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CISG CASE PRESENTATION

Russia 8 November 2001 Arbitration Court [Appellate Court] for the Moscow Region [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/011108r1.html]

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

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Case identification

DATE OF DECISION: 20011108 (8 November 2001)

JURISDICTION: Russian Federation

TRIBUNAL: Federal Arbitration Court for the Moscow Region

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: KG-A40/6314-01

CASE NAME: DB Gas and Oil ApS v. JSC Novoil

CASE HISTORY: 1st instance Arbitration Court for the City of Moscow (A40-43159/00-25-97) 5 February 2001; 2d instance Appellate Division of the Arbitration Court for the City of Moscow (A40-43159/00-25-97) 10 April 2001; 3d instance Arbitration Court for the Moscow Region 25 June 2001 [reversing and remanding (lower courts had not applied the Convention)]; 4th instance Arbitration Court for the City of Moscow (A40-43159/00-25-97) 6 August 2001 [reversed in part]

SELLER'S COUNTRY: Russia (defendant)

BUYER'S COUNTRY: Denmark (plaintiff)

GOODS INVOLVED: Crude oil


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 74 [Also cited: Article 7 ]

Classification of issues using UNCITRAL classification code numbers:

74C [General rules for measuring damages (problems): causation]

Descriptors: Damages

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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): Unavailable

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

Federal Arbitration Court for the Moscow Region of the Russian Federation
Case No. KG-A40/6314-01 of 8 November 2001

Translation by Yelena Kalika [*]

The Federal Arbitration Court for the Moscow Region, in the presence of: Kuznetsov M.N. (power of attorney of 21 August 2001), Nevzorov I.A. (power of attorney of 21 August 2001); defendant's representatives, namely Kokarev D.A. (power of attorney of 16 January 2001), Kokareva S.V. (power of attorney of 16 January 2001), Chumakova M.I. (power of attorney of 26 December 2000), has reviewed the cassation complaint of the private joint-stock company "Novaoil" as to the decision of the Arbitration Court for the City of Moscow No. A40-43159/00-25-97 of 6 August 2001.

The Federal Arbitration Court for the Moscow Region has found:

The company "DB Gas and Oil ApS" (Denmark) filed a lawsuit against JSC "Novoil" with the Arbitration Court for the City of Moscow. The plaintiff sought damages in the amount of [US] $125,992,449 (or the equivalent of the sum in Russian rubles at the rate of the Central Bank of the Russian Federation on the day of payment) including $125,161,569 in penalty damages and [US] $830,880 of loss due to a breach of a contract of 23 March 1999 for the sale of crude oil.

On remand, after the decision of 5 February 2001 was reversed and the resolution of 10 April 2001 of the same court denied the claim, the resolution of the cassational court of 25 June 2001 and the decision of 6 August 2001) granted the claims in the part of [US] $2,769,000 (in penalties) and $50,000 of loss in its ruble equivalent at the rate of the Central Bank of the Russian Federation on the day of payment.

When partially granting the claim, the court took into account that there was no delivery of oil under the said contract at all. The court also took into consideration the proportionality between the amount of penalty damages sought and the consequences of a breach of contract as well as proof of loss.

In his cassational motion, the defendant requests to reverse the decision and to deny the claim arguing that the court wrongfully applied the rules of law.

The plaintiff, on the contrary, argues that the decision is correct and should be affirmed.

After discussing, the court denies the plaintiff's motion pursuant to Article 87(3) of the Arbitration Procedural Code of the Russian Federation as the power of attorney issued to Chumakova M.I. was confirmed and an attorney for the plaintiff (Nevzorov I.A.) has read the materials of the case.

The court has reviewed the lawfulness of the contested decision pursuant to Articles 171 and 174 of the Arbitration Procedural Code of the Russian Federation. On hearing the arguments of the parties, the court finds that the decision in the part granting penalty damages shall be reversed as the one against the rules of the material law (Article 176 of the Arbitration Procedural Code of the Russian Federation).

When granting damages, the court found evidence proving the damages in the amount of [US] $50,000 in the invoice issued by JSC "Arkhangelskaya Neftebaza" on 15 March 1999, the plaintiff's payment documents and a confirmation of the recipient including a bank statement.

However, the contract No. 10039 of 12 March 1999 between the plaintiff and JSC "Arkhangelskaya Neftebaza" and the invoice of 15 March 1999 issued by the JSC "Arkhangelskaya Neftebaza" had been made prior to the conclusion of a contract for the sale of oil between the plaintiff and the defendant. Consequently, any losses experienced by the plaintiff had no causal relationship with the defendant's failure to fulfill his obligations. Therefore, pursuant to Article 74 of the Vienna Convention on Contracts for the international sale of goods the plaintiff proved neither the fact of loss nor its amount.

When granting a claim for penalty damages, the court fully, objectively and thoroughly reviewed the circumstances of the case; evaluated the relative, admissible and true evidence; and correctly applied the law. Therefore, the cassational court has no grounds to reverse the lower court's decision (Articles 124, 127, 165, 174 of the Arbitration Procedural Code of the Russian Federation).

The arguments made in the claim were wrong and directed to the re-evaluation of the circumstances evaluated by the court as well as to a different application of the rules of law.

Interpreting the terms of a contract of 23 March 1999 as written on its face (pursuant to Articles 421, 431 of the Civil Code of the Russian Federation, Article 7 of the Vienna Convention on Contracts for the International Sale of Goods, Article 166 of the Principles of the Civil Legislation of the USSR and republics), the court reasonably concluded that the defendant was liable for a failure to fulfill his obligations to deliver 78,000 tons of oil (Provision 7.3 of the contract, Article 401 of the Civil Code of the Russian Federation). The failure resulted since there was no contract between the plaintiff and either JSC "AK Transneft" or its daughter companies for the transportation of oil under the contract as required by the Resolution on oil transportation in the pipeline system (approved by the order No. 208 of 5 October 1996 of the Ministry of Fuel and Energy). The mentioned Resolution contradicts neither the rules of the Civil Code of the Russian Federation nor the Vienna Convention on Contracts for the International Sale of Goods, nor the contract itself. Moreover, although the said Resolution was not mentioned in the contract, it was assumed in the terms of the contract that there would be a law regulating the oil transportation in the pipeline system, i.e., the said Resolution.

The terms stated in Provision 5.1 of a contract of 23 March 1999 did not prove that if they had been met, the contract between the defendant and JSC "AK Transneft" would have been concluded. Therefore, the defendant cannot be relieved from liability.

On the ground of Articles 171, 174-177 of the Arbitration Procedural Code of the Russian Federation, the court holds:

Decision No. A40-43159/00-25-97 of the Arbitration Court for the City of Moscow held on 6 August 2001 is reversed in the part granting damages in the amount of $50,000. The claim is denied. The rest of the decision is upheld.


FOOTNOTE

* Yelena Kalika, a law student at the Pace University School of Law, has studied at the Moscow State Law Academy, interned with a Moscow law firm, and is a Research Assistant at the Pace Institute of International Commercial Law.

All translations should be verified by cross-checking against the original text.

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Pace Law School Institute of International Commercial Law - Last updated June 2, 2003
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