Russia 28 February 2002 Arbitration proceeding 2/2001 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/020228r1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 2/2001
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Russian Federation (claimant)
BUYER'S COUNTRY: Ukraine (respondent)
GOODS INVOLVED: Goods
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:
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. 43 [263-266]
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 there is an alternative arbitration clause in the contract, the Claimant has a right to choose [which one of] the arbitral tribunals he wishes [to bring the claim with].
1.2 Where there is a provision in the contract stating that the laws of two States shall apply, it follows that the parties failed to agree on the applicable law. For this reason, when arbitrating the dispute, the Tribunal applied the CISG because both parties are located in CISG Contracting States (Russia and the Ukraine). [The Tribunal] subsidiary applied Russian law as the law of the Seller's State.
1.3 The motion to adjourn the proceeding due to the illness of the CEO of the Respondent [Buyer]'s firm was denied both because it was filed not by the [Buyer]'s firm itself but by the CEO personally (as a private person) and because the [Buyer] -- a legal entity -- could be represented in the proceeding by other persons.
1.4 Since the penalties calculated by the Claimant [Seller] were clearly disproportionate to the consequences of the breach, their amount was reduced by 50% pursuant to Article 333 of the Russian Federation Civil Code.
2. FACTS AND PLEADINGS
[Seller], a Russian private entrepreneur, brought a claim against Respondent [Buyer], a Ukrainian firm, in connection with its failure to pay for the goods which the [Seller] tendered to the [Buyer] at the Seller's warehouse in accordance with the contract for the international sale of goods made on 31 March 1999. The [Seller] demanded the sum in arrears and expenses in connection with the payment of arbitration fees. The [Buyer] submitted no reply to the claim.
3. TRIBUNAL’S REASONING
The Tribunal's award contained the following main points.
3.1 Clause 11 of the parties' contract of 31 March 1999 contains an arbitration clause stating that disputes and disagreements shall be arbitrated "[either] by the Arbitration Court at the Ukraine Chamber of Commerce and Industry in Kiev or by the Arbitration Court at the Russian Federation Chamber of Commerce and Industry in Moscow".
The Tribunal finds it has competence to arbitrate the present dispute. By filing his claim with the Tribunal, the Claimant [Seller] utilized his right to choose [an arbitral tribunal] set in the parties' agreement. The Tribunal also takes into account that as of the date of the claim the Arbitration Court at the Russian Federation Chamber of Commerce and Industry in Moscow was the Tribunal competent to arbitrate such disputes.
3.2 Pursuant to Clause 13 of the contract of 31 March 1999, the parties' relationships shall be governed by the provisions of the said contract as well as by the Ukraine and Russian Federation laws.
Taking into consideration that the parties failed to clearly establish the laws of which state -- the Ukraine or Russian Federation -- should govern their relationships under the contract, the Tribunal is of the opinion that in this case the CISG should apply. Both States, where the parties are located, are CISG Contracting States. The Ukraine has been a CISG Contracting State since 1 February 1991. The Russian Federation has been a CISG Contracting State since 1 September 1991.
Where the CISG does not provide for the settlement of an issue on the merits, the law determined based on Article 7(2) CISG and Article 28(2) of the Russian Federation Law "On International Commercial Arbitration" should apply as a subsidiary statute. Since the contract was made in 1999, when Article 166 of the USSR Principles of Civil Laws 1991 was in force, Russian law should apply as the law of the Seller's State based on the said conflict of laws provision.
3.3 The Tribunal finds it possible to arbitrate the present dispute in the absence of the [Buyer]'s representative. The Tribunal ascertains that the Tribunal sent a timely notice to the [Buyer] that the proceeding was scheduled for 28 February 2002. The notice was sent by certified mail. It was delivered to the addressee (the [Buyer]) on 16 January 2002. Article 28(2) of the Rules of the Tribunal provides for the arbitration of a case in the absence of the parties' representatives. It sets forth that a party's failure to appear in the proceeding, where such party has been duly notified of the time and place of the hearing, does not preclude the arbitration of the case and the rendering of an award.
Upon review of the telegram of 27 February 2002 requesting to adjourn the hearing of the case to a later date due to the illness of the CEO of the [Buyer]'s firm, the Tribunal comes to the conclusion that this request cannot be considered because the telegram was sent by the firm's CEO (a private person) personally and not by the [Buyer]'s firm itself. In the Tribunal's opinion, the reason stated in the telegram is also not compelling since the [Buyer], a legal entity, could be represented in the proceeding not only by its CEO but also by other persons.
3.4 Upon review of the [Seller]'s claims to recover from the [Buyer] the debt for the goods delivered, the Tribunal finds them reasonable.
The materials of the case (a copy of Specification to the contract No. 4 of 31 March 1999, Waybill No. 9 of 31 March 1999, Pro-forma Invoice No. 6 of 31 March 1999) evidence that the [Seller] indeed delivered the goods to the [Buyer] for the amount claimed.
At the arbitration hearing held on 28 February 2002 the [Seller]'s representative submitted to the Tribunal a fax message dated 26 September 2001. [The fax message] was sent to the [Seller] by the [Buyer]. In [that fax message], the [Buyer] acknowledged the amount of debt for the goods delivered under the contract of 31 March 1999 and asked for an extension due to the difficult financial situation.
Based on the terms of the contract and Article 53 CISG, according to which the buyer must pay the price for the goods as required by the contract, the Tribunal decides that the [Seller]'s claims in connection with the sum in arrears should be sustained.
3.5 The [Seller]'s claim to recover penalties from the [Buyer] is based on Clause 9.1 of the contract of 31 March 1999, according to which in case of a failure to timely pay for the goods delivered, the [Buyer] shall pay penalties in the amount of 0.5% of the sum in arrears for each day of delay.
The amount of penalties is calculated in accordance with the computations submitted by the [Seller] for the period from 1 May 1999 (the date of payment) to 20 December 2000 (the date of the claim).
Based on Article 333 of the Russian Federation Civil Code, the Tribunal finds it possible to partially sustain the said [Seller]'s claims in the amount of 50%. [Article 333] provides that a court has discretion to reduce the amount of penalties where they are clearly disproportionate to the consequences of the breach. The Tribunal takes into account that the amount of penalties calculated by the [Seller] is two and a half times higher than the sum in arrears.
Since the claim is only partially satisfied, pursuant to article 6(2) of the Regulations on arbitration fees and expenses, the arbitration fees and expenses should be apportioned between the parties in proportion to the claims sustained and denied.
* This is a translation of data on Proceeding 2/2001, dated 28 February 2002, 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. 43 [263-266].
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 the Ukraine 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