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CISG CASE PRESENTATION

Russia 30 May 2000 Arbitration proceeding 356/1999 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/000530r1.html]

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

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Case identification

DATE OF DECISION: 20000530 (30 May 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: 356/1999

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Germany (claimant)

BUYER'S COUNTRY: Russian Federation (respondent)

GOODS INVOLVED: Equipment


Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 3(2) ; 6 [Also cited: Article 53 ]

Classification of issues using UNCITRAL classification code numbers:

3B [Services [not] preponderant part of obligation];

6B [Choice of law: reference to "international law provisions"]

Descriptors: Choice of law ; Services

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Editorial remarks

Choice of law. "A choice of law clause containing a reference to 'international law provisions' was disregarded by the Tribunal, as this clause was found to be imprecise. The CISG was applied not on the basis of this clause, but by virtue of Article 1(1)(a). ... [T]his clause ... could be interpreted as comprising not only international sources based on the authority of state(s) but also 'soft law' sources. Although the decision to disregard the clause may seem justifiable from a practical point of view, it can, nonetheless, be argued that thorough examination of the choice of law clause should have been carried out. Such an examination could have revealed, for example, that it was the parties' intention to choose other sources of international commercial law." Djakhongir Saidov, 7 Vindobona Journal of International Commercial Law and Arbitration (1/2003) 1-62 at p. 8.

Goods v. services content. "In [this] case, the seller, in addition to its obligation to supply equipment, undertook an obligation to render a number of services such as construction work, balancing and commissioning, geodetic work, feasibility study of the project. The ICAC determined that the price of the equipment amounted to more than fifty percent of the entire price of the contract. Therefore, the Tribunal held that the dispute was to be governed by the CISG." Id. at 10 (citations omitted).

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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=874&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. 54 [264-266]

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Schwenzer & Fountoulakis ed., International Sales Law, Routledge-Cavendish (2007) at pp. 559, 609

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Case text (English translation)

Queen Mary Case Translation Programme

Russian federation arbitration proceeding 356/1999 of 30 May 2000

Translation [*] by Mykhaylo Danylko [**]

Translation edited by Yelena Kalika [***]

1. SUMMARY OF RULING

     1.1 The provisions of the Vienna Convention [UN Convention on Contracts for the International Sale of Goods (1980), hereinafter CISG] were applied to the contract herein, which in addition to the supply of equipment also provided for performance of some specific work [services], in accordance with Article 3(1) CISG because the price of the equipment to be delivered amounts to more than 50% of the price of the contract.

[Translator's note: Although the Tribunal referred to Article 3(1) CISG, Article 3(2) appears to have been the provision the Tribunal intended.]

     1.2 Considering that the relations of the parties to this dispute are governed by the CISG, the Tribunal of International Commercial Arbitration at the Chamber of Commerce & Industry of the Russian Federation (hereinafter Tribunal) did not take into account the clause in the contract which provided that international law provisions should be applied due to the imprecision of this clause. Based on the Russian rules of conflict of law (Article 166 of the Fundamentals of Civil Law of USSR 1991), German law was declared as subsidiary applicable law to the present dispute.

     1.3 As a result of examining the documents provided by the parties, the Tribunal, despite the [buyer]'s assertion that the signatures of its representatives were invalid, ruled that [buyer] should pay its principal amount of debt.

     1.4 The Tribunal left unconsidered the [seller]'s claim as to recovery of penalties for the delay in payment because the contract did not expressly provide for the conditions on the terms and manner of payment and, besides this, the full calculation of the sum of penalties was not provided to the Tribunal.

2. FACTS AND PLEADINGS

This action was brought by the [seller], a German company, against the [buyer], a Russian company, in connection with default in payment for shipped equipment and performed work under the contract concluded between the parties on 29 July 1996.

     2.1 [Seller's position]

The [seller] based its claim on the acceptance certificate signed by the representatives of the parties on 15 September 1998.

The [seller]'s claims included:

     2.2 [Buyer's position]

The [buyer] refuted the [seller]'s claims asserting that:

     2.3 [Tribunal's opinion]

The [buyer] has provided evidence of removal of the defects mentioned in the acceptance certificate.

3. TRIBUNAL'S REASONING

The ruling of the Tribunal contained the following main points:

     3.1 [Jurisdiction of the Tribunal]

Clause 13 of the contract stipulated that all disputes which might arise from the contract or in connection with it are to be settled by the International Arbitration [sic] at the Chamber of Commerce & Industry of the Russian Federation in Moscow according to its Rules with application of the rules of international law.

Whereas on the date of signing of the contract the Tribunal of International Commercial Arbitration was operating at the Chamber of Commerce & Industry of the Russian Federation in Moscow, the Tribunal considers that, notwithstanding the impreciseness of the name of the arbitration authority, the parties meant the Tribunal of International Commercial Arbitration at the Chamber of Commerce & Industry of the Russian Federation.

Besides this, the [seller] sent the legal action papers to the Tribunal whereupon the [buyer] in turn provided the Tribunal with a written statement of defense and did not argue the competence of the Tribunal.

Based on the above, the Tribunal concluded that it has the necessary competence to arbitrate the present dispute.

     3.2 [Applicable law]

The agreement of the parties on 20 January 1997, altering the contract of 29 July 1996, in clause 8 contains the splitting of the entire price of the contract into price of shipment of the equipment and price of the construction work, balancing and commissioning, geodetic work, and feasibility study of the project.

According to that splitting, the price of the equipment to be delivered amounts to more than 50% of the entire price of the contract.

Therefore, the relations of the parties not covered by the contract should be governed by the CISG, to which the Russian Federation and Germany are Contracting States (Article 3(1) CISG).

Besides this, according to Article 166(1) of the Fundamentals of Civil Law of USSR 1991, which became effective in the territory of the Russian Federation since 3 August 1992, if the international sales contract does not provide for the applicable law, the law to be applied is the law of the country where the seller to the sales contract has its principal place of business. Considering that the seller to the contract is a German company, the subsidiary law to be applied to the relations of the parties is the substantive law of Germany.

Whereas the provisions of CISG are applicable to this dispute, the Tribunal cannot take into account the agreement of the parties - that provided that international law provisions should be applied - due to its imprecision.

     3.3 [The merits of the case]

After consideration of the merits of the [seller]'s claims, the Tribunal decided that case materials confirmed the [seller]'s performance of its obligation as to shipment of the equipment, performance of supervision, start-up and geodetic work.

Confirmation of this is found in the fact that the parties' representatives signed an acceptance certificate of 15 September 1998 that the equipment had been put into operation and in the acceptance certificate deed of 14 September 1998 approved by [buyer]'s CEO, confirming that the equipment had been assembled and put into operation.

The preamble to the acceptance certificate of 15 September 1998 contains no notes on the defects that could have essentially limited the fitness of the equipment and the performed work.

Therefore, based upon the aforesaid the Tribunal finds that the equipment has been duly accepted by [buyer] and was put into operation on 15 September 1998 (i.e., 3rd quarter of 1998).

According to Article 53 CISG the buyer must pay the price for the goods, that is the [buyer]'s primary obligation.

Based on the above, the Tribunal reached the conclusion that the sum of the principal debt should be recovered from the [buyer].

     3.4 [Penalties]

As to the claim of [seller] to recover penalties for the delay in payment for the equipment and work, the Tribunal ruled that the parties did not expressly specify in the contract and the annex to it the conditions on the terms and manner of payment of the amount of the principal debt. Besides this, the [seller] did not provide the Tribunal with the full calculation of the sum of penalties claimed; [seller] provided only limited general data. Due to these circumstances the claim of the [seller] to recover the penalties was left without being considered by the Tribunal.

     3.5 [Arbitration fees and expenses]

According to Article 6(2) of the Rules of the Tribunal on Arbitration Expenses and Fees, in case of partially granted claims the arbitration fees are to be paid by the Respondent [buyer] proportionally to the part of claims granted and by the Claimant [seller] proportionally to the part of the claims dismissed.


FOOTNOTES

* This is a translation of data on the award in Proceeding 356/1999, dated 30 May 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. 54 [264-266]. All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Germany is referred to as [seller]; Respondent of the Russian Federation is referred to as [buyer].

** 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.

*** Yelena Kalika, a law student at the Pace University School of Law, has studied at the Moscow State Law Academy, interned with a Mascow law firm, and is a Research Assistant at the Pace Institute of International Commercial Law.

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Pace Law School Institute of International Commercial Law - Last updated February 16, 2007
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