Russia 7 June 2002 Arbitration proceeding 116/2001 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/020607r1,html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 116/2001
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Switzerland (claimant)
BUYER'S COUNTRY: Russian Federation (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. 62 [367-372]
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 The provision in the arbitration clause of a contract stating that a dispute shall be submitted for the arbitration by an arbitral tribunal should the parties fail to reach a mutual agreement cannot be viewed as a set pretrial procedure because it does not directly and clearly say so.
1.2 In the absence of a choice of law provision in a contract for the international sale of goods, the Tribunal concludes that the parties' relationships are governed by the CISG because the parties' commercial enterprises are located in CISG Contracting States. Swiss law subsidiary governs [the relationships] as the law of the seller's state based on Article 166 of the USSR Principles of Civil Law 1991. The Claimant [Seller]'s argument that the parties' relationships should be governed by the rules of Russian civil law as well as by the CISG is found unreasonable.
1.3 That the [Seller] authorized a third party to represent him in the relationships with the Respondent [Buyer] cannot be viewed as a transfer of the [Seller]'s rights and obligations under the contract to this third party. In accordance with the contract, the [Seller] could do so only with the permission of the [Buyer].
2. FACTS AND PLEADINGS
[Seller], a Swiss firm, brought a claim against Respondent [Buyer], a Russian firm, in connection with partial non-payment for the goods delivered under a contract for the international sale of goods made by the parties on 14 October 1997. Referring to the additional agreement to the contract, which was signed by the parties on 11 August 1999 and according to which the [Buyer] was to pay off the debt not later than November 1999, the [Seller] demanded to recover from the [Buyer] the amount of debt, contractual penalties for the delay in payment and arbitration fees since the [Buyer] failed to fulfill his obligations.
The [Buyer] contested the Tribunal's competence to arbitrate the present dispute because, in his opinion, the [Seller] did not follow the pretrial procedure of dispute settlement set forth in the arbitration clause in the contract. In the [Buyer]'s opinion, the fact that a third party consulting firm contacted the [Buyer] in connection with the settlement of this dispute cannot serve as evidence of the fact that the [Seller] followed the [set] procedure of filing a claim since the [Buyer] did not agree to the [Seller]'s transferring his rights and obligations under the contract to this third party.
The [Seller] objected to the [Buyer]'s argument. The [Seller] explained that he did not transfer any rights and obligations under the contract to that third party but authorized [that third party] to represent the [Seller] in his dispute with the [Buyer] in connection with the contract in controversy.
3. TRIBUNAL’S REASONING
The Tribunal's award contained the following main points.
3.1 When resolving the issue of the arbitration of the case in the absence of the [Buyer]'s representatives, the Tribunal ascertained that notices that the hearing was scheduled for 18 April 2002 were mailed to two addresses of the [Buyer]. They were returned to the Tribunal with a marking "Addressee no longer at this address".
The Tribunal also noted that the materials of the claim and notice that the hearing was scheduled for 6 March 2002, which were mailed to one of the above stated addresses, were delivered to the [Buyer] on 5 October 2001 and 14 January 2002 respectively. (The materials of the case contain receipts issued by the courier service).
In accordance with Article 12(1) of the Rules of the Tribunal, the parties shall immediately notify the Tribunal of any address change. As follows from Article 12(5) of the Rules of the Tribunal, any written message is deemed to be received if it was delivered to the last known place of business of a commercial enterprise or to a party's address either by certified mail or by any other method which provides for the registration of an attempt to deliver the message. Pursuant to Article 28(2) of the Rules of the Tribunal, a party's failure to appear at the proceeding, where this party has been duly notified of the time, date, and place of arbitration, does not preclude the arbitration of the case and the rendering of an award.
Since in violation of Article 12(1) of the Rules of the Tribunal, the [Buyer] failed to notify either the Tribunal or the [Seller] of his new address, the Tribunal finds it possible to deem the [Buyer] to be duly notified of the date, time and pace of the arbitration. [The Tribunal] also took into consideration that an attempt was made to send notice to the two known addresses of the [Buyer] by express mail. It also applied the provisions of Article 12(5) and 28(2) of the Rules of the Tribunal.
For the above stated reasons and taking into consideration that earlier the [Buyer] made a motion to adjourn the hearing of the case scheduled for 6 March 2002 as well as that the Tribunal sustained the motion and rescheduled the hearing to 18 April 2002, the Tribunal found it possible to arbitrate the case on the merits in the absence of the [Buyer]'s representatives. [When doing so], the Tribunal also took into account the [Seller]'s position on this issue announced during the proceeding and that the materials of the case are sufficient to arbitrate the dispute on the merits.
3.2 Clause 9.7 of the parties' contract of 14 October 1997 provides: "the parties shall attempt to settle any disputes and disagreements that may arise out of the present contract or in connection with it. If the parties are unable to reach a mutual agreement, the dispute shall be arbitrated by the Arbitration Court at the Russia Chamber of Commerce and Industry in Moscow. The award rendered by this tribunal shall be binding on the parties."
Based on the said clause in the contract, it may be concluded that the parties meant the Tribunal. In accordance with Clause 2 of the Regulations of the Tribunal, it may arbitrate any disputes following from contractual or other civil relationships arising out of international commercial transactions and other types of international business relations when a commercial enterprise of at least one party to the dispute is located abroad.
The [Buyer]'s argument that the [Seller] failed to follow the mandatory procedure of bringing a claim, which was set forth in the contract, cannot be considered by the Tribunal because the [Buyer] bases this argument only on the fact that, in his opinion, the parties did not attempt to settle the dispute as set forth in Clause 9.7 of the contract.
In the Tribunal's opinion, a contractual provision stating that disputes shall be resolved by the parties' agreement cannot be viewed as a mandatory pretrial procedure of bringing a claim because the provision on the said procedure must be directly and clearly stated in the contract. The contract does not contain such a provision. Besides, the Tribunal notes that the [Seller] made numerous attempts through its representative, a consulting firm, to turn to the [Buyer] suggesting that the dispute be settled. [This fact] is evidenced by the materials of the case and, in particular, by the letters [of the consulting company] addressed to the [Buyer].
Taking the above into consideration and since the present dispute arose out of a contract for the international sale of goods, where the [Seller] is a Swiss firm and the [Buyer] is a Russia legal entity, and since the [Seller] filed his claim with the Tribunal and the [Buyer], while arguing that the [Seller] did not follow the set pretrial procedure, has presented no objections to the Tribunal's competence, the Tribunal finds it has competence to arbitrate the present dispute.
3.3 Turning to the issue of the applicable law, the Tribunal ascertained that the parties failed to agree on it. In the [Seller]'s opinion, as stated in the claim, the parties' relationships in connection with the present dispute shall be governed by the rules of Russian civil law as well as by the CISG.
The Tribunal cannot agree with the [Seller]'s argument. [The Tribunal is of the opinion] that the relationships in controversy should, first of all, be governed by the CISG because the commercial enterprises of the parties are located in CISG Contracting States (Article 1(1)(a) CISG). Pursuant to the conflict of laws provision set forth in Article 166 of the USSR Principles of Civil Law 1991, the law of the seller's state should apply as a subsidiary statute. [In this case], it is Swiss substantive law.
3.4 Upon review of the [Seller]'s claim to recover from the [Buyer] the amount of the main debt, the Tribunal ascertained that on 9 June 1998 the [Seller] delivered the goods to the [Buyer] in accordance with the terms of the contract of 14 October 1997.
Later the [Seller] and [Buyer] signed an additional agreement to the contract, according to which the [Buyer]'s debt for the goods delivered was determined in the amount claimed by the [Seller] as the main debt and the [Buyer] was to pay the said amount to the [Seller] not later than November 1999.
Notwithstanding the claims made by the [Seller]'s representative (see letters in the materials of the case), the [Buyer] has not paid the [Seller] for the goods delivered.
Evaluating such [Buyer]'s actions, the Tribunal qualifies them as a unilateral refusal to fulfill a duty to pay for the goods delivered as required by the contract and law.
The amount of the [Buyer]'s debt in the sum claimed by the [Seller] is evidenced by the additional agreement that was signed and sealed by the parties' representatives. The additional agreement was made on 11 August 1999.
The Tribunal also takes into account that in his reply to the claim submitted with the Tribunal on 21 February 2002, the [Buyer] failed to contest the claims either on the merits or in connection with the amount claimed, although he had an opportunity to do so.
The [Buyer]'s reference to the fact that the [Seller] had no right to transfer his rights and obligations under the contract to a third party cannot be considered by the Tribunal. (In the [Buyer]'s opinion, the consulting company is such a third party). The [Seller] did not transfer any of his rights and obligations under the contract with the [Buyer] to the consulting company. The [Seller] merely authorized [the consulting company] to represent the [Seller] in [the dispute] with the [Buyer].
For the above stated reasons and based on Articles 53, 54, 61, and 62 CISG, the Tribunal believes that the [Seller]'s claim to recover from the [Buyer] the amount of the main debt is reasonable and must be sustained.
3.5 Upon review of the [Seller]'s claim to recover penalties from the [Buyer], the Tribunal ascertained that Clause 9.5 of the contract of 14 October 1997 provided for the buyer's liability for the breach of his duty to make payments. [In such case] the buyer was to pay penalties in the amount of 0.5% of the price of the goods delivered in fact for each day of delay in payment.
For the above stated reasons and since the [Buyer] has not paid the [Seller] for the goods, the Tribunal believes that the [Seller]'s claim to recover penalties from the [Buyer] is reasonable and must be sustained.
3.6 Pursuant to Article 6(1) of the Regulations on arbitration fees and expenses, the Tribunal finds it reasonable to recover from the Respondent [Buyer] the arbitration expenses incurred by the Claimant [Seller].
* This is a translation of data on Proceeding 116/2001, dated 7 June 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. 62 [367-372].
All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Switzerland 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.Go to Case Table of Contents