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CISG CASE PRESENTATION

Ukraine 28 July 2003 Arbitration proceeding (Communication equipment case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/030728u5.html]

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

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Case identification

DATE OF DECISION: 20030728 (28 July 2003)

JURISDICTION: Arbitration ; Ukraine

TRIBUNAL: Tribunal of International Commercial Arbitration at the Ukraine Chamber of Commerce and Trade

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: Unavailable

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Germany (claimant)

BUYER'S COUNTRY: Ukraine (respondent)

GOODS INVOLVED: Communication equipment


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 53

Classification of issues using UNCITRAL classification code numbers:

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

Descriptors: 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

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Russian): Praktika ofzhdunarodnogo kommercheskogo arbitrazhnogo suda pri TPP Ukraine. Vneshneekonomicheskie spory [Practice of the International Commercial Arbitration Tribunal at the Ukraine Chamber of Commerce and Industry, Foreign Economic Disputes], Kyiv, published by Praksis (2006), Case No. 21 [191-197]

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

Tribunal of International Commercial Arbitration of the
Ukrainian Chamber of Commerce and Trade

Award of 28 July 2003

Translation [*] by Gayane Nuridzhanyan [**]

PARTICULARS OF THE CASE

The International Commercial Arbitral Tribunal at the Ukrainian Chamber of Commerce and Trade (hereinafter Tribunal) having considered the action brought by Claimant [Seller], a German company, against Respondent [Buyer] an Ukrainian company, for the recovery of 10,619.19 of the main sum in arrears has decided the following.

The legal basis for the adjudication of the dispute by the Tribunal is Section 10 of Contract of 27 September 1999 according to which:

"All disputes which may arise as the result of or in connection with the present Contract shall be settled by the parties by negotiations. If the parties fail to reach an agreement the dispute shall be submitted for adjudication to the Commercial Arbitral Tribunal at the Ukrainian Chamber of Commerce and Trade. The Tribunal's award shall be final and binding upon the parties."

According to art. 2 of the Law of Ukraine "On International Commercial Arbitration," the full title of the Tribunal is the International Commercial Arbitral Tribunal at the Ukrainian Chamber of Commerce and Trade. In Section 12 of the Contract of 27 September 1999, the parties have stipulated that the applicable substantive law is civil law of Ukraine. By virtue of the resolution of the President of the Tribunal dated 21 April 2003, the Tribunal has initiated proceedings in the case. After the case was prepared, hearings were appointed for 21 July 2003 and the parties were notified of this by summons.

On 16 July 2003, the Tribunal received [Buyer]'s statement of defense of 16 July 2003 in which [Buyer] disagreed with [Seller]'s claims alleging that the action does not comply with the requirements of para. 5.1 of the Rules of Tribunal, in particular, the action does not contain complete references to Ukrainian legislation. Moreover, [Buyer] states that there is no evidence of efforts to settle the dispute by negotiations although [Buyer] does not disclaim existence of the indebtedness under the Contract according to the Mutual Accounts Revision Act of 12 March 2003.

[Seller]'s representative has presented its objections to the statement of defense. [Seller]'s representative considers [Buyer]'s objections unfounded and requests the Tribunal to satisfy its claims in full and to impose payment of the arbitration expenses on [Buyer].

At the Tribunal's proceedings of 21 July 2003, [Buyer]'s representative petitioned for postponement of the hearings in order to have a possibility to learn the materials of the case. The petition was based on the replacement of the [Buyer]'s counsel. The [Buyer] has authorized a new lawyer to present its interests in this case. The [Buyer] requested a postponement of the hearings to enable its new counsel to learn the case and to adduce arguments with regard to it.

[Seller]'s representative objected to the postponement of the hearings since in its opinion, the representative of the [Buyer] had enough time to learn materials of the case. Furthermore, at the [Buyer]'s request the Tribunal has already prolonged the term for the presentation of the statement of defense by the [Buyer]. According to the [Seller], the petition has been lodged by the [Buyer] for the purpose of delay and is considered as unwillingness to pay off admitted debts.

Having considered the [Buyer]'s petition, the Tribunal announced a break till 13:00, 28 July 2003 in order to give the [Buyer]'s new counsel the opportunity to learn the materials of the case. The parties were notified of this at the Tribunal's hearings.

At the Tribunal's hearings of 28 July 2003, [Seller]'s representatives presented an alteration of the subject of the action and increase in the amount claimed, i.e., [Seller] claimed recovery from the [Buyer] of 10,619.19 of the main sum in arrears, 25.08 of the commission paid by the [Seller] to the bank for the transfer of the registration and arbitration fee and, moreover, [Seller] claimed recovery at the expense of the [Buyer] cost of the arbitration fee.

At the hearings of 28 July 2003, the [Buyer] petitioned for postponement of the proceedings. This petition was based on the fact that on 24 July 2003 the [Buyer] had lodged an action against the [Seller] in the Commercial Court for avoidance of the Contract of equipment sale of 27 September 1999. Since this action is related to the case which is being considered by the Tribunal on recovery from the [Buyer] of 10,619.19 based on the mentioned Contract, the cases which are considered by the Commercial Court and by the Tribunal are interconnected. In view of the above, the [Buyer] requested the Tribunal to defer its proceedings till the consideration on the merits of the case on nullification of the Contract on the sale of communication equipment of 27 September 1999 brought by the [Buyer] against the [Seller].

A copy of the claim for nullification of the Contract of 27 September 1999 with incoming note of the Commercial Court dated 24 July 2004 is enclosed with the petition.

Having considered this petition, the Tribunal rejected it for the following reasons:

   -    The Contract of 27 September 1999 contains an arbitration clause (S. 10) according to which all disputes that may arise as the result of or in connection with the present Contract shall be adjudicated by the Tribunal;
 
   -    According to art. 16(1) of the Law of Ukraine "On International Commercial Arbitration", an arbitration clause which is a part of the contract shall be interpreted as an agreement that is independent of the other conditions of the contract. Moreover, a decision on the invalidity of the contract does not entail nullity of the arbitration clause;
 
   -    By virtue of art. 8(2) of the Law of Ukraine "On the Law of Ukraine on International Commercial Arbitration", if a party addresses to a state court a dispute which is the subject of arbitration proceedings, arbitration proceedings nonetheless can be initiated or continued or an arbitral award can be handed down while admissibility issues are being considered by the court.

In view of the rejection of the petition for the postponement of the proceedings, the representative of the [Buyer] lodged a challenge to the arbitral panel of the Tribunal. This challenge is motivated by the fact that since the arbitral panel has not accepted [Buyer]'s petition for postponement of the proceedings, the arbitral panel's partiality with regard to the correct and complete adjudication of the dispute can be detected. On these grounds, the [Buyer] considers lawful adjudication of the case by the arbitral panel of the Tribunal impossible.

Since [Seller]'s representatives have not agreed with this challenge, it was considered by the Tribunal according to art. 13(2) of the Law of Ukraine "On International Commercial Arbitration". This challenge was dismissed by the Tribunal on the following grounds:

   -    The [Buyer] has been familiar with composition of the arbitral panel of the Tribunal in the present case since 17 June 2003, which is the date of receipt of the summons. At the hearing of the Tribunal of 21 July 2003 the [Buyer] did not lodged any challenge to the arbitral panel of the Tribunal, nor has the [Buyer] lodged any challenge prior to the start of these hearings.
 
   -    According to art. 12(2) of the Law of Ukraine "On International Commercial Arbitration", para. 3.8 of the Rules of Tribunal, a challenge to the arbitral panel of the Tribunal can be lodged only under conditions when there exist circumstances which raise doubts as to its impartiality and independence or if the panel does not possess qualifications stipulated by the parties; the [Buyer] has not adduced any of these grounds to substantiate its challenge;
 
   -    Furthermore, according to the [Buyer], the basis for the challenge is rejection of its petition for the postponement of the proceedings by the Tribunal on the grounds that the [Buyer] has brought an action before the Commercial Court for the nullification of the Contract of 27 September 1999. However, that action was lodged by the [Buyer] contrary to arts 7, 8, 16 of the Law of Ukraine "On International Commercial Arbitration" and the arbitral clause contained in the Contract of 27 September 1999.

After the challenge to the arbitral panel was dismissed, the [Buyer]'s representative filed a petition for the postponement of the proceedings for the purpose of lodging a challenge to the arbitral panel for the second time on the basis of arts. 12, 18 of the Law of Ukraine "On International Commercial Arbitration" and paras. 2.5, 3.8, 7.5 of the Rules of Tribunal.

This petition was dismissed by the Tribunal due to the fact that, according to para. 7.5 of the Rules of Tribunal, it can defer proceedings in the case, in particular, if the party which has lodged such a claim addresses the President of the Ukrainian Chamber of Commerce and Trade in accordance with para. 3.11 of the Rules of Tribunal. However, this article sets forth the right but not the obligation of the Tribunal to defer the proceedings on the grounds foreseen in particular in para. 7.5(c) of the Rules of Tribunal. Moreover, according to art. 13(3) of the Law of Ukraine "On International Commercial Arbitration" and para. 3.11 of the Rules of Tribunal, the Tribunal can continue arbitral proceedings and can hand down an arbitral award while a request for the challenge to the arbitral panel is being considered.

OPINION OF THE ARBITRAL TRIBUNAL

Taking into account that:

1. According to the Contract of 27 September 1999, the [Seller] undertook to sell from its warehouse in Germany (Hamburg) under CIP conditions (INCOTERMS, 1990) and the [Buyer] undertook to purchase equipment for the total cost of 31,212 Deutsch Mark [DM].

2. The Contract provides that delivery of the goods shall be carried out not later than within thirty days from the moment of the bank notification of the receipt by [Seller]'s account of a pre-payment in the amount of 6,242 [DM], which is to be transferred by the [Buyer] to the [Seller]'s account not later than five days after contract signing.

3. Pursuant to the conditions of the Contract, on 4 October 1999 the [Buyer] transferred to the [Seller] the prepayment in the amount of 6,242 [DM], which was entered in [Seller]'s account on 5 October 1999. This is confirmed by relevant bank documents available in the materials of the case.

4. Pursuant to its obligations under the Contract, on 3 November 1999 the [Seller] delivered to the [Buyer] equipment to the sum of 31,212 [DM]. This is confirmed by the materials of the case and is not contested by the [Buyer].

5. In accordance with the Contract, the sum of the residual payments for the equipment delivered to the [Buyer] constitutes 24,790 [DM] and shall be transferred by the [Buyer] to the [Seller]'s account in equal parts each amounting to 4,161.66 [DM] during six months after shipment of the equipment.

6. The [Buyer] has accepted the goods. However, contrary to the conditions of the Contract, art. 53 of the UN Convention on Contracts for the International Sale of Goods (Contracting States to which are the States of the contending parties) and art. 24 of the Civil Code of the USSR envisaging obligation of the [Buyer] to pay the established price, the [Buyer] has only partially paid the cost of the delivered goods, having transferred to the [Seller] in April 2000 US $2,042.53 which were converted and entered in the [Seller]'s account on 20 April 2000 in the amount of 2,147.77.

7. In connection with transition of the member states of European Union (including Germany) to a single European currency and withdrawal of the German Mark from circulation, [Buyer]'s indebtedness in Euros according to the fixed course established for currency exchange (1,955.83) constitutes 10,619.19.

8. The Accounts Revision Act under the contract signed by the representatives of both parties on 12 March 2003 confirms the indebtedness in the amount of 10,619.19. Moreover, in its statement of defense, [Buyer] does not contest indebtedness under the contract according to the Mutual Accounts Revision Act of 12 March 2003.

9. Hence, the [Seller]'s claim for recovery from the [Buyer] of the main sum in arrears in the amount of 10,619.19 is confirmed by the materials of the case as well-founded and is therefore subject to satisfaction.

10. In view of the satisfaction of the [Seller]'s claim in full, according to S.V, para.1 of the Regulations on Arbitration Fees and Expenses, the arbitration fee paid by the [Seller] is imposed on the party against which the decision is handed down, i.e., on the [Buyer] in the present case and shall be recovered from it.

11. [Seller] as well claims to recover from the [Buyer] 25.08 which constitutes a commission paid by the [Seller] to the bank during the transfer of the registration and arbitration fee. Since payment of the commission was carried out by the [Seller] in relation to the arbitration proceedings and this claim is confirmed by the [Seller] documentarily, the commission paid by the [Seller] in the amount of 25.08 is subject to recovery from the [Buyer].

AWARD

In accordance with the conditions of Contract of 27 September 1999, art. 53 of the UN Convention on Contracts for the International Sale of Goods, arts. 161, 224 of the Civil Code of USSR, arts. 7, 8, 12, 13, 16, 18, 31 of the Law of Ukraine "On International Commercial Arbitration", paras. 3.8, 3.10, 3.11, 7.5, 8.2, 8.4-8.9 of the Rules of the Tribunal, and Section V, para. 1 of the Regulations on Arbitration Fees and Expenses, the Tribunal has decided:

The [Buyer] is obliged immediately after receipt of the present award to pay to the [Seller]:

   -      10,619.19 [main sum in arrears];
   -           635.10 [reimbursement of the expenses on payment of the arbitration fee];
   -             25.08 [commission paid by the [Seller] to the bank during the transfer of the registration and arbitration fee].

In total, the amount of the satisfied claims constitutes 11,279.37.

The judgment is final.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Germany is referred to as [Seller] and Respondent of Ukraine is referred to as [Buyer]. Amounts in the former currency of Germany (Deutsche Mark) are indicated as [DM].

** Gayane Nuridzhanyan, junior associate at the law firm Danylko, Kushnir, Solltys & Yakymyak, Attorneys & Counselors at Law, Kyiv, Ukraine <http://www.dksylaw.com/>, student at Kyiv International University with major in private international law; participant of Canada-Ukraine Parliamentary Program, member of Ukrainian team at 2005 Telders International Moot Court Competition, The Hague.

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Pace Law School Institute of International Commercial Law - Last updated December 1, 2006
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