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CISG CASE PRESENTATION

Ukraine 12 January 2004 Arbitration proceeding (Automobile tires) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/040112u5.html]

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

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Case identification

DATE OF DECISION: 20040112 (12 January 2004)

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: Ukraine (claimant)

BUYER'S COUNTRY: Czech Republic (respondent)

GOODS INVOLVED: Automobile tires


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 77

Classification of issues using UNCITRAL classification code numbers:

77A [Obligation to take reasonable measures to mitigate damages]

Descriptors: Mitigation of loss

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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 Mezhdunarodnogo kommercheskogo arbitrazhnogo suda pri TPP Ukrainy. 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. 51 [439-444]

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

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

Award of 12 January 2004

Translation [*] by Gayane Nuridzhanyan [**]

The International Commercial Arbitral Tribunal at the Ukrainian Chamber of Commerce and Trade (hereinafter Tribunal) having considered the action brought by [Seller], Ukrainian LLC against [Buyer], a Czech company, for the recovery of:

[SELLER]'S CLAIM

   -    US $696.27 [the underpayment in a sale of US $6,546.82];
   -    A penalty for payment delay in the amount of US $985.22; and
   -    Losses in the form of a fine levied by the tax authority according to the Law of Ukraine "On the Procedure for the Settlement of Payments in Foreign Currency" in the amount of US $4, 865.33

has decided the following.

      The legal basis for the adjudication of the dispute by the Tribunal is the arbitration clause of the Contract # 231 concluded by the parties on 19 February 2002, according to which disputes connected with the conclusion, fulfilment, amendment and cancellation of the contract are to be considered by the Tribunal in accordance with the substantive and procedural law of Ukraine.

The subject of Contract # 231 of 19 February 2002 is the sale of assorted automobile tires in the general amount of US $5,835,230.93, in the quantity and at the price set forth in the specifications (Supplement #1 to the Contract).

The price of each consignment of the goods delivered by the [Seller] is subject to payment by the [Buyer] in US dollars by the transfer of monetary funds to the [Seller]'s account within 90 days from the date of delivery.

Pursuant to the provisions of the Contract, the [Seller] has delivered to the [Buyer] several consignments of automobile tires in the agreed assortment in the general sum of US $250,099.30. The last delivery in the sum of US $1,216.40 was completed by the [Seller] on 10 September 2002.

During the period from 23 August till 10 December 2002, the [Buyer] made payments to the [Seller]'s in the amount of US $249,403.30. This is an amount that was US $696.27 less than required.

In view of the underpayment, on 26 September 2003, the [Seller] commenced this suit. By virtue of the resolution of the Tribunal President of 29 September 2003 the Tribunal has initiated proceedings in the case.

[BUYER]'S DEFENSE

In its statement of received by the Tribunal on 26 November 2003, the [Buyer] did not dispute the underpayment of US $696.27 of the price of the automobile tires received under Contract # 231 of 19 February 2002, but presented a set-off defense. And the [Buyer] objected to [Seller]'s claim for US $6,546.82. Buyer alleged:

      First, on the basis of art. 217 of the Ukrainian Civil Code, [Buyer]'s obligation to pay the remainder of the price of the automobile tires delivered under Contract # 231 of 19 February 2002 in the amount of US $696.27 is offset by counterclaim [Buyer] has against the [Seller] in this same amount representing the price of metal cord that was not delivered by the [Seller] under another contract, Contract # 230 of 19 February 2002. [Buyer] alleges that this is confirmed by the Mutual Accounts Revision Act during the period of the validity of the mentioned Contract between [Buyer] and [Seller] of 9 September 2002, a copy of which is enclosed with [Buyer]'s statement of defense;

      Second, with due account of the above, the payment delay did not take place and therefore [Seller]'s claim to recover the penalty in the amount of US $985.22 is unfounded;

      Third, losses in the amount of US $4,865.33 caused by the payment of the fine for the breach of the procedure of the settlement of the accounts in the foreign currency should be borne by the [Seller] , as they occurred through [Seller]'s own fault, since it did not take all the measures for the mitigation of such losses.

After the composition of the Tribunal, proceedings were appointed on 12 January 2003.

At the Tribunal's hearings [Buyer]'s representative confirmed his viewpoint and petitioned for rejection of the action of the [Seller].

OPINION OF THE ARBITRAL TRIBUNAL

Taking into account that:

   1.   The subject of the consideration in the present case is Contract # 231 concluded by the parties on 19 February 2002.
 
   2. Under this Contract, the [Seller] delivered to the [Buyer] automobile tires in the agreed assortment in the general amount of US $250,099.30. The [Buyer] has accepted this delivery but has only paid for it partially in the sum of US $249,403.03, paying US $696.27 less than required. These facts are confirmed by the Mutual Accounts Revision Act for the period of the validity of the Contract # 231 of 19 February 2002 between [Buyer] and [Seller] of 9 December 2002, signed by the representatives of the parties, whose signatures are ensealed and recognized by the [Buyer].
 
   3. [Buyer]'s arguments on cessation of the obligation to pay the cost of the goods to the same sum by the unilateral offset of the counterclaim arising out from Contract # 230 of 19 February 2002 between [Buyer] and [Seller] on the basis of art. 217 of the Civil Code of Ukrainian Soviet Social Republic cannot be taken into consideration by the Tribunal since fulfilment of Contract #230 is not the subject of the present case and is beyond the competence of the present Tribunal.
 
   4. With due account of the above, [Seller]'s claim for the recovery from the [Buyer] of US $696.27 for the remainder of the price of the goods is well-founded and is subject to satisfaction.
 
   5. The [Seller] delivered the last consignment of the goods to the [Buyer] at the price of US $1,216.40 on 10 September 2002. This is admitted by the [Buyer] in the statement of defense and by [Buyer]'s representative at the Tribunal's hearings.

In conformity with para. 5.2 of Contract # 231, the price for the goods was to be paid within 90 days from the date of delivery, i.e., before 12 December 2002.

As of the date [Seller] has brought this action against the [Buyer], the latter has delayed payment of the goods for 238 days. Therefore, according to para. 9.3 of the Contract, the [Buyer] is obliged to pay to the [Seller] a penalty in the amount of 0.5 % of the non-paid sum for each late day.

Thus, a penalty in the amount of US $985.22 for 283 late days claimed by the [Seller] is to be recovered from the [Buyer].
 

   6. As for the [Seller]'s claim to also recover from the [Buyer] of the losses in the sum of US $4,865.33 caused by the payment of the fine for the breach of the currency legislation to the budget of Ukraine, this claim is not be satisfied.

According to art. 77 of the UN Convention on Contracts of International Sale of Goods of 1980 (CISG) "a party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting from the breach". Article 4 of the Law of Ukraine "On the Procedure for the Settlement of Payments in Foreign Currency" envisages that at the Tribunal's receipt of the action of a resident on recovery of debts from a non-resident arising as a result of non-observance by the non-resident of the terms established by the export-import contract, the calculation of the penalty for the currency that has not been received is suspended and the penalty for this period is not paid. Hence, had the [Seller] addressed this subject in time for the protection of the violated rights, [Seller] would have a possibility to prevent these losses; however, this was not done.

Therefore, there is no legal basis for the [Seller] to recover these losses in the amount of US $4,865.33 from the [Buyer].
 

   7. In total, [Seller] is entitled to satisfaction in the amount of US $1,681,49 which constitutes 25.68 % of the claimed amount. According to para. 2, S.V of the Regulations on Arbitration Fees and Expenses, the arbitration fee is divided between the parties in proportion to the satisfied claims; in particular: 25.68 % is to be paid at the expense of the [Buyer] and 74.32 % at the expense of the [Seller].

AWARD

Following the conditions of Contract # 231 of 19 February 2002 and Specification # 1 to the Contract, art. 77 of the Vienna Convention, arts 161, 178, 179, 224 of the Civil Code of the Ukrainian Soviet Socialist Republic, and arts 8.4-8.9 of the Rules of the Tribunal, the Tribunal has decided:

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

   -    The remainder of the debt for the goods in the amount of US $696.27;
   -    US $985.22 for the penalty for the payment delay; and
   -    US $308.16 as reimbursement of the expenses on payment of the arbitration fee.

In total the amount of the satisfied claims constitutes US $1,989.65. All other action claims are rejected.

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 [Seller] and Respondent of Czech Republic is referred to as [Buyer].

** 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 August 17, 2006
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