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CISG CASE PRESENTATION

Ukraine 10 December 2003 Tribunal of International Commercial Arbitration, Ukrainian Chamber of Commerce & Trade [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/031210u5.html]

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

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Case identification

ASSIGNED DATE OF DECISION 20031210 (10 December 2003)

JURISDICTION: Arbitration ; Ukraine

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: Unavailable

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: [-] (respondent)

BUYER'S COUNTRY: Ukraine (claimant)

GOODS INVOLVED: Goods


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 30 ; 74

Classification of issues using UNCITRAL classification code numbers:

30A [Obligations of the seller];

74A [General rules for measuring damages: loss suffered as consequence of breach]

Descriptors: Delivery ; 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): Gazeta "Advocatura", No. 8, 10 December 2003

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
at the Ukrainian Chamber of Commerce and Trade

Date assigned to case: 10 December 2003
[Date of case currently unavailable; assigned date is
date the case was published in Gazeta "Advocatura"]

Translation [*] by Mykhaylo Danylko [**]

The Tribunal of International Commercial Arbitration at the Ukrainian Chamber of Commerce and Trade (hereinafter Tribunal) heard at the hearing a case arisen from action of Claimant, a Ukrainian company, [Buyer], against Respondent, a foreign company, [Seller] to recover $141,962.00 of debt, including $128,215.00 of the price of prepaid goods that were to be delivered but had not been delivered, $13,747.00 for losses suffered due to additional expenses incurred in connection with technical repair of the goods, and also compensation of the arbitration fees, paid by the [Buyer].

The legal ground for arbitration of the case by the Tribunal is Clause 9 of Contract # 15/125 concluded between the [Buyer] and Ukrainian Representative Office of the [Seller] on 17 December 1997, according to which all disputes and misunderstandings arising from or in connection with this contract that cannot be settled by mutual negotiations, should be settled by the Tribunal in accordance with the Rules of Tribunal. The Tribunal found that the material law of Ukraine is the law applicable to the contract.

Having reviewed the materials of the case and having heard the representatives of the parties, the Tribunal found that on 17 December 1997 the [Buyer] and [Seller], through the [Seller]'s Representative Office in Ukraine, entered into a sales contract to supply the goods according to the specification, which is Annex #1 to the mentioned contract; the particular quantity and the terms of delivery were to be agreed by the parties additionally by method of sending of the written request from [Buyer] to [Seller]; the goods were to be delivered from the licensed customs warehouse of the [Seller]'s Representative Office in Ukraine; the main condition of transfer of the part of goods to the [Buyer] was a prepayment in the amount of 30 percent of the price of the goods to the bank account of the [Seller] according to the agreed schedule of deliveries.

The contract also provided that the price of the goods was fixed in the US Dollars and is defined in the specification (Annex #1) to the contract. The [Buyer] was obligated to make a settlement of payments with [Seller] separately for each delivery, beginning from the moment of transfer of the lot of goods on the basis of bills of lading and other shipping documents turned over to the [Buyer], by transferring the payment in US Dollars or in Ukrainian Hryvnas (according to the rate of the National Bank of Ukraine at the date of payment) to the bank account of [Seller].

After conclusion of the contract, the [Seller]'s Representative Office in Ukraine sent to the [Buyer] a letter, signed by the director of the Representative Office, in which he asked the [Buyer] to pay the sum of 420,000.00 Ukrainian Hryvnas on the account of performance of the contract.

On 29 December 1997, the [Seller]'s Representative Office transferred to [Buyer] the bill of lading for receiving the goods in the sum of 450,678.00 Ukrainian Hryvnas, including VAT.

      -   Referring to the fact that in February-April 1998, on the basis of the contract and the documents received from the [Seller], the [Buyer] made a payment to the bank account of [Seller] in the sum of 256,000.00 Ukrainian Hryvnas (56.8 percent of the cost of three units of the goods), that the [Seller] breached Clause 3.5 of the contract and failed to deliver the goods, and left the claim of [Buyer] without consideration alleging that the [Buyer] did not pay the full price of the goods.
 
      - In March 2001, [Buyer] filed an action with the Tribunal to recover from [Seller] the sum partially paid for undelivered goods in the amount of $128,215.00 and losses in the amount of $13,747.00 suffered due to additional expenses incurred in connection with technical repair of the goods that were to be delivered, in total $141,962.00, and also to recover compensation for the arbitration fees. [...]

On 1 June 2001, the Tribunal received the [Seller]'s response to the claim, in which he asked to dismiss the [Buyer]'s claim, alleging that:

      -   The contract concluded between the [Buyer] and the [Seller]'s Representative Office in Ukraine was preliminary, since it did not contain all essential terms of the sales contract, which were to be agreed by parties in the specification (Annex # 1) to the contract. In this connection, the [Seller] considered the payment made by the [Buyer] in the sum of 181,000.00 Ukrainian Hryvnas, but not in the sum of 256,000.00 Ukrainian Hryvnas, as the [Buyer]'s proposal to agree the essential terms of the contract.
 
      - On 29 December 1997, the parties concluded the sales contract by transfer to the [Buyer] of the title document (bill of lading) to the goods. Since at the conclusion of this contract the mandatory written form was not observed, by virtue of Arts. 45 and 48 of the Ukrainian Soviet Socialistic Republic Civil Code the mentioned sales contract is void. Therefore, the [Buyer] should return to the [Seller] all goods received under this contract, i.e., in accordance with Art. 128 of the Ukrainian Soviet Socialistic Republic Civil Code, [Buyer] should transfer the goods by transferring the title document.
 
      - Furthermore, the case cannot be a subject of arbitration at the Tribunal under the international sales contract concluded on 29 December 1997, in connection with non-observance of its written form, i.e., because of the lack of parties' agreement as to the place of settlement of disputes.

At the hearing of the Tribunal, the [Buyer] presented his objections to the merits of the [Seller]'s response to the action and also additional documents: the letter from the [Seller]'s Representative Office of 21 December 1997 addressed to the [Buyer]; technical documentation for the goods; certificates on settlement of payments between the Representative Office of [Seller] and [Buyer]; [Seller]'s Representative Office's claim of 19 October 2000; letter from the [Seller] of 16 March 1999 addressed to the deputy director of its Representative Office in Ukraine. [...]

In his objections, disputing the [Seller]'s arguments that the contract of 17 December 1999 was a preliminary contract, the [Buyer] explained that the [Seller]'s letter of 21 December 1997, invoice of 29 December 1997 and bill of lading of 29 December 1997 had reference to the contract of 17 December 1997 and included the description of the goods, their quantity, price, total cost; thus together, particularly with the Annex to the contract of 17 December 1997, they constitute a single whole [contract] evidencing that the contract has been concluded in accordance with law.

The [Buyer]'s director also explained that having passed to [Buyer] the technical documentation for the goods, the [Seller] in fact refused to pass over [the goods] demanding full payment, which is a breach of the conditions of the contract, according to which the settlements were to be made separately for each delivery, beginning from the moment of transfer to the [Buyer] of the lot of the goods. With this, the [Buyer] referred to the letter of [Seller] of 16 March 1999 addressed to its Representative Office in Ukraine, by which the [Seller]'s deputy director obliged its Representative Office to suspend the delivery to [Buyer] of three units of the goods.

The [Buyer]'s representatives urged the Tribunal to completely uphold the [Buyer]'s claim.

The [Seller]'s representatives objected to [Buyer]'s claim to recover $128,215.00. They explained that the invoice to which the [Buyer] referred did not concern this contract, since there was a reference to the order of 12 December 1997, but not to the above mentioned contract, and, besides this the invoice was issued for the sum of 450,678.00 Ukrainian Hryvnas including VAT, while the contract stipulated that the price of the goods was to be calculated in US Dollars with a zero rate of VAT.

As to the claims of [Buyer] to recover the losses in the sum of $13,747.00, the [Seller] also objected to them, alleging that the guaranty service of his goods was carried by his specialized service centers established throughout Ukraine and the [Seller] did not authorize the [Buyer] to make the technical repair of the goods by himself.

Taking into account that:

1. The parties concluded the contract for the sale of goods of [Seller].

2. The case materials disprove [Seller]'s arguments that the contract was not being performed by the parties because of the absence in it of the essential terms of sale; because the payment, made by [Buyer] in the sum of 181,000.00 Ukrainian Hryvnas should be deemed as [Buyer]'s proposal to agree to those terms; because the transfer to the [Buyer] of the bill of lading and of the invoice was made by [Seller] not on the account of performance of the present contract.

In particular, in his letter of 21 December 1997 the director of the [Seller]'s Representative Office in Ukraine asked the [Buyer]'s director to transfer to the bank account of the Representative Office 420,000.00 Ukrainian Hryvnas on account of performance of the contract of 17 December 1997.

On 29 December 1997, the [Seller] transferred to the [Buyer] a bill of lading for receiving of three units of the goods for the total sum of 450,678.00 Ukrainian Hryvnas including VAT, and also the invoice for the payment according to the contract of the sum of 375,565.00 Ukrainian Hryvnas of the cost of three units of the goods, which were to be shipped on 29 December 1997.

The allegation of [Seller] that the invoice had no connection to the contract of 17 December 1997 since there is a reference in it to the contract of 12 December 1997 cannot be found reasonable since the [Seller] did not present to the Tribunal the contract dated 12 December 1997 and the [Buyer] at the hearing of the Tribunal explained that the contract of 17 December 1997 was concluded between the parties under the # 15, but in the documentation of [Buyer] it is registered under # 15/215 and also the date 12 December 1997 in the invoice instead of 17 December 1997 was written by mistake.

The [Seller] confirmed in further correspondence with [Buyer] formalization of the bill of lading and the invoice in order to transfer to the [Buyer] three units of the goods under the contract of 17 December 1997.

Under these circumstances, the Tribunal found that the sending by [Seller] to [Buyer] of the letter requesting transfer the sum of 420,000.00 Ukrainian Hryvnas on account of performance of the contract and [Seller]'s transferring to [Buyer] of the bill of lading and of the invoice are actions of the [Seller] aimed at performing provisions of the contract agreed by the parties.

3. Therefore, according to the contract of 17 December 1997, the letter of the [Seller] of 21 December 1997, the bill of lading and the invoice, the [Seller] was obligated to deliver to the [Buyer] the goods for the total cost of 450,678.00 Ukrainian Hryvnas, including VAT, on the conditions DDP -- licensed customs warehouse of the [Seller]'s Representative Office in Ukraine (Incoterms 1990).

4. The [Buyer], as a partial prepayment of the price for the goods, transferred to the [Seller] the sum of 256,000.00 Ukrainian Hryvnas, which is confirmed by the [Buyer]'s banking orders for the sum of 15,000.00 Ukrainian Hryvnas, also by a letter of [Buyer] addressed to the Chief of the Department of Railway at the [Buyer]'s place to transfer to the bank account of the [Seller]'s Representative Office in Ukraine the sum of 60,000.00 Ukrainian Hryvnas, and by a letter of [Buyer] addressed to the director of the [Seller]'s Representative Office asking to accept the sum of 60,000.00 Ukrainian Hryvnas, transferred to the bank account of the Representative Office on the account of mutual settlement of payments between the parties.

The [Seller]'s allegation that the [Buyer] transferred to the Respondent not 256,000.00 Ukrainian Hryvnas, but only 181,000.00 Ukrainian Hryvnas on the account of payment for the goods is disproved by the abovementioned documents and by the claim of the [Seller]'s Representative Office in which the Representative Office confirmed the receipt from the [Buyer] of the sum of 256,000.00 Ukrainian Hryvnas as a payment of the cost of three units of the goods according to the contract.

5. According to the Clause 3.5 of the contract, the [Seller] had to deliver the goods after the [Buyer] made a prepayment of 30 percent of the cost of goods. The [Buyer] performed this term on 17 March 1998 (the prepayment consisted of 166,000.00 Ukrainian Hryvnas), after which the [Buyer] once more transferred 90,000.00 Ukrainian Hryvnas (on 31 March 1998 and 30 April 1998).

The [Seller], having breached Clause 3.5 of the contract, failed to deliver the goods, explaining this because from the moment of transfer to the [Buyer] of the bill of landing, the [Buyer] was obligated to make the final settlement for the goods, which is confirmed by the [Seller]'s letter addressed to its Representative Office obligating it to suspend the delivery of goods to the [Buyer], and also by the response to the [Buyer]'s claim.

6. The [Seller]'s insistence on full payment of the price for the goods from the moment of transfer to the [Buyer] of the bill of lading contradicts Clause 5.1 of the contract, according to which the settlement for each delivery of the goods should be made from the moment of transfer of the lot of goods, but not of the bills of lading. The goods had not been delivered to the [Buyer], which is a violation of Art. 30 of the Vienna Convention 1980 [UN Convention on Contracts for the International Sale of Goods (1980) (hereinafter CISG)], and Art. 224 of the Ukrainian Soviet Socialistic Republic Civil Code.

7. At the hearing of the Tribunal, the [Seller]'s representatives confirmed that the goods had not been transferred to the [Buyer].

8. According to Art. 231 of the Civil Code of the Ukrainian Soviet Socialistic Republic Civil, if seller in breach of the contract does not transfer the goods to buyer, the buyer has a right to refuse performance of the contract and to claim the recovery of losses.

9. Under such circumstances, the Tribunal found reasonable the claim of [Buyer] to recover from [Seller] the partially paid price for the goods that were to be delivered, but had not been delivered because of fault of the [Seller].

10. Taking into account that in accordance with Part 4 and Clause 5.1 of the contract. the price of the goods and the total price of the contract was set in US Dollars and that the payment should be made in the US Dollars or in the national currency of Ukraine according to the current exchange rate of the National Bank of Ukraine at the date of payment, the sum of the debt of [Seller] should be recovered in US Dollars.

The [Buyer] made a wire to pay for the goods in the amount of 256,000.00 Ukrainian Hryvnas that at the exchange rate of the National Bank of Ukraine at the date of payment amounts to $128,098.00, but not to $128,215.00 as stipulated in the statement of action. Therefore, Tribunal granted the claim of [Buyer] partially, in the sum of $128,098.00 to recover from [Seller] the advance payment for the undelivered goods under the contract.

11. The Tribunal dismissed the claims of [Buyer] to recover losses in the sum of $13,747.00 he had suffered due to the additional expenses incurred in connection with technical repair of the goods that were to be delivered by the [Seller] under the contract on the following basis.

The [Buyer], to ground his claims, referred to the fact that he, after the proposal of [Seller], in June 1998 at his warehouse made a technical adjustment of the goods with the aim to further transfer the goods to [Buyer] and to transport them to his place, in connection with which he suffered additional losses in the sum of $13,747.00.

The [Seller], objecting to the claim in that part, presented a report, according to which in the territory of Ukraine in the period from 1997-1998 the repair and service of [Seller]'s products, including guaranty service, were carried by specialized service centers established throughout Ukraine, in connection with which the [Seller] asserted, that he did not authorize and could not authorize [Buyer] to make the technical adjustment of the goods by himself.

The [Buyer] presented no evidence that the works on technical adjustment of the goods were carried out by instruction of [Seller]. Taking into account the abovesaid, the Tribunal dismissed the [Buyer]'s claim to recover from [Seller] the losses in the sum of $13,747.00.

12. According to section 5, para. 2 of the Rules of Tribunal on Arbitration Fees and Expenses, when a claim is granted partially, the arbitration fees are to be put on the Respondent pro rata to the amount of granted claims and on the Claimant pro rata to that part of claims that were dismissed.

When filing his action, the Claimant [Buyer] paid arbitration fees in the sum of 33,913 Ukrainian Hryvnas. Since the claims were granted in the sum of $128.098.00 (90.23% of the price of action), the arbitration fees in the sum of $5,647.00 are to be put on the Respondent [Seller]. The arbitration fees in the sum of $611.00 are to be put on [Buyer].

Guided by terms of the contract of 17 December 1997, Art. 30 CISG, Arts. 224 and 231 of the Ukrainian Soviet Socialistic Republic Civil Code, Art. 31 of the Law of Ukraine on the Tribunal of International Commercial Arbitration, Arts. 8(4) - 8(9) of the Rules of Tribunal, section 5, para. 2 of the Rules of Tribunal on Arbitration Fees and Expenses, the Tribunal decided:

      -   To require the [Seller] to pay to [Buyer] immediately after receiving this judgment the sum of $128,089.00 as a recovery of the prepaid price for the undelivered goods and also $5,647.00 as a compensation of arbitration fees; and
 
      - To dismiss the rest of the claims.

The judgment is final.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Ukraine is referred to as [Buyer] and Respondent, a foreign company, is referred to as [Seller].

** Mykhaylo Danylko is a Partner with the law firm Danylko, Kushnir, Soltys & Yakymyak, Attorneys & Counselors at Law, Kiev, Ukraine <http://www.dksylaw.com>. He holds a Master of Laws (European Studies Program) from the Law School of International Business Science and Technology University, Kiev, Ukraine (July 2000); a Master of Management in Business of the Business School of International Science and Technology University, Kiev, Ukraine (June 2002); and has received his LL.M. in International and Comparative Law at the Pace University School of Law.

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