INTERNATIONAL CHAMBER OF COMMERCE International Court of Arbitration Case No. 28947/KC/2024 Award Date: February 28, 2025
The Tribunal, constituted in accordance with the Rules of Arbitration of the International Chamber of Commerce and comprising Professor Helena Martinez (Presiding Arbitrator, Spain), Mr. James Thornton (Co-Arbitrator, United Kingdom), and Dr. Akiko Tanaka (Co-Arbitrator, Japan), has rendered its final award in the dispute between Consolidated Electronics Manufacturing Ltd. (Claimant, incorporated in Singapore) and European Distribution Networks S.A. (Respondent, incorporated in France).
The dispute arose from a Master Distribution Agreement executed on March 15, 2020, pursuant to which Claimant appointed Respondent as the exclusive distributor of its consumer electronics products throughout the European Economic Area for an initial term of five years. The Agreement contained minimum purchase commitments requiring Respondent to order products valued at no less than €45 million annually, with provisions for termination in the event Respondent failed to meet these thresholds for two consecutive years.
Claimant initiated arbitration proceedings on June 12, 2024, asserting that Respondent had materially breached the Agreement by failing to meet minimum purchase commitments in both 2022 (ordering products valued at only €38.2 million) and 2023 (ordering products valued at only €34.7 million). Claimant sought damages totaling €28.5 million, comprising €21.1 million in lost profits calculated based on the shortfall between actual orders and contractual minimums, €5.2 million in costs associated with maintaining excess manufacturing capacity, and €2.2 million in legal fees and arbitration costs.
Respondent contested these claims, invoking the force majeure clause contained in Article 14.3 of the Agreement, which excused performance obligations in circumstances beyond a party's reasonable control. Respondent contended that its inability to meet purchase commitments resulted directly from unprecedented supply chain disruptions and semiconductor shortages that began in late 2021 and persisted through 2023, coupled with a severe contraction in consumer demand throughout Europe triggered by macroeconomic instability. Respondent further argued that Claimant had failed to mitigate damages by refusing Respondent's repeated requests to temporarily reduce minimum purchase requirements.
After thorough examination of documentary evidence, expert testimony regarding market conditions and industry practices, and oral hearings conducted in Geneva in November 2024, the Tribunal finds that while supply chain disruptions and demand contractions did occur during the relevant period, these circumstances do not constitute force majeure under the Agreement's express terms, which require events to be both unforeseeable and unavoidable. The evidence establishes that similar disruptions were widely anticipated by industry participants by mid-2021, and that Respondent possessed alternative procurement channels and inventory management strategies that could have partially mitigated the impact.
Accordingly, the Tribunal awards Claimant damages in the amount of €16.8 million, representing a reduction from the claimed amount to account for Claimant's partial failure to mitigate and uncertainties in the lost profit calculations. Each party shall bear its own legal costs, and arbitration fees shall be shared equally. This award is final and binding, subject to enforcement under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.