Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography
Search the entire CISG Database (case data + other data)

CISG CASE PRESENTATION

Russia 1 March 2004 Federal Arbitration Court of the North-West Area, St. Petersburg
[Cite as: http://cisgw3.law.pace.edu/cases/040301r1.html]

Primary source(s) of information for case presentation: UNCITRAL case abstract

Case Table of Contents


Case identification

DATE OF DECISION: 20040301 (1 March 2004)

JURISDICTION: Arbitration ; Russian Federation

TRIBUNAL: Federal Arbitration Court of the North-West Area, St. Petersburg

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: A21-4040/03-C1

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russia

BUYER'S COUNTRY: Norway

GOODS INVOLVED: Hull of a ship


UNCITRAL case abstract

RUSSIAN FEDERATION: Federal Arbitration Court of the North-West Area, St. Petersburg
[No. A21-4040/03-C1] 1 March 2004

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/145],
CLOUT abstract no. 1373

Reproduced with permission of UNCITRAL

Abstract prepared by A. I. Muranov, National Correspondent, D. L. Davydenko and D. D. Yalaletdinova

A Russian company, which identified itself as the seller, appealed to the Court to overrule the Russian Federal Tax Service's decision on its use of value-added tax (VAT) exemption in relation to international sales.

The company entered into a contract with a Norwegian firm concerning the partially constructed hull of a ship. After receiving advance payments from the firm and delivering the hull, the company had a dispute with the Russian tax authorities about its use of VAT exemption. The company believed that the contract was a sales contract, whereby, pursuant to Russian tax legislation, the money received for the goods was not subject to VAT. The Federal Tax Service considered that the contract was a contract for the performance of work, and not a contract for the supply of goods, in as much as the materials for the construction of the hull were supplied by the Norwegian firm.

The courts of first and second instance ruled that the company's position was well-founded, on the grounds that the subject matter of the contract was the supply of goods. The Federal Arbitration Court of the North-West Area (the court of third instance) overturned the verdicts of the lower courts and ordered a retrial at the court of first instance, on the following grounds.

The quantity of material supplied by the party should be taken into account when determining the type of contract. Under article 3 CISG, contracts for the supply of goods to be manufactured or produced are to be considered sales contracts unless the party that ordered the goods undertook to supply a substantial part of the materials necessary for the manufacture or production of those goods. In other words, if that party supplied a large part of the materials necessary for the manufacture of the goods, the contract might be considered a construction contract. However, this was not the decisive factor in the classification of the contract in question as a supply or construction contract but should be assessed in conjunction with the other terms of the contract concluded by the parties.

It was clear from the content of the contract that the Norwegian firm had extensive rights regarding the construction process of the hull. The contract provided for the firm's right at any point to request alterations, additions or modifications to the hull or to change the order. Grounds for termination of the contract included the non-fulfilment of schedules and delays in the performance of the stages of work according to the schedule. Moreover, if any of the conditions stipulated by the contract were conceded to be unfulfilled, the firm had the right to take the hull away from the company and complete the construction wherever it deemed necessary.

According to an addendum to the contract, the title of the contract had been changed to: "A contract for the construction and delivery of a partially constructed hull". In addition, according to a new version of one of the contract schedules, the company was required to complete and deliver a partially constructed steel hull, including materials, in the amount and to the specifications laid down by the firm.

With the acceptance report, the parties had confirmed that the company had constructed the hull for the firm. The extent of the work performed and the workmanship met the conditions and requirements of the contract. It was also clear from the contract that construction of the hull was to be completed in Norway and that ownership would pass to the firm upon completion.

The courts had not sufficiently analysed the provisions of the applicable regulations and contract documents. The question of the quantity of materials and equipment supplied by the Norwegian firm had not been examined, although the company had specifically referred to this matter. It had not been established whether this factor was significant in relation to the terms of the contract.

It was essential to determine to what contract type the contract concluded actually belonged and for what the proceeds of sale had been received. The decision on the tax exemption depended on the decision concerning the nature of the proceeds received, namely, whether they related to the delivery of the goods or the work performed.

Go to Case Table of Contents

Classification of issues present

APPLICATION OF CISG: [-]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 3

Classification of issues using UNCITRAL classification code numbers:

Unavailable

Descriptors: Unavailable

Go to Case Table of Contents

Editorial remarks

Go to Case Table of Contents

Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Russian): online database of court judgements <http://kad.arbitr.ru>

Translation: Unavailable

CITATIONS TO COMMENTS ON DECISION

Unavailable

Go to Case Table of Contents
Pace Law School Institute of International Commercial Law - Last updated August 26, 2014
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography