（1） Claimant/counter-defendant： Seller
（2） Defendant/Counter-claimant： Buyer
Place of arbitration：
In 1994, the parties concluded three contracts for the sale of a product according to certain contract specifications. The buyer paid 90% of the price payable under each of the contracts upon presentation of the shipping documents, as contractually agreed.
The product delivered pursuant to the first and third contracts met the contract specifications. The conformity of the second consignment was dispute prior to its shipment. When the product was again inspected upon arrival, it was found that it did not meet the contract specifications. The product was eventually sold by the buyer to third parties at considerable loss, after having undergone a certain treatment to make it more saleable.
The seller initiated arbitration proceedings to recover the 10% balance remaining due under the contracts. The buyer filed a counterclaim alleging that the seller’s claim should be set off against the amounts which the buyer estimates to be payable to the buyer by the seller, i.e., the direct losses, financing costs, lost profits and interest.
I. APPLICABLE LAW
（1） The contract contains no provisions regarding the substantive law. Accordingly that law has to be determined by the Arbitrators in accordance with Art. 13（3） of the ICC rules. Under that article, the Arbitrators will apply the law designated as the proper law by the rule of conflicts which they deem appropriate.
（2） The contract is between a Seller and a Buyer （of different nationalities） for delivery （in a third country）. The sale was f.o.b. so that the transfer of risks to the Buyer took place in （the country of Seller）. （The country of Seller） accordingly appears as being the jurisdiction to which the sale is most closely related.
（3） The Hague Convention on the law applicable to international sales of goods dated 15 June 1995 （Art. 3） regarding sales contracts, refers as governing law to the law of the Seller’s current residence. （The country of the Buyer） has adhered to the Hague convention, not （the country of the Seller）. However, the general trend in conflicts of law is to apply the domestic law of the current residence of the debtor of the essential undertaking arising under the contract. That debtor in a sales contract is the Seller. Based on those combined findings, （the law of the country of the Seller） appears to be the proper law governing the Contract between the Seller and the Buyer.
As regards the applicable rules of （the law of the country of the Seller）, the Arbitrators have relied on the Parties’ respective statements on the subject and on the information obtained by the Arbitration from an independent consultant. The Arbitrators, in accordance with the last paragraph of Art. 13 of the ICC rules, will also take into account the relevant trade usage.
II. ADMISSIBILITY OF THE COUNTERCLAIM
（5） The Tribunal finds that there is no better source to determine the prevailing trade usage than terms of the United Convention on the International Sale of Goods of 11 April 1980, usually called the Vienna Convention. This is also even though neither （the country of the Buyer） nor （the country of the Seller） are parties to that Convention. If they were, the Convention might be applicable to this case as a matter of law and not only as reflecting the trade usage.
（6） The Vienna Convention, which has been given effect to in 17 countries, may be fairly taken to reflect the generally recognized usage regarding the matter of the non-conformity of goods on international sales. Art. 38（1）of the Convention puts the onus on the Buyer to “examine the goods or cause them to be examined promptly”. The buyer should then notify the Seller of the nonconformity of the goods within a reasonable period as of the moment he noticed or should have noticed the defect； otherwise he forfeits his right to raise a claim based on the said non-conformity. Art. 39（1） specifies in the respect that： “In any event the buyer shall lose the right to rely on a lack of conformity of the goods if he has not given notice thereof to the seller within a period of two years from the date on which the goods were handed over, unless the lack of conformity constituted a breach of guarantee covering a longer period.”
（7） In the circumstances, the Buyer had the shipment examined within a reasonable time-span since （an expert） was requested to inspect the shipment even before the goods had arrived. The Buyer should also be deemed to have given notice of the defects within a reasonable period, that is eight days after the expert’s report had been published.
（8） The Tribunal finds that, in the circumstances of the case, the Buyer has complied with the above-mentioned requirements of the Vienna Convention. These requirements are considerably more flexible than those provided under www.legaltranz.com（the law of the country of the Seller）. This law, by imposing extremely short and specific time requirements in respect of the giving of the notice of defects by the Buyer to the Seller appears to be an exception on this point to the generally accepted trade usage.
（9） In any case, the Seller should be regarded as having forfeited its right to invoke any non-compliance with the requirements of Art. 38 and 39 of the Vienna Convention since Art. 40 states that the Seller cannot rely on Arts. 38 and 39, if the lack of conformity relates to facts of which he knew, or of which he could not have been unware, and which he did not disclose. Indeed, this appears to be the case, since it clearly transpires from the file and evidence that the Seller knew and could not be unaware （of the non-conformity of the consignment to ） contract specification.
（10） This provision, even assuming that it may apply in the circumstances, does not in any way require the tribunal to reject the counterclaim if its examination might delay that of the main claim. It simply states that the counterclaim for setting off is always admissible except only that the tribunal may find it appropriate to serve the counterclaim from the main claim lest a concurrent examination of counterclaim should excessively delay the judgment on the merits. In the present case, the main Claim and the counterclaim, in accordance with the Terms of Reference, have been examined together so as to be the subject of a single award, and there is no reason to separate them.
（11） The Tribunal awarded the Seller the full amount of its claim and set it off against part of the counterclaim filed by the Buyer.