Russia 17 September 2001 Arbitration proceeding 16/1999 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/010917r1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 16/2001
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Russian Federation (claimant)
BUYER'S COUNTRY: Egypt (respondent)
GOODS INVOLVED: Machine
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:
8A [Interpretation of party’s statements or other conduct: intent of party making statement or engaging in conduct]; 9A [International usages: Incoterms]; 78B [Rate of interest]
8A [Interpretation of party’s statements or other conduct: intent of party making statement or engaging in conduct];
9A [International usages: Incoterms];
78B [Rate of interest]
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. 21 [__-__]
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 Where the goods were delivered CIF port of destination, the buyer must bring the claim in connection with the damage done during the unloading of the goods at the port of destination against the insurer and not against the seller, unless the damage resulted from the seller's actions or omissions to act.
1.2 When interpreting the CIF term of delivery set forth in the contract, [the Tribunal] took into consideration trade usages reflected, in particular, in INCOTERMS-90.
1.3 Upon finding the CISG applicable to the parties' relationships, when interpreting the contractual provision on the payment for the goods, the Tribunal considered both the plain meaning of the words and expressions stated in the contract and the parties' subsequent actions.
1.4 The Respondent [Buyer]'s motion to terminate the arbitration proceeding due to the parties' agreement to settle was denied because the [Buyer] failed to fulfill his obligations under such agreement within the period of time stated in the agreement.
1.5 The annual interest rate for the delay in payment was determined based on the publication in "Vestnik Banka Rossii" [i.e., the Bank of Russia News] regarding the rates for short-term loans in US dollars.
2. FACTS AND PLEADINGS
[Seller], a Russian firm, brought the claim against Respondent [Buyer], an Egyptian firm, in connection with non-payment for the goods delivered under the contract made by the parties on 17 June 1997. The contract provided for the delivery of two machines. The machine delivered CIF Alexandria was damaged during the unloading at the port of destination. Based on that circumstance, the [Buyer] did not pay the price of the machine to the seller, notwithstanding the fact that the insurer paid the [Buyer]’s claim. The settlement agreement signed by the parties -- pursuant to which the [Buyer] was to pay off his debts in installments within the set period of time and the [Seller] was to withdraw his claim -- was only partially fulfilled by the [Buyer]. When the [Seller] deposited the check issued by the [Buyer] as a guarantee of payment, it was rejected by the bank due to the lack of funds on the [Buyer]'s account. The [Seller]'s claims included the sum of the main debt, annual interest and arbitration fees.
The [Buyer] objected to the claims. In particular, he argued that the duty to pay would arise only upon delivery of two machines. The [Buyer] brought a counterclaim to recover damages resulted from non-delivery of the second machine.
3. TRIBUNAL’S REASONING
The Tribunal's award contained the following main points.
3.1 The Tribunal decided the issue whether or not it was possible to arbitrate the case in the absence of the [Buyer]. Taking into account that in his letter of 12 September 2001 the [Buyer] asked to arbitrate the case in his absence and that the [Seller] did not object to it, the Tribunal decided to hear the case in the absence of the [Buyer], based on Article 28(3) of the Tribunal's Rules.
3.2 The Tribunal decided the issue whether or not the [Seller]'s claim of annual interest was made known to the [Buyer]. This claim is related to earlier claims of the sum in arrears. The [Seller] made a claim of annual interest in his letter of 11 January 2001. Besides, the claim of annual interest is contained in the amended claim dated 6 September 2001. [That the amendment] was mailed is confirmed by DHL. Besides, in the amended reply dated 12 September 2001, the [Buyer] refers to documents that the [Seller] mailed to him along with the amended claim of 6 September 2001. In particular, he refers to the agreement of 25 November 1999. Therefore, the Tribunal is of the opinion that it has grounds to find that the [Buyer] was aware of the [Seller]'s claim of annual interest stated in the [Seller]'s materials of 6 September 2001.
3.3 The Tribunal's competence is based on Clause 11 of the contract according to which all disputes and disagreements that may arise out of the contract shall be arbitrated by the Arbitration Court at the Russian Federation Chamber of Commerce and Industry. Pursuant to Appendix No. 1 to the Russian Federation Law "On International Arbitration", the International Commercial Arbitration Tribunal at the Russian Federation Chamber of Commerce and Industry is the successor of the Arbitration Court at the USSR Chamber of Commerce and Industry. For the above reasons, the Tribunal concluded that it had competence to arbitrate the present dispute.
3.4 Taking into consideration that the parties to the present dispute are legal entities whose commercial enterprises are located in Russia and Egypt, the Tribunal is of the opinion that the parties' relationships under the contract are governed by the CISG pursuant to Article 1(1)(a) CISG. Issues not settled in the CISG are subsidiary governed by Russian law as the law of the seller's State pursuant to Article 166 of the USSR Principles of Civil Law 1991 which are still in force in Russia.
3.5 As follows from the materials presented, there is no dispute between the parties as to whether or not the goods were delivered. Originally, the goods were not paid for. Subsequently, the parties attempted to settle and signed the agreement of 25 November 1999 as well as two amendments to it. As acknowledged by the [Seller], the [Buyer] paid off some portion of the debt. The [Buyer]'s debt is reduced by the amount paid off. Non-delivery of the second machine is not a ground for the refusal to pay for the machine already delivered. Therefore, pursuant to Article 53 CISG, the Tribunal finds that the [Buyer] must pay to the [Seller] the amount claimed.
3.6 a) The Tribunal reviewed the [Buyer]'s counterclaims. The language of the contract does not support the [Buyer]'s assertion that the contract provides for the payment for two machines. The word "shears" used in its plural form means "scissors". It also means one machine. The subsequent actions of the parties demonstrate that they intended to settle their dispute in connection with delivery of one machine by signing the agreement of 25 November 1999. Therefore, the Tribunal finds that the [Buyer]'s assertions that he must make a payment under the contract only upon delivery of the second machine have no grounds.
b) Clause 1 of the contract sets forth that the goods shall be delivered CIF Alexandria. In accordance with trade usages reflected, in particular, in INCOTERMS-90, when the goods are delivered CIF port of destination, the risk of loss is being transferred to the buyer when the goods cross the ship's rail at the port of loading.
As follows from the materials of the case, the goods were insured by the joint stock company "Ingosstrah" (see insurance policy of 2 December 1999). Thus, the [Buyer] should have claimed damages caused by the unloading of the goods from the insurer. The [Buyer] did so. As follows from the materials of the case, the insurer "Ingosstrah" agreed to pay the [Buyer] [the sum of his losses] (see the [Buyer]'s letter of 29 December 1998). Besides, the certificate of acceptance of 19 November 1998, which was signed by the representatives of both parties, states that "… the replacement of the base shall be made in accordance with the prices stated in the specification. Alternatively, it shall be manufactured by another manufacturer when the payments are received from the joint stock company "Ingosstrah"". It follows that already on 19 November 1998 the [Buyer] knew that damages in connection with defects in the goods should be claimed from the insurer. The [Buyer] also failed to submit any evidence of the insurer's rejection of [the [Buyer]'s] claims.
The [Buyer]'s counterclaim to recover damages was not filed as a counterclaim. Nor were the registration and arbitration fees paid. Pursuant to Article 18(2) of the Tribunal's Rules, [the Tribunal] does not have to arbitrate such claims.
3.7 The [Seller] demands annual interest on the sum of main debt from the [Buyer]. This claim is allowed by Article 78 CISG. Taking into account that the said Article does not set forth the rate of annual interest, in this case the parties' relationships are subsidiary governed by Article 395 of the Russian Federation Civil Code as well as by the resolution of the Plenum of the Russian Federation Supreme Court and Higher Arbitration Court No. 6/8 of 1 July 1996. Pursuant to the said legislative acts, the annual interest rate shall be determined based on the publications at the official mass media concerning median interest rates for short-term hard currency loans in the place of creditor.
To support [his claim of] the annual interest rate of 11%, the [Seller] submitted a statement of the Russian Federation Central Bank on short-term loans issued by Russian Federation lending organizations in US dollars. [The statement] was published in the "Vestnik Banka Rossii" magazine [i.e., the Bank of Russia News] (see issue No. 43, 2001). It follows from the statement that the median interest rate for short-term hard currency loans has been fluctuating between 11.7% and 11.1% since July 2000. Therefore, the Tribunal is of the opinion that the [Seller]'s claim to recover annual interest of 11% is reasonable.
Although the [Buyer]'s debt had arisen prior to 1 July 2000, the [Seller] asks to recover annual interest from 1 July 2000 to the date of factual payment.
Taking the above into consideration, the Tribunal concludes that the [Seller]'s claim to recover annual interest of 11% on the sum of main debt from 1 July 2000 to the date of factual payment should be sustained.
3.8 The [Buyer]'s motion to terminate the arbitration proceeding based on the agreement of 25 November 1999 cannot be taken into account because there has been no settlement in fact.
3.9 In accordance with Article 6(1) of the regulations on arbitration fees and expenses, the [Buyer] must reimburse arbitration fees to the [Seller].
* This is a translation of data on Proceeding 16/1999, dated 17 September 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. 21 [__-__].
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 Egypt 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