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CISG CASE PRESENTATION

Russia 23 May 2003 Arbitration proceeding 161/2002 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/030523r1.html]

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

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Case identification

DATE OF DECISION: 20030523 (23 May 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: 161/2002

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russian Federation (respondent)

BUYER'S COUNTRY: British Virgin Islands (claimant)

GOODS INVOLVED: [-]


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 74 [Also cited: Article 45 ]

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 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. 14 [92-96]

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 161/2002 of 23 May 2003

Translation [*] by Yelena Kalika [**]

1. SUMMARY OF RULING

      1.1 In the absence of an agreement of the parties on the law governing their relationships under a contract for the international sale of goods, pursuant to Article 166 of the USSR Principles of Civil Laws 1991, it was found that Russian laws should apply as the laws of the Seller's state. Taking into consideration that the Seller's commercial enterprise was located in a CISG Contracting State, when resolving the dispute the Tribunal applied the provisions of the CISG based on Article 1(1)(b) CISG. The provisions of the Russian Federation Civil Code were applied as subsidiary laws.

      1.2 Since the contract of the parties did not provide that the transfer of creditor's rights to a third party required a debtor's consent, the Tribunal concluded that the rights of the creditor (Claimant 1 [Buyer]) passed to a third party [Claimant 2] based on the agreement of the creditor with the third party. [The rights transferred] included the rights following from the arbitration clause of the contract.

      1.3 Since Claimant 1 [Buyer], the assignor, dropped the case, the award was rendered for Claimant 2, the assignee who was a co-Claimant in the case.

2. FACTS AND PLEADINGS

Two companies (co-Claimants) from the British Virgin Islands brought a claim against a Russian company in connection with its failure to perform its obligations under a contract for the international sale of goods of 3 April 1997. The breach included a short delivery of goods and failure to return an advance payment received by the [Seller] for the goods not delivered. Claimant 1 [Buyer] had entered into its contract with the Respondent [Seller] on behalf of Claimant 2. Under the contract, certain goods were to be delivered. The [Seller] agreed that Claimant 2 would pay for the goods. Claimant 2 paid for the goods delivered. Besides, Claimant 2 made an advance payment for the goods that the [Seller] did not deliver. The [Seller]'s debt including contractual damages was stated in the Protocol signed by the parties on 3 March 2000.

On 12 March 1998, Claimant 1 [Buyer] and Claimant 2 signed an agreement in which Claimant 1 [Buyer] transferred to Claimant 2 his right of claim following from the contract between Claimant 1 [Buyer] and the [Seller]. The agreement set forth that, pursuant to the arbitration clause, both Claimants would act together as co-Claimants.

The [Seller] failed to appear before the Tribunal and made no explanations on the claim.

During the hearing Claimant 1 [Buyer] decided to drop the case.

3. TRIBUNAL'S REASONING

The award rendered by the Tribunal contained the following main points.

      3.1 The competence of the Tribunal

              3.1.1 Clause 12 of the contract sets forth that all disputes and disagreements that might arise out of the present contract or in connection with it shall be arbitrated by the Arbitration Court at the Russian Federation Chamber of Commerce and Industry in accordance with its Rules.

By Resolution of the Supreme Council of the Russian Federation of 7 July 1993 "On coming into force of the Russian Federation Law on International Commercial Arbitration" the Arbitration Court was renamed the International Commercial Tribunal at the Russian Federation Chamber of Commerce and Industry.

              3.1.2 The contract does not provide that the transfer of the creditor's rights to a third party is conditioned on the debtor's consent. Thus, the transfer of a right of claim from Claimant 1 [Buyer] to Claimant 2 does not violate Article 382(2) of the Russian Federation Civil Code. The agreement provides for the full transfer of the assignor's rights under the contract to the assignee on the terms existing on the date when the Agreement was made.

              3.1.3 The view that the assignee receives the rights following from an arbitration agreement between the debtor and assignor is widely accepted in legal sources. (For example, Lebedev S. N., International Commercial Arbitration: The arbiters' competence and the agreement of the parties. M., 1997, p. 78; Musin V.A. An arbitration clause in an international commercial contract and the issue of a transfer of a right // Treteiskiy sud. 2000. No. 4. P. 37-38). This view is also accepted in legal practice. In particular, the Resolution of the Presidium of the Russian Federation Higher Arbitration Court of 17 June 1999 states that "a right to bring a claim in defense of the rights violated is one of the component parts of a right of claim transferred to a new creditor", and " the terms on which the rights of the original creditor pass to the new creditor, which are mentioned in Article 384 of the Russian Federation Civil Code, may also include the provision on the choice of an Arbitral Tribunal to resolve possible disputes between the parties to the contract." (see Vestnik Vysshego Arbitrazhnogo Suda RF. 1997. No. 9. P. 66-67).

              3.1.4 As to the provision of the Agreement concerning collective participation in arbitration hearings initiated based on the arbitration clause in the contract, first, such an agreement supports the assignee's legal rights in connection with the arbitration clause. Second, such an agreement was fulfilled when [the Claimants] filed their collective claim with the Tribunal. At the same time, this agreement does not limit the freedom of action of the parties' representatives in the arbitration proceeding.

For the above stated reasons, the Tribunal concludes:

     a)   The rights transferred from Claimant 1 [Buyer] to Claimant 2 under the contract include the right to defend one's interests before the Arbitral Tribunal stated in the contract.
 
     b) Pursuant to Article 16 of the Russian Federation Law "On International Commercial Arbitration" and Article 1(5) of the Rules of the Tribunal, the Tribunal has competence to arbitrate the present dispute.

      3.2 The applicable law

The contract does not provide for the applicable law. Later the parties also failed to choose the applicable law.

In accordance with the provisions of the Russian Federation Law "On International Commercial Arbitration" (Article 28(2)), the Tribunal determined the applicable law based on the conflict of laws provision it found applicable. The Tribunal found that Article 166 of the USSR Principles of Civil Law 1991, which had been in force when the contract was made, was such a conflict of laws provision. Pursuant to Article 166(1), in the absence of the parties' agreement on the applicable law, the laws of the State, where the seller under the contract was founded, resides or has its primary place of business, shall apply. In the present dispute such laws are Russian laws. Since, in accordance with Article 15(4) of the Russian Federation Constitution, international treaties of the Russian Federation are a component part of its legal system, the Tribunal finds that the CISG should govern the relationships of the parties (see Article 1(1)(b) CISG). Russian laws should apply as subsidiary laws.

      3.3 In connection with the [Seller]'s failure to appear at the hearing, the Tribunal found that on 5 March 2003 notice of the time and place of the hearing was mailed to him by certified mail with a return receipt requested. As evidenced by the materials of the case, the [Seller] received notice on 18 March 2003. In such circumstances, in accordance with Article 28(2) of the Rules of the Tribunal, the Tribunal finds no grounds precluding the arbitration of the case in the absence of the [Seller].

      3.4 After reviewing the Claimant's collective claim that Claimant 1 [Buyer] has no interest in the present dispute and drops his claims, the Tribunal finds that such a decision of the Claimants represents execution of their rights. The Tribunal accepts such decision as a fact. Only one subject remains on the Claimants' side ("the Claimant") and the Tribunal should take this circumstance into account when rendering its award.

      3.5 After reviewing the Claimant's claim to recover the debt from the [Seller], based on the materials of the case and the Claimant's explanations, the Tribunal found that the [Seller] breached his contractual obligations both as to the quantity of the goods to be delivered (see Clause 2 of the contract, Clause 2 of Appendix 2 to the contract, Clause 2 of Appendix 3 to the contract, and Clause 1 of Appendix 4 to the contract) and as to the refund of an advance payment for goods that were not delivered (see Clause 7) and obligations set forth in protocols of 11 March 1998, 7 April 1999 and 3 March 2000 concerning the payment of the said debt by the [Seller].

The [Seller] should pay the unpaid sum of the debt to the Claimant based on Articles 45 and 74 CISG.

      3.6 In accordance with Article 6(1) of the Regulations on arbitration fees and expenses (see Appendix to the Rules of the Tribunal), according to which arbitration fees should be paid by the losing party, the Tribunal finds that the [Seller] shall repay the amount of the arbitration fees to the Claimant.


FOOTNOTES

* This is a translation of data on Proceeding 161/2002, dated 23 May 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. 14 [92-96].

All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant 1 of the British Virgin Islands is referred to as Claimant 1 [Buyer]; Claimant 1's assignee, also of the British Virgin Islands, is referred to as Claimant 2; and Respondent of the Russian Federation 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 May 8, 2006
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