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CISG CASE PRESENTATION

Russia 30 July 2001 Arbitration proceeding 198/2000 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/010730r1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20010730 (30 July 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: 198/2000

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Italy (claimant)

BUYER'S COUNTRY: Russian Federation (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: Articles 78 ; 79 [Also cited: Articles 7(2) ; 57 ]

Classification of issues using UNCITRAL classification code numbers:

78B [Rate of interest];

79B [Impediments excusing party from damages]

Descriptors: Interest ; Exemptions or impediments

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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 [126-129]

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 198/2000 of 30 July 2001

Translation [*] by Yelena Kalika [**]

1.  SUMMARY OF RULING

     1.1 In the absence of a provision in the contract on the applicable law, the Tribunal found that the relationships of the parties under the international contract for the sale of goods are governed by the CISG because the commercial enterprises of the parties to the contract are located in Italy and Russia, i.e., CISG Contracting States. Italian substantive law applies subsidiary as the law of the seller's state pursuant to Article 166 of the USSR principles of Civil Law 1991.

     1.2 Taking into consideration that in accordance with the terms of the contract the payment was to be made to the Claimant [Seller]'s bank, the Italian bank was found to be a proper place of payment. In this connection, the fact that the Russian bank, which withdrew the funds from the Respondent [Buyer]'s account, failed to transfer the payment to the [Seller]'s bank, cannot be viewed as the [Buyer]'s performance of his obligations.

     1.3 The Tribunal found that the fact that the Russian bank did not make a transfer to the [Seller]'s account following the instruction of the Russian Federation Central Bank of 4 September 1998 to stop all the payments by residents under contracts in hard currency with nonresidents did not relieve the [Buyer] from liability for damages pursuant to Article 79 CISG.

     1.4 Annual interest was calculated based on the Civil Code of Italy and was also based on an affidavit certified by a Milan notary public.

2.  FACTS AND PLEADINGS

The claim was brought by the Italian [Seller] against the Russian [Buyer] in connection with non-payment for the goods delivered under the contract for the international sale of goods made by the parties on 25 February 1998. The [Seller] demanded the payment in arrears, interest for the use of another's funds, attorneys' fees and arbitration expenses.

The [Buyer] contested the [Seller]'s claim arguing that he gave instructions to a Russian bank [to make a transfer]. The bank withdrew the amount claimed by the [Seller] from the [Buyer]'s account. In support of his argument, the [Buyer] presented a letter from the Russian bank and [Buyer]'s accounting documents. The Russian bank did not transfer the said funds to the [Seller]'s account at the Italian bank due to instruction no. 344-u of 4 September 1998 issued by the Russian Federation Central Bank on the suspension of all resident's payments under contracts in hard currency to non-residents. Since the instruction of the Russian Federation Central Bank was an unforeseeable circumstance, the [Buyer], in his opinion, is not liable pursuant to Article 79 CISG.

3.  TRIBUNAL'S REASONING

The Tribunal's award contained the following points.

     3.1 The Tribunal's competence to arbitrate disputes between the parties follows from clause 16 of the parties' contract. In accordance with the said clause, all disputes and disagreements that can arise from the present contract or in connection with it shall be arbitrated by the Tribunal at the Russian Federation Chamber of Commerce and Industry in the city of Moscow in accordance with its rules. The award of the Tribunal shall be final and binding on both parties. [The jurisdiction of the general jurisdiction courts was expressly excluded in the contract.]

Taking into consideration the facts stated above and the absence of objections on the [Buyer]'s part, and pursuant to Articles 2, 3, and 5 of the Tribunal's Rules, the Tribunal found that it had competence to arbitrate the present dispute.

     3.2 The contract made by the parties contains no provision on the applicable law. Since both Italy and Russia, where the commercial enterprises of the parties are located, are CISG Contracting States, the relationships of the parties not settled in the contract are governed by the CISG. Pursuant to Article 7(2) CISG and Article 166(1) of the USSR Principles of Civil Law 1991, the law of Italy should be applied as subsidiary law.

     3.3 After reviewing the [Seller]'s claims on the merits, the Tribunal found that from April to July 1998 the [Seller] delivered 100 tons of goods to the [Buyer]. The [Buyer] did not pay for a substantial part of the goods.

The Tribunal took into consideration that the [Buyer] acknowledged his debt to the [Seller] both in the answer to the claim of 25 May 2001 and during the proceeding held on 25 May 2002.

The Tribunal is also of the opinion that it was established that the payment obligations based on clauses 6 and 10 of the contract and Article 57 CISG were not fulfilled. Clause 10 of the contract contains an express reference to the Seller's bank. Therefore, the Tribunal believes that the proper place of payment was the bank in Italy named in the contract.

In this connection, the Tribunal cannot take into consideration the [Buyer]'s argument that he instructed his bank in Russia to make a transfer on 6 October 1998 because the money was not deposited to the [Seller]'s account due to the instructions issued by the Russian Federation Central Bank.

The [Buyer]'s reference to the impediments that prevented him from fulfilling his obligations, i.e., the said instruction of the Central Bank, is not grounded in Article 79 CISG. In addition, the Tribunal cannot take such argument into account because [Buyer]'s failure to fulfill his obligations resulted from a third party actions, i.e., the Russian bank, which was necessary for the performance of the contract. It was not established that such third party was relieved from liability.

     3.4 When reviewing the [Seller]'s claim to recover annual interest, the Tribunal considered the following circumstances. Pursuant to Article 78 CISG, if a party fails to pay the purchase price or any other sum, the other party is entitled to interest on it. Since Article 78 does not set forth the exact interest rate, then, as stated above, the law of Italy should apply.

The [Seller] presented an affidavit of 2 May 2001 certified by A.M., a notary public from the city of Milan. It follows from the affidavit that, in accordance with Article 1224 of the Civil Code of Italy, interest on the sum in arrears should be determined based on the parties' agreement. In the absence of such agreement, the rate set forth in the law should apply. From 30 September to 31 December 1998 the annual interest rate in Italy was 5%. From 1 January 1999 to 31 December 2000 the annual interest rate was 2.5%. From 1 January 2001 the annual interest rate has been 3.5%.

Thus, annual interest should be recovered for the period from 30 September 1998 to 25 May 2001. In addition, annual interest at the rate of 3.5% should be paid on the sum in arrears from 26 May 2001 to the date of factual payment.

When calculating the amount of interest, the Tribunal took into consideration that the [Buyer] made no objections in connection with the periods of time for which interest was calculated as well as in connection with the interest rate.

     3.5 Taking into consideration the partially sustained claim of the [Seller] reduced by the amount of interest incorrectly calculated, in accordance with Article 6(2) of the Regulations on Arbitration Expenses and Fees, the [Buyer] should pay the [Seller]'s arbitration expenses in the amount proportionate to the sustained claims.

     3.6 The [Seller]'s claim to recover attorneys' fees from the [Buyer] was found reasonable. The Tribunal took into account the degree of difficulty of the case and the fact that the [Seller] presented evidence of the expenses incurred.


FOOTNOTES

* This is a translation of the award in proceeding 198/2000, dated 30 July 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. 19 [126-129]. All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Italy 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.

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