Russia 20 May 2002 Arbitration Court [Appellate Court] for the Volgo-Vyatsky Circuit [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/020520r1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: A31-275/12
CASE HISTORY: 1st instance Arbitration Court for Kostroma Region 21 February 2002 [sustained]
SELLER'S COUNTRY: Russian Federation
BUYER'S COUNTRY: Finland
GOODS INVOLVED: Birch balances
APPLICATION OF CISG: Yes
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): Unavailable
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Case text (English translation) [second draft]
Queen Mary Case Translation Programme
Case No. A31-275/12 of 20 May 2002
Translation by Yelena Kalika [*]
The Federal Arbitration Court for the Volgo-Vyatsky Circuit consisting of the Chairman Bazileva T.V. and Judges Bashva N. Yu and Berdnikov O.Ye, in the presence of the Claimant's representative Gromov V.Yu (power of attorney # 2 of 8 January 2002) and the Respondent's representative Gaevoy D.D (power of attorney # 226 of 29 January 2002), reviewed the cassation complaint brought by the Kostroma Customs Department in connection with the decision of the Arbitration Court for the Kostroma Region issued on 21 February 2002 on case No. A31-275/12 by Judges Polyashova T.M., Strelnikova O.A. and Kaliberda A.I.
[The Federal Arbitration Court for the Volgo-Vyatsky Circuit]
The private joint stock company "Buyles" from the city of Buy in the Kostroma Region ("the Company") commenced an action with the Arbitration Court for the Kostroma Region against the Kostroma Customs Department. The claim was brought to find invalid the [Customs Department's] resolutions of 4 December 2001 on case 12900-255/01 regarding violations of the customs rules.
The claim was sustained in the decision of 21 February 2002.
The case was not appealed.
The Kostroma Customs Department disagreed with the court's conclusions and contests the decision at the Federal Arbitration Court for the Volgo-Vyatsky Circuit. The Kostroma Customs Department argued that Articles 98, 231(6), 273 and 296 of the Russian Federation Customs Code, Article 202 of the Russian Federation Civil Code, Article 5 of the Russian Federation Law No. 3615-1 of 9 October 1992 "On currency control and regulation", paragraph 1 of the Russian Federation President Order No. 1209 of 18 August 1996 "On state regulation of international barter transactions", the Russian Federation Central Bank instruction No. 86-I and the Russian Federation State Customs Department instruction No. 01-23/26541 of 13 October 1999 "On procedure of hard currency control over the transfer to the Russian Federation of proceeds received from export of goods" were violated.
In the Claimant's opinion, it was established during the audit that there were occasions on which the hard currency proceeds had not been deposited to the Company's account as a result of [the buyer's] rejection of the goods of unsatisfactory quality as well as a result of errors in measuring of the goods at the Sender's place. In this connection, the Claimant asks to reverse the said judicial act and to deny the claim.
There was no reply to the cassation complaint.
At the hearing the Claimant's representative made the same arguments as the ones stated in the cassation complaint.
The Respondent's representative argued against the Claimant's position. He argued that the court's decision was lawful and reasonable and asked to upheld the decision and to deny the [cassation] claim.
In accordance with the procedure set forth in Articles 171 and 174 of the Russian Federation Arbitration Procedure Code, the Federal Arbitration Court for the Volgo-Vyatsky Circuit reviewed the lawfulness of the application of the rules of substantive and procedural law by the Arbitration Court for the Kostroma Region.
As follows from the materials of the case, the private joint stock company "Buyles" made a contract No. 09368 of 10 November 1999 with Stora Enso Oyj of Finland ("the Foreign Firm") to deliver birch balances for the total amount of EURO 907, 500.00.
The preliminary price of the goods delivered to the Foreign Firm under the customs declarations No. 12901/090201/0000165 and No. 12901/120201/0000174 was set as EURO 23,400.33. After the accounting of the goods received as well as after inspecting their quality at the place of destination, it turned out that the quantity of birch balances was smaller than the number stated in the shipping documents. Within the set term of 90 days the counter agent transferred the hard currency proceeds to the Company. [The hard currency proceeds] amounted to EURO 21,966.75, i.e. they were not transferred in full. The difference not received amounted to EURO 1,433.58.
Bn the resolution of the Kostroma Customs Department of 4 December 2001 on case No. 12900-255/01 the Company was found liable for the violation of the customs rules under Article 273 of the Russian Federation Customs Code. Pursuant to Article 273, a fine in the amount of 125% of the cost of the goods, which were the object of violation, were imposed on the exporter. [This fine] amounted to 47,505.26 Russian rubles.
The Company disagreed with the resolution of the Kostroma Customs Department and brought a claim at the Central Customs Department. After [the Central Customs Department] refused to reverse the said resolution, the Company contested the Customs Department's unlawful resolution at the Arbitration Court for the Kostroma Region.
The lower court, when sustaining the claim, relied upon Article 53 of the Russian Federation Arbitration Procedure Code and Chapter III of the CISG. The court took into consideration that the foreign counter agent was making payments for the wood received after inspecting [the goods] at the place of destination at the presence of an independent expert organization and by so doing acted in accordance with the contract made.
The cassation board found no grounds for the reversal of the decision. These are the reasons:
Pursuant to Article 98 of the Russian Federation Customs Code, Article 5 of the Russian Federation Law "On currency control and regulation", and paragraph 1 of the Russian Federation President Order No. 1209 of 18 August 1996 "On state regulation of international barter transactions", failure to make deposits of hard currency proceeds constitutes a violation of the customs export regime. The liability for such violation is set forth in Article 273 of Russian Federation Customs Code.
Article 273 of Russian Federation Customs Code states that any unlawful operations with goods and vehicles, which are placed under some customs regime, as well as changing their condition, using and transferring them entail the imposition of liability in the form of a fine. [Such fine] may constitute between 100% and 200% of the cost of the goods and vehicles which are the direct objects of such violation. [The goods and vehicles] may be confiscated. The cost of such goods and vehicles may be recovered [by the state]. A license or a qualification document may be terminated.
After fully and thoroughly reviewing evidence submitted, the Arbitration Court for the Kostroma Region found that the hard currency proceeds were received by the Company not in the full amount. The court took into account the provision of the contract No. 09368 of 10 November 1999 stating that the acceptance of the goods should meet the technical terms TU 13-2-1-95 and [the goods] should be paid for in accordance with the results of measuring and inspecting the quality [of the goods] at the place of destination. The technical terms 13-2-1-95 "Balances delivered to Finland" entered into force on 1 April 1995. As required by the contract and technical terms, the foreign buyer paid for the goods received upon acceptance.
The materials of the case also evidence that the quantity of the wood at the place of acceptance turned out to be smaller, i.e., it did not correspond with the quantity stated both in the shipping documents and in the customs declarations.
The possibility of buyer's reducing the cost of the goods received follows from the text of Chapter III of the CISG.
The timely receipt of the payments under the contract No. 09368 of 10 November 1999 was documentary proven. The amount of the hard currency proceeds received corresponds with the quantity of the wood accepted by the foreign counter agent.
In violation of Article 53 of the Russian Federation Arbitration Procedure Code, the Kostroma Customs Department did not present any evidence that the documents submitted with the case were not true.
The court denies as unreasonable the Claimant's claim that, pursuant to clause 3 of the contract No. 09368 of 10 November 1999 setting forth the terms of delivery of goods as DAF Russian-Finnish border (the Incoterms 1990), the quantity of the wood exported should be determined at the time when the goods crossed the border. The said terms evidence only the procedure of determining the price per one cubic meter taking into account the expenses incurred in connection with delivery of the goods to the border.
In such circumstances, when finding invalid the resolution of the Kostroma Customs Department of 4 December 2001 on case No. 12900-255/01 regarding violations of the customs rules, the Arbitration Court for the Kostroma Region did not violate substantive and procedural law.
The issue of dividing the court expenses was not decided since, pursuant to Article 5(3) of the Russian Federation Law "On state fee", the Claimant is relieved from paying the state fee.
Pursuant to Articles 174, 175(1) and 177 of the Russian Federation Arbitration Procedure Code, the Federal Arbitration Court for the Volgo-Vyatsky Circuit
The decision of the Arbitration Court for the Kostroma Region of 21 February 2002 on case No. A31-275/12 is upheld. The cassation claim of the Kostroma Customs Department is denied.
This resolution comes into force immediately and cannot be appealed.
The Chairman: BAZILEVA T.V.; Judges: BASHEVA N.Yu, BERDNIKOV O.Ye.
* 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. Go to Case Table of Contents