Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography

CISG CASE PRESENTATION

Russia 19 March 2004 Arbitration proceeding 135/2003 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/040319r1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20040319 (19 March 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: 135/2003

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: United States (claimant)

BUYER'S COUNTRY: Ukraine (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: Articles 4 ; 74 ; 78 [Also cited: Articles 53 ; 61 ; 62 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Scope of Convention (issues excluded): penalty clauses];

74A [General rules for measuring damages: loss suffered as consequence of breach];

78B [Rate of Interest]

Descriptors: Scope of Convention ; Penalty clauses ; Damages ; Interest

Go to Case Table of Contents

Editorial remarks

Go to Case Table of Contents

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. 15 [111-114]

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

Go to Case Table of Contents
Case text (English translation)

Queen Mary Case Translation Programme

Russian Federation arbitration proceeding 135/2003 of 19 March 2004

Translation [*] by Gayane Nuridzhanyan [**]

1. SUMMARY OF RULING

     1.1 The places of business of the contracting parties are in States that are Party to the Vienna International Sales Convention of 1980 (CISG) and the parties did not exclude the application of the CISG. The CISG is accordingly the governing law of the contract, with Russian substantive law as the subsidiary statute.

     1.2 On the grounds of the contract terms providing that, where fines and penalties fixed by the contract are not offset, parties are entitled to claim payment of the fines and complete compensation of losses. [Buyer] is accordingly held responsible to pay to the [Seller] the contract penalty, the amount of which was essentially reduced by the [Seller]. And, by virtue of the provisions of arts. 74 and 78 of Vienna Convention of 1980, the interest per annum was recovered for the use of monetary funds of another (in the amount for which the arbitration fee was paid by the [Seller]), as well as for the period from the date of this award till the day of factual payment of the sum of the debt. At the same time, [Seller]'s claim for recovery of the interest per annum for the period up to the date of the award for which the arbitration fee was not paid was left by the Tribunal without consideration.

2. FACTS AND PLEADINGS

The arbitration was instituted by Claimant [Seller], an American firm, against Respondent [Buyer], a Ukrainian company, in connection with incomplete payment for goods delivered under an international sale and purchase contract concluded by the parties on 28 September 2000. The [Seller] has set the claim to cover the sum in arrears, payment of the contract penalty, the amount of which was reduced by the [Seller] 21.7 times, as well as payment of the interest for the use of the funds of another from the first overdue day till the day of the factual payment at the LIBOR rate as of the day of the claim filing.

In support of his claims, the [Seller] has presented the "Accounts Revision Acts" signed by the parties, the schedule of the debts offset, suggested but not realized by the [Buyer], and the claim set up against the [Buyer].

The [Buyer] did not present explanations of his position on the claims, nor did his representatives appear at the hearings of the Tribunal.

3. TRIBUNAL'S REASONING

The award of the Tribunal addressed the following issues.

     3.1 The competence of the Tribunal

The Tribunal's competence to consider this dispute follows from the arbitration clause contained in the contract concluded by the parties on 28 September 2000 (paras 12.2-12.5 of Supplement #1) and is not contested by the parties. The present dispute falls within the scope of the subject and object jurisdiction envisioned for the Tribunal in para. 2 of the Regulation on International Commercial Arbitration Tribunal, which is a supplement to the Law of the Russian Federation "On International Commercial Arbitration" and para. 1(2) of the Rules of the Tribunal. Under such circumstances, the Tribunal has concluded that adjudication of the present dispute is within the competence of the Tribunal by virtue of para. 1 of the Rules of the Tribunal.

     3.2 Non-appearance of the [Buyer]

Having considered the issue of absence of representatives of the [Buyer] at the hearings, the Tribunal has found that, by the summons of 26 January 2004, [Buyer] was properly informed about appointment of the hearings of the case on 19 March 2004. The Tribunal stated as well that [Buyer] had not complied with a number of the requirements of the Rules of the Tribunal, in particular, after receiving the claim papers on 23 September 2003, the [Buyer] did not present explanations within the terms fixed by the Rules of the Tribunal.

Based on the above and considering the position of the representative of the [Seller] urging the consideration of the case in the absence of the [Buyer]'s representatives and regarding that the materials presented by the [Seller] suffice for the consideration of the case on the merits, the Tribunal, following para. 28(2) of the Rules of the Tribunal, found it possible to adjudicate the case in the absence of the representative of the [Buyer].

     3.3 Applicable law

In para. 12.2 of the Supplement #1 to their contract of 28 September 2000, the parties had determined Russian substantive law as the law applicable to their relations in case of dispute.

Taking into account that at the time of the conclusion of the contract, the places of business of the [Seller] and the [Buyer] were located in Contracting States to the Vienna Convention of 1980, as well as the fact that the parties had not excluded the application of the CISG to their contractual relations and that the [Seller] in his writ and at the hearings confirmed and proved his position with respect to the applicability of the CISG to the present dispute, the Tribunal based on para. (1)(a), art. 1 of the CISG concluded that the relations of the parties in the present dispute are subject to the Vienna Convention, and that Russian substantive law is applied as the subsidiary law.

     3.4 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 stated that the "Acceptance-Conveyance Act" of 6 November 2000 signed by the parties, in the materials of the case, confirms that the [Seller] has fulfilled his obligations under the contract having delivered to the [Buyer] goods in the amount indicated in this Act. The [Buyer], as it follows from materials of the case ("Accounts Revision Act" of 1 January 2003, "Schedule of the Debts Offset" of 15 March 2002 suggested by the [Buyer]), fulfilled his obligation partially and did not pay in full the sum claimed by the [Seller], in contravention of art. 53 of the Vienna Convention of 1980.

With due account of the above and following para. 1(a), art. 61 and art. 62 of the Vienna Convention of 1980, the Tribunal finds the claim of the [Seller] for the recovery from the [Buyer] of the cost of the goods delivered but not paid for valid and subject to satisfaction.

     3.5 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 has stated that such right is provided by para. (vi) of the contract of 28 September 2000 and para. 10.3 of the Supplement #1 to it. Taking into account that [Seller] has essentially reduced the amount of the contract penalty, which according to the calculations of the [Seller] as of 14 August 2003 constituted a sum exceeding the claimed sum by 21.7 times, the Tribunal following para.1, art. 330 and s.1, art. 333 of the Russian Civil Code admitted this claim to be satisfied.

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

Considering the claim of the [Seller] to recover from the [Buyer] interest per annum for the use of monetary funds of another from the first overdue day till the day of factual payment at the LIBOR rate as of the day of the claim filing in the amount of 1.14 % per annum, including the sum of the interest as of 14 August 2003 at the indicated rate, the Tribunal held as follows:

Supplement #1 to the contract (para. 10.5) provides that, where fines and penalties foreseen by the contract are not offset, parties are entitled to claim payment of the calculated fines and complete compensation of losses. The Vienna Convention of 1980 (art. 78) stipulates that interest on the sum in arrears can be recovered without prejudice to any other claim on the grounds of art. 74 of the Convention.

Taking into account the indicated provisions of the contract and Vienna Convention as well as the fact that a penalty (as a loss) is a form of property liability (although the issues about application of the penalty are not regulated by Vienna Convention), the Tribunal has found that interest per annum is to be recovered from the [Buyer] in addition to the sum of the penalty.

In the view of the absence of the agreement of the parties on the rate of the bank interest, the [Seller] has claimed to recover interest per annum at the LIBOR rate in respect to three months credits in US dollars in the amount of 1.14 %, determined according to the printout of the corresponding website as of 6 August 2003 presented by the [Seller].

Since the date of the rate of the bank interest rate stated by the [Seller] is close to the date of the claim filing - 27 August 2003 - the Tribunal, on the grounds of art. 395(1) of the Russian Civil Code found the claim of the [Seller] about application of the LIBOR annual interest rate as of 6 August 2003 in the amount of 1.14 % well-founded and subject to satisfaction.

Based on the above, the Tribunal has concluded that the claim of the [Seller] for the payment of interest per annum at the indicated rate for the period from the first overdue day till 14 August of 2003 is well-founded and is subject to satisfaction by virtue of art. 78 of the Vienna Convention of 1980.

Considering [Seller]'s claim for the payment of interest per annum for the residual period, i.e., from 15 August 2003 till the day of the factual offset of the debt by the [Buyer], the amount of which is not determined by the [Seller], the Tribunal stated that [Seller] did not pay the arbitration fee for the claim for the payment of the interest per annum for the period from 15 August 2003 till the day the arbitral award is handed down. Taking into account the above and following para. 18(2) of the Rules of the Tribunal, the latter left the claim on the payment of interest per annum for the period from the 15 August 2003 till the day of the judgment passing without consideration.

The Tribunal, on grounds of art. 395(3) of the Russian Civil Code, has found [Seller]'s claim for the payment of interest per annum for the period from the date the arbitral award is handed down till the day of factual payment at the rate 1.14 % valid and subject to satisfaction.

     3.7 Payment of arbitration fee

In compliance with para. 6.1 of the Regulations on Arbitration Expenses and Fees (Supplement to the Rules of the Tribunal), the arbitration fee is imposed on the party against which the arbitral award was handed down. Hence, the fee paid by the [Seller] is to be compensated by the [Buyer].


FOOTNOTES

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

Go to Case Table of Contents
Pace Law School Institute of International Commercial Law - Last updated February 22, 2006
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography