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CISG CASE PRESENTATION

Russia 26 June 2003 Arbitration proceeding 85/2002 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/030626r1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20030626 (26 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: 85/2002

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Germany (respondent)

BUYER'S COUNTRY: Russian Federation (claimant)

GOODS INVOLVED: Equipment


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 74

Classification of issues using UNCITRAL classification code numbers:

74A ; 74B [General rules for measuring damages: loss suffered as consequence of breach; Outer limits of damages: foreseeability of loss]

Descriptors: Damages ; Foreseeability of 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): Rozenberg, Praktika of Mejdunarodnogo Commercheskogo Arbitrajnogo Syda: Haychno-Practicheskiy Commentariy [Practice of the International Commercial Arbitration Court: Scientific - Practical Comments] Moscow (2003) No. 25 [143-148]

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 85/2002 of 26 June 2003

Translation [*] by Yelena Kalika [**]

1. SUMMARY OF RULING

     1.1 In the absence of a choice of law provision in a contract for the international sale of goods, the Tribunal found that the relationships of the parties were governed by the CISG since the commercial enterprises of the parties were located in States that were CISG Contracting States.

     1.2 Since the Respondent [Seller] failed to deliver the equipment, for which the Claimant [Buyer] had paid in advance, the amount of the advance payment was recovered from the Seller. [The advance payment was recovered] with interest in the amount set forth in the contract.

     1.3 The [Seller] must pay the [Buyer]'s losses resulted from the payment of penalties imposed by the customs authorities due to the [Seller]'s failure to perform his obligation to deliver the equipment. It was also taken into account that the [Buyer] proved the amount of losses sustained as well as a causal connection between the [Seller]'s actions and the losses. It was also taken into account that the [Buyer] had notified the [Seller] that the losses would result and that the [Seller] failed to take measures to prevent such losses.

2. FACTS AND PLEADINGS

[Buyer], a Russian firm, brought a claim against [Seller], a German firm, in connection with non-delivery of the equipment under a contract for the international sale of goods made by the parties on 9 June 2001.

The [Buyer]'s claims included:

    -     The recovery of the advance payment made in accordance with the provisions of the contract,
    -     Annual interest in the amount set forth in the contract,
    -     Contractual penalties for the delay in delivery,
    -     Arbitration fees and expenses in connection with the arbitration proceeding.

The [Buyer] later dropped his claim of the recovery of contractual penalties for the delay in delivery and brought an additional claim to recover damages resulted from his paying penalties imposed on him by the customs authorities as a result of non-delivery of the equipment.

The [Seller] made no appearance in this case.

3. TRIBUNAL'S REASONING

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

     3.1 Chapter IX of the contract sets forth that "all disputes and disagreements under the contract shall be submitted for arbitration to the Tribunal." For this reason and pursuant to Article 1 of the Rules of the Tribunal, the Tribunal finds itself competent to arbitrate the present dispute.

     3.2 Pursuant to Articles 12 and 23 of the Rules of the Tribunal, the [Seller] was notified of the date and time of the hearing. The [Seller] did not move to adjourn the case. The [Buyer]'s representative suggested that the case could be arbitrated without the [Seller]. Pursuant to Article 28(2) of the Rules, the Tribunal concludes that the [Seller]'s failure to appear at the hearing does not preclude the hearing of the case and rendering of an award.

     3.3 Since in their contract the parties failed to set forth the applicable substantive law and since the Russian Federation and Germany are CISG Contracting States, the Tribunal finds that the CISG should be applied when arbitrating this dispute.

     3.4 Pursuant to the contract, the [Buyer] transferred the advance payment to the [Seller]. This fact is evidenced by payment orders No. 16 of 26 June 2001 and No. 24 of 24 August 2001 (see the materials of the case).

As follows from the materials of the case, in his correspondence with the [Buyer], the [Seller] several times acknowledged his receipt of the said amount [of the advance payment]. At first, he stated that he was ready to deliver the goods but later informed the [Buyer] of his intention to refund the payment in full (see Letter of 14 August 2001, Letter of 18 September 2001, Letter of 8 November 2001, Letter of 28 December 2001). The [Seller] presented no evidence of his performance of obligations.

Chapter III of the contract provides that in case of impossibility of delivery of the equipment within the period of time set forth in the contract the [Seller] must refund the advance payment with annual interest to the [Buyer].

For the above stated reasons, the Tribunal finds reasonable the [Buyer]'s claim to recover from the [Seller] the sum in arrears.

     3.5 The [Buyer] brought a claim to recover from the [Seller] annual interest for the delay in returning of the advance payment at the rate of 36% of the amount of the advance payment. The delay in returning of the payment was 553 days (from 27 June 2001 to 31 March 2003). The [Buyer] made a computation of annual interest based on part 2 of Chapter III of the contract in which the parties set forth the rate of annual interest to be paid in case of a refund of the advance payment. The [Seller] did not object to the [Buyer]'s computation of annual interest.

For the above reasons and taking into account the provisions of Chapter III of the contract as well as the adverse character of the arbitration process, the Tribunal grants the [Buyer]'s claim of annual interest in the amount sought by the [Buyer].

     3.6 The [Buyer] seeks to recover from the [Seller] damages resulted from the [Buyer]'s payment of penalties imposed by the customs authorities on 11 March 2003 due to the [Seller]'s failure to perform his obligation to deliver the equipment under the contract. After reviewing the said claim, the Tribunal concludes that the materials of the case evidence the amount of damages sustained as well as the causal connection between the [Seller]'s actions and the damages sustained by the [Buyer] (see the decision issued by the customs authorities on 11 March 2003, payment order No. 276 of 18 March 2003 and payment order No. 309 of 26 March 2003 evidencing that such penalties were paid).

The Tribunal notes that in his letters of 4 November 2001 and 8 November 2002 the [Buyer] notified the [Seller] that such damages might result. Thus, the [Seller] had an opportunity to take measures necessary to prevent such damages but failed to do so.

For the above stated reasons, the Tribunal grants the [Buyer]'s claim to recover damages sustained by him.

     3.7 In support of his claim to recover expenses incurred in connection with the arbitration of the case, the [Buyer] submitted the railroad tickets of his representative, pro forma invoice No. 0004818 of 25 March 2003 and other documents.

Paragraph 9 of the Regulations on arbitration fees and expenses sets forth that a winning party may seek to recover any reasonable expenses incurred by it from the losing party.

The Tribunal finds that the [Buyer]'s expenses are reasonable and supported by documentary evidence. Thus, this claim is granted.

     3.8 Since the [Buyer] dropped and reduced some of the claims, pursuant to article 45(2) of the rules of the Tribunal, the Tribunal does not review such claims.

     3.9 In accordance with Article 6(1) of the Regulations on arbitration expenses and fees the arbitration fees paid by the [Buyer] should be recovered from the [Seller] in proportion to the amount of the claims granted.


FOOTNOTES

* This is a translation of data on Proceeding 85/2002, dated 26 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. 25 [143-148].

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 Germany 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 December 12, 2005
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