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CISG CASE PRESENTATION

Russia 27 February 2001Arbitration proceeding 276/1999 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/010227r1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20010227 (27 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: 276/1999

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russian Federation (claimant)

BUYER'S COUNTRY: France (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 78

Classification of issues using UNCITRAL classification code numbers:

78B [Rate of interest]

Descriptors: Interest

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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. 11 [72-75]

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
276/1999 of 27 February 2001

Translation [*] by Yelena Kalika [**]

1.  SUMMARY OF RULING

      1.1 A slightly different name of the arbitral tribunal stated in the arbitration clause does not preclude the Tribunal's competence to arbitrate the present dispute. The Tribunal takes into consideration that the parties' intent to submit their dispute for arbitration by the Tribunal clearly follows from the arbitration clause. It also follows both from the [Seller]'s filing his claim with the Tribunal and from the Respondent [Buyer]'s failure to object to the Tribunal's competence.

      1.2 While the parties agreed in the contract that the Russian Federation laws should govern their relationships, the Tribunal finds that their contractual relationships are governed by the CISG and Russian civil law as subsidiary law.

      1.3 Where a party committed a delay in payment for the goods delivered under the contract for the international sale of goods, annual interest was recovered pursuant to Article 78 CISG and the Russian Federation Civil Code (Articles 486(3), 395 and 823) in addition to the penalties provided for in the contract. The annual interest was recovered for the use of another's funds considering that the [Seller] issued a commercial loan to the [Buyer].

      1.4 Pursuant to Article 394 of the Russian Federation Civil Code, the [Seller] demanded a recovery of his losses suffered in connection with the payment of a fine imposed on him by the Russian customs authority due to his failure to timely deposit hard currency proceeds. This claim is denied because the sum of the contractual penalties recovered exceeds the amount of such losses. Basides, the contract does not state that the purpose of such penalty is to penalize the [Buyer]. [The purpose of the penalty is to offset the loss].

2.  FACTS AND PLEADINGS

[Seller], a Russian firm, brought a claim against [Buyer], a French firm, based on the contract for the international sale of goods made by the parties on 18 November 1998. The contract provided for the delivery of goods DDU [Buyer]'s warehouse in France (INCOTERMS-90). The first 50% of the price of goods was to be paid within 30 calendar days after the date of delivery; the remaining 50% of the price was to be paid within 60 calendar days after the date of delivery based on the documents listed in the contract. The [Buyer] failed to pay for the goods received claiming that he had difficulties in selling them and had to return most of the goods to the [Seller]. The [Seller]'s claims included: the payment for the goods not returned, a contractual penalty for failure to make a 50% payment of the price of the goods delivered within the period stated in the contract and contractual penalties on the price of goods not returned and for which [the [Buyer] also failed to make the remaining 50% payment. The [Seller] also demanded annual interest for the use of another's funds based on a statement issued by the [Seller]'s bank. [The statement] concerned the amount and payment of damages that resulted from the Russian customs authority's imposing of a fine on the [Seller] for his failure to deposit hard currency proceeds. The [Seller] also demanded recovery of attorneys’ fees and arbitration fees.

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 the arbitration clause in Clause 6 of the General Terms of Delivery in the parties' contract. [The arbitration clause] sets forth that "if the parties are unable to reach a mutual agreement, all disputes and disagreements that may arise out of the present contract or in connection with it shall be arbitrated at the Commercial Arbitration Court at the Russian Federation Chamber of Commerce and Industry in accordance with its Rules." There is only one commercial arbitration court at the Russian Federation Chamber of Commerce and Industry that arbitrates international commercial disputes. It is the present Tribunal. Notwithstanding the fact that the arbitration clause states [the Tribunal's name incorrectly], the [Seller] filed his claim with the Tribunal. The [Seller] explained that, when making the contract, the parties meant to choose the Tribunal. The [Buyer] did not contest the Tribunal's competence.

In this connection, the Tribunal finds that it has competence to arbitrate the present dispute.

      3.2 As follows from the materials of the case, the goods in controversy were delivered to the [Buyer] by the [Seller]. The [Buyer] returned some portion of the goods received to the [Seller]. The difference between the price of the goods delivered and the price of the goods returned was not refunded. The [Buyer] did not contest the sum of debt. In this connection, the Tribunal finds reasonable the [Seller]'s claim to recover the sum in arrears from the [Buyer]. The Tribunal believes it should sustain the [Seller]'s claim.

      3.3 The Tribunal finds reasonable the [Seller]'s claim of a recovery from the [Buyer] of the penalties set forth in the provision on the parties' liability in the contract. The penalties must be paid in the amount of 0.1% of the price of the goods delivered for each day of delay in payment.

      3.4 After reviewing the [Seller]'s claim to recover annual interest for the use of another's funds from the [Buyer], the Tribunal reached the following conclusions. Clause 6 of the General Terms of Delivery in the contract sets forth that the current Russian Federation laws shall govern their relationships. Pursuant to Article 15 of the Russian Federation Constitution and Article 7 of the Russian Federation Civil Code, international treaties of the Russian Federation are a component part of the Russian Federation legal system. Therefore, the relationships between the [Seller] and [Buyer] should be governed by the CISG. Issues not settled in the CISG should be governed by the Russian substantive laws as subsidiary law. Since Article 78 CISG does not set forth the interest rate for the use of another's funds, Articles 486(3), 395 and 823 of the Russian Federation Civil Code should apply.

The Tribunal finds reasonable the [Seller]'s claim to recover from the [Buyer] the amount stated in the claim as a penalty for the use of another's funds because the [Buyer] received a commercial loan in connection with the goods delivered.

      3.5 After reviewing the [Seller]'s claim to recover from the [Buyer] the losses suffered, the Tribunal concludes that since pursuant to article 394(1) of the Russian Federation Civil Code the parties did not agree to the contrary, losses should be reimbursed in connection with that portion [of losses] that was not covered by the penalty.

In this connection, the [Seller]'s claim to recover losses suffered should not be sustained where the sum of penalty exceeds the amount of losses.

      3.6 After reviewing the [Seller]'s claim to recover from the [Buyer] expenses incurred in connection with attorneys’ fees and after reviewing the documents submitted by the [Seller], the Tribunal held that the [Seller]'s claim was reasonable pursuant to Article 9 of the Regulations on arbitration fees and expenses. The Tribunal sustained the claim.

      3.7 Pursuant to Article 6(2) of the regulations on arbitration fees and expenses, since the claim was only partially sustained, the [Buyer] must pay the arbitration fees in proportion to the claims sustained. The [Seller] must pay arbitration fees in proportion to the claims denied.


FOOTNOTES

* This is a translation of the award in proceeding 276/1999, dated 27 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. 11 [72-75].

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 France 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 17, 2004
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