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CISG CASE PRESENTATION

Russia 2 December 2002 Arbitration proceeding 18/2002 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/021202r1.html]

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

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Case identification

DATE OF DECISION: 20021202 (2 December 2002)

JURISDICTION: Arbitration ; Russian Federation

TRIBUNAL: Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 18/2002

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: United States (claimant)

BUYER'S COUNTRY: Ukraine (respondent)

GOODS INVOLVED: Goods


Classification of issues present

APPLICATION OF CISG: Yes. [Articles 6 and 1(1)(a). Contract provided that it shall be governed by Russian substantive law. Tribunal interpreted this to mean Russian Federation substantive law including the CISG.]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 6 ; 78 [Also cited: Article 62 ]

Classification of issues using UNCITRAL classification code numbers:

6B [(Implied) agreement to apply Convention];

78B [Rate of interest]

Descriptors: Choice of law ; Interest

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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): Rozenberg, Praktika of Mejdunarodnogo Commercheskogo Arbitrajnogo Syda: Haychno-Practicheskiy Commentariy [Practice of the International Commercial Arbitration Court: Scientific - Practical Comments] Moscow (2001-2002) No. 77 [454-457]

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

Russian Federation arbitration proceeding
18/2002 of 2 December 2002

Translation [*] by Yelena Kalika [**]

1.  SUMMARY OF† RULING

     1.1 Since the [Seller] claimed penalties in the amount reduced in comparison with the amount set in the contract, the Tribunal found the [Seller]'s claim reasonable pursuant to the Russian Federation Civil Code. [The penalties] represented the consequences of the Respondent [Buyer]'s breach of his duties.

     1.2 After finding that the relationships of the parties under the contract for the international sale of goods were governed by the CISG, the Tribunal held the [Seller] entitled to recover annual interest for the use of another's funds pursuant to Article 78 CISG and Article 395 of the Russian Federation Civil Code.† [The annual interest was recovered] in addition to the amount of damages for the delay in payment set forth in the contract.

     1.3 Pursuant to Article 395(3) of the Russian Federation Civil Code, annual interest was calculated up to the date of the factual payment by the [Buyer] made in accordance with the Tribunal's award.

2.  FACTS AND PLEADINGS

[Seller], a U.S. firm, brought a claim against Respondent [Buyer], a Ukrainian firm, in connection with partial non-payment for the goods delivered under the contract for the international sale of goods made by the parties on 31 January 2000. The contract was to be in force until 31 December 2000. † Under the contract, the [Buyer] was to make full payment for the relevant shipments no later than 60 calendar days after the first day of the month in which the shipment was made.† The [Buyer] systematically delayed payments. † In this connection, the Seller stopped making any shipments on 1 August 2000. [Seller did so] pursuant to a provision in the contract giving him this right. † On 1 July 2001, the parties signed a payment verification statement which stated the amount of the Buyer's debt. The [Seller]'s claims included: the sum in arrears, and the contractual penalties for the delay in payment. During the arbitration proceeding, the [Seller] reduced the amount of his claim due to the [Buyer]'s partial payment made after the claim was brought. The [Seller] also brought an additional claim to recover from the [Buyer] annual interest for the use of another's funds from the date of the Tribunal's award to the date of factual payment.

The [Buyer] submitted no explanations in connection with the claim.

3. †TRIBUNALíS REASONING

The Tribunal's award contained the following main points.

     3.1 The Tribunal's competence to arbitrate the present dispute follows from the arbitration clause in Appendix No. 1 to the parties' contract of 31 January 2000 (clause 13.2). The parties do not contest it.

     3.2 After reviewing the issue of the [Buyer]'s absence at the proceeding, the Tribunal ascertained that the [Buyer] received timely notice of the hearing dated 28 August 2002. The hearing was scheduled for 15 October 2002. As evidenced by the postal receipt, such notice was sent to the [Buyer] in accordance with the Provisions of Article 23 of the Tribunal's Rules. The [Buyer] received it on 30 August 2002.

Pursuant to Article 28(2) of the Tribunal's Rules, where a party was duly notified of the time and place of the arbitration proceeding, that party's absence does not preclude the arbitration and the rendering of an award unless the absent party moved in writing to adjourn the proceeding for a good cause shown. Since the [Buyer] failed to make such a motion and since the [Seller] insisted that the dispute be arbitrated, the Tribunal found it possible to arbitrate the dispute in the absence of the [Buyer].

     3.3 Turning to the issue of the applicable law, the Tribunal ascertained that in Clause 13.2 of Appendix No. 1 to the contract of 31 January 2000 the parties stated that, when resolving disputes in connection with the contract, Russian substantive law should apply. Pursuant to Article 28(1) of the Russian Federation Law "On International Commercial Arbitration" of 7 July 1993 and in accordance with Article 13(1) of the Tribunal's Rules, the Tribunal concluded that the parties' relationships in connection with the present dispute should be governed by the Russian Federation substantive law including the CISG.

     3.4 When arbitrating the [Seller]'s claims on the merits, the Tribunal took into account the following.

The materials of the case (the acts of acceptance signed by the parties' representatives on 12 April 2000, 1 May 2000, 12 June 2000 and 12 July 2000) evidence that the [Seller] delivered the goods to the [Buyer]. The [Buyer] failed to fully pay the price of the goods as evidenced by the [Buyer]'s acknowledgement of the debt under the contract. [The acknowledgement] was made both in the payment verification statement of 1 July 2001 and in the [Buyer]'s letter No. 22/5 of 8 May 2002.† At the time the claim was brought, the [Buyer]'s debt had amounted to the sum [originally] claimed by the [Seller]. By the date of the proceeding, it had been reduced due to the [Buyer]'s partial payment of his debt.

For the above stated reasons and based on Articles 53, 61(1)(a) and 62 CISG, the Tribunal finds that the [Seller]'s claim to recover from the [Buyer] the sum in arrears for the goods delivered (taking into consideration that the claim was reduced) is reasonable and should be sustained.

As to the sum transferred by the [Buyer] on 30 August 2002, for which the [Seller] dropped his claim, the Tribunal terminates the arbitration pursuant to Article 45(2)(a) of the Tribunal's Rules.

     3.5 When reviewing the [Seller]'s claim to recover penalties from the [Buyer], the Tribunal took into consideration that the [Seller] claimed a smaller amount of penalties than the one he had a right to under the contract. [The amount claimed] seems to be proportionate to the consequences of the [Buyer]'s breach of his duties. Pursuant to Article 330(1), 331 and 333(1) of the Russian Federation Civil Code, the Tribunal found the said [Seller]'s claim reasonable.† The claim should be sustained.

     3.6 When reviewing the [Seller]'s claim to recover from the [Buyer] annual interest from the date of the award to the date of the factual payment at the LIBOR rate (1.7700%), the Tribunal took into consideration the following. Based on Article 78 CISG and Article 395(1) of the Russian Federation Civil Code, which set forth the right to claim annual interest on the sum in arrears, the Tribunal concluded that the interest should be calculated based on the sum of the [Buyer]'s main debt. (Article 395(1) of the Russian Federation Civil Code sets forth that the court has discretion to sustain a claim of interest in the amount based on the bank interest rate on the date of the decision in the place of creditor). Taking into account that the [Seller] is a legal entity located in the USA and that the [Seller] claimed annual interest for the use of another's funds only from the date of the award, pursuant to Article 395(1) of the Russian Federation Civil Code, the Tribunal is of the opinion that the LIBOR rate as of 11 October 2002 may be applied.† In accordance with the statement on the London Inter-Bank Offer Rate, which was submitted by the [Seller], [such rate] constituted 1.7700% annually [as of 11 October 2002]. In addition, the Tribunal is of the opinion that the [Seller]'s claim to recover the said annual interest to the date of factual payment is reasonable. [Such conclusion] is based on Article 395(3) of the Russian Federation Civil Code which allows to calculate interest up to the date of payment.

For the above stated reasons, the Tribunal concluded that the [Seller]'s claim to recover from the [Buyer] annual interest for the use of another's funds is reasonable and should be sustained. The annual interest should be computed based on the sum of the main debt at the rate of 1.7700% from the date of the award to the date of the factual payment by the [Buyer].

     3.7 When resolving the issue of apportioning the arbitration fees, the Tribunal reasoned that the decision to reduce the amount of the claims was made by the [Seller] due to the [Buyer]'s partial payment of 30 August 2002. [Such conclusion] follows from the computation submitted by the [Seller] during the proceeding. Since the debt was [partially] paid off after the case had been scheduled for arbitration and after the [Buyer] had received notice on 28 August 2002 and since all the [Seller]'s claims were found reasonable and were sustained, the Tribunal holds that the [Buyer] must reimburse the arbitration fees to the [Seller] based on Article 6(1) of the Regulations on arbitration fees and expenses (i.e., based on the Amendment to the Rules).


FOOTNOTES

* This is a translation of data on Proceeding 18/2002, dated 2 December 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. 77 [454-457].

All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of the United States 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.

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