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CISG CASE PRESENTATION

Russia 28 June 2004 Arbitration proceeding 167/2003 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/040628r1.html]

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

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Case identification

DATE OF DECISION: 20040628 (28 June 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: 167/2003

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Cyprus (claimant)

BUYER'S COUNTRY: Kazakhstan (rrespondent)

GOODS INVOLVED: [-]


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 53 [Also cited: Articles 7 ; 61 ; 62 ; 63 ]

Classification of issues using UNCITRAL classification code numbers:

53A [Buyer's obligation to pay price of goods]

Descriptors: Price

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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. 33 [253-258]

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 167/2003 of 28 June 2004

Translation [*] by Gayane Nuridzhanyan [**]

1. SUMMARY OF RULING

      1.1 The Respondent [Buyer] has stated that national court of his country lacks jurisdiction in respect to the dispute between the Claimant [Seller] and the [Buyer] in view of the arbitration clause present in the contract of the [Seller] with a third party, which provides consideration of the dispute in the arbitration court. Thereby, the [Buyer] has admitted the obligation of the arbitration clause in the relations between the [Seller] and the [Buyer].

      1.2 The ruling of the court of the [Buyer]'s country (Republic of Kazakhstan) on lack of jurisdiction to consider the present dispute in national courts and on the competence of the arbitration court to consider this dispute on the basis of the Convention on Legal Redress and Legal Relations in Respect to Civil, Family and Criminal Cases (Russia and Kazakhstan are Contracting States to it) is admitted as valid in the territory of Russia without special proceedings.

      1.3 In the absence of the agreement of the parties on the applicable law, it is determined by the International Commercial Arbitral Tribunal (hereinafter, Tribunal) on the basis of the conflict of laws norm considered applicable by the Tribunal. Since the dispute between the parties arises from an international sales contract, the Vienna Convention of 1980 (CISG), which is a component of the Russian legal system, is taken into consideration. The norms of the Russian Civil Code are applied as the subsidiary law.

      1.4 Taking into consideration that the [Buyer] has acknowledged the sum of the [Seller]'s claim, the Tribunal has obliged the [Buyer] to pay the [Seller] amount of the main sum in arrears with added interest in the amount defined by the parties. As for the fine for the payment delay, the Tribunal took into account the good will of the [Seller] expressed in the reduction of the amount of the fine and acknowledged that [Seller]'s actions comply with principles on which art. 333 of the Russian Civil Code is based (reduction of the penalty amount when it is obviously disproportionate with the consequences of the violations of the obligations).

      1.5 On the basis of the Rules of the Tribunal (para. 10 of its Supplement), reimbursement in full of the arbitration fee paid by the [Seller] is imposed on the [Buyer] taking into account that claimed demand was fully admitted by the [Buyer], which is reflected in the common document signed by the [Seller] and the [Buyer] prior to the lodging of the claim.

2. FACTS AND PLEADINGS

The action was brought by Claimant [Seller], a Cyprian firm, against three companies of the Republic of Kazakhstan. [Seller] concluded an international sales contract with one of these companies, the [Buyer], on 15 March 1997 on the conditions DDU destination place in the Republic of Kazakhstan. The [Seller] has fulfilled the conditions of the contract, however, the [Buyer] has not fulfill its payment obligations. On 10 December 1997, the [Seller] and the [Buyer] signed a protocol by which the [Buyer] acknowledged the sum of the debts. More than once, the [Seller] and the [Buyer] have signed schedules of the debt's offset.

Later, on 14 September 1999 the [Seller] and another company of the Republic of Kazakhstan agreed upon the sum of the general debts under this contract and that company undertook to offset the sum of the debts.

On 7 October 2000, the [Buyer] has signed with the [Seller] a protocol by which the [Buyer] has admitted the sum of the debts under the contract; the parties have also set the debt's offset schedule. However, the [Buyer] has not paid the admitted indebtedness.

The [Seller] had lodged a claim in the Regional Court of Kazakhstan at the [Buyer]'s location with a demand to recover the debts from the [Buyer]. In the course of the consideration of that claim, the [Buyer] has stated that according to the conditions of the contract concluded by the [Seller] and the [Buyer], the disputes in respect to such debts are to be settled by the arbitration court. On this basis, the [Buyer] sought to have those proceedings discontinued.

The ruling of the Regional Court of the Republic of Kazakhstan of 10 October 2002 by which proceedings on the claim of the [Seller] were dissolved on the basis of the [Buyer]'s statement, was reversed by the Resolution of 28 December 2002 of the Board of Civil Cases of the Kazakhstan Republic Supreme Court on grounds of [Seller]'s appeal. However, the Supervisory Board of the Kazakhstan Republic Supreme Court, on submission of the President of the Kazakhstan Republic Supreme Court on 18 March 2003, cancelled the resolution of 28 December 2002 of the Board of Civil Cases of the Kazakhstan Republic Supreme Court and reinstated the ruling of the Regional Court of 10 October 2002.

The [Seller] initially lodged the claim before the Tribunal against all three companies of the Kazakhstan Republic; later the [Seller] claimed the recovery of the sum only from the [Buyer], excluding from the proceedings the two other companies of the Kazakhstan Republic.

The [Seller] seeks: payment of the amount of the main sum in arrears, which includes the interest agreed in the contract and the penalty for the payment delay and reimbursement of [Seller]'s expenses on payment of the arbitration fee as well.

Neither the [Buyer] nor the other indicated companies of the Kazakhstan Republic presented statements of defense to the Tribunal or objections to the competence of the Tribunal; their representatives have not appeared at the Tribunal's hearings.

In the course of the arbitration proceedings, the [Seller] reduced the amount of the claim in respect to the sum of the penalty.

3. TRIBUNAL'S REASONING

The award of the Tribunal contained the following basic points.

      3.1 Non-appearance of the Respondents

Considering the issue of the absence of the representatives of the Respondents on the hearings of 28 June 2004, the Tribunal has stated that notification of the postal service testifies that claim papers as well as notice of appointment of the hearings on the case on 21 April and 28 June 2004 were in advance in compliance with requirements of the Rules of Tribunal delivered to the Respondents.

Therefore, the Tribunal in conformity with art. 3(1) of the Law of the Russian Federation "On International Commercial Arbitration" took measures to duly notify the Respondents about the claim lodged against them, and about the date and place of the hearings.

However, representatives of the Respondents have not presented a statement of defense and have not appeared either at the first hearing (21 April 2004) or at the second hearing (28 June 2004) of the Tribunal regardless of the fact that the hearings were postponed mainly because of the absence of the representatives of the Respondents at the hearing of 21 April 2004.

Since there were no objections or declarations or hindrances for the hearing of the case from the side of the Respondents as well taking into consideration the application of the [Seller] to consider the case in the absence of the Respondents, the Tribunal guided by art. 25 of the Law of the Russian Federation "On International Commercial Arbitration" and para. 28(2) of the Rules of the Tribunal, considers it possible to hear the present case in the absence of the Respondents' representatives.

      3.2 The competence of the Tribunal

Para. 10 of the contract # 6/97 of 15 March 1997 enclosed with the writ by the [Seller] contains the following arbitration clause:

"All disputes and disagreements which may arise from the present contract and which cannot be settled by means of negotiations shall be brought before the Arbitration provided such disputes do not fall within the jurisdiction of the general courts. Arbitration is to be formed in Moscow in accordance with the Rules of the Chamber of Commerce and Industry of the Russian Federation."

Art. 52, S. III "Recognition and Execution of the Decisions" of the Convention on Legal Redress and Legal Relations in respect to Civil, Family and Criminal Cases (Minsk, 22 January 1993), which came into force on 19 May 1994 and was signed and ratified by Russia and Kazakhstan in 1994, provides that court decisions of the Kazakhstan Republic which in its character do not require execution are recognized in the territory of Russia without special proceedings.

Following art. 52, the Tribunal has concluded that the Regional Court of the Kazakhstan Republic and the Supervisory Board of the Kazakhstan Republic Supreme Court have stated that the present dispute, in accordance with the position of the [Buyer], is to be settled in the arbitration court in compliance with the arbitration clause of Contract # 6/97 of 15 March 1997.

As follows from the statements of the national courts of the Kazakhstan Republic, the [Buyer] has directly recognized the competence of the Arbitral Tribunal formed in Moscow in accordance with the Rules of the Russian Chamber of Commerce and Industry for settlement of the disputes involved in the suit lodged by the [Seller] against the [Buyer] in connection with non-fulfillment of the obligations to offset the debts under Contract # 6/97 of 15 March 1997.

Since, as of the date of the conclusion of this contract, the only arbitration body at the Chamber of Commerce and Industry of Russian Federation competent to settle disputes of such nature between the Cyprian firm and the company of Kazakhstan Republic was the International Commercial Arbitral Tribunal at the Chamber of Commerce and Industry of the Russian Federation, the Tribunal concludes that the parties intended the International Commercial Arbitral Tribunal at the Chamber of Commerce and Industry of the Russian Federation in spite of the inaccurate wording of the arbitration clause.

On the basis of the arbitration clause of the contract which was recognized by the [Buyer] as applicable to the settlement of the present dispute between the parties, the Tribunal guided by arts. 7 and 16 of the Law of the Russian Federation "On International Commercial Arbitration" adjudged itself as the arbitration institution (arbitration court) competent to consider the present dispute. This is in accordance with the Rules of the Tribunal at the Chamber of Commerce and Industry of the Russian Federation (came into force on 1 May 1995) approved by the President of the Chamber of Commerce and Industry of the Russian Federation on 8 December 1994 in compliance with para. 1 of the Regulations on the Tribunal which is Supplement # 1 to the Law of the Russian Federation "On International Commercial Arbitration".

      3.3 Applicable law

Addressing the issue of law applicable to the relations between the parties, the Tribunal has found that parties had not agreed on the applicable law in the contract.

The [Seller] requested the Tribunal to determine the applicable law on the basis of the conflict of laws norm which [Seller] considered applicable.

The [Buyer], who has avoided participation in the hearings, has not present a statement of defense, and has not expressed his point of view with regard to applicable law, had however insisted on the competence of the Tribunal at the Chamber of Commerce and Industry of the Russian Federation to consider the present dispute. Thus, having committed consideration of the dispute to the Tribunal, the [Buyer] has as well committed to the Tribunal the solution of the issue of applicable law.

According to para. 13 of the Rules of Tribunal, art. 28 (2) of the Law of the Russian Federation "On International Commercial Arbitration", the Tribunal has applied conflict of laws norm lex fori and states that Russian law is applicable to the present dispute as the law of the place of adjudication of the dispute, consideration being given to the Vienna Convention of 1980 as a component part of Russian legal system.

The grounds for application of the Vienna Convention of 1980 are art. 15(4) of the Constitution of Russian Federation and art. 7(2) of the Russian Civil Code as well as art. 1(1)(b) of this Convention. By virtue of art. 7(2) of the Vienna Convention of 1980, norms of Russian Civil Code are to be applied subsidiary to the issues which are not directly regulated in the Convention and cannot be solved by the general principles on which the Convention is based.

      3.4 Evaluation of reasonableness of [Seller]'s claims on the merits

The Tribunal has found that the dispute has arisen in connection with non-fulfillment of the obligation by the [Buyer] under the protocol of 7 October 2000, in which the [Seller] and the [Buyer] have agreed on the general amount of the debt under Contract # 6/97 of 15 March 1997. They have determined the responsibilities of the parties, signed the document, and have agreed on the conditions and terms of the debt's offset.

It follows from the documents presented by the [Seller] to the Tribunal, namely, copies of the accounts #183-187, 189-195, 197-199, 201-202 and debts revise accounts # 73-81, schedules of the debts offset agreed by the [Seller] and the [Buyer] with regard to the conditions and procedure of the offset of the sum of the debts under Contract # 6/97 as of 6 October 2000, the protocol of 7 October 2000 and all supplements to it, that arrears of the [Buyer] to the [Seller] under Contract # 6/97 consist of the sum of main debts and fine for the delay of the debts offset.

The Tribunal takes into consideration that in para. 3 of the protocol of 7 October 2000 the [Seller] and the [Buyer] have agreed to discontinue calculation of interest after 6 October 2000 to the general sum in arrears of the [Buyer] adjusted in para. 1 of the above mentioned protocol. The Tribunal has as well taken into consideration the good will of the [Seller] expressed in the reduction by 35% of the amount claimed in respect to the sum of the fine.

With due account to the above, the Tribunal considers that the claims presented and specified at the hearings of 28 June 2004 are well-founded and subject to satisfaction.

The conditions of Contract # 6/97 of 15 March 1997, the protocol signed by the [Seller] and the [Buyer] on 7 October 2000 as well the provisions of arts. 53, 61, 62 and 63 of the Vienna Convention 1980 compose the legal basis for the Tribunal to oblige the [Buyer] to pay the main sum in arrears.

Payment of the penalty by the [Buyer] complies with conditions of Contract # 6/97 of 15 March 1997 and the protocol of 7 October 2000 and is based on art. 330 of the Russian Civil Code.

Voluntary reduction of the amount of the penalty by the [Seller] corresponds to the principles on which art. 333 of the Russian Civil Code is based.

      3.5 Payment of the arbitration fee

[Seller]'s claim for the recovery of the expenses on payment of the arbitration and registration fee is subject to satisfaction in compliance with para. 6 of the Regulations on Arbitration Expenses and Fees (Supplement to the Rules of the Tribunal), which provides that the arbitration fee is imposed on the party against which the arbitral award was passed, however, if the action was satisfied partially, the arbitration fee is imposed on the Respondent proportionally to the amount of the satisfied claims.

Taking into account that [Buyer] has acknowledged that the [Seller] is entitled to the contract claims and the recovery of the full amount of the fine, and that the [Seller] has voluntarily provided for its reduction, the Tribunal, following para. 10 of the Regulations on Arbitration Expenses and Fees, rules that [Buyer] is obliged to reimburse [Seller]'s expenses on payment of arbitration fee in full.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of the Cyprus is referred to as [Seller] and Respondent of Kazakhstan 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 in 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 May 17, 2006
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