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CISG CASE PRESENTATION

Russia 11 February 2000 Arbitration proceeding 226/1999 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/000211r1.html]

Primary source(s) of information for case presentation: Case text

Case Table of Contents


Case identification

DATE OF DECISION: 20000210 (11 February 2000)

JURISDICTION: Arbitration ; Russian Federation

TRIBUNAL: Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 226/1999

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Italy (respondent)

BUYER'S COUNTRY: Russian Federation (claimant)

GOODS INVOLVED: Equipment


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 39 [Also relevant: Articles 25 ; 64 ; 84 ]

Classification of issues using UNCITRAL classification code numbers:

39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time]

Descriptors: Lack of conformity notice, timeliness

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=875&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (Russian): Rozenberg, Practika of Mejdunarodnogo Commercheskogo Arbitrajnogo Syda: Haychno-Practicheskiy Commentariy [Practice of the International Commercial Arbitration Court: Scientific - Practical Comments] Moscow (1999-2000) No. 46 [228-232]

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Djakhongir Saidov, 7 Vindobona Journal of International Commercial Law and Arbitration (1/2003) 1-62 at n.135 (notice of lack of conformity given within reasonable time); CISG-AC advisory opinion on Examination of the Goods and Notice of Non-Conformity [7 June 2004] (this case and related cases cited in addendum to opinion)

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Russian Federation arbitration proceeding 226/1999
of 11 February 2000

Translation [*] by Mykhaylo Danylko [**]

1. SUMMARY OF RULING

      1.1 Where the international sales contract provides that the seller shall present a certificate of readiness of goods for shipment issued by a neutral controlling authority, the absence of such certificate provides a basis for the buyer to refuse to take delivery of the goods.

      1.2 The certificate of readiness of goods for shipment issued by a neutral authority without examination of the goods and only on the basis of the expertise of technical documentation confirming the documentation's conformity with the requirements of the standard provided by the contract, should not be considered as evidence of readiness of goods for shipment and conformity of the goods with the quality requirements of the contract.

      1.3 Failure by the seller to perform its obligation to provide the buyer with pre-shipment documentation within the time established by the contract and absence of the evidence of readiness of goods for shipment constitute seller's failure to perform its obligations to deliver goods in time and, in accordance with the conditions of the contract, are admitted as reasonable claims for the recovery of the amount of advance payment made by buyer and the penalty based on that payment.

      1.4 The Tribunal of International Commercial Arbitration at the Chamber of Commerce & Industry of the Russian Federation (hereinafter Tribunal) left unconsidered the claim of buyer to recover the amount of annual interest charged for seller's use of buyer's money, noting that the buyer did not capitalize the amount of interest and did not pay arbitration fees for that part of its claims.

2. FACTS AND PLEADINGS

This action was brought by Claimant [buyer], a Russian company, against Respondent [seller], an Italian company, in connection with [seller's] failure to perform its obligations as to delivery of equipment under the contract of international sale concluded between the parties on 10 August 1998.

     2.1 [Buyer's position]

The [buyer]'s claims included:

      2.2 [Seller's position]

The [seller] objected to the claims of the [buyer] asserting that [seller] had performed its obligations under the contract. The [buyer] unreasonably refused to take delivery of the goods and is deprived of the right to recover the advance payment by virtue of the respective clause of the contract.

3. TRIBUNAL'S REASONING

The ruling of the Tribunal contained the following main points:

      3.1 [Jurisdiction competence of the Tribunal]

The competence of the Tribunal to arbitrate the dispute follows directly from the arbitration clause of the contract between the parties. Guided by Articles 7 and 16 of the Russian Federation Law on the Tribunal of International Commercial Arbitration and 1(3) and 1(5) of the Rules of Tribunal, the Tribunal recognized its own competence to arbitrate the presented dispute.

     3.2 [Applicable law]

The Tribunal takes into account that the parties directly stipulated in the contract the applicability of the Vienna Convention 1980 [UN Convention on Contracts for the International Sale of Goods (1980), hereinafter CISG] and also confirmed that during the hearings. Guided by 13(1) of the Rules of Tribunal, the Tribunal ruled that provisions of this Convention should be applied to arbitration of the dispute between the [buyer] and the [seller] herein.

     3.3 [The merits of the case]

3.3.1 [Seller's failure to perform its obligations]

While hearing the [buyer]'s claim as to recovery from the [seller] of the amount of principal debt, the Tribunal stated the following:

Therefore, the [seller] failed to fulfill its contractual obligations within the stated term - 120 days following the date the advance payment was made - that was conditio sine qua non for the [buyer]'s next payment according to clause 3.3 of the contract.

3.3.2 [Recovery of advance payment by buyer]

The Tribunal found that on 17 March 1999 the [seller] provided to the [buyer] the pre-shipment documentation and requested the next payment. In order to fall within the terms of payment of the next installment - 7 days after the date of notification of readiness for shipment as provided in clause 3.3 of the contract - the [buyer] on 22 March 1999 notified the [seller] about its arrival to Italy on 24 March 1999 in order to take delivery of the equipment that was in accordance with clause 16 of the contract.

[Buyer] asserts and [seller] does not dispute that on 24 March 1999 the [seller] denied the [buyer]'s representative the opportunity to examine and take delivery of the equipment issued with SGS certificate.

The Tribunal did not find convincing the [seller]'s argument that the fact of readiness of equipment for shipment had been confirmed with a set of documents and therefore there was no need to examine the goods.

From the contractual provisions in clause 8, it follows that only the SGS certificate confirming the readiness of equipment for shipment may be considered as proof of readiness of equipment for shipment. However, the Tribunal found that as asserted by [buyer] and not disputed by [seller] and as follows from the language of the SGS certificate of 1 March 1999 provided by the [seller] in the set of documents, the SGS certificate was issued on the basis of the expertise of technical documentation and not upon examination of the equipment.

Thus, the SGS certificate of 1 March 1999 certifies conformity of the technical documentation with the requirements of GOST [All-Union State Standard] on safety and sanitary requirements, but cannot be considered as evidence of the readiness of equipment for shipment and its conformity with contractual requirements of quality.

The Tribunal pays attention to the fact that [seller] has not denied [buyer]'s assertion in its letter of 1 April 1999 that the copy of the certificate received on the surrender of goods to the carrier bears neither the signature of acceptance nor the seal of the carrier.

The Tribunal also finds that [seller] has not provided any convincing arguments against [buyer]'s submission that [buyer] had received information (letter of 12 April 1999) from the manufacturer of the equipment under the contract herein of the actual time of manufacturing of the equipment in late April 1999 and of the fact that the equipment would be shipped to the [seller] only upon making the payment.

The Tribunal considers that [seller]'s refusal of [buyer]'s request based on clause 16 of the contract regarding acceptance of the equipment with presence of SGS certificate on 27 January 1999 may also be considered as proof that the [seller] did not have the equipment ready for shipment on that mentioned date.

Considering all of the aforesaid, the Tribunal finds that [seller] failed to perform its contractual obligations - as stipulated in clause 8 of the contract - to provide the full set of pre-shipment documents, whereas upon notification from [buyer] on 27 January 1999 and re-notification on 17 March 1999 the [seller] failed to present the SGS certificate confirming the readiness of equipment for shipment that was conditio sine qua non for the [buyer] to make next payment.

The Tribunal finds that the absence from the [seller]'s possession of the SGS certificate, which could be issued on the basis of examination of the equipment but not on the basis of technical documentation, together with the refusal of the [buyer] to accept the goods on the basis of the SGS certificate of 24 March 1999 and the [seller]'s failure to provide any arguments against the [buyer]'s information received from the equipment manufacturer on the readiness of the equipment by the end of April 1999, evidence the fact that the [seller] did not possess the equipment ready for shipment.

Resulting from the aforesaid, the Tribunal states that [seller] cannot withhold the payments received from the [buyer] by resorting to clause 4 of the contract, which allows such withholding in the event of [buyer]'s refusal to take delivery of the equipment under the contract.

The Tribunal holds that [buyer], by paying on time the relevant advance payment in full and by all its actions and proposals to the [seller], proved [buyer]'s readiness for further performance of the contract depending upon the [seller] duly performing its obligations under the contract.

The Tribunal takes into account that under clause 3.5 of the contract, in the event of failure to deliver the goods within 180 days from the date first payment has been made, the [seller] is obliged to pay back to the [buyer]'s account the full amount of received payment under the contract.

Considering the aforesaid and guided by clause 3.3 of the contract, the Tribunal holds that [buyer]'s claim as to recovery from the [seller] of the amount of advance payment has to be granted.

3.3.3 [Recovery of penalties]

After hearing the [buyer]'s claim to recover penalties from the [seller] the Tribunal found the following:

Considering the aforesaid and guided by clause 6.2 of the contract, the Tribunal holds that this claim of [buyer] has to be granted.

3.3.4 [Recovery of interest]

Concerning the [buyer]'s claim to recover annual interest for the use of its money [by the seller], the Tribunal holds that as the [buyer] did not capitalize the amount of annual interest and did not pay arbitration fees for this part of its claim, this claim should be left unconsidered according to 18(2) of the Rules of Tribunal.

     3.4 [Arbitration fees and expenses]

According to 6(1) of the Rules of the Tribunal on Arbitration Expenses and Fees, the Tribunal holds that the [buyer]'s claim against the [seller] for the recovery of arbitration fees paid by the [buyer] has to be granted.


FOOTNOTES

* This is a translation of data on the award in Proceeding 226/1999, dated 11 February 2000, of the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, reported in: Rozenberg ed. Arb Praktika 1999-2000, No. 46 [228-232]. For purposes of this translation, Claimant of the Russian Federation is referred to as [buyer]; Respondent of Italy is referred to as [seller].

** Mykhaylo Danylko is a Partner with the law firm Danylko, Kushnir, Soltys & Yakymyak, Attorneys & Counselors at Law, Kiev, Ukraine <http://www.dksylaw.com>. He holds a Masters of Laws (European Studies Program) from the Law School of International Science and Technology University, Kiev, Ukraine (July 2000); a Master of Management in Business of the Business School of International Science and Technology University (June 2002); and has received his LL.M. in International and Comparative Law at the Pace University School of Law. The second-iteration redaction of this translation was by Dr. John Felemegas of Australia.

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Pace Law School Institute of International Commercial Law - Last updated October 20, 2004
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