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CISG CASE PRESENTATION

Argentina 2 July 2003 Juzgado Comercial [Commercial Court] Buenos Aires (Arbatax S.A. Reorganization Proceeding) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/030702a1.html]

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

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Case identification

DATE OF DECISION: 20030702 (2 July 2003)

JURISDICTION: Argentina

TRIBUNAL: Juzgado Comercial No. 26 Secretaria No. 51, Buenos Aires

JUDGE(S): Dr. Rodolfo A. Ramirez

CASE NUMBER/DOCKET NUMBER: Unavailable

CASE NAME: Arbatax S.A. Reorganization Proceeding

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Uruguay

BUYER'S COUNTRY: Argentina

GOODS INVOLVED: [-]


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 9 ; 54 [Also cited: Article 7 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Scope of Convention (issues excluded): mandatory currency conversion rules, currency of payment];

9B [Implied agreement on international usages];

54A [Obligation to pay price: enabling steps]

Descriptors: Scope of Convention ; Validity ; Currency issues ; Incoterms ; Usages and practices ; Price

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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

Spanish: CISG-Spain and Latin America website <http://www.uc3m.es/uc3m/dpto/PR/dppr03/cisg/rargen13.htm>

CITATIONS TO TEXT OF DECISION

Original language (Spanish): CISG-Spain and Latin America website <http://www.uc3m.es/uc3m/dpto/PR/dppr03/cisg/sargen13.htm>

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

Juzgado Comercial (Commercial Court of Original Jurisdiction) No. 26
Arbatax S.A., Reorganization Proceeding

Buenos Aires, 2 July 2003

Translation [*] by Juan Manuel Falabella [**]

Pursuant to the conditions hereof and the evidence herein, the grounds provided by the trustee in the individual report, having expired the periods prescribed by sections 33, 34 and 35 of Act No. 24522 and pursuant to section 36 thereof; IT IS ORDERED, ADJUDGED AND DECREED that:

  1. Any claim and priority proposed by the trustee, which has not been opposed by either the trustee, the debtor or any creditor, be allowed.

  2. Those claims which had been challenged by the trustee, who proposed the allowance of a claim of a different amount or consideration, and which were not opposed by the parties concerned, be allowed pursuant to the opinion of the trustee.

  3. Those claims or that claim filed by SERGIO DOS SANTOS be disallowed.

[...]

20. CLAIM FILED BY DANCOTEX S.A.

Textil del Sur S.r.l. opposed this claim by representing that:

   -    The person who asserts to be the attorney-in-fact of the alleged creditor has not signed the proof of claim;
   -    The capacity to act in a judicial proceeding has not been proved;
   -    The reciprocity required by section 4 of L.C. [Reorganization Proceedings Act] has not been observed;
   -    The effective delivery of the alleged sold goods has not been proved by the documentary evidence; and that
   -    The claim should have been "pesified" [converted into Argentina's legal tender] pursuant to Executive Order No. 214/02.

The trustee, in the individual report, states that:

   -    With respect to the lack of signature of the alleged attorney-in-fact, although the copy examined by debtor was not signed, the copy in possession of the trustee was indeed signed;
   -    The power of attorney granted to perform out-of-court procedures is sufficient, given the fact that the proof of claim filed before a trustee is an out-of-court act;
   -    Regarding the fact that reciprocity has not been proven, the trustee maintains that such requirement can be demonstrated by evidencing the absence of a relevant distinction in the foreign law, which may arise not only from the law but also from case law and custom;
   -    The knowledge the judge hearing the domestic reorganization proceeding has with respect to the reciprocity is sufficient to prove such reciprocity, even in the case the petitioner has not yet moved for it;
   -    With regard to the observation on the lack of evidence of delivery of the goods, the petitioner, in fact, extended evidence of receipt of goods.
   -    With respect to the currency applicable to the transaction, the trustee manifests that the claim is excluded from "pesification", pursuant to Executive Order No. 410/02; thus, according to the trustee, the claim should be allowed in dollars.

In the first place and in connection with the power of attorney borne by petitioner, it should be noted that, whereas in order to file a proof of claim, legal counsel is not necessary, the power of attorney submitted to such end granting powers to act in legal proceedings is also beyond the requirements.

Reciprocity; Governing law

With regard to the objection that has been raised in connection with the fact that reciprocity has not been proven, it should be mentioned that the reciprocity requirement under section 4 of Act No. 24522 is not applicable to this case for the claim that was filed should be decided pursuant to the rules of the Treaty of Montevideo on International Terrestrial Commercial Law 1940.

In this domestic reorganization proceeding, a claim was filed by a Uruguayan exporter, who shall be denominated "foreign creditor", in contrast to the denomination "local creditors" which, under such Treaty, is meant to refer to those creditors whose claims should be cancelled within the state (section 46 of the Treaty.) The concurrence of the domestic proceeding with the claim which place of performance is Uruguay -- upon the grounds which will be discussed hereinbelow provides "multinationalizing" elements which, when related to the legal systems of two signatory States of the abovementioned Treaty, confirm it as the governing law.

It also is worth mentioning that section 53 of the abovementioned Treaty states that, when appropriate, the rules concerning bankruptcy therein contained will be applicable to "reorganization proceedings" or other similar remedies.

In this framework, section 40 of the Treaty grants international jurisdiction on reorganization matters to the competent courts of the domicile of the corporation. Therefore, having the corporation undergoing a reorganization proceeding at its domicile in this city, the jurisdiction of this court is confirmed under this Treaty. It should be mentioned that, by operation of section 48 of the aforementioned set of rules, in those cases in which, pursuant to the Treaty, there is a case for only one proceeding, all of the debtor's creditors shall file their claims and prove their rights in accordance with the law and before the court of the State that has opened the proceeding. Whence, the pertinence of the petition under analysis.

On the other hand, it is worth noting that section 48 of the Treaty of Montevideo on International Terrestrial Commercial Law 1940 also establishes a priority in favor of "local creditors" over foreign creditors, over the estate located in that State; however, it should be pointed out that this provision refers to a case of adjudication in bankruptcy; thus, it should be construed that, being the case herein a reorganization proceeding, such deferral or priority provision does not automatically govern this case and only does so, in the scope therein set, with regard to a bankruptcy proceeding but, in a reorganization, it is not possible to apply a priority that, by its nature, only governs straight bankruptcy proceedings.

For the abovementioned reasons, it is sensible to conclude that the admissibility of a petition filed by a foreign creditor in a reorganization proceeding, under the Treaty of Montevideo, need not comply with the reciprocity requirement of section 4 L.C. because such Act is a local rule of conflict of laws; and conventional rules shall prevail pursuant to the constitutional principle that awards superiority to International Treaties over local legislation (section 31 of the Federal Constitution).

Law governing the currency aspects of the claim

It is evident that, in this local reorganization proceeding, a proof of claim filed by a Uruguayan exporter shall be governed by Argentine conflict of laws on reorganization matters, since Argentine courts have jurisdiction over the case given the fact that debtor's domicile is within the State of such courts (section 40 mentioned ut supra). Therefore, Argentine law shall govern the reorganization proceeding, as a domestic proceeding, in connection with that which has not been expressly prescribed by the Treaty. However, the aforementioned does not constitute a standard with respect to the determination of the law which shall govern the claim, its scope and amount. Thus, the governing law will depend on the nature of the obligation.

The contractual relationship between the parties, arising from the evidence herein, does not express any choice by the parties with regard to the governing law in case of conflict. That is to say, the evidence herein does not prove the existence of an express agreement on the choice of the local law as the governing law of the contract and this determines the fact that the contract shall be governed by its own material rules and the rules of local private international law shall only be applicable by default and, in case the parties have not chosen to settle their conflicts under a certain law, to determine the law governing the contract with respect to all those issues that parties have not considered by virtue of the exercise of their material autonomy.

According to what has been said, in this case, pursuant to the terms and conditions of the contract and considering the lack of reference made by the parties with respect to the governing law in the event of any controversy, the substance of the transaction shall be governed by the Argentine conflict of laws in connection with international contracts (in this case, the Vienna Convention on Contracts for the International Sale of Goods 1980, in force between Argentina and Uruguay) since both parties have their places of business in signatory States (article 1). Only if the case could not be decided applying the general principles of the Convention, the court may apply the rules of private international law of the lex fori (article 7, paragraphs (1) and (2) of the Convention) and, by default, sections 1209 and 1210 of the Civil Code.

In this framework and taking into consideration, in the first place, the terms and conditions of the contract -- material autonomy -- it is clear that the evidence herein proves the entity of a consideration for this claim with regard to its existence and enforceability, by means of which the parties entered into an international contract for the sale of goods, with terms and conditions specifically agreed upon, and that such transaction was governed by a FOB Montevideo clause, which specifically and materially included terms of the Official Rules for the Interpretation of Trade Terms of the Paris International Chamber of Commerce.

It is worth mentioning that such rules aim at providing a set of international regulations, of an optional nature, to establish a basis for construing the main kinds of contracts applied for the international sale of goods, in connection with the delivery of the goods, the passing of risk, the distribution of expenses as well as the necessary documentary formalities to cross the borders of the different States.

In this case, in connection with the agreement on the abovementioned clause (FOB), as well as in CIF-CF clauses, international custom dictates that the law of the place of shipping shall govern the case, and that such place is generally the same place of seller's domicile (cf.. Boggiano A. Derecho Internacional Privado T. II p. 384).

It is worth noting the fact that, when parties have not made any express reference to such rules as INCOTERMS 2000, as in this case, but it is agreed "a contract for the sale of goods with a simple reference to any of the terms of the aforementioned rules (FOB, in this case), the agreed clause shall govern the case if it does not clash with the rules and customs generally applicable to the corresponding transaction. It must be stated that the Vienna Convention on Contracts for the International Sale of Goods, governing this case, establishes in its article 9 that parties are bound by any usage to which they have agreed and by any practices which they have established between themselves, but parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned. In this case, the agreed clause -- FOB -- shall be considered as part of the so called F terms, which require that seller hand over the goods to be shipped in accordance with buyer's instructions. Specifically, the term FOB means "free on board" and entails the fact that the seller should hand over the goods when they pass over the ship's rail at the agreed place of shipping. This means that buyer must bear all costs and risks of loss or damage suffered by the goods from that particular place. The FOB term binds the seller to ship the goods to the custom for exportation (cf. INCOTERMS 2000 of the International Chamber of Commerce).

In accordance with the documentary evidence herein, the claim duly proved shall be allowed. However, the agreed rules do not make any express reference to the variations in the form and exchange rate of the payment currency, an issue present in this case.

At this point, in the absence of any provision, the law applicable by default shall govern, given the fact that the parties have not chosen the governing law. Therefore, by default, Argentine conflict of laws, in force with Uruguay (i.e., the Vienna Convention), shall be applied.

Out of the principles of the Vienna Convention 1980, it emerges, from article 54 thereof, that buyer's obligation to pay the price "includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made." However, the Convention makes no reference to the currency with which the payment shall be made, an issue that should be expressly foreseen in the agreement or it should be determined pursuant to the governing domestic law under conflict of laws (cf. Compraventa Internacional de Mercaderías Garro Alejandro M. & Zuppi Alberto L., Bs. As., Ed. Larrocca, 1990, p. 222 y sgtes).

By virtue of the Vienna Convention (article 7 thereof), Argentine conflict of laws -- lex fori -- shall govern the issue. Such law, applicable by default, dictates that the law of the place of performance shall govern the validity, nature and obligations of the contract (sections 1209 and 1210 of the Civil Code).

In this case, although the place of performance has not been expressly agreed upon (section 1212 of the Civil Code), it may be affirmed, unequivocally, that the place of performance is implicitly but clearly stated when, the seller having its domicile in Uruguay, the delivery of the goods is agreed in accordance with a FOB clause, shipment in Montevideo. It is clear that the law of the agreed place of performance was the Uruguayan law and by operation of sections 1209 and 1210 of the Civil Code, the law of the place of performance governs the formation, nature, validity, obligations and any other issue, of any nature, in connection with the contract. It is further stated that, given the fact that, in this case, parties have not agreed on a clearly stated governing law and the issue has not been foreseen by the Vienna Convention, Argentine conflict of laws (lex fori) shall apply.

Such conflict of laws may be set aside, in our State and in this case, by operation of the police power laws emerging from economic emergency laws (Act No. 25561, Executive Order No. 214/02 and agreeing ones) that establish, in principle, for individuals, the "pesification" of those legal relationships arising under the Convertibility Act (Act No. 23982) since such rules are mandatory laws of the lex fori, which cannot be disregarded and shall prevail over parties' will. Nevertheless, this case is an exception provided by police power laws in Executive Order No. 410/02.

Indeed, in this scenario, the claim concerned does not fall within the scope of the currency conversion into pesos set forth in section 1 of Executive Order No. 214/02 because it is a private sector transaction to pay a sum of money in foreign currency, for which performance the foreign law shall apply (Uruguayan law) since it is an event expressly considered in Executive Order No. 410/02, section (1), subsection (e) and in Communication A 3507, 3561, 3566 B.C.R.A [Central Bank of the Argentine Republic] that excludes the obligations to pay a sum of money in foreign currency of the public or private sector from the currency conversion into pesos.

Given the fact that Uruguayan laws shall govern this case, the claim shall be allowed in foreign currency (US dollars) at the exchange rate of the effective time of payment, unless otherwise agreed by the parties in the framework of a plan of arrangement.

RULING

Wherefore, it is ordered, adjudged and decreed:

      That the claim filed by DANCOTEX S.A. for US $57,089.30 and AR $50 be allowed as an unsecured non-priority claim (section 248 L.C.).


FOOTNOTES

* All translations should be verified by cross-checking against the original text.

** Juan Manuel Falabella is a participant in the 16th annual Willem C. Vis International Commercial Arbitration Moot representing the School of Law, Universidad de Buenos Aires. He has attended the Summer Institute in International and Comparative Law, Stetson University and has Sworn Legal Translation credentials, School of Modern Languages, Pontifica Universidad Catolica Argentina.

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Pace Law School Institute of International Commercial Law - Last updated October 23, 2008
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