Russia 3 February 2004 Arbitration proceeding 71/2003 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/040203r1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 71/2003
CASE HISTORY: Unavailable
SELLER'S COUNTRY: [-] (claimant)
BUYER'S COUNTRY: Russian Federation (respondent)
GOODS INVOLVED: Goods
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
4B [Scope of Convention (issues excluded): validity]; 53A [Buyerís obligation to pay price of goods]; 78B [Rate of interest]
4B [Scope of Convention (issues excluded): validity];
53A [Buyerís obligation to pay price of goods];
78B [Rate of interest]
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (Russian): Rozenberg, Praktika of Mezhdunarodnogo kommercheskogo arbitrazhnogo suda pri TPP RF za 2004 g. [Practice of the International Commercial Arbitration Tribunal at the Russian Federation Chamber of Commerce and Industry for 2004] Moscow (2005) No. 4 [42-47]
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Queen Mary Case Translation Programme
3 February 2004 [Case No. 71/2003]
Translation [*] by Guyane Nuridzhanyan [**]
1.† SUMMARY OF RULING
1.1† Since the Respondent [Buyer] did not present evidence that a contract of factoring had been concluded between the [Seller] and third party or that a cession of creditorís rights had taken place, the objections of the [Buyer] to the right of the Claimant [Seller] (party to the contract) to sue the [Buyer] in connection with non payment of the goods delivered were rejected.
1.2† On application of the Vienna Convention of 1980, the validity of an Additional agreement between the parties shall be determined according to the norms of the subsidiary statute (i.e., Russian substantive law), since the Vienna Convention does not concern the validity of the contract or any of its provisions (art. 4 of the Convention). However, interpreting the contract the Tribunal concluded that the contract contains a condition on the moment of the beginning of the computation of the payment term and thus, the issue of invalidity of the Additional agreement is baseless whereas the agreement on such an essential point as the term of the payment is absent.
1.3 †Failure of the [Seller] to present the proof of the rate of interest per annum in the place of its location entailed refusal to satisfy [Seller]ís demands of the payment of interest based on art. 78 of the Vienna Convention of 1980 and art. 395 of Russian Civil Code. The baselessness of the [Seller]ís computation at the refinance rate in the place of deptorís location was especially noted.
2.† FACTS AND PLEADINGS
The claim was lodged by a foreign firm [Seller] against a Russian organization [Buyer] in connection with the incomplete payment for goods delivered according to an international sales contract concluded between the parties on 8 April 2002. The contract was of a general nature. It envisaged execution of single deliveries on terms set forth in additional agreements fixing quantity, range of goods, form and terms of payment of such single deliveries. The contract also provided the possibility to derogate from the general provisions of the contract while fixing the conditions for the single delivery. According to the contract, the payment for the goods delivered was to be made during a period of 120 days starting with the day of the delivery. On 8 April 2002, the parties altered the text of the contract envisaging that delivered goods would be subject to monthly payment to the extent that the [Buyer] takes the goods by execution of the settlement of accounts on the basis of the [Buyer]ís report on the realization of the goods.
On the 1 August 2002, the parties concluded an Additional agreement on single delivery envisaging settlement of the account for it during 120 days including specific payment bank details. The payment for this single delivery was only partly executed by the [Buyer] and, in this connection, the [Seller] raised a demand to pay off the debts.
On the request of the [Buyer] of 18 July 2002, the [Seller] supplied a second consignment of goods in respect to which specific conditions of payment were not stipulated. Although the [Buyer] has taken part of these goods, he did not settle accounts of the [Seller].
The [Seller] demanded the extinguishment of the sum in arrears for two consignments of the goods indicated above with added on interest per annum as well as reimbursement of the arbitration fee and expenses for the lawyersí services.
The [Buyer] contested the demands of the [Seller], presenting following main arguments:
First, [Seller] has no rights of suit in respect to the first consignment of the goods since the [Seller] has assigned the right of such demand to a third party.
Second, the Additional agreement between the parties in respect to the second consignment is invalid since it does not contain provisions on the terms of payment (the moment of the beginning of its computation), i.e., in the agreement the essential condition of the contract is lacking. Therefore, regarding the second consignment, general provisions of the payment for the goods in proportion to the realization of the goods operate.
The [Seller] presented objections to the arguments of the [Buyer] insisting on the satisfaction of his claims. As for the issue of not the realized part of the second consignment, it will be settled separate from these arbitration proceedings.
3. TRIBUNALíS REASONING
The award of the Tribunal contained the following basic points.
3.1 The competence of the Tribunal
The competence of the Tribunal to consider the present case is based on art. 11.1, which is the arbitration clause of the contract concluded by the parties. According to that arbitration clause, "all disputes and differences which may arise from the present contract or in connection with it, except for those subject to the jurisdiction of common courts, are to be settled at the International Commercial Arbitration Tribunal at the Chamber of Commerce and Industry of Russian Federation (Moscow) in compliance with the Rules of the Tribunal."
The Tribunal also states that the dispute between the parties concerns contractual relations arisen during realization of international economic ties; the enterprise of the [Seller] is registered abroad, therefore this dispute thereby comes under the notion of disputes which, according to the Law of Russian Federation "On International Commercial Arbitration" and the Rules of the Tribunal, can be considered by the Tribunal.
Bringing the case before the Tribunal by the [Seller] as well as submission of the response to the claim by the [Buyer], according to art. 16 of the Law of Russian Federation "On International Commercial Arbitration" testifies that the parties acknowledge the competence of the Tribunal to consider the present dispute.
The composition of the Tribunal was formed according to the Rules of the Tribunal; there were no comments on the composition of the Tribunal.
3.2† The applicable law
With respect to the issue of the law applicable to the legal relations of the parties to the present case, the Tribunal stated that, according to art. 11.2 of the contract concluded between the parties, issues not regulated by the contract are regulated by the Vienna Convention of 1980 (CISG). In respect to issues not regulated by this Convention, the relations of the parties to the contract are subsidiarily regulated by the law of Russian Federation.
3.3† Evaluation of the resonableness of [Seller]ís claims
†† Addressing the claims of the [Seller] on the merits of the case, the Tribunal has stated the following:
Neither in the materials of the case, nor during the oral hearings have the parties presented evidence that a contract of factoring had been concluded between the [Seller] and a third person or that a cession of the rights had taken place. This implies that rights of demand remain with [Seller], i.e., Claimant. Nevertheless, as it was confirmed by the representatives of the parties in the course of the oral hearings, partial execution of the contract in favor of a third party by the [Buyer] was admitted by the parties as a proper fulfillment of the contract, since the [Buyer] executed instruction of the party according to the contract, and by virtue of art. 312 of the Russian Civil Code such fulfillment is fulfillment in favor of the [Seller].
Moreover, in the opinion of the Tribunal, the Additional agreement of 1 August 2002 presented by the parties cannot be considered as a contract of factoring or cession, since it does not contain any conditions giving grounds for such interpretation, and contains only conditions about change of the recipient by the specific invoice. Hence, the Additional agreement mentioned cannot entail transfer to a third party of the right to demand proper fulfillment of the obligations to pay for the goods delivered by the [Seller].
The Tribunal finds it possible to agree with the statement of the [Buyer] that the Additional agreement of 1 August 2002 does not contain provisions indicating alteration of the general conditions of the payment for the goods fixed in art.5.1 of the contract in the edition of the additional agreement of 8 April 2002. However, the Tribunal considers the [Buyer]ís statement groundless and unrelated to the merits of the case since the indicated Additional agreement alters the payment conditions of the specific single delivery of the goods.
The Tribunal finds baseless the arguments of the [Buyer] concerning the fact that parties did not reach an agreement on such essential condition of the contract as payment term relating to the single delivery of the second consignment since the term of payment envisaged by the parties, i.e., 120 days, is to be interpreted together with all the other conditions of the contractial relations of the parties and in particular with art. 5.1 of the contract, which provides for affixment of the payment terms to the date of delivery as a general condition. The Tribunal finds the [Buyer]ís reference to arts. 191, 314 and 432 of the Russian Civil Code baseless and unrelated to the circumstances of the present case, since these articles stipulate the terms of the fulfillment of the obligations and the beginning of its flow and not the moment of the beginning of its calculation.
3.4 Evaluation of reasonableness of [Seller]'s claim to recover from the [Buyer] the sum in arrears for the goods delivered
The fact of the delivery by the [Seller] of two consignment of the goods indicated in the writ is documentarily proved and is not contested by the [Buyer].
In respect to the second consignment of the goods, the Tribunal based itself on art. 5.1 of the contract in the edition of the Additional agreement of 8 April 2002, according to which the goods delivered shall be paid for in proportion to their realization by the [Buyer]. The payments for the goods shall be executed monthly on the basis of the reports of the [Buyer] on the goodsí realization. The [Seller] has presented the [Buyer]ís report confirming the fact of the realization of part of the goods delivered in the second consignment.
Under such conditions, based on arts. 53, 61, 62 of the Vienna Convention, the Tribunal finds that the claim of the [Seller] for payment for the goods delivered and taken by the [Buyer] is well-founded and true. On these grounds, the claims of the [Seller] for the payment of the sum of the main debt for these goods is subject to satisfaction in full.
On the basis of art. 2.3 of the contract according to which parties are entitled to adjust in respect to each single delivery conditions different from general conditions and valid only for this single delivery, the parties have agreed on the special conditions of the payment for the goods delivered in the first consignment. As it was indicated in invoice, signed by the plenipotentiaries of both parties as well as confirmed by the parties later in the Additional agreement of 1August 2002, the goods delivered by this invoice were to be paid for by the [Buyer] in full within 120 calendar days starting with the day of delivery. The goods delivered by that invoice were only partially paid for by the [Buyer], which is acknowledged by the [Buyer].
In the light of the above, the Tribunal finds that, according to arts. 53, 61 and 62 of the Vienna Convention, the claim of the [Seller] for payment for the goods delivered to the [Buyer] is well-founded and true. On these grounds, the claim of the [Seller] for payment of the sum in arrears is subject to satisfaction in full.
3.5 Evaluation of reasonableness of [Seller]'s claims to recover from the [Buyer] the interest per annum
In respect of the [Seller]ís claim to collect interest for use of anotherís monetary funds, the Tribunal states:
The claim of the [Seller] for interest per annum on the sum of the main debt is based on art. 78 of the Vienna Convention of 1980 envisaging the right of a party to the interest from the overdue sum without prejudice to any other claim if the other party has failed to pay on time.
Since the amount of the interest per annum is not determined by the Vienna Convention, it is to be determined according to art. 395 of the Russian Civil Code. According to that article, the amount of the interest per annum is defined by the existing rate of bank interest in the location of the creditor at the day of execution of the bill of debt or its corresponding part. The [Seller] in contravention of art. 395 of Russian Civil Code presented the calculation of the interest per annum on the basis of the rate of refinancing by the Central Bank of Russian Federation, i.e., on the basis of the rate of bank interest existing in the debtorís location.
In the light of the above, the Tribunal rejects the claim of the [Seller] about collecting that amount of interest per annum.
3.6. Evaluation of reasonableness of [Seller]'s claims to recover from the [Buyer] the expenses incurred by the [Seller]
†† In respect to the claim of the [Seller] to reimburse the expenses on the legal services, the Tribunal states:
As evidence of the expenses for legal services, the [Seller] has presented the agreement of 1 April of 2003 on the arbitration case legal support and payment order of 11 April of 2003.
The right of the party, in favor of whom the decision was made, to impose on the other party the reimbursement of the incurred reasonable expenses connected with the arbitration proceedings, in particular, expenses owing to protection of a partyís interest by legal representatives, is provided by para. 9 of the Regulations on Arbitration Expenses and Fees.
The Tribunal considers that with due consideration of the complexity of the case and on the basis of the criterion of the requirement of reasonableness and proportionality, the [Seller]ís claim for the payment of legal services is subject to half-pay.
3.7 Evaluation of reasonableness of [Seller]'s claims to recover from the [Buyer] the arbitration fee
In relation to the claims of the [Seller] for reimbursement of the expenses for payment of the arbitration fee, the Tribunal, guided by para. 6(2) of the Regulations on Arbitration Expenses and Fees, imposes on the [Buyer] reimbursement of the fee proportionally to the amount of the satisfied claims
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Respondent of the Russian Federation is referred to as [Buyer] and Claimant of another country is referred to as [Buyer].
** Gayane Nuridzhanyan, junior associate at the law firm Danylko, Kushnir, Soltys & 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.Go to Case Table of Contents