Swiss law, neither the promise of
guarantee to the beneficiary nor the guarantor's contract with the
principal require a specific form,

The Arbitral Tribunal deems this objection irrelevant. As Defendant 2)


pleaded itself, sect.6 of the Agreement contains a "fully independent,
separate and autonomous obligation of the bank as the guarantor".

BGE 101 11 327 et seq.; Pestalozzi in HonsellNogtl Wiegandt,


Art. ll1,ann. 9.

An independent guarantee is issued for the specific purpose that the


guarantor may not plead defences against the beneficiary originating
from the relationship between guarantor and principal. Therefore, if
the guarantor has effectively issued an independent guarantee he may
not plead against the beneficiary that the principal - here Defendant 1)
- instructed him to withhold payment,

The relationship between guarantor and principal is normally a


mandate within the meaning of Art. 394 CO, which does not require a
specific form,
Gautschi in Berner Kommentar, Art. 395, ann. 49 a; Weber in
HonsellNogtlWiegandt, Art. 395, ann. 10.

Pestalozzi, in HonsellNogtlWiegand, Art. 11 1, ann. 20.


4)

Payments by MOD to Defendant 1)


Defendant 2) also pleads that the MOD had effected the payments to
Defendant 1) through a bank other than Defendant 2). The majority of
the Arbitral Tribunal deems this not a valid defence.
Sect. 6 of the Agreement of ..... does not even suggest that the
independent guarantee given by Defendant 2) was to be conditional
upon the MOD making payments to Defendant 1) exclusively through
Defendant 2). On the contrary, sect. 6 subsect.2 expressly declares that
payments made by setting off Y.'s debt to Z. are considered "cash
payment". The mode of payment from MOD to Defendant 1) is an
internal matter between Defendant 1) and Defendant 2) and does not
concern the guarantee issued to Claimant.

6)

Amounts Due to Claimant from Defendant 2)

a)

The Arbitral Tribunal is unable to share the Claimant's opinion that it


is entitled to sue Defendant 2) for the total value of the M-84-contract
for failing its obligation to open the letter of credit.
Sect.6 of the Agreement is subject to interpretation by the Arbitral
Tribunal, applying the principle of good faith, in order to define the
obligations undertaken by Defendant 2).
The construction put forward by Claimant may be possible on the face
of the contract. Defendant 2) has to issue an irrevocable Letter of
Guarantee "for the entire amount of fees due to Consultant", and "said
Letter of Guarantee shall be payable at first demand of Consultant", in
the event Guarantor fails to effect payment of Consultant's fees within
15 days after payment is due.

For these reasons we consider that according to this


Agreement you do not bear any obligations. Because of all of
the above said kindly refuse any eventual demands for
payment based on this Agreement.

5)

Y. Law not Applicable

Defendant 2) cannot be heard with the defence that under Y. law the
contract between the guarantor (Defendant 2) and his principal
(Defendant I) must be in writing.

To speak in favor of the above we are sending a copy of the


letter of the ....., directed to W. and a notice which we have
received from the Ministry of Defence of Z."

In the opinion of the majority, sect. 9 of the Agreement of ......


effectively excludes Y. law. Under Swiss law, neither the promise of
guarantee to the beneficiary nor the guarantor's contract with the
principal require a specific form,

The Arbitral Tribunal deems this objection irrelevant. As Defendant 2)


pleaded itself, sect.6 of the Agreement contains a "fully independent,
separate and autonomous obligation of the bank as the guarantor".

BGE 101 11 327 et seq.; Pestalozzi in HonsellNogtl Wiegandt,


Art. ll1,ann. 9.

An independent guarantee is issued for the specific purpose that the


guarantor may not plead defences against the beneficiary originating
from the relationship between guarantor and principal. Therefore, if
the guarantor has effectively issued an independent guarantee he may
not plead against the beneficiary that the principal - here Defendant 1)
- instructed him to withhold payment,

The relationship between guarantor and principal is normally a


mandate within the meaning of Art. 394 CO, which does not require a
specific form,
Gautschi in Berner Kommentar, Art. 395, ann. 49 a; Weber in
HonsellNogtlWiegandt, Art. 395, ann. 10.

Pestalozzi, in HonsellNogtlWiegand, Art. 11 1, ann. 20.


4)

Payments by MOD to Defendant 1)


Defendant 2) also pleads that the MOD had effected the payments to
Defendant 1) through a bank other than Defendant 2). The majority of
the Arbitral Tribunal deems this not a valid defence.
Sect. 6 of the Agreement of ..... does not even suggest that the
independent guarantee given by Defendant 2) was to be conditional
upon the MOD making payments to Defendant 1) exclusively through
Defendant 2). On the contrary, sect. 6 subsect.2 expressly declares that
payments made by setting off Y.'s debt to Z. are considered "cash
payment". The mode of payment from MOD to Defendant 1) is an
internal matter between Defendant 1) and Defendant 2) and does not
concern the guarantee issued to Claimant.

6)

Amounts Due to Claimant from Defendant 2)

a)

The Arbitral Tribunal is unable to share the Claimant's opinion that it


is entitled to sue Defendant 2) for the total value of the M-84-contract
for failing its obligation to open the letter of credit.
Sect.6 of the Agreement is subject to interpretation by the Arbitral
Tribunal, applying the principle of good faith, in order to define the
obligations undertaken by Defendant 2).
The construction put forward by Claimant may be possible on the face
of the contract. Defendant 2) has to issue an irrevocable Letter of
Guarantee "for the entire amount of fees due to Consultant", and "said
Letter of Guarantee shall be payable at first demand of Consultant", in
the event Guarantor fails to effect payment of Consultant's fees within
15 days after payment is due.

dispute, the Arbitral Tribunal refrains from commenting in the


Reasons on each factual or legal allegation it has deemed irrelevant.

However, the Parties obviously did not understand this literally when
they concluded the Agreement falsa demonstratio non nocet. The
purpose of a bank guarantee cannot be to grant to the creditor a
position stronger than the one he would have if the debtor had duly
performed the contract.
-

VII.

Costs

1)

The Claimant and the Defendants respectively moved to impose the


costs on the other Party. The Arbitral Tribunal has to fix the costs
according to the proportional success or failure of the substantive
claims on which it had to decide.

This applies to the case in dispute. The bank guarantee intended to


secure Claimant's contractual payment claims against Defendant l),
meaning that Defendant 2) had to effect unconditional payment at first
demand as is the usual purpose of the Letter of Credit in international
commerce. But Claimant was not to have the right to enforce against
Defendant 2) such claims which did not (yet) exist against Defendant
1). The Claimant's claim against Defendant 1) is conditional on the
payments actually effected by the MOD including those made by setoff of Y.'s debts to Z. The real intention of the Parties therefore was
that Claimant could enforce only such payment claims against
Defendant 2), based on the Letter of Guarantee, which existed against
Defendant 1). This applies equally to the damages based on Art. 111
CO.
b)

The Claimant's success is approximately 50%, in proportion to the


claims it raised. The Defendants had the same proportional success
with their defence. The Arbitral Tribunal therefore deems appropriate
that the Claimant and the Defendants each bear 50% of the costs, and
that each Defendant has to bear 25% of the costs of arbitration.
The costs of arbitration include the fees of the Arbitrators and the
administrative costs as fixed by the ICC-Court of Arbitration, Art. 20
sect. 2 ICC-rules.

For the amount of the claims due to the Claimant at present, it is


referred to the deliberations supra No.lV. The liability of Defendant 2)
is limited to the amounts owed by Defendant 1). The claims raised in
excess of this are dismissed as without merits at present.

The total costs of arbitration


amounts to
2)

Here, too, it is emphasized that the claim against Defendant 2) is


dismissed at present only because the claims exceeding the amounts
that are hereby awarded are not yet due. The Claimant may therefore
put forward the claims now dismissed in an arbitration procedure as
soon as they have become due.
Other Irrelevant Facts, Allegations or Opinions
The Arbitral Tribunal has examined but deemed irrelevant the
numerous other allegations and defences put forward by the Parties,
even where the witnesses have confirmed such assertions. In view of
the complex and extensive allegations presented in this arbitral

As the Claimant has paid the entire advance on costs, it has a claim
against both Defendants jointly to be reimbursed 50% of the advance
on costs.
The Defendants have to reimburse
Claimant

3)

VI.

US$ 700.000,-

US$350.000,-

The same deliberations apply to the normal legal costs incurred by the
Parties. Therefore, each Party has to bear its own costs, the costs of its
lawyers and the costs of the witnesses named by it and heard by the
Arbitral Tribunal. For the witnesses named by both Parties, the costs
fall on the Party who presented the respective witness at the hearing.

dispute, the Arbitral Tribunal refrains from commenting in the


Reasons on each factual or legal allegation it has deemed irrelevant.

However, the Parties obviously did not understand this literally when
they concluded the Agreement falsa demonstratio non nocet. The
purpose of a bank guarantee cannot be to grant to the creditor a
position stronger than the one he would have if the debtor had duly
performed the contract.
-

VII.

Costs

1)

The Claimant and the Defendants respectively moved to impose the


costs on the other Party. The Arbitral Tribunal has to fix the costs
according to the proportional success or failure of the substantive
claims on which it had to decide.

This applies to the case in dispute. The bank guarantee intended to


secure Claimant's contractual payment claims against Defendant l),
meaning that Defendant 2) had to effect unconditional payment at first
demand as is the usual purpose of the Letter of Credit in international
commerce. But Claimant was not to have the right to enforce against
Defendant 2) such claims which did not (yet) exist against Defendant
1). The Claimant's claim against Defendant 1) is conditional on the
payments actually effected by the MOD including those made by setoff of Y.'s debts to Z. The real intention of the Parties therefore was
that Claimant could enforce only such payment claims against
Defendant 2), based on the Letter of Guarantee, which existed against
Defendant 1). This applies equally to the damages based on Art. 111
CO.
b)

The Claimant's success is approximately 50%, in proportion to the


claims it raised. The Defendants had the same proportional success
with their defence. The Arbitral Tribunal therefore deems appropriate
that the Claimant and the Defendants each bear 50% of the costs, and
that each Defendant has to bear 25% of the costs of arbitration.
The costs of arbitration include the fees of the Arbitrators and the
administrative costs as fixed by the ICC-Court of Arbitration, Art. 20
sect. 2 ICC-rules.

For the amount of the claims due to the Claimant at present, it is


referred to the deliberations supra No.lV. The liability of Defendant 2)
is limited to the amounts owed by Defendant 1). The claims raised in
excess of this are dismissed as without merits at present.

The total costs of arbitration


amounts to
2)

Here, too, it is emphasized that the claim against Defendant 2) is


dismissed at present only because the claims exceeding the amounts
that are hereby awarded are not yet due. The Claimant may therefore
put forward the claims now dismissed in an arbitration procedure as
soon as they have become due.
Other Irrelevant Facts, Allegations or Opinions
The Arbitral Tribunal has examined but deemed irrelevant the
numerous other allegations and defences put forward by the Parties,
even where the witnesses have confirmed such assertions. In view of
the complex and extensive allegations presented in this arbitral

As the Claimant has paid the entire advance on costs, it has a claim
against both Defendants jointly to be reimbursed 50% of the advance
on costs.
The Defendants have to reimburse
Claimant

3)

VI.

US$ 700.000,-

US$350.000,-

The same deliberations apply to the normal legal costs incurred by the
Parties. Therefore, each Party has to bear its own costs, the costs of its
lawyers and the costs of the witnesses named by it and heard by the
Arbitral Tribunal. For the witnesses named by both Parties, the costs
fall on the Party who presented the respective witness at the hearing.

VIII.

The Claimant requested in its Final Brief of ....., to render separate


Arbitral Awards against each Defendant. It made clear, however, that
this was not meant as a doubling of its claims. Nevertheless, the Arbitral Tribunal has to dismiss the motion.
The Claimant may demand the amounts awarded to it in the Final
Award only once, regardless of whether payment is effected by
Defendant 1) or Defendant 2). Two separate Final Awards would
enable the Claimant to have both declared enforceable and seek
enforcement separately against Defendant 1) and Defendant 2). It is
generally undesirable to have two separately enforceable titles on an
identical claim.

For these reasons


the majority of the Arbitral Tribunal decides
the following:
I.

The Final Prayer for Relief by Claimant exceeding these amounts is


dismissed as without merits at present.

Only one Arbitral Award

The Defendants 1) and 2) shall pay to the Claimant:


1)

US$46.099.140,36 plus
5% interest on US$ 8.908.190,- from ......,
5% interest on US$ 13.362.285,- from ......,
5% interest on US$ 23.828.665,36 from ......;

2)

UKE 1.029.629,37 plus


5% interest on UK& 171.604,89 from .......,
5% interest on UK&257.407,34 from .......,
5% interest on UK& 600.617,16 from .......;

3)

US$3.910.953,- plus 5% interest from .......

11.

The costs of Arbitration are US$ 700.000,of which Claimant bears 50% = US$350.000,and the Defendants 1) and 2) 50% = US$350.000,-.

111.

The Defendants 1) and 2) shall pay to the Claimant 50% of the


advance on costs paid by Claimant = US$ 350.000,-.

IV.

Each Party shall bear its own costs, the costs of its lawyers and of the
witnesses it has presented.

VIII.

The Claimant requested in its Final Brief of ....., to render separate


Arbitral Awards against each Defendant. It made clear, however, that
this was not meant as a doubling of its claims. Nevertheless, the Arbitral Tribunal has to dismiss the motion.
The Claimant may demand the amounts awarded to it in the Final
Award only once, regardless of whether payment is effected by
Defendant 1) or Defendant 2). Two separate Final Awards would
enable the Claimant to have both declared enforceable and seek
enforcement separately against Defendant 1) and Defendant 2). It is
generally undesirable to have two separately enforceable titles on an
identical claim.

For these reasons


the majority of the Arbitral Tribunal decides
the following:
I.

The Final Prayer for Relief by Claimant exceeding these amounts is


dismissed as without merits at present.

Only one Arbitral Award

The Defendants 1) and 2) shall pay to the Claimant:


1)

US$46.099.140,36 plus
5% interest on US$ 8.908.190,- from ......,
5% interest on US$ 13.362.285,- from ......,
5% interest on US$ 23.828.665,36 from ......;

2)

UKE 1.029.629,37 plus


5% interest on UK& 171.604,89 from .......,
5% interest on UK&257.407,34 from .......,
5% interest on UK& 600.617,16 from .......;

3)

US$3.910.953,- plus 5% interest from .......

11.

The costs of Arbitration are US$ 700.000,of which Claimant bears 50% = US$350.000,and the Defendants 1) and 2) 50% = US$350.000,-.

111.

The Defendants 1) and 2) shall pay to the Claimant 50% of the


advance on costs paid by Claimant = US$ 350.000,-.

IV.

Each Party shall bear its own costs, the costs of its lawyers and of the
witnesses it has presented.

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l'ensemble de ces prestations devant permettre a A de produire et commercialiser dans de brefs delais des couleurs indCltbiles compktitives et, en
particulier, aptes a concurrencer celles de B.
Alors mCme que les connaissances que le Defendeur s'Ctait ainsi
engage a transmettre a la Demanderesse ne faisaient encore l'objet, lors de la
signature du contrat, ni d'une documentation ni de droits de propriCtC
industrielle, en particulier de brevets, elles n'en constituaient pas moins un
know-how ou savoir-faire transmissible. On peut en effet definir le knowhow, a la suite de J.M. Mousseron (Aspects juridiques du know-how, Cahier
de droit de l'entreprise 1972, p. 6) de "connaissance technique transmissible
mais non immediatement accessible au public et non brevetee"; ou avec Engel
(Contrats de droit suisse, Beme 1992, p. 721) de "savoir technique,
commercial ou Cconomique, d'application pratique et de valeur patrimoniale,
dont le titulaire a la maitrise et le profit"; ou encore, avec Frangois
Dessemontet (Le savoir-faire industriel, thitse Lausanne 1974, p. 7)
d'"ensemb1e des connaissances non brevetees utilisCes dans l'industrie"; ou
enfin, avec Pedrazzini (Le contrat de licence, TDS VII, 1, 3, p. 118) de
"connaissances (techniques mais aussi commerciales ou Cconomiques) qui
n'ont besoin ni d'Ctre protegees par un brevet ni d'Ctre secretes, donc
accessibles en soi aux tiers, mais que ceux-ci perdraient beaucoup de temps et
d'argent ri rechercher et acquerir." Tel Ctait prCcisCment le but poursuivi par A
en s'assurant le concours du Defendeur : Ctre en mesure de produire et
commercialiser rapidement des couleurs compCtitives, domaine dans lequel
elle avait perdu une grande partie de son savoir-faire et du march6 (cf. ch. 1
ci-dessus).
En conclusion, contrairement a ce que paraissent avoir envisagC les
parties tant dans leurs Ccritures que dans leurs plaidoiries, la presence ou non
d'une documentation et, moins encore, de droits de propriCtC industrielle n'est
pas decisive pour admettre l'existence d'un know-how contractuel et pour
qualifier le contrat tendant au transfert de ce know-how.

c.

La qualification du contrat

Si, au vu de ce qui prCcitde, il ne fait pas de doute que le contrat conclu


entre les parties a pour objet essentiel la mise a disposition du know-how ou
savoir-faire du Demandeur, il convient d'emblee de relever que ce genre de
contrat peut consister soit en une cession, soit en une licence (cf. notamment
Engel, op. cit., p. 722, et Ivan Cherpillod : Les droits et obligations des parties
au contrat de know-how apres l'expiration du contrat en droit suisse, Recueil
des travaux prksentes aux deuxiitmes journCes juridiques yougoslavo-suisses,
publications de I'ISDC no 5, Zurich 1986, p. 192-193). Dans le premier cas,
qui s'apparente a une vente de brevet, le titulaire cede son savoir-faire a
I'acquCreur qui pourra dCsormais l'utiliser sans limitation, notamment de
durCe. Dans le second, qui s'apparente 9 une licence de brevet, le preneur
bCneficie du savoir-faire pour la duree du contrat, moyennant paiement d'une
redevance, mais ne peut plus l'utiliser aprits l'expiration du contrat, du moins
aussi longtemps que ce know-how demeure secret. En l'espece, la limitation
de la durCe du contrat a une periode initiale de trois ans et la rCmunCration
sous la forme d'une commission, avec un minimum garanti, parlerait plut6t en
faveur d'une licence. Toutefois, rien dans le contrat n'indique que A devrait
renoncer a utiliser les connaissances transmises aprits l'expiration de celui-ci.
Au contraire, l'art. 6 al. 3 impose au consultant, c'est-a-dire au Defendeur,
une interdiction de concurrence pendant deux ans a dater de l'expiration du
contrat, ce qui n'aurait aucun sens si la Demanderesse devait cesser, des
1'CchCance contractuelle, de fabriquer et commercialiser les couleurs
indClebiles mises au point avec le concours du DCfendeur. Aussi les arbitres
estiment-ils que le contrat avait pour objet le transfert definitif du know-how a
la Demanderesse, alors mtme que la collaboration et la remunkration du
DCfendeur Ctaient limitCes dans le temps.
La qualification d'un tel contrat est controversCe en droit suisse. Dans
un recent arr6t (ATF 115 11 255 = JdT 1990 I 609 c. 2a), le Tribunal fCdCral
s'est born6 a considCrer que la mise a disposition du savoir-faire contre une
remuneration sous forme de commissions pouvait Ctre soumise aux ritgles du
contrat de licence, qui constitue precisement un contrat sui aeneris ou innom6
(cf. ATF 92 I1 299 et Engel, op. cit., p. 718 ss). La doctrine est divisCe.
Certains auteurs considitrent precisCment qu'il s'agit d'un contrat innommk,
qui ne saurait Ctre soumis a la rkglementation d'aucun des types de contrats
prCvus par le Code, notamment pas aux rkgles sur le mandat (cf. notamment
Franqois Dessemontet : Les contrats de service, RDS 1987, p. 93 ss, spec.

l'ensemble de ces prestations devant permettre a A de produire et commercialiser dans de brefs delais des couleurs indCltbiles compktitives et, en
particulier, aptes a concurrencer celles de B.
Alors mCme que les connaissances que le Defendeur s'Ctait ainsi
engage a transmettre a la Demanderesse ne faisaient encore l'objet, lors de la
signature du contrat, ni d'une documentation ni de droits de propriCtC
industrielle, en particulier de brevets, elles n'en constituaient pas moins un
know-how ou savoir-faire transmissible. On peut en effet definir le knowhow, a la suite de J.M. Mousseron (Aspects juridiques du know-how, Cahier
de droit de l'entreprise 1972, p. 6) de "connaissance technique transmissible
mais non immediatement accessible au public et non brevetee"; ou avec Engel
(Contrats de droit suisse, Beme 1992, p. 721) de "savoir technique,
commercial ou Cconomique, d'application pratique et de valeur patrimoniale,
dont le titulaire a la maitrise et le profit"; ou encore, avec Frangois
Dessemontet (Le savoir-faire industriel, thitse Lausanne 1974, p. 7)
d'"ensemb1e des connaissances non brevetees utilisCes dans l'industrie"; ou
enfin, avec Pedrazzini (Le contrat de licence, TDS VII, 1, 3, p. 118) de
"connaissances (techniques mais aussi commerciales ou Cconomiques) qui
n'ont besoin ni d'Ctre protegees par un brevet ni d'Ctre secretes, donc
accessibles en soi aux tiers, mais que ceux-ci perdraient beaucoup de temps et
d'argent ri rechercher et acquerir." Tel Ctait prCcisCment le but poursuivi par A
en s'assurant le concours du Defendeur : Ctre en mesure de produire et
commercialiser rapidement des couleurs compCtitives, domaine dans lequel
elle avait perdu une grande partie de son savoir-faire et du march6 (cf. ch. 1
ci-dessus).
En conclusion, contrairement a ce que paraissent avoir envisagC les
parties tant dans leurs Ccritures que dans leurs plaidoiries, la presence ou non
d'une documentation et, moins encore, de droits de propriCtC industrielle n'est
pas decisive pour admettre l'existence d'un know-how contractuel et pour
qualifier le contrat tendant au transfert de ce know-how.

c.

La qualification du contrat

Si, au vu de ce qui prCcitde, il ne fait pas de doute que le contrat conclu


entre les parties a pour objet essentiel la mise a disposition du know-how ou
savoir-faire du Demandeur, il convient d'emblee de relever que ce genre de
contrat peut consister soit en une cession, soit en une licence (cf. notamment
Engel, op. cit., p. 722, et Ivan Cherpillod : Les droits et obligations des parties
au contrat de know-how apres l'expiration du contrat en droit suisse, Recueil
des travaux prksentes aux deuxiitmes journCes juridiques yougoslavo-suisses,
publications de I'ISDC no 5, Zurich 1986, p. 192-193). Dans le premier cas,
qui s'apparente a une vente de brevet, le titulaire cede son savoir-faire a
I'acquCreur qui pourra dCsormais l'utiliser sans limitation, notamment de
durCe. Dans le second, qui s'apparente 9 une licence de brevet, le preneur
bCneficie du savoir-faire pour la duree du contrat, moyennant paiement d'une
redevance, mais ne peut plus l'utiliser aprits l'expiration du contrat, du moins
aussi longtemps que ce know-how demeure secret. En l'espece, la limitation
de la durCe du contrat a une periode initiale de trois ans et la rCmunCration
sous la forme d'une commission, avec un minimum garanti, parlerait plut6t en
faveur d'une licence. Toutefois, rien dans le contrat n'indique que A devrait
renoncer a utiliser les connaissances transmises aprits l'expiration de celui-ci.
Au contraire, l'art. 6 al. 3 impose au consultant, c'est-a-dire au Defendeur,
une interdiction de concurrence pendant deux ans a dater de l'expiration du
contrat, ce qui n'aurait aucun sens si la Demanderesse devait cesser, des
1'CchCance contractuelle, de fabriquer et commercialiser les couleurs
indClebiles mises au point avec le concours du DCfendeur. Aussi les arbitres
estiment-ils que le contrat avait pour objet le transfert definitif du know-how a
la Demanderesse, alors mtme que la collaboration et la remunkration du
DCfendeur Ctaient limitCes dans le temps.
La qualification d'un tel contrat est controversCe en droit suisse. Dans
un recent arr6t (ATF 115 11 255 = JdT 1990 I 609 c. 2a), le Tribunal fCdCral
s'est born6 a considCrer que la mise a disposition du savoir-faire contre une
remuneration sous forme de commissions pouvait Ctre soumise aux ritgles du
contrat de licence, qui constitue precisement un contrat sui aeneris ou innom6
(cf. ATF 92 I1 299 et Engel, op. cit., p. 718 ss). La doctrine est divisCe.
Certains auteurs considitrent precisCment qu'il s'agit d'un contrat innommk,
qui ne saurait Ctre soumis a la rkglementation d'aucun des types de contrats
prCvus par le Code, notamment pas aux rkgles sur le mandat (cf. notamment
Franqois Dessemontet : Les contrats de service, RDS 1987, p. 93 ss, spec.

p. 137-138, oh il souligne que le contrat de savoir-faire a pour objet un


transfert de bien immatkriel et ne constitue pas un contrat de service tombant
sous le coup de I'art. 394 al. 2 CO; Engel, op. cit., p. 720-723, pour qui
1'ClCment essentiel est la communication definitive ou temporaire au preneur
d'un certain savoir-faire; Beat Viktor Koller : Der Know-How-Vertrag nach
schweizerischem Recht ..., these Zurich 1979, spec. p. 4 0 4 1 , pour qui la
difference essentielle provient du fait que chacune des parties agit ici dans son
propre intCrCt, et p. 171-172, ou il nie la possibilitk d'une repudiation
immediate que postule l'art. 404 CO). D'autres soulignent l'analogie avec le
contrat de vente (cf. notamment Etienne Nebel : Les contrats de recherche
scientifique et technique, thkse Genkve 1972, spec. p. 61 et 67; Herbert
Stumpf : Des Know-How-Vertrag, 3e Edition Heidelberg, 1977, p. 4243), ou
avec le contrat de louage d'ouvrages, au sens du droit franqais, ou d'entreprise
(Frangois Magnin : Know-how et propriete industrielle, Paris 1974, spec. p.
290-294, pour qui il se justifie d'etendre "au contrat de know-how tout entier
la qualification de contrat d'entreprise"). Enfin, certains estiment qu'il s'agit
essentiellement d'un contrat de service auquel les rbgles du mandat sont
applicables en vertu du renvoi de I'art. 394 al. 2 CO (cf. notamment JeanNicolas Dmey : Vertrage auf Informationsleistung, innominat Vertrage,
Festgabe Walter R. Schluep, Zurich 1988, p. 147 ss, spec. p. 164, oh il relkve
neanmoins que l'application de l'art. 404 CO apparait inappropriee, mais que
le problbme ne pourrait Ctre rCsolu que par une modification de la loi; Nebel,
op. cit., p. 72-76, qui suggkre alors de n'attribuer qu'une portCe dispositive a
I'art. 404 CO).
Cette dernibre qualification est celle invoquCe en l'espkce par le
Defendeur, dont l'avocat confirma a A, aprks la lettre de rksiliation du
29 janvier 1991, que son client "repudiait le mandat" qui lui avait CtC confie
par le contrat du 30 mars 1990 ! I1 fait valoir que ses prestations consistaient
essentiellement en des services fournis a titre independant, sans garantie de
resultat, dans I'intCr&t et pour le compte de A, repondant ainsi aux critkres
determinants du mandat (cf. Walter Fellmann : Der einfache Auflrag, n. 91 ss
ad art. 394). A tout le moins, les rkgles du mandat seraient-elles applicables en
vertu du renvoi de l'art. 394 al. 2 CO et de la portCe trbs extensive conferee a
cette disposition et, par 18-mCme, a I'art. 404 CO par le Tribunal federal (cf.
notamment la jurisprudence citee par Dessemontet, op. cit., p. 118 et, plus
recemment, ATF 115 I1 464 = JdT 1990 1 312, oh le Tribunal fedha1
confirme sa jurisprudence antbieure, sans toutefois trancher en l'espbce).
Sans meconnaitre la disposition prCcitCe et le champ d'application trbs large

attribue par la jurisprudence a I'art. 404 CO, le Tribunal arbitral ne saurait se


rallier en l'espbce a une telle qualification. Cela tout d'abord parce que,
comme l'ont releve a juste titre de nombreux auteurs, une des caractCristiques
du contrat de know-how consiste dans la transmission du savoir-faire,
l'assistance technique et les services promis ne constituant en realit6 qu'un
moyen d'assurer ce transfert (cf. notamment Dessemontet, op. cit., p. 137;
Engel, op. cit., p. 172; Koller, op. cit., p. 9 et 41 : 1st jedoch die
Arbeitsleistung nur ein Mittel zur Erfihlung, wobei der wesentliche Zweck in
der Offenbarung von Kenntnissen und Erfahrungen liegt, so handelt es sich
um einen Know-How-Vertrag; Magnin, op. cit., p. 314-315; Mousseron,
p. 14). Ce dernier auteur, qui fait autorite en France, souligne que ce contrat
engendre pour l'essentiel une obligation de communication, qui le distingue a
la fois des contrats d'ktudes ou d'engineering et de ceux d'assistance
technique. Tel est bien le cas en l'espkce. En effet, comme on l'a montrC sous
lit. b. ci-dessus, le contrat avait essentiellement pour objet de transferer a A
les connaissances et I'experience acquises par le DCfendeur dans le domaine
des couleurs indelibiles pour permettre a la Demanderesse de fabriquer et
commercialiser un produit cornpetitif. L'assistance a la fois technique et
commerciale, comme l'etablissement d'une documentation qui manquait
encore, ne constituaient que des moyens de parvenir a ce resultat, objet
essentiel du contrat. PrCcisCment, et c'est la une deuxibme objection decisive
a la thkse du DCfendeur, le contrat tendait a procurer A un rksultat, soit la
possibilitk pour elle de produire et commercialiser des couleurs indelebiles
aptes a concurrencer celles des autres specialistes, en particulier de B.
L7art.2.1 du contrat est cet egard trks significatif puisqu'il met comme
premiere obligation a charge du DCfendeur de mettre a disposition ou rendre
accessible tout le know-how contractuel. Or, une telle obligation de resultat
est Ctrangere a la nature du mandat.
Enfin, la possibilitk de revocation ou repudiation en tout temps selon
I'art. 404 CO serait a la fois contraire a la nature du contrat et a la volontk des
parties. A sa nature car, comme le relkve notamment Dessemontet (op. cit.,
p. 138), un transfert de technologie s'etend gCnCralement sur plusieurs annees,
ce qui implique un contrat d'une certaine durCe. I1 n'est en effet le plus
souvent pas possible de transfkrer du jour au lendemain une experience, des
connaissances et un savoir-faire acquis de longue date et ne se resumant pas
en une seule formule. Cela est encore plus vrai lorsque, comme en l'espkce, il
ne s'agit pas seulement de transmettre ce savoir-faire, mais encore de
developper les principes de base, d'assurer la formation technique du

p. 137-138, oh il souligne que le contrat de savoir-faire a pour objet un


transfert de bien immatkriel et ne constitue pas un contrat de service tombant
sous le coup de I'art. 394 al. 2 CO; Engel, op. cit., p. 720-723, pour qui
1'ClCment essentiel est la communication definitive ou temporaire au preneur
d'un certain savoir-faire; Beat Viktor Koller : Der Know-How-Vertrag nach
schweizerischem Recht ..., these Zurich 1979, spec. p. 4 0 4 1 , pour qui la
difference essentielle provient du fait que chacune des parties agit ici dans son
propre intCrCt, et p. 171-172, ou il nie la possibilitk d'une repudiation
immediate que postule l'art. 404 CO). D'autres soulignent l'analogie avec le
contrat de vente (cf. notamment Etienne Nebel : Les contrats de recherche
scientifique et technique, thkse Genkve 1972, spec. p. 61 et 67; Herbert
Stumpf : Des Know-How-Vertrag, 3e Edition Heidelberg, 1977, p. 4243), ou
avec le contrat de louage d'ouvrages, au sens du droit franqais, ou d'entreprise
(Frangois Magnin : Know-how et propriete industrielle, Paris 1974, spec. p.
290-294, pour qui il se justifie d'etendre "au contrat de know-how tout entier
la qualification de contrat d'entreprise"). Enfin, certains estiment qu'il s'agit
essentiellement d'un contrat de service auquel les rbgles du mandat sont
applicables en vertu du renvoi de I'art. 394 al. 2 CO (cf. notamment JeanNicolas Dmey : Vertrage auf Informationsleistung, innominat Vertrage,
Festgabe Walter R. Schluep, Zurich 1988, p. 147 ss, spec. p. 164, oh il relkve
neanmoins que l'application de l'art. 404 CO apparait inappropriee, mais que
le problbme ne pourrait Ctre rCsolu que par une modification de la loi; Nebel,
op. cit., p. 72-76, qui suggkre alors de n'attribuer qu'une portCe dispositive a
I'art. 404 CO).
Cette dernibre qualification est celle invoquCe en l'espkce par le
Defendeur, dont l'avocat confirma a A, aprks la lettre de rksiliation du
29 janvier 1991, que son client "repudiait le mandat" qui lui avait CtC confie
par le contrat du 30 mars 1990 ! I1 fait valoir que ses prestations consistaient
essentiellement en des services fournis a titre independant, sans garantie de
resultat, dans I'intCr&t et pour le compte de A, repondant ainsi aux critkres
determinants du mandat (cf. Walter Fellmann : Der einfache Auflrag, n. 91 ss
ad art. 394). A tout le moins, les rkgles du mandat seraient-elles applicables en
vertu du renvoi de l'art. 394 al. 2 CO et de la portCe trbs extensive conferee a
cette disposition et, par 18-mCme, a I'art. 404 CO par le Tribunal federal (cf.
notamment la jurisprudence citee par Dessemontet, op. cit., p. 118 et, plus
recemment, ATF 115 I1 464 = JdT 1990 1 312, oh le Tribunal fedha1
confirme sa jurisprudence antbieure, sans toutefois trancher en l'espbce).
Sans meconnaitre la disposition prCcitCe et le champ d'application trbs large

attribue par la jurisprudence a I'art. 404 CO, le Tribunal arbitral ne saurait se


rallier en l'espbce a une telle qualification. Cela tout d'abord parce que,
comme l'ont releve a juste titre de nombreux auteurs, une des caractCristiques
du contrat de know-how consiste dans la transmission du savoir-faire,
l'assistance technique et les services promis ne constituant en realit6 qu'un
moyen d'assurer ce transfert (cf. notamment Dessemontet, op. cit., p. 137;
Engel, op. cit., p. 172; Koller, op. cit., p. 9 et 41 : 1st jedoch die
Arbeitsleistung nur ein Mittel zur Erfihlung, wobei der wesentliche Zweck in
der Offenbarung von Kenntnissen und Erfahrungen liegt, so handelt es sich
um einen Know-How-Vertrag; Magnin, op. cit., p. 314-315; Mousseron,
p. 14). Ce dernier auteur, qui fait autorite en France, souligne que ce contrat
engendre pour l'essentiel une obligation de communication, qui le distingue a
la fois des contrats d'ktudes ou d'engineering et de ceux d'assistance
technique. Tel est bien le cas en l'espkce. En effet, comme on l'a montrC sous
lit. b. ci-dessus, le contrat avait essentiellement pour objet de transferer a A
les connaissances et I'experience acquises par le DCfendeur dans le domaine
des couleurs indelibiles pour permettre a la Demanderesse de fabriquer et
commercialiser un produit cornpetitif. L'assistance a la fois technique et
commerciale, comme l'etablissement d'une documentation qui manquait
encore, ne constituaient que des moyens de parvenir a ce resultat, objet
essentiel du contrat. PrCcisCment, et c'est la une deuxibme objection decisive
a la thkse du DCfendeur, le contrat tendait a procurer A un rksultat, soit la
possibilitk pour elle de produire et commercialiser des couleurs indelebiles
aptes a concurrencer celles des autres specialistes, en particulier de B.
L7art.2.1 du contrat est cet egard trks significatif puisqu'il met comme
premiere obligation a charge du DCfendeur de mettre a disposition ou rendre
accessible tout le know-how contractuel. Or, une telle obligation de resultat
est Ctrangere a la nature du mandat.
Enfin, la possibilitk de revocation ou repudiation en tout temps selon
I'art. 404 CO serait a la fois contraire a la nature du contrat et a la volontk des
parties. A sa nature car, comme le relkve notamment Dessemontet (op. cit.,
p. 138), un transfert de technologie s'etend gCnCralement sur plusieurs annees,
ce qui implique un contrat d'une certaine durCe. I1 n'est en effet le plus
souvent pas possible de transfkrer du jour au lendemain une experience, des
connaissances et un savoir-faire acquis de longue date et ne se resumant pas
en une seule formule. Cela est encore plus vrai lorsque, comme en l'espkce, il
ne s'agit pas seulement de transmettre ce savoir-faire, mais encore de
developper les principes de base, d'assurer la formation technique du

personnel (art. 2.2), d'assurer les rapports avec les fournisseurs (art. 2.3) et
avec les clients, en particulier pour mettre au point les applications techniques
(art. 2.4). I1 etait dbs lors de l'essence mCme de ce contrat que celui-ci
s'etende sur une certaine dude, fixee en l'espbce a trois ans. Pour se
convaincre qu'une facult6 de revocation ou de rkpudiation immediate serait
manifestement contraire au contrat et
la volonte des parties, il suffit
d'imaginer I'hypothbse inverse, soit celle ou, sit6t aprbs avoir acquis les
elements de base necessaires pour demarrer avec la production des couleurs
indelebiles, la Demanderesse aurait prCmaturCment rompu le contrat, privant
ainsi le DCfendeur de la rCmunCration contractuelle jusqu'a 1'Ccheant ! I1 ne
fait pas de doute que C aurait protest6 contre une telle revocation et reclam6
son dQjusqu'a 1'CchCance du contrat.
Une telle atteinte la volonte des parties ne pourrait se justifier que si
le droit de revoquer ou repudier en tout temps Ctait dictC ici par des
considerations d'ordre public l'emportant nettement sur le principe pacta sunt
servanda. Selon la jurisprudence, la ratio leais de l'art. 404 CO est que le
mandat implique g6nCralement une relation de confiance caractkriske au point
que, si cette confiance disparait, le maintien du contrat n'a plus aucun sens
(cf. en dernier lieu ATF 115 I1 464 = JdT 1990 I 3 12 c. 2a). Or, on ne saurait
considerer que le contrat de know-how implique une telle relation de
confiance caracterisee et reciproque. Elle n'est en tout cas pas plus forte que
dans le contrat d'entreprise. Si le cessionnaire compte certes sur les
connaissances et llexpCrience professionnelles du cedant, comme le maitre de
l'ouvrage sur celles de I'entrepreneur, on ne saurait en particulier considerer
que le lien n o d par le cCdant, comme par l'entrepreneur, postule qu'il puisse
s'en liberer en tout temps. Or, si l'art. 377 CO autorise le maitre se departir
du contrat en payant le travail dej& fait et en indemnisant complbtement
I'entrepreneur, celui-ci ne peut en revanche se soustraire a ses obligations
contractuelles.
En conclusion, le Tribunal arbitral estime que le contrat de know-how
conclu entre les parties ne saurait Ctre qualifiC de mandat et que l'art. 404 CO
est inapplicable en I'espece. Cette disposition serait inconciliable avec la
volontk des parties, sans Ctre pour autant justifiee par une consideration
d'ordre public. I1 serait paradoxal, et mCme inadmissible, que la soumission
de ce contrat international au droit suisse ait pour consCquence de l'emporter
sur le principe pacta sunt servanda qui est lui considirk comme relevant de

l'ordre public au sens de l'art. 190 al. 2 lit. e LDIP (cf. notamment TF, Bul.
ASA 1992, p. 365 c. 2a et 381c. 6a).

d.

La ~ortCede l'art. 404 CO

Si I'on ne devait deja, pour les raisons indiqukes ci-dessus, ecarter


l'application en I'espece des regles sur le mandat et, en particulier, de
l'art. 404 CO, il y aurait lieu de s'interroger sur sa portee. Certes, dans une
jurisprudence constante, mais neanmoins critiquee, le Tribunal fideral lui a
reconnu un caractere impCratif. Mais, dans une Ctude rkcente, un auteur a mis
judicieusement en question sa portee (Franz Werro : La distinction entre le
pouvoir et le droit de resilier, Droit de la construction 1991, p. 55x3). 11
soutient en effet que si cette disposition confere aux parties le pouvoir
intangible de mettre fin en tout temps au mandat, cela ne signifie pas
necessairement qu'elles aient le droit de l'exercer en tout temps, notamment
en violation de la duree fixCe dans le contrat. Si ce pouvoir de resilier est
reconnu dans tous les contrats de service impliquant une intervention
personnelle du dCbiteur, il ne dispense pas pour autant d'indemniser le
dommage cause par la resiliation, que celle-ci intervienne en temps
inopportun (art. 404 al. 2 CO) ou en violation du contrat. Cette interpretation
seduisante conduirait en l'espbce A considkrer que si le Difendeur avait
effectivement le pouvoir de rCpudier prCmaturCment, comme il I'a fait par sa
lettre du 29 janvier 1991, il n'en demeurerait pas moins responsable du
dommage causC par I'inexCcution de ses obligations contractuelles telles que
definies ci-dessus. I1 n'est toutefois pas nCcessaire de s'arrCter plus
longuement cette justification subsidiaire dbs lors que, de I'avis du Tribunal
arbitral, le DCfendeur ne peut se prevaloir de l'art. 404 CO.

personnel (art. 2.2), d'assurer les rapports avec les fournisseurs (art. 2.3) et
avec les clients, en particulier pour mettre au point les applications techniques
(art. 2.4). I1 etait dbs lors de l'essence mCme de ce contrat que celui-ci
s'etende sur une certaine dude, fixee en l'espbce a trois ans. Pour se
convaincre qu'une facult6 de revocation ou de rkpudiation immediate serait
manifestement contraire au contrat et
la volonte des parties, il suffit
d'imaginer I'hypothbse inverse, soit celle ou, sit6t aprbs avoir acquis les
elements de base necessaires pour demarrer avec la production des couleurs
indelebiles, la Demanderesse aurait prCmaturCment rompu le contrat, privant
ainsi le DCfendeur de la rCmunCration contractuelle jusqu'a 1'Ccheant ! I1 ne
fait pas de doute que C aurait protest6 contre une telle revocation et reclam6
son dQjusqu'a 1'CchCance du contrat.
Une telle atteinte la volonte des parties ne pourrait se justifier que si
le droit de revoquer ou repudier en tout temps Ctait dictC ici par des
considerations d'ordre public l'emportant nettement sur le principe pacta sunt
servanda. Selon la jurisprudence, la ratio leais de l'art. 404 CO est que le
mandat implique g6nCralement une relation de confiance caractkriske au point
que, si cette confiance disparait, le maintien du contrat n'a plus aucun sens
(cf. en dernier lieu ATF 115 I1 464 = JdT 1990 I 3 12 c. 2a). Or, on ne saurait
considerer que le contrat de know-how implique une telle relation de
confiance caracterisee et reciproque. Elle n'est en tout cas pas plus forte que
dans le contrat d'entreprise. Si le cessionnaire compte certes sur les
connaissances et llexpCrience professionnelles du cedant, comme le maitre de
l'ouvrage sur celles de I'entrepreneur, on ne saurait en particulier considerer
que le lien n o d par le cCdant, comme par l'entrepreneur, postule qu'il puisse
s'en liberer en tout temps. Or, si l'art. 377 CO autorise le maitre se departir
du contrat en payant le travail dej& fait et en indemnisant complbtement
I'entrepreneur, celui-ci ne peut en revanche se soustraire a ses obligations
contractuelles.
En conclusion, le Tribunal arbitral estime que le contrat de know-how
conclu entre les parties ne saurait Ctre qualifiC de mandat et que l'art. 404 CO
est inapplicable en I'espece. Cette disposition serait inconciliable avec la
volontk des parties, sans Ctre pour autant justifiee par une consideration
d'ordre public. I1 serait paradoxal, et mCme inadmissible, que la soumission
de ce contrat international au droit suisse ait pour consCquence de l'emporter
sur le principe pacta sunt servanda qui est lui considirk comme relevant de

l'ordre public au sens de l'art. 190 al. 2 lit. e LDIP (cf. notamment TF, Bul.
ASA 1992, p. 365 c. 2a et 381c. 6a).

d.

La ~ortCede l'art. 404 CO

Si I'on ne devait deja, pour les raisons indiqukes ci-dessus, ecarter


l'application en I'espece des regles sur le mandat et, en particulier, de
l'art. 404 CO, il y aurait lieu de s'interroger sur sa portee. Certes, dans une
jurisprudence constante, mais neanmoins critiquee, le Tribunal fideral lui a
reconnu un caractere impCratif. Mais, dans une Ctude rkcente, un auteur a mis
judicieusement en question sa portee (Franz Werro : La distinction entre le
pouvoir et le droit de resilier, Droit de la construction 1991, p. 55x3). 11
soutient en effet que si cette disposition confere aux parties le pouvoir
intangible de mettre fin en tout temps au mandat, cela ne signifie pas
necessairement qu'elles aient le droit de l'exercer en tout temps, notamment
en violation de la duree fixCe dans le contrat. Si ce pouvoir de resilier est
reconnu dans tous les contrats de service impliquant une intervention
personnelle du dCbiteur, il ne dispense pas pour autant d'indemniser le
dommage cause par la resiliation, que celle-ci intervienne en temps
inopportun (art. 404 al. 2 CO) ou en violation du contrat. Cette interpretation
seduisante conduirait en l'espbce A considkrer que si le Difendeur avait
effectivement le pouvoir de rCpudier prCmaturCment, comme il I'a fait par sa
lettre du 29 janvier 1991, il n'en demeurerait pas moins responsable du
dommage causC par I'inexCcution de ses obligations contractuelles telles que
definies ci-dessus. I1 n'est toutefois pas nCcessaire de s'arrCter plus
longuement cette justification subsidiaire dbs lors que, de I'avis du Tribunal
arbitral, le DCfendeur ne peut se prevaloir de l'art. 404 CO.