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CISG CASE PRESENTATION

Russia 24 December 2002 Arbitration proceeding 37/2002 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/021224r1.html]

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

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Case identification

DATE OF DECISION: 20021224 (24 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: 37/2002

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russian Federation (claimant)

BUYER'S COUNTRY: Estonia (respondent)

GOODS INVOLVED: Goods


UNCITRAL case abstract

RUSSIAN FEDERATION: Award in Case No. 37/2002 of 24 December 2002 of the
Arbitration Tribunal of Russian Federation Chamber of Commerce and Industry

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/128],
CLOUT abstract no. 1237

Reproduced with permission of UNCITRAL

Abstract prepared by Alexey Kostromov

This case deals primarily with the determination of the amount of damages suffered by the seller as the result of the breach of contract by the buyer.

A Russian company (the seller) entered into an international sales contract with an Estonian company (the buyer). The seller complied with its obligations under the contract. The goods were delivered and the respective bills of lading evidenced that the delivery was timely and that the buyer took over the goods without claims in respect of quality, quantity, description or packaging. The buyer failed to pay for the goods within the period of 50 days from the date of shipment as was agreed in the contract. Additionally, the buyer did not respond to the seller’s request to pay for the delivery sent more than one month after the deadline for payment. The contract contained a governing law clause, according to which it was subject to Russian law, and an arbitration clause, according to which any disputes arising out of or in connection with the contract shall be resolved by the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (hereinafter referred to as the “Tribunal”) in accordance with its Rules of Arbitration. Therefore, the seller initiated arbitration proceedings before the Tribunal.

The Tribunal applied the CISG as part of the Russian substantive law to which the parties agreed in Clause 10 of the contract; moreover, it found that the CISG applied by virtue of article 1(1)(a), since both parties had their place of business in Contracting States to the Convention at the time of the conclusion of the contract. The Tribunal also found Russian law applicable to the matters not settled in the CISG as a subsidiary law.

On the substance of the dispute, the Tribunal found that the failure of the buyer to pay the price of goods amounted to the breach of buyer’s obligations under article 53 CISG, under which “[t]he buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention.” The buyer neither provided the Tribunal with the facts evidencing an exemption from liability for damages for a failure to perform its obligations under the contract (as provided by article 79 CISG) nor contested the nature and the amount of damages claimed by the seller. The Tribunal held that the seller was entitled to the price of goods in accordance with article 61 CISG and to damages under article 74.

The damages suffered by the seller as the result of breach of the contract included the sum of money equal to an administrative penalty paid by the seller pursuant to a decision of the Russian Customs authorities due to the seller’s failure to timely deposit foreign currency proceeds under the contract, and compensation of arbitration and attorneys’ fees.

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Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 74 [Also cited: Articles 53 ; 61 ]

Classification of issues using UNCITRAL classification code numbers:

74A [General rules for measuring damages: loss suffered as consequence of breach]

Descriptors: Damages

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

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. 80 [469-471]

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

Russian Federation arbitration proceeding 37/2002 of 24 December 2002

Translation [*] by Mykhaylo Danylko [**]

Translation edited by Yelena Kalika [***]

1.  SUMMARY OF RULING

     1.1 The Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry [hereinafter Tribunal] found that the clause of international sales contract on application of Russian law means application of the Vienna Convention 1980 [hereinafter CISG] and subsidiary application of rules of Russian substantive law to the relations of parties.

     1.2 Pursuant to Art. 74 CISG, the Tribunal recovered from [Buyer] the sum of an administrative penalty incurred by [Seller] in connection with Buyer's breach of contractual terms of payment.

     1.3 The sum, granted to [Seller] in German Marks (according to the terms of contract), was recovered in Euros at the rate set by EU Resolution No. 2866/98 of 31 December 1998.

2.  FACTS AND PLEADINGS

The action was brought by Claimant [Seller], a Russian company, against Respondent [Buyer], an Estonian company, in connection with non-payment for goods delivered under an international sales contract concluded by the parties on 17 November 2000. The claims of [Seller] included: recovery of debt; compensation of losses arisen in connection with payment of an administrative penalty according to the decision of Russian Customs authorities due to [Buyer's] failure to timely deposit foreign currency proceeds under the contract concluded with [Buyer], and compensation of arbitration and legal fees.

The [Buyer] did not present any explanations to the action.

3.  TRIBUNAL'S REASONING

The ruling of the Tribunal contained the following main points.

     3.1 [Jurisdictional competence]

The competence of the Tribunal to arbitrate the dispute is set forth in Clause 10 of the contract (both in English and Russian versions) of 17 November 2000, according to which all disputes related to this contract shall be resolved by the [...] Tribunal in accordance with its rules. Considering the above mentioned arbitration clause and paras. 1(2), 1(3), 1(5) of the Rules of Tribunal, the Tribunal found itself competent to arbitrate the present dispute.

     3.2 [Applicable law]

As to the law applicable to the parties' contractual relations, the Tribunal found that according to Clause 10 of the contract the parties specified that "the present contract should be governed by Russian law". Therefore, when arbitrating the dispute, the Tribunal shall be guided by provisions of the contract and the CISG to which Russia and Estonia are Contracting States, with Russian material law applied as the subsidiary law.

     3.3 [Merits of the case]

The case materials evidence that [Seller] has fulfilled his obligations under the contract, when he made a delivery of the goods for the total value in German Marks stipulated in the statement of action (Bills of Lading Nos. 060056 and 060057 of 11 September 2001). The Bills of Lading bear stamps confirming that [Buyer] accepted the goods with no claims as to quality and quantity.

According to the terms of the contract, the [Buyer] had to pay for the delivered goods within fifty calendar days from the date of shipment (see the additional agreement of 28 August 2001). However, the [Buyer] did not make a payment. [Seller]'s claim of 29 November 2001 requesting [Buyer] to pay off the debt was left without consideration by the [Buyer].

By virtue of Art. 53 CISG, the buyer must pay the price for the goods and accept the delivery of goods according to the requirements of the contract and the Convention.

According to Art. 61 CISG, if the buyer does not perform his obligations under the contract and the Convention, the seller has the right to demand from buyer payment of the price for the goods. The [Buyer] did not present to the Tribunal any evidence that could exempt him fully or in part from his liability for breach of his contractual obligations. The [Buyer] did not contest the claims of [Seller] either on the merits or as to the amount of the claims.

The seller also has a right to claim compensation of losses from buyer. The losses for breach of contract by one of the parties is the sum equal to the loss suffered by the other party as a result of breach of the contract (Art. 74 CISG). The payment of a penalty by [Seller] is confirmed by the bank statement No. 6640 of 13 September 2002. The Tribunal found reasonable the claim of [Seller] to recover from [Buyer] the losses suffered in connection with payment of administrative penalty due to fault of [Buyer].

The sum granted in German Marks should be recovered in Euros at the official rate DM 1.95583/ Euro 1 according to EU Resolution No. 2866/98 of 31 December 1998 (Official Journal of the European Communities. L 359. Vol. 41. 31 December 1998).

The claim of [Seller] to recover arbitration and registration fees should be granted on the basis of para. 6 of the Rules of Tribunal on Arbitration Fees and Expenses.


FOOTNOTES

* This is a translation of data on Proceeding 37/2002 of 24 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. 80 [469-471]. 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]; Respondent of Estonia is referred to as [Buyer].

** Mykhaylo Danylko is a partner with the law firm Danylko, Kushnir, Soltys & Yakymyak, Attorneys & Counselors at Law, Kiev, Ukraine <http://www.dksylaw.com>. He holds a Master of Laws (European Studies Program) from the Law School of International Business Science and Technology University, Kiev, Ukraine (July 2000); a Master of Management in Business of the Business School of International Science and Technology University, Kiev, Ukraine (June 2002); and has received his LL.M. in International and Comparative Law at the Pace University School of Law.

*** 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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