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CISG CASE PRESENTATION

Russia 22 February 2001 Arbitration proceeding 114/2000 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/010222r1.html]

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

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Case identification

DATE OF DECISION: 20010222 (22 February 2001)

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: 114/2000

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russian Federation (claimant)

BUYER'S COUNTRY: Germany (respondent)

GOODS INVOLVED: Goods


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 53

Classification of issues using UNCITRAL classification code numbers:

Unavailable

Descriptors: Unavailable

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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

Unavailable

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. 19 [68-71]

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Russian Federation arbitration proceeding 114/2000 of 22 February 2001

Translation [*] by Yelena Kalika [**]

1.  SUMMARY OF RULING

      1.1 In the absence of a choice of law provision in the contract for the international sale of goods, the Tribunal found that the parties' relationships were governed by the CISG because the parties' commercial enterprises were located in CISG Contracting States. Russian civil laws govern [the relationships] as subsidiary law based on the conflict of laws provision in the USSR Principles of Civil Law 1991.

      1.2 The Respondent [Buyer]'s payment of a part of the debt to a third party firm, which was a shareholder in the [Seller]'s firm - and not to the Claimant [Seller] - was not recognized as a due performance of obligations by the [Buyer] under his contract with the [Seller].

      1.3 Where the term in the contract concerning damages was not clear, the Tribunal interpreted it to mean that the [Seller] had a right to penalties in the amount of 0.85% daily for 30 days and, in addition to that, a one time lump sum payment of 0.1% and not 0.1% daily as the [Seller] thought.

      1.4 Pursuant to the Tribunal's Rules, a counterclaim may be brought only in connection with the same contract as the main claim. The arbitration of a counterclaim was terminated without rendering an award also because it was brought against the company that was managed by the outside management. Pursuant to the Russian Federation Federal Law "On Insolvency (Bankruptcy)", such claims may be brought only with the state arbitration court at the place of Respondent's location.

2.  FACTS AND PLEADINGS

[Seller], a Russian firm, brought a claim against [Buyer], a German firm, based on the contract for the international sale of goods made by the parties on 28 January 2000. The claim was brought in connection with partial nonpayment for the goods delivered. The payment was to be made by a wire transfer within the period of time stated in the contract. The [Seller] demanded the payment, penalties for the delay in payment as set forth in the contract and reimbursement of the arbitration fees paid.

The [Buyer] contested the claim. In his opinion, he performed his obligations to make a payment when he transferred the amount due to the bank account of a third party. Being a shareholder of the of the [Seller]'s firm, the third party was [virtually] identical to the [Seller]. The [Buyer] also argued that the [Seller] failed to fulfill his obligations under a loan agreement with an Austrian bank, thus, forcing the [Buyer], who was a guarantor under that agreement, to pay the relevant sum of money to the bank. In his turn, the [Buyer] filed a counterclaim for a sum exceeding the sum of the main claim. The [Seller] objected to the counterclaim and insisted that his main claim be sustained.

3.  TRIBUNAL'S REASONING

The Tribunal's award contained the following main points.

      3.1 Clause 8 of the parties' contract made on 28 January 2000 sets forth that any disputes and disagreements arising out of the contract shall be arbitrated by the International Commercial Arbitration Tribunal at the Russian Federation Chamber of Commerce and Industry.

Considering that the parties made a proper written agreement to arbitrate the present dispute at the Tribunal, the Tribunal found that it had competence to arbitrate the present dispute (Article 1(3) of the Tribunal's Rules).

      3.2 The parties failed to agree on the applicable law in the contract. Since both Germany and Russia, where the [Seller]'s and [Buyer]'s commercial enterprises are located, are CISG Contracting States, the parties' relationships not settled in the contract are governed by the CISG pursuant to Article 1(1)(a) CISG.

At the same time, pursuant to Article 7(2) CISG, questions concerning matters governed by the CISG which are not expressly settled in it are to be settled in conformity with the law applicable by virtue of the rules of private international law.

Taking into consideration that the USSR Principles of Civil Law 1991 have been in force (since 3 August 1992) on the date of signing the contract, the relationships of the parties are also governed the these Principles.

Pursuant to Article 166(1)(1) of the USSR Principles of Civil Law 1991, contracts for the sale of goods shall be governed by the laws of the state where the seller was incorporated, is residing or has its main place of business. In the present case it is the Russian Federation civil law.

      3.3 The claims were brought based on the contract setting forth the payment for the goods by means of a wire transfer within 10 days after receiving the shipping documents. Besides, the [Buyer] was to make the last payment not later than 5 May 2000.

Clause 10 of the contract stated the requisites of the recipient bank.

According to the bank statements, the [Buyer] made a partial payment for the goods delivered. The payments were made to the [Seller]'s accounts at a stated bank on 13 April and 19 April 2000.

The [Buyer] transferred the rest of the sum to third party's account at an Austrian bank pursuant to a loan agreement of 10 June 1999 and the Moscow contract of 24 March 2000.

The Tribunal cannot find reasonable the [Buyer]'s explanation that he made these transfers to satisfy his debt to the [Seller] under the contract of 28 January 2000. The third party, to which the payment was made, is an independent legal entity, a party to the loan agreement with the Austrian bank of 10 June 1999.

Pursuant to the agreement of 23 March 2000, this third party intended to transfer all its rights as a borrower under the loan agreement to the [Seller]. However, that agreement was not signed by all its parties. Besides, the agreement provided for the arbitration of all the disputes following from it at the International Arbitration Center of the Federal Chamber of Economics in Vienna. Therefore, the Tribunal has no competence to arbitrate disputes and claims arising out of the agreement of 23 March 2000.

The [Buyer] did not establish that the multilateral Moscow contract of 24 March 2000 replaced the contract made by the parties to the dispute on 28 January 2000. Besides, that agreement also does not contain an arbitration clause providing for the arbitration by the Tribunal, and the [Seller] does not agree to arbitrate such dispute at the Tribunal. Therefore, in such case the Tribunal has no competence to arbitrate disputes and claims arising out of the contract of 24 March 2000.

For the above stated reasons and based on Article 53 CISG, according to which the buyer's main obligation is to pay the price for the goods, including taking such steps as may be required to make a payment, as well as pursuant to Article 486 of the Russian Federation Civil Code, which sets forth the buyer's obligation to pay for the goods delivered, the [Buyer] must pay the amount not paid for the goods delivered.

      3.4 Pursuant to Clause 3 of the contract, when the buyer makes an untimely payment for the goods, he must pay a penalty in the amount of 0.05% of the price of goods for each day of delay within 30 days. He then must pay 0.1%. The Tribunal is of the opinion is that the 0.1% penalty is a lump sum that must be paid once and not for every day of delay in payment for the goods after [the first] 30 days. Therefore, the [Seller]'s claim of penalties should be reduced.

      3.5 The Tribunal terminated the arbitration of a counterclaim without rendering an award because the counterclaim was based on the loan agreement of 10 June 1999, the agreement of 27 March 2000 to substitute a party in a loan agreement and on the Moscow contract of 24 March 2000 which contained no arbitration clause providing for the arbitration of disputes by the Tribunal. Besides, in accordance with Article 5.7 of the Federal Law "On Insolvency (Bankruptcy)", all the claims against a firm, which is being managed by the outside management, can be brought only with the arbitration court at the place of its location.

      3.6 Pursuant to Article 6(2) of the Regulations on Arbitration Fees and Expenses, arbitration fees should be paid by the Respondent in proportion to the claims sustained. The Claimant must pay arbitration fees in proportion to the claims denied.


FOOTNOTES

* This is a translation of the award in proceeding 114/2000, dated 22 February 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. 10 [68-71]. All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of the Russian Federation is referred to as [Seller] and Respondent of Germany 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.

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Pace Law School Institute of International Commercial Law - Last updated August 10, 2004
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