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CISG CASE PRESENTATION

Russia 24 February 2004 Arbitration proceeding 136/2003 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/040224r1.html]

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

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Case identification

DATE OF DECISION: 20040224 (24 February 2004)

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: 136/2003

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Moldova (claimant)

BUYER'S COUNTRY: United States (respondent)

GOODS INVOLVED: [-]


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 10 [Also cited: Articles 53 ; 61 ; 62 ]

Classification of issues using UNCITRAL classification code numbers:

10A [Place of business: which of multiple places of business is relevant]

Descriptors: Business, place of

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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): 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. 9 [72-75]

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

Russian Federation arbitration proceeding 136/2003 of 24 February 2004

Translation [*] by Gayane Nuridzhanyan [**]

1. SUMMARY OF RULING

     1.1 On the grounds of art. 10 of the Vienna Convention of 1980 the location of the business enterprise of the Respondent [Buyer] (USA Company) is considered the Republic of Moldova, where the branch of the company, which has concluded contract with the other USA company, is located.

     1.2 The objection of the [Buyer] to the right of claim of the [Seller], which has concluded an agency contract with a third company undertaking to provide repayment of debts of the [Buyer], was rejected, considering that the agency contract does not foresee the obligation of the agent to lodge a claim and contains direct indication that it does not exclude the right of the [Seller] to apply to the arbitration court with a claim to recover the debts from the Buyer.

     1.3 In the presence of a clause stating that Russian substantive law is applicable to the relations of the parties, the priority of application of the Vienna Convention of 1980 is acknowledged by the Tribunal, considering that the USA and the Republic of Moldova were parties to the CISG at the time of the conclusion of the contract. Russian civil legislation is to be applied as the subsidiary statute.

     1.4 The claim of the [Seller] to recover from the [Buyer] the contract penalty in the amount reduced by the [Seller] was upheld.

     1.5 The claim of the [Seller] to recover interest per annum for the period from the day of the passing of the arbitral award till the day of the actual repayment of debts was left without consideration, taking into account that [Seller] had not paid at the arbitration charges for this claim.

2. FACTS AND PLEADINGS

The claim was lodged by a US company against a branch of another US company in the Republic of Moldova in connection with partial non-payment for goods delivered under a contract concluded on 29 December 1999. The [Seller] demanded the recovery of the sum in arrears with the addition to it of a contract penalty and interest per annum for the period from the day of judgment passing till the day of factual repayment. The amount of the contract penalty was reduced 6.7 times the amount of the main sum in arrears.

The [Buyer] contested the right of the [Seller] to claim referring to the agency contract concluded by the [Seller] with a third company, which [Buyer] alleged is entitled to present the interest of the [Seller] in the issue of repayment of the debts by the [Buyer].

The [Buyer] did not present explanations in respect to the claim and his representatives did not appear at the hearings of the ICA Arbitral Tribunal (hereinafter: Tribunal)

3. TRIBUNAL'S REASONING

The award of the Tribunal addressed the following issues.

     3.1 The competence of the Tribunal

The competence of the Tribunal to adjudicate this dispute follows from the arbitration clause concluded between the parties of the contract of 29 December 1999 (paras 13.2 and 13.3 of Supplement #1) and is not contested by the parties.

     3.2 Evaluation of reasonableness of [Buyer]'s objection to the right of the [Seller] to lodge the claim

Having considered the question raised by the [Buyer] in his letter of 7 October 2003 about the right of the [Seller] to apply to the Tribunal with the claim in this dispute in the view of an agency contract concluded by the [Seller] on 23 June 2003 with a third company entitled to represent the interests of the [Seller] on the issue of the repayment of the debts by the [Buyer], the Tribunal has stated: At the hearings of the Tribunal, the representatives of the [Seller] presented properly validated agreements of 6 February and 17 September 2003 on the fulfillment of all actions necessary for the representation of the interests of the [Seller] including participation in hearings in all courts on the territory of Russia, court of arbitration included.

According to para. 2 of the agency contract, the third company (agent) undertook to provide the repayment of the debts by the [Buyer] to the [Seller] under the contract of 12 December 1999 not less than by 85% by realization of certain actions listed in the same paragraph. However, these actions do not include the direct obligation of the agent to lodge claim with the court. Moreover, para. 9.4 of the agency contract directly indicates that conclusion of the present contract does not exclude the right of the [Seller] to apply to the arbitration court with the claim to recover the debts from the Buyer.

The Tribunal has decided that phrase "arbitration court" is used here as the synonym of the word "arbitration", which according to the interpretation rules set out in art. 2 of the Law of the Russian Federation "On the International Commercial Tribunal" means "any arbitration (court of arbitration) in particular the International Commercial Arbitration Tribunal at the Chamber of Commerce and Industry of the Russian Federation". Based on the above, the Tribunal has concluded that the agency contract of 23 June 2003 not merely fails to impose on the agent the obligation to apply to the Tribunal in order to provide the repayment of the debts, but directly reserves this right to the [Seller] and the [Seller] is party to the arbitration agreement (paras 13.2 and 13.3 of Supplement # 1 to the contract), rights according to which were not assigned to the third party, so the [Seller] is entitled to apply to the Tribunal with the present claim.

     3.3 Non-appearance of the [Buyer]

Considering the issue of the absence of the representatives of the [Buyer] at the hearings of the Tribunal, the latter found that the [Buyer], having been properly notified by the summons of 27 November 2003 about appointment of the hearings on 15 January 2004, had presented a written solicitation requesting adjournment of the proceedings because of the sickness of the director of the enterprise, which was received in the Tribunal on 14 January 2004. The Tribunal concluded that since the [Buyer] had not presented documents confirming the fact of the sickness of the director of the enterprise, reason for the solicitation of adjournment of the proceedings was not valid.

The Tribunal also stated that [Buyer] failed to follow a number of other requirements of the Rules of the Tribunal, in particular, upon the receipt on 6 October 2003 of the claim papers, the [Buyer] did not present explanations within the term set by the Rules of the Tribunal.

Based on above and taking into account the position of the representatives of the [Seller] insisting on the consideration of the case in the absence of the representative of the [Buyer], the Tribunal, regarding the materials presented by the [Seller] as sufficient for the consideration of the dispute on the merits, and guided by para. 28(2) of the Rules of the Tribunal, found it possible to conduct the hearings in the absence of the representative of the [Buyer].

     3.4 The applicable law

Addressing the issue of the applicable law, the Tribunal stated that para. 13.2 of the contract of 29 of December 1999 determines Russian substantive law as law applicable to the relations of the parties in case of dispute.

Taking into account that the business enterprise of the [Buyer] that is located in the Republic of Moldova has the closest connection to the contract and its performance, and that the Republic of Moldova as well as the State, where the place of business of the [Seller] is located (the USA), at the time of the conclusion of the contract were Contracting States to the Vienna Convention of 1980, as well considering that parties did not exclude its application to the relations arising from the contract and the [Seller] has proved in the writ and confirmed at the hearings his position with respect to the applicability of the indicated Convention to the present dispute, the Tribunal on the grounds of art. 1(1)(a) and art. 10 of the Convention has concluded that the Convention is to be applied to the relations of the parties in the present dispute and that Russian substantive law is applicable as the subsidiary statute.

     3.5 Evaluation of reasonableness of [Seller]'s claims to recover from the [Buyer] the sum in arrears for the goods delivered

Considering the claims of the [Seller] on the merits, the Tribunal concludes as follows.

The materials of the case (delivery-acceptance act of 1 June 2000 and two acts of 1 July 2000) confirm that [Seller] has fulfilled its obligations as provided by the contract. However, the [Buyer] has only partially fulfilled his obligations on payment, having failed to pay in contravention of art. 53 of the Vienna Convention the sum of US dollars, claimed by the [Seller].

In the view of the above and guided by art. 61(1)(a) and art.62 of the Vienna Convention of 1980, the Tribunal finds that the claim of the [Seller] to recover from the [Buyer] the cost of the unpaid delivered goods is well-founded and is subject to satisfaction.

     3.6 Evaluation of reasonableness of [Seller]'s claims to recover from the [Buyer] the contract penalty

Considering the claim of the [Seller] to recover from the [Buyer] the contract penalty, the Tribunal with due account of the right of the [Seller] to recover the contract penalty according to para. vi of the contract of 29 December 1999 and para. 10.3 of Supplement #1 to the contract and considering that the [Seller] has essentially reduced the sum of the contract penalty which as of 12 August 2003 amounted to an amount 6.7 times exceeding the sum of the main debt, according to the calculations presented by the [Seller], and guided by para. 1, art. 330 of the Russian Civil Code admitted [Seller]'s reduced penalty claim to be subject to satisfaction.

     3.7 Evaluation of reasonableness of [Seller]'s claims to recover from the [Buyer] interest per annum for use of another's funds

The claim of the [Seller] to recover from the [Buyer] interest for the use of another's funds for the period from the day of the passing of the arbitral award till the day of the actual repayment of debts basing this claim at the LIBOR rate as of the day of the handing down of the arbitral award is left by the Tribunal without consideration since the arbitration fee for this claim was not paid.

     3.8 Payment of the arbitration fee

In accordance with para. 6.1. of the Regulations on Arbitration Expenses and Fees (Supplement to the Rules of the Tribunal at the Chamber of Commerce and Industry of the Russian Federation), the arbitration fee is imposed on the party against which the arbitral award was passed. Hence, the fee paid by the [Seller] is subject to recovery from the [Buyer].


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Moldova is referred to as [Seller] and Respondent of the United States 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 January 31, 2006
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