KNPP represented German machine manufacturer in an ICC Arbitration

Trade business in India can be challenging! KNPP supported successfully a German manufacturer of CNC machines to solve a legal dispute with a customer from India.

What was the case about?

In 2016 the customer from India ordered CNC-machines for a price of 4,2 Mio. Euro. The machines had been delivered and commissioned in 2017 by the German seller under retention of title and payment of the purchase price in installments was agreed with the Indian buyer. To secure the risk of a default payment, the German seller obtained financial coverage from HERMES and COFACE Germany. After commissioning of the machines, the Indian buyer paid the first installment of the purchase price but refused to pay any further installments with the allegation, the commissioned machines would be defective and can't be used for production. As soon as the conflict arose in 2017, the parties started negotiations to settle their dispute. KNPP was engaged in 2017 to support the German seller in the negotiations. Parallel to the negotiations and in a lurking manner, the Indian seller started a law suit in India, to avoid that the German seller obtains repossession of its machines to remove them from the seller's premises. The German seller was represented in the law suit by KNPP's Indian Partner from MAHESHWARI in Delhi. Parallel to the ongoing law suit in India, the Parties conducted over 2 years various attempts to settle their dispute amicably. The negotiations finally failed, since the Indian buyer practiced a strategy of obstruction and detention. For two years, any access to the machines for the German owner was denied by the Indian buyer. Against this background and the pending law suit in India, the German seller decided end of 2019 to initiate an Arbitration procedure at the International Chamber of Commerce Paris (ICC). KNPP-Partner Markus Hoffmann-von Wolffersdorff represented the German seller as lead-counsel, supported by Dr. Daniel M. Sharma LL.M from DLA Piper Germany as co-counsel. The Indian buyer was represented by Haver & Mailänder from Stuttgart. The German seller-side as Claimant applied for payment of due purchase price, whereas the Indian buyer-side as Respondent applied for payment of damage compensation. The United Nations-CISG-Law was applicable for all legal claims in the dispute. At the beginning of the arbitral proceedings, the Parties agreed to cease their pending law suit in India, followed by respective submissions to the Indian Courts. During the arbitration proceeding, the German seller could gain access to the machines for a technical expert from Germany who detected that all commissioned machines were used for production over 3 years and in a poor condition.  

Due to the outbreak of the Corona-pandemic in 2020 with its global travel restrictions, the sudden death of the President of the Arbitral Tribunal and the need to elect a new President, the proceedings were massively delayed. Therefore, the Parties conducted in December 2022 a last attempt to reach a settlement under guidance of the Arbitral Tribunal. After challenging virtual negotiations, finally the Parties reached a win-win-settlement, confirmed by the Arbitral Tribunal. After both Parties successfully fulfilled their obligations according to the settlement agreement in March 2023, the arbitral proceedings were concluded by a Termination Order from the Arbitral Tribunal.

The learnings of this case?

Both conflict parties spent for five years a lot of time, nerves, work force and money to solve their dispute. Both sides experienced the intercultural challenges of international trade business with a buyer and seller from very different cultural backgrounds and varying principals of business. To minimize the risks for conflicts in international trade, professional agreements, communication and negotiation skills and intercultural experiences are indispensable. Preventive advisory by experienced law firms is recommendable to avoid legal disputes and if things getting worse, it's good to have reliable partners like KNPP on your side!