Russia 10 January 2001 Arbitration proceeding 101/2000 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/010110r1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 101/2001
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Poland (claimant)
BUYER'S COUNTRY: Russian Federation (respondent)
GOODS INVOLVED: Goods
APPLICATION OF CISG: Yes [Article 1(1)(a)]
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (Russian): Rozenberg, Praktika of Mejdunarodnogo Commercheskogo Arbitrajnogo Syda: Haychno-Practicheskiy Commentariy [Practice of the International Commercial Arbitration Court: Scientific - Practical Comments] Moscow (2001-2002) No. 1 [23-26]
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Queen Mary Case Translation Programme
Translation [*] by Yelena Kalika [**]
1. SUMMARY OF RULING
1.1 The charter of a legal entity sets forth the requirements to its name and the authority of its officers. That the Claimant [Seller]'s name in the contract is identical to his name stated in the claim is determined based on the extract from the Trade register of the court in the place of Claimant.
1.2 In the absence of the parties' agreement on the applicable law, the Tribunal ascertained that as of the date of the contract in controversy both Russia and Poland had been CISG Contracting States. The commercial enterprises of the parties are located in Russia and Poland. The Tribunal decided that the CISG should govern the parties' relationships. The law of Poland was applied as a subsidiary law, as the law of the seller's State.
1.3 The contract provided for penalties. Pursuant to Polish law (Article 484 of the Civil Code of Poland), penalties can be reduced on a creditor's demand only for reasons stated in the law, if the obligation was sufficiently performed or if the amount of contractual penalties was clearly excessive. Since the [Buyer] did not present reasonable evidence that the contractual penalties should be eliminated or reduced based on Article 484 of the Civil Code of Poland, his motion in this regard was denied. The [Buyer]'s difficult financial situation, to which he referred, cannot be taken into account in this connection. At the same time, the Tribunal sustained the [Seller]'s claim to recover from the [Buyer] 50% of the penalties, as the [Seller] agreed at the proceeding.
1.4 50% of the [Seller]'s expenses, which were incurred in connection with the case, were recovered from the [Buyer], as the [Seller] agreed at the proceeding.
2. FACTS AND PLEADINGS
[Seller], a Polish firm brought a claim against Respondent [Buyer], a Russian firm, in connection with partial non-payment for the goods delivered under two contracts for the international sale of goods. The parties made the contracts on 16 September 1997 and 26 January 1999 respectively. The [Seller] demanded the sum in arrears, the contractual penalties for the delay in payment as well as arbitration fees and attorney's fees. The [Buyer], while not denying the fact of debt in the amount stated by the [Seller], contested the [Seller]'s right to bring a claim. The [Buyer] argued that the legal form of the [Seller]'s firm stated in the contract differs from that stated in the claim. The [Buyer] also argued that the officer, who issued a power of attorney to the lawyer, lacked any authority to do so. Upon review of the [Buyer]'s motion to terminate the arbitration on the above grounds, the Tribunal denied it. The Tribunal took into consideration the extract from the Trade register of the Warsaw district court which was submitted by the [Seller]. The Tribunal ascertained that the [Seller]'s firm is listed in the Trade register under the name stated both in the claim and in the contracts. [The Tribunal also ascertained] that the officer signing the contracts and power of attorney had authority to do so.
When arbitrating the case on the merits, the [Buyer] moved to either completely eliminate the contractual penalties or to reduce them due to his difficult financial situation.
The [Seller] expressed his readiness to reduce the penalties by 50%.
The [Buyer] also moved to reduce by 50% the amount of attorney's fees claimed by the [Seller]. The [Seller] agreed to do so.
3. TRIBUNAL’S REASONING
The Tribunal's award contained the following main points.
3.1 The Tribunal's competence to arbitrate the present dispute is based on Clause 11 ("Arbitration") of the contract No. 302/97 of 16 September 1997 and on Clause 11 ("Arbitration") of the contract No. 303/98 of 26 January 1998. [In accordance with these contracts], all the disputes, disagreements and claims arising out of them or in connection with them shall be arbitrated by the Tribunal in Moscow in accordance with its Rules.
Pursuant to the arbitration clauses in the contracts, the Tribunal finds that it has competence to arbitrate the present dispute based on Article 1(3) and (5) of the Rules of the Tribunal.
3.2 Since the parties failed to provide for the applicable law in the contracts in controversy, the Tribunal is of the opinion that the parties' relationships in controversy should be governed by the CISG based on Article 1(1)(a) CISG. The Tribunal took into account that as of the date of the contracts both Russia and Poland had been CISG Contracting States.
Based on Article 13(1) of the Tribunal's Rules and Article 166(1) of the USSR Principles of Civil Law 1991, the Tribunal is of the opinion that, pursuant to Article 7(2) CISG, the law of Poland should be applied as the subsidiary law when filling gaps in the CISG. Poland is the State where the seller was incorporated.
3.3 The Tribunal ascertained that the [Seller] fulfilled his duties under contracts No. 302/97 of 16 September 1997 and No. 303/98 of 26 January 1998. The materials of the case evidence that the deliveries of goods in controversy were made. The [Buyer] does not contest this fact.
During the proceeding, the parties agreed on the sum of the main debt. Therefore, this sum should be recovered from the [Buyer].
3.4 The [Seller]'s right to seek damages for the delay in payment is directly stated in Clause 5.4 of contracts No. 302/97 of 16 September 1997 and No. 303/98 of 26 January 1998. They set forth that "if the buyer fails to make a payment within 90 days, he shall pay interest for the delay in payment at the rate of 0.1% of the sum of the delayed payment for each day of delay, but not exceeding 10% of the delayed payment."
As to the [Buyer]'s motion to eliminate the contractual penalties completely, the Tribunal could not sustain it because the [Buyer] failed to present reasonable grounds allowing either to eliminate the penalties or to reduce them based on Article 484 of the Civil Code of Poland.
However, since the [Seller] agreed to reduce the contractual penalties by 50%, the Tribunal finds it reasonable to sustain the claim of contractual penalties in the amount stated by the [Seller].
3.5 Pursuant to Article 9 of the Regulations on arbitration fees and expenses, a winning party may recover his reasonable expenses from the other party. Taking into account that the award is rendered for the [Seller] and that the [Seller] agreed to reduce the claim of his expenses by 50%, the Tribunal sustains this claim in the amount reduced by the [Seller].
3.6 Pursuant to Article 6(2) of the Regulations on arbitration fees and expenses, the Respondent [Buyer] should pay the arbitration fees in proportion to the claims sustained. The Claimant [Seller] should pay the fees in proportion to the claims denied.
* This is a translation of data on Proceeding 101/2000, dated 10 January 2001, of the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, reported in Rozenberg ed., Arb. Praktika (2001-2002) No. 1 [23-26].
All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Poland is referred to as [Seller] and Respondent of the Russian Federation is referred to as [Buyer].
** Yelena Kalika, JD Pace University School of Law, has studied at the Moscow State Law Academy, interned with a Moscow law firm, and is an Associate at the Pace Institute of International Commercial Law.Go to Case Table of Contents