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CISG CASE PRESENTATION

Russia 30 December 2003 Arbitration proceeding 58/2003 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/031230r1.html]

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

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Case identification

DATE OF DECISION: 20031230 (30 December 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: 58/2003

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Italy (claimant)

BUYER'S COUNTRY: Russian Federation (respondent)

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: Articles 53 ; 54 ; 78

Classification of issues using UNCITRAL classification code numbers:

Unavailable

Descriptors: Unavailable

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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. 43 [248-256]

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
Russian Chamber of Commerce and Industry

30 December 2003 [Case No. 58/2003]

Translation [*] by Alexander Morari [**]

1. SUMMARY OF RULING

      1.1 Taking into account an imprecision in the arbitration clause of the contract between the parties, the International Commercial Arbitration Court at the Russian Federation Chamber of Commer ce and Industry (referred to as the Tribunal) declined Respondent [Buyer]'s statement that the Tribunal lacks jurisdiction to consider the present dispute based on the following circumstances:

   -    First, this statement was submitted with an unjustified delay after the [Buyer] presented his statement of defense, which, in accordance with art. 4 and art. 16 (2) of the Russian Federal Law "On International Commercial Arbitration", constituted a waiver of the [Buyer]'s right to object the jurisdiction of the Tribunal.
 
   -    Second, this statement by the [Buyer] is unfounded in its substance since it is clearly stated in the arbitration clause of the contract that the parties agree to refer all disputes between them to the International Arbitration Court at the Russian Federation Chamber of Commerce and Industry, that is the Tribunal.

Therefore, the fact that there is a commercial arbitration at the Moscow Chamber of Commerce and Industry, of which the [Buyer] just recently became aware, gives no ground to conclude that there was a lack of commonly agreed will of the parties to refer to the Tribunal all disputes arising out of the contract.

      1.2 Pursuant to art. 2(2) of the Russian Federal Law "On International Commercial Arbitration", the arbitration clause of the sales contract is not considered a part of the contract of guarantee, in which there was a reference to the sales contract. The Tribunal concluded that there are no grounds to consider the mentioned reference a part of the contract of guarantee. Therefore, the guarantor shall not be considered as a co-Respondent.

      1.3 Since the parties' places of business are in States parties to the Vienna Convention 1980 [UN Convention on Contracts for the International Sale of Goods (1980), hereinafter CISG], the Tribunal applied the CISG to the dispute between the parties according to art. 1(1)(a) CISG. Russian substantive law is applied as a subsidiary statute as both parties made references to it (Russian Civil Code) in documents and statements submitted to the Tribunal.

      1.4 [Buyer]'s statements that the Claimant [Seller] missed the limitation period were found groundless bearing in mind that [Buyer] repeatedly admitted its debt, which, according to art. 203 of the Russian Civil Code led to the limitation period ceasing to run. The [Buyer] acknowledged its debt a) by signing together with the [Seller] a document stating that the [Buyer] has a debt recovery of which is a subject-matter of the present action; b) by partially repaying the acknowledged amount of debt.

      1.5 The Tribunal rejected [Buyer]'s statements alleging that [Seller]'s delivery of the equipment was not in the quantity nor of the quality agreed upon in the contract between the parties. Such statements were found by the Tribunal as contradicting the materials of the case containing a document signed by the [Buyer] according to which the [Seller] fully performed its contractual obligations.

      1.6 Pursuant to art. 53 and art. 54 CISG, the Tribunal granted [Seller]'s claim to recover the principal debt and entitled the [Seller] to interest on the debt to be recovered from the [Buyer] in accordance with art. 78 CISG. The interest was calculated according to art. 395(1) of the Russian Civil Code on the basis of a certificate issued by the Central Bank of Italy indicating the average interest rate at the [Seller]'s place of business.

2. FACTS AND PLEADINGS

The action was brought by [Seller], an Italian company, against a Russian company (the [Buyer] of the equipment according to the contract of international sales of goods concluded on 1 October 1997, and a Russian body of local self-government acting as a guarantor of the [Buyer]'s obligations). Although the equipment was delivered in accordance with the contract and assembled, the [Buyer] made only partial payment. Taking into account that the [Seller] and the body of local self-government concluded a contract of guarantee, whereby the guarantor guaranteed payment under the contract with funds from local budget, the [Seller] demanded to recover jointly from the [Buyer] and the guarantor the debt with interest on it.

      2.1 The [Buyer], having initially presented its statement of defense on the subject-matter of the action, made a submission that the Tribunal lacks jurisdiction to consider the present dispute.

      2.2 The body of local self-government contested both the fact of conclusion of a contract of guarantee with the [Seller], and the Tribunal's jurisdiction to consider an action against it. It also referred to the fact that, even if it had concluded a contract of guarantee and the Tribunal had had the jurisdiction to consider the present dispute, then, according to art. 367(4) of the Russian Civil Code, the guarantee terminated since the [Seller] did not file a claim against it within one year from the date of the expiry of the term fixed for performance by the [Buyer] of the obligations secured by the contract of guarantee.

      2.3 The [Seller] submitted its objections to the reasoning by the [Buyer] and the guarantor.

3. TRIBUNAL'S REASONING

The ruling of the Tribunal contained the following main points.

      3.1 [Jurisdiction of the Tribunal]

      Considering the question of its jurisdiction over the dispute which arose out of the contract between the [Seller] and the [Buyer] concluded on 1 October 1997, the Tribunal ruled that the parties agreed in art. 12 of the contract that "all disputes and differences, which may arise out of the present contract or in connection thereof shall be referred, except when a general court has jurisdiction, to the International Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation in accordance with its rules of procedure".

The [Seller], referring in the statement of action to the mentioned arbitration clause of the contract, filed an action with the Tribunal and, acting in compliance with the Rules of Tribunal, paid the arbitration fee, appointed an arbiter and a reserve arbiter, submitted valid foundations for the action and took part in the arbitration proceedings.

When notified of the action brought against it, the [Buyer] submitted to the Tribunal a statement of defense on 17 September 2003. Later on 20 October 2003, the Tribunal received from the [Buyer] a supplement to this statement of defense, in which the [Buyer] stated that the Tribunal lacks jurisdiction to consider the present dispute since the arbitration clause of the contract clearly gives an exact name of the arbitration court. Besides, the [Buyer] stated that it only recently became aware of the fact that at the time of conclusion of the contract there were two permanently functioning arbitration courts: the Tribunal and the Chamber of Commercial Arbitration at the Moscow Chamber of Commerce and Industry, whose official names differ from the wording in the arbitration clause fixed by the parties. In such a situation, the [Buyer] believes, pursuant to art. V of the European Convention on International Commercial Arbitration, that it is entitled, based on the fact that the arbitration agreement was null and void, to raise a plea as to the Tribunal's jurisdiction over the dispute. The [Buyer], therefore, referred to art. 4 and art.16 of the Russian Federal Law "On International Commercial Arbitration" and requested the Tribunal to admit its lack of jurisdiction to consider the dispute and to terminate the arbitration. During the arbitration proceedings, the [Buyer] maintained this position.

Disagreeing with [Buyer]'s arguments against Tribunal's jurisdiction, the [Seller] submitted to the Tribunal written statements of 31 October 2003, and then, referring to these statements in the arbitral proceedings, stated that by the International Arbitration Court at the Russian Federation Chamber of Commerce and Industry the parties implied the Tribunal, which was functioning at the time of conclusion of the contract as well as at the present moment.

Having considered [Buyer]'s arguments against the Tribunal's jurisdiction over the present dispute, the Tribunal found them groundless for the following reasons:

   -    First and foremost, it should be noted that [Buyer]'s statement concerning the Tribunal's lack of jurisdiction was submitted after [Buyer] presented its statement of defense, which is in contradiction with provisions of art. 16(2) of the Russian Federal Law "On International Commercial Arbitration".
 
   -    Furthermore, this statement is unfounded in its substance, since it is clearly stated in the arbitration clause of the contract that the parties agree to refer their disputes to the Tribunal. Such a Tribunal, both at the time of conclusion of the contract as well as at the present moment, is the International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, that is the Tribunal. The latter has the jurisdiction to consider disputes arising out of international transactions, provided the place of business of at least one party is situated in another State.

Therefore, [Buyer]'s argument that at the time of conclusion of the contract there was a Commercial Arbitration at the Moscow Chamber of Commerce and Industry, of which he has only recently become aware (whereas the contract was concluded in 1997, that is about six years ago), cannot be taken into consideration by the Tribunal. Also, the Tribunal finds no grounds to invalidate the arbitration clause on the basis of [Buyer]'s reference to an incomplete name of the arbitration tribunal mentioned in the arbitration clause, since the only missing word is "commercial".

There is no doubt that it is the Tribunal the parties implied at the conclusion of the arbitration clause. This was confirmed by the [Seller] in the arbitral proceedings. Hence, based on provisions of art. 16(1) of the Russian Federal Law "On International Commercial Arbitration", the Tribunal decided that it has the jurisdiction to consider the present dispute.

      3.2 [Applicable law]

      Since the parties' places of business at the time of conclusion of the contract of 31 October 1997 were in States parties to the CISG, the Tribunal concluded that the CISG is applicable to the present dispute according to art. 1(1)(a) CISG.

Although the contract does not specify the applicable national law, both parties referred to the provisions of the Russian Civil Code in their documents and argumentation during the arbitral proceedings. Thereby, the parties agreed to apply to their disputes provisions of Russian substantive law. With this in mind, the Tribunal found that matters not covered by the CISG shall be considered with application of the subsidiary law chosen by the parties, that is the Russian substantive law.

      3.3 [The guarantee]

From the content of Contract 46/01 concluded between the [Seller] and a Russian body of local self-government of 13 January 1998 and Supplements thereof, as well as from Decree 12 issued by the head of the Russian body of local self-government of 16 March 1999, it follows that the said body of local self-government undertook an obligation to be responsible for [Buyer]'s failure to perform its obligations of payment for the equipment delivered under the contract of 1 October 1997. Therefore, under Contract 46/01, the Russian body of local self-government undertook obligations of guarantor to the [Seller] as the creditor. In this respect, in accordance with art. 361 of the Russian Civil Code the Tribunal concluded that Contract 46/01, by its legal nature, is a contract of guarantee.

      3.4 [The motion by the guarantor]

Having considered the application by the Russian body of local self-government that the Tribunal should terminate the proceedings based on Tribunal's lack of jurisdiction to consider the dispute between this body and the [Seller], the Tribunal finds this motion well-founded for the following grounds. Art. 1(2) of the Russian Federal Law "On International Commercial Arbitration" and section 2(3) of the Rules of Tribunal provide that the Tribunal considers disputes provided there is a written agreement between the parties to refer to its jurisdiction an existing or a potential dispute. Pursuant to art.7(1) of the mentioned law, an arbitration agreement can be concluded as an arbitration clause within a contract or as a separate agreement. In Contract of Guarantee 46/01 concluded between the [Seller] and the Russian body of local self-government and in the Supplement thereof, such an arbitration clause referring any dispute to the jurisdiction of the Tribunal is absent.

The Tribunal does not take into consideration the submission by the [Seller] that since in the contract of guarantee there is a reference to the contract of 1 October 1997, the arbitration clause contained in the latter covers the dispute between the [Seller] and the Russian body of local self-government (as a co-Respondent). Based on the provisions of art. 7(2) of the above mentioned law, the Tribunal does not see any grounds to consider the reference to the sales contract between the [Seller] and the [Buyer] contained in the contract of guarantee sufficient enough to make the arbitration clause of the sales contract a part of the contract of guarantee.

In view of this reasoning, the Tribunal finds that it has no jurisdiction to consider the dispute between the [Seller] and the Russian body of local self-government. In this respect, according to the Rules of Tribunal, the proceedings on the dispute in relation to the Russian body of local self-government are subject to termination.

      3.5 [The merits of the case against the Buyer]

      Turning to the merits of the case, the Tribunal regarded as unfounded [Buyer]'s submission that the [Seller] missed the limitation period.

Referring to art. 3.1 of the contract, the [Buyer] calculates the limitation period in relation to the claims against it starting from 5 February 1999 (180 days after the goods were delivered to the recipient). However, the [Buyer] did not take into account that on 19 April 2000, by signing Supplement 2 to Contract of Guarantee 46/01, which fixed the amount of [Buyer]'s indebtedness under the contract of 1 October 1997, the [Buyer] admitted having a debt to the [Seller]. In accordance with art. 203(1) of the Russian Civil Code, the performing of that action by the debtor, that is the [Buyer] in this dispute, testifies to its admitting the debt. This fact caused the limitation period to cease to run.

In accordance with clause 20 of the ruling by the Plenums of the Supreme Court of the Russian Federation and of the Supreme Arbitration Court of the Russian Federation number 15/18 of 12 and 15 November 2001, partial payment of the principal debt by the [Buyer] shall also be viewed as an action testifying to its admitting a debt in respect of cessation of the limitation period, since the [Buyer] admitted in the arbitration proceedings that on 29 April 2000 it transferred to the [Seller] a partial amount of debt indicated in Supplement 2. Due to this, the outstanding amount of [Buyer]'s debt to the [Seller] constituted the amount demanded by the [Seller] from the [Buyer].

Relying on art. 203(2) [of the Russian Civil Code], the Tribunal found that after the mentioned cessation, the limitation period for [Seller]'s claim started anew from 29 April 2000 and the time that had expired before the cessation shall not be included in the new period.

Since the statement of action was submitted by the [Seller] to the Tribunal on 11 April 2003, the action was brought against the [Buyer] within the three-year limitation period provided for in art. 196 of the Russian Civil Code.

      3.6 [Ruling on Seller's demand]

Having considered [Seller's] demand to recover from the [Buyer] the amount of the principal debt, the Tribunal finds it well-founded.

The [Seller] performed its obligations under the contract of 1 October 1997 by delivering the equipment to the [Buyer]. The equipment was delivered by motor transport, by six vehicles in the period from March to June 1998, which is confirmed by copies of motor waybills 61/73/98, 61/149/98, 61/182/98, 61/276/98, 61/300/98 submitted by the [Seller].

The [Seller] performed contractually provided assembling works necessary for installation of the equipment, as well as after-sales service of the assembled equipment, which is confirmed by clause 2 of Supplement 2 of 19 April 2000 to Contract 46/01 of 13 January 1998 signed by the [Seller] and the [Buyer].

Yet, as it follows from the materials of the case, the [Buyer] has not fully performed its contractual obligation to pay for the equipment delivered to it.

The [Buyer] did not acknowledge the action brought against it alleging that [Seller]'s delivery of the equipment was not in conformity with the quantity nor of the quality specified in the sales contract. However, this statement by the [Buyer] is contradicted by the materials of the case, as clause 2 of Supplement 2 of 19 April 2000 to Contract 46/01 states that "the [Buyer] confirms performance by the [Seller] of all necessary operations relating to the equipment in full conformity with the concluded contract". The [Buyer] has not submitted any evidence supporting its claims.

Therefore, taking into consideration that according to art. 53 and art. 54 CISG the [Buyer] must pay the price for the received goods, the Tribunal rules that [Seller]'s claim to recover the amount of principal debt from the [Buyer] is to be granted.

      3.7 [Interest]

      [Seller]'s demand to recover interest from the [Buyer] is based on art. 78 CISG. This provision entitles the [Seller] to interest on the overdue amount if a [Buyer] delays payment of the price. Since CISG does not provide for the interest rate, it shall be determined in compliance with the subsidiary applicable law, that is, Russian law. It follows from the calculations submitted by the [Seller], that the interest-rate is determined by the [Seller] in accordance with art. 395(1) of the Russian Civil Code and taking into consideration the average interest-rate in the amount of 3% on the basis of a certificate issued by the Central Bank of Italy of 31 March 2003. In this connection, the [Seller] explained that it calculated the interest not from the first day of delay in payment by the [Buyer], but 1) from 20 April 2000 on the initial amount of debt and 2) from 2 May 2000 to the date of bringing the action before the Tribunal on the outstanding amount of debt accordingly. The [Buyer] did not contest this calculation procedure in the arbitral proceedings.

Therefore, the Tribunal ruled that [Seller]'s demand to recover the interest from the [Buyer] is to be granted.

      3.8 [Arbitration fees]

      In compliance with section 6(1) of the Rules of Arbitration Costs and Excises (Supplement to the Rules of Tribunal), the arbitration excise is to be imposed on the party against which the Tribunal made a ruling, that is the [Buyer].


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Italy is referred to as [Seller] and a Respondent of the Russian Federation is referred to as [Buyer]. A second Respondent of the Russian Federation is [Buyer]'s guarantor.

** Alexander Morari, born in the Republic of Moldova; has taken part in a number of international moot courts as a member of Moldovan Team and as the coach of Russian Teams.

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