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CISG CASE PRESENTATION

Russia 16 April 2003 Arbitration proceeding 99/2002 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/030416r1.html]

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

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Case identification

DATE OF DECISION: 20030416 (16 April 2003)

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: 99/2002

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Ukraine (respondent)

BUYER'S COUNTRY: Russian Federation (claimant)

GOODS INVOLVED: [-]


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 84(1) [Also cited: Articles 30 ; 45 ; 53 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Scope of Convention (issues excluded): penalty provisions];

84A [Restitution of benefits received: seller bound to refund price must pay interest]

Descriptors: Unavailable

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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): M.G. Rozenberg, Praktika Mezhdunarodnogo kommercheskogo arbitrazhnogo suda pri TPP RF za 2003 g./Sost. [Arbitration decisions rendered by the International Commercial Tribunal at the Russian Federation Chamber of Commerce and Industry in 2003], published by "Statut" (2004), Case No. 11 [78-82]

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 99/2002 of 16 April 2003

Translation [*] by Yelena Kalika [**]

1. SUMMARY OF RULING

      1.1 Where there was a provision in the contract stating that the relationships of the parties under the contract were governed by the current Russian Federation laws, the dispute was resolved based on the CISG as well as on the Russian Federation Civil Code as subsidiary law. The Tribunal took into account that both parties agreed to this.

      1.2 The contract of the parties, which set forth that the buyer should pay for the goods both in the monetary form and by means of a counter delivery of goods, was found to be a contract for the international sale of goods.

      1.3 When holding that the advance payment should be refunded due to the Seller's failure to deliver the goods, the Tribunal applied the provisions of the CISG (Article 84(1)). The amount of interest to be paid by the Seller was determined based on Article 395 of the Russian Federation Civil Code.

      1.4 In addition to the amount of interest on the advance payment, the Tribunal held that the seller should pay the contractual penalties for the delay in delivery until the date of termination of the contract by the Buyer.

2. FACTS AND PLEADING

Claimant [Buyer] a Russian company brought a claim against Respondent [Seller] a Ukrainian company in connection with its failure to perform its obligations under a contract for the international sale of goods made by the parties on 11 March 2002. The claims of the Buyer included a refund of the advance payment with annual interest, contractual penalties for the delay in delivery, as well as arbitration fees and attorneys' fees.

The Seller did not contest the main claims of the Buyer either on the merits or in connection with their amount. However, the Seller raised a question of a transfer of the debt to a third party that failed to fulfill its obligations to the Seller. At the same time, Seller alleged that annual interest should not be recovered since the contract of the parties does not contain a provision [allowing such recovery].

3. TRIBUNAL'S REASONING

The Tribunal's award contains the following main points.

      3.1 As to the competence of the Tribunal to arbitrate this dispute, the Tribunal ascertained that Clause 8.2 of the contract made by the parties on 11 March 2002 contains an arbitration clause. In accordance with the [arbitration clause], disputes following from the contract shall be arbitrated by the Commercial Arbitration Tribunal at the Russian Federation Chamber of Commerce and Industry.

When entering into the arbitration agreement, the parties incorrectly named the organization to which they agreed to submit their disputes for arbitration. The language of the arbitration clause, in the Tribunal's opinion, evidences that the parties clearly intended to submit disputes arising from this contract to a competent arbitral tribunal. At the time the contract was made and the dispute arose, the Tribunal was the body of the Russian Federation Chamber of Commerce and Industry which was competent to arbitrate disputes arising from contractual relationships in connection with international commercial transactions. Therefore, the Tribunal finds that, when including the arbitration clause in their contract, the parties meant the Tribunal, although they incorrectly stated its name.

The Tribunal also ascertains that the dispute between the parties concerned contractual relationships that arose in connection with international commercial transactions. The Seller's enterprise is located abroad. Thus, this is a dispute which, pursuant to the Russian Federation Law "On International Commercial Arbitration" and the Rules of the Tribunal, can be arbitrated by the Tribunal.

For the above stated reasons and pursuant to Articles 7 and 16 of the Russian Federation Law "On International Commercial Arbitration", the Tribunal finds that it has competence to arbitrate the present dispute.

The panel of the Tribunal was selected in accordance with the Rules of the Tribunal. No objections to the candidates were made.

      3.2 As to the issue of the applicable law, the Tribunal ascertains that in Clause 8.2 of the contract the parties agreed that their relationships were to be governed by the Russian Federation laws that were in force as of the date of the contract. Both in the complaint and in the oral argument made at the hearing on 24 March 2003, the Buyer based his claims on the provisions of the CISG. The Buyer based his claims concerning the issues not settled in the CISG on the Russian Federation Civil Code. At the same hearing, the representative of the Seller conceded that the CISG should govern the present dispute along with the Russian Federation substantive law applied as subsidiary law.

Thus, the parties agreed at the hearing that the CISG applies to this case and that the issues not settled in the CISG or only partially settled in it were governed by substantive law of the Russian Federation.

      3.3 As to the merits of the Buyer's claims, the Tribunal ascertains that the Buyer's claims consist of two parts:

      -     A refund of the advance payment for the goods not delivered with interest, and
      -     The payment of contractual penalties for the delay in delivery pursuant to Clause 5.1 of the contract.

             3.3.1 In Clause 3 of the contract the parties set forth the procedure of making the payment for the goods. The payment was to be made by means of a wire transfer of the amount in Russian rubles set in the contract within five banking days as well as by means of the Buyer's delivery to the Seller of certain vehicles/equipment for a sum stated in the contract. The Buyer made a transfer of the advance payment to the Seller in accordance with the procedure set forth in Clause 3 of the contract. [Thus], the Seller's obligation to deliver the goods for the sum received was created.

Thus, the Claimant -- in his capacity as a buyer -- fulfilled the obligation to pay for the goods imposed on him in Article 53 CISG, whereas the Seller -- in his capacity as a seller -- failed to fulfill the obligation to deliver the goods to the buyer imposed on him in Article 30 CISG. That the Buyer transferred the advance payment is evidenced by Payment Order No. 273 of 18 March 2002 (see copy attached to the materials of the case). The Seller received this advance payment and does not contest its amount. For the above stated reasons and pursuant to Articles 30 and 53 of the CISG, the Seller must refund the advance payment to the Buyer.

             3.3.2 As to the Buyer's claim to recover from the Seller annual interest for the use of the amount of the advance payment from 18 March 2002 to 14 February 2003, the Tribunal ascertains the following. Pursuant to Article 84(1) CISG, if a seller is bound to refund the price, he must also pay interest on it, from the date on which the price was paid. Since the CISG does not set forth the rate of annual interest, such annual interest must be determined in accordance with the provisions of Article 395 of the Russian Federation Civil Code. The Buyer has submitted evidence in support of the rate of 21% annually sought by him. He also has submitted the computations of interest. The Seller has not contested such computations.

For the above stated reasons and pursuant to Article 84(1) CISG and Article 395 of the Russian Federation Civil Code, the Tribunal grants the Buyer's claim to recover from the Seller annual interest in Russian rubles in accordance with the computations submitted by the Buyer.

             3.3.3 As to the Buyer's claim to recover from the Seller contractual penalties for the delay in delivery, the Tribunal ascertains that, as stated above, the Buyer transferred the agreed sum of the advance payment to the Seller. However, the Seller failed to deliver the goods for the said amount.

The CISG does not contain provisions concerning [contractual] penalties. However, if the seller fails to perform any of his obligations under the contract or the CISG, Article 45(2) gives the buyer a right to use any other remedies in addition to the restitution of losses. Therefore, pursuant to Article 330 of the Russian Federation Civil Code, the parties had a right to provide in their contract for the payment of damages for the delay of goods.

Clause 5.1 of the contract sets forth that the rate of penalties should be 0.2% of the price of the goods not delivered. The length of the delay constituted 70 days (from 10 April 2002 to the date of the Buyer's termination of the contract, i.e., 20 June 2002). The Seller has not objected to the computations of the penalties. For the above stated reasons and pursuant to Article 330 of the Russian Federation Civil Code and Clause 5.1 of the contract, the Seller must pay to the Buyer penalties in the amount sought by the Buyer.

      3.4 Since, due to the Seller's failure to perform his obligations under the contract, the Buyer had to turn to the Tribunal to protect his rights and since the Buyer's claims are granted in full, the Tribunal grants the Buyer's claim to recover from the Seller the amount of arbitration and registration fees. [The Tribunal] based its decision on Article 6(1) of the Regulations on arbitration fees and expenses which provides that the losing party should pay arbitration and registration fees.

      3.5 As to the Buyer's claim to recover from the Seller his expenses incurred in connection with the arbitration, the Tribunal ascertains that, as evidenced by the documents submitted by the Buyer, the said expenses include the airfare of the Seller's representative. Pursuant to Article 9 of the Regulations on arbitration fees and expenses (see the attachment to the Rules of the Tribunal), the Tribunal believes that such expenses are reasonable and proved and they must be paid by the Seller in the amount sought.


FOOTNOTES

* This is a translation of data on Proceeding 99/2002, dated 16 April 2003, of the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, reported in Rozenberg ed., Arb. Praktika (2003) No. 11 [78-82].

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 [Buyer] and Respondent of the Ukraine is referred to as [Seller].

** 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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Pace Law School Institute of International Commercial Law - Last updated June 29, 2005
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