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CISG CASE PRESENTATION

Russia 5 June 2003 Arbitration proceeding 2/2002 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/030605r1.html]

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

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Case identification

DATE OF DECISION: 20030605 (5 June 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: 2/2002

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russian Federation (claimant)

BUYER'S COUNTRY: Lithuania (respondent)

GOODS INVOLVED: [-]


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 53 ; 74

Classification of issues using UNCITRAL classification code numbers:

53A [Buyer's obligation to pay price of goods];

74A [General rules for measuring damages: loss suffered as consequence of breach (penalties imposed on seller)]

Descriptors: Price ; 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. 18 [108-110]

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 2/2002 of 5 June 2003

Translation [*] by Yelena Kalika [**]

1. SUMMARY OF RULING

      1.1 Since the commercial enterprises of the parties to the contract are located in CISG Contracting States, the parties' relationships shall be governed by the CISG. Pursuant to Article 166 of the USSR Principles of Civil Law 1991, Russian law is applied as subsidiary law, as the law of the seller's State.

      1.2 After granting the [Seller]'s claims to recover the amount of principal debt and contractual penalties for the delay in payment, the Tribunal concluded that the [Seller]'s claims to recover from the Respondent [Buyer] damages sustained as a result of paying penalties for the failure to make a timely deposit of hard currency proceeds were reasonable. ([The penalties] were imposed by the customs authorities). However, pursuant to Article 394 of the Russian Federation Civil Code, which presumes that damages (contractual penalties) shall be offset, the [Seller]'s damages are to be paid only in the amount exceeding the amount of contractual penalties.

2. FACTS AND PLEADINGS

[Seller], a Russian firm, brought a claim against Respondent [Buyer], a Lithuanian firm, in connection with partial non-payment for the goods delivered under a contract for the international sale of goods made on 11 August 2000. The [Seller]'s claims included:

     -      The payment of the debt;
     -      The payment of contractual penalties for the delay in payment;
     -      The reimbursement of the penalties paid by the [Seller] in accordance with the decision of the customs authorities issued in connection with the [Seller]'s failure to make a timely deposit of hard currency proceeds;
     -      The payment of arbitration fees.

That the [Buyer] owed the amount of the principal debt to the [Seller] was acknowledged in the parties' correspondence.

3. TRIBUNAL'S REASONING

The Tribunal's award contained the following main points.

      3.1 The Tribunal's competence to arbitrate disputes between the parties is set forth in Clause 9 of the contract of 11 August 2000. [This contract] contains a provision stating that the Tribunal in Moscow shall arbitrate disputes [between the parties].

For the above reasons and based on Articles 2, 3, and 5 of the Rules of the Tribunal, the Tribunal found that it had competence to arbitrate the present dispute.

      3.2 Turning to the issue of the law governing the parties' relationships under the contract, the Tribunal finds that there is no choice of law provision in the contract. Since both Russia and Lithuania are CISG Contracting States and since the parties' enterprises are located in these States, the Tribunal concludes that the CISG shall apply based on Article 1(1)(a) CISG.

Issues not settled in the CISG shall be governed by Russian law based on the conflict of laws provision of Article 166 of the USSR Principles of Civil Law 1991. [Article 166] provides that, in the absence of an agreement between the parties as to the applicable law, the law of the State, where the seller under the contract of sale was incorporated, shall apply.

For the above stated reasons, the Tribunal concludes that the dispute between the parties shall be primarily governed by the CISG. Issues not settled in the CISG shall be governed by Russian law.

      3.3 When arbitrating the claims on the merits, the Tribunal takes into account that the [Seller] delivered to the [Buyer] the goods for the total value stated in the complaint and evidenced by the waybill of 1 September 2000 and the [Buyer]'s letters of 21 September 2000 and 18 October 2000 which were submitted by the [Seller]. The Tribunal ascertains that the [Buyer] partially paid for the goods as evidenced by the payment order No. 4 of 24 August 2000.

Taking the above into consideration and based on Article 53 CISG, the Tribunal believes that the [Buyer] must pay the sum in arrears sought by the [Seller] for the goods delivered.

      3.4 Pursuant to Clause 5.2 of the contract, if the buyer fails to transfer the payment within the period of time stated in the contract, he shall pay [to the seller] 0.1% of the cost of goods for each day of delay.

The Tribunal believes that the [Buyer] must pay contractual penalties to the [Seller] for the delay in payment in the amount sought by the [Seller] and not contested by the [Buyer].

      3.5 After reviewing the [Seller]'s claim to recover from the [Buyer] the penalties imposed on the [Seller] for his failure to timely deposit hard currency proceeds, the Tribunal ascertains that the said amount represents the amount of damages sustained by the [Seller] as a result of the [Buyer]'s improper performance of his obligation to pay for the goods. The [Buyer] must repay the said damages to the [Seller] (see Articles 15(1) and 393(2) of the Russian Federation Civil Code). The Tribunal also takes into account that, according to Clause 5.2 of the contract of 11 August 2000, the [Buyer] shall compensate to the [Seller] any penalties imposed on the [Seller] by the State authorities in connection with an untimely deposit of hard currency proceeds [received from the sale of] the goods delivered.

The Tribunal takes into account that, pursuant to Article 394(1) of the Russian Federation Civil Law, if a penalty is set for any improper performance or non-performance of an obligation, damages shall be paid in the amount not covered by the penalty. Since the penalty must be offset, as stated in Clause 5.2 of the contract of 11 August 2000, the [Buyer] must pay the amount of penalties paid pursuant to the decision issued by the customs authorities but not in excess of the penalties stated in the contract.

      3.6 Pursuant to Article 18 of the Rules of the Tribunal and Article 6(1) of the Regulations on arbitration fees and expenses, the [Buyer] must reimburse arbitration fees to the [Seller].


FOOTNOTES

* This is a translation of data on Proceeding 2/2002, dated 5 June 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. 18 [108-110].

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] and Respondent of Lithuania 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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Pace Law School Institute of International Commercial Law - Last updated February 2, 2005
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