## Facts

- A Swiss buyer and an Austrian seller concluded a contract for the sale of chemical fertilizer to be delivered in Ukraine through the seller’s Ukrainian supplier.
- The buyer was required to supply sacks for packaging and to send them directly to the Ukrainian supplier.
- The contract included an ICC arbitration clause but no choice-of-law clause.
- The Ukrainian supplier asserted the sacks were nonconforming with Ukrainian chemical-industry technical and production standards and could not be used to pack the fertilizer.
- Delivery was delayed, and the seller did not provide a firm new delivery date.
- The buyer purchased substitute fertilizer and initiated ICC arbitration seated in Basel, Switzerland, before a sole arbitrator.

## Issues

1. Whether the CISG governed the parties’ contract absent a choice-of-law clause.
2. Whether the seller’s nonperformance and failure to secure timely delivery constituted a fundamental breach permitting the buyer to avoid the contract under CISG Articles 25 and 49(1)(a).
3. How to determine the interest rate under CISG Article 78 when the Convention does not specify a rate, including whether an international benchmark (LIBOR plus a margin) could be applied using CISG Article 7(2).

## Decision

- The tribunal held the CISG governed the contract under Article 1(1)(a) because it was an international sale between parties in different CISG Contracting States.
- The tribunal found the seller’s failures amounted to fundamental breach under Article 25, entitling the buyer to avoid the contract under Article 49(1)(a).
- The tribunal awarded damages consistent with avoidance and cover, and granted interest.
- For interest, the tribunal applied a rate of LIBOR + 2%, treating this approach as supported by general principles used to fill a gap under CISG Article 7(2).

## Legal Principles

- CISG Article 1(1)(a) applies directly to an international sale of goods between parties in different Contracting States, without requiring selection of a particular domestic law through conflict-of-laws analysis.
- Under CISG Articles 25 and 49(1)(a), the buyer may avoid the contract when the seller’s nonperformance constitutes a fundamental breach, assessed by the seriousness of the deprivation of the buyer’s contractual expectations.
- CISG Article 78 establishes a right to interest on sums in arrears but does not determine the rate of interest.
- Under CISG Article 7(2), matters governed but not expressly settled by the CISG may be resolved by general principles on which the CISG is based; the tribunal treated widely used transnational formulations (including a short-term commercial borrowing benchmark) as such principles.
- An international commercial rate such as LIBOR plus a reasonable margin may be used to quantify interest under Article 78 when justified as a general-principles solution.

## Conclusion

The tribunal applied the CISG to an international fertilizer sale, upheld the buyer’s avoidance for fundamental breach caused by delivery failure and uncertainty, and addressed the Article 78 interest-rate gap by awarding LIBOR + 2% through CISG Article 7(2) general-principles reasoning.


ICC Case No. 8128, 123 J. Droit Int’l 1024 (1996)