INSERT YOUR COIN. (As sole arbitrator). In September *** a French company commenced an ICC arbitration against both their principal, an manufacturer of vending machines based in Europe, and the principal’s French subsidiary. The claimant was claining some 1.3m euro as damages for unlawful early de facto termination of the exclusive distribution contract according to which they had being distributing the machines in France for some ten years. Moreover, a 2.3m euro claim was made also in respect of alleged unfair competition; in fact, it had turned out that the principal had utilized their French subsidiary as their new distributor in the territory. The principal rejected all accusation, focusing on their past distributors’ inability to stay in the business for financial straits and the fact that the original contract was formally elapsed after its first renewal and a business relationship had continue thereafter on a de facto basis only. The case was decided according the Spanish law (following a specific clause in the contract); however, I decided to apply the French laws in respect of the claim for unfair competition against the principal’s subsidiary (second defendant). In fact, said claim was a claim in tort (for an event occurred in France), and it could not be considered as closely interlinked with the first claim, based on a contractual liability. It emerged in arbitration that the principal actually had by-passed their distributor by inviting their French clients to address their orders (not to the distributor, but) to the newly established subsidiary. This they did, possibly in the erroneous belief that they were no longer bound to the contract. On the contrary, the contract provided for automatic extension of an indefinite number of 2-year periods. No act of unfair competing was detected. In the end, damages were awarded to the dismissed French distributor on account of early-unjustified contract termination; to the extent they were foreseeable damages (representing the loss of profit for the non-performed portion of the contract). The arbitration lasted less than 2 years; the Distributor had to bear 30% of the proceedings costs, and was entitled to some reimbursement of their counsel fees.
THIS NECKLACE FITS YOU WELL. (As sole arbitrator). A European manufacturer of jewelry and leather goods had been distributing their products in Spain, Portugal and Andorra through a Spanish company. The original contract actually stated that it would remain in force “until a joint company is created between parties”. This never happened; indeed, the principal at a certain point stopped supplying the distributor on account of various reasons, namely delays in payments, failure in attaining the agreed quotas, and the fact that the joint company has not been created. The principal so declared the contract as terminated for cause. On its hand, distributor opposed said termination as unjustified, and claimed that payments were suspended because of the principal’s attempt to push the distributor out of the market by means of unjustified rising in prices. The principal obtained a payment order by an Italian court in form of ‘decreto ingiuntivo’ and also started an ICC arbitration following a prevision in the contract to that effect. The distributor initially counterclaimed damages, including a goodwill indemnity; however, this counterclaim was later deemed as renounced on account of the fact that the distributor did not provide the ICC with the relevant deposit as per the ICC arbitration Rules. In re termination, I ruled in favor of the distributor: in fact in the course of the proceeding it emerged that no clear minimum purchase volumes had ever been agreed between the parties, and that the principal had always showed a high tolerance for delays in payment made by distributor. As for the company to be created, there was no deadline. On the other end, it was undeniable that the distributor owed a certain amount of money in consideration of the products sold to the distributor, and distributor was ordered to pay, with interest (BCE rate plus 7 points). It was also considered that the action brought by the principal before the domestic court in order to obtain the payment order, was compatible with the arbitral procedure (and not as an implicit renunciation to it, as claimed by respondent).
CHEESE RIPENING. (As member of a 3-arbitrator panel. Ad hoc tribunal. Italian law applied). Parmesan ripening is a long process, that usually takes one year at least. From a financial point of view that may be a disaster if you don’t have sufficient resources in the meanwhile. For this reason, an Italian producer would agree to sell out its entire fresh production to a competitor, cash some front money and wait until the product was mature in order to be finally paid. The settlement price was to be determined in accordance with the actual results of the sale campaign. The system could have worked in principle, however the agreement was so poorly drafted that a dispute arose when the ripening was completed and it was time to set the settlement price. This was to be equal to the difference between the advance payment made, and the “milk (equivalent cheese per kilo) set in the local Chamber of Commerce official bulletin“, after deduction of certain costs. In fact, the milk utilised for producing Parmesan is determined only once the resulting cheese has been sold (therefore long after the milk has been supplied); it’s a form of joint-venturing agreed between milk and cheese producers. The Chamber is a neutral arbiter in this mechanism, and they release quarterly a milk ‘price of reference’ averaging all the transactions on matured cheese occurred in the period. Well, according to one party the agreement should be read as referring to the milk price (that’s was what the Bulletin is intended for); according to the other party, reference was clearly on the cheese price instead (it would amount to a nonsense, to ague otherwise). Of course, the divide was huge, being the milk price just a fraction of the cheese price. As a matter of fact, the maturer partner refused to pay, and the supplier party immediately diverged part of its production to alternative clients, and soon after they did cancel the contract claiming gross misconduct. The arbitral tribunal found that the agreement was to be read as providing for a reference to the cheese (not the milk) reference price; however, the arbitrators awarded the maturer partner damages for ungrounded contract termination by the supplier partner. The latter, in fact, would rush out of the contract too early, without giving the other party any chance to remedy within a reasonable time; in addition, they breached the contract by supplying third parties before issueing a formal notice for termination.