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CISG CASE PRESENTATION

Russia 28 September 2004 Arbitration proceeding 157/2003 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/040928r1.html]

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

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Case identification

DATE OF DECISION: 20040928 (28 September 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: 157/2003

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 53 [Also cited: Article 54 ]

Classification of issues using UNCITRAL classification code numbers:

53A [Buyer's oblligation 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. 40 [294-299]

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

Tribunal of International Commercial Arbitration at the
Russian Chamber of Commerce and Industry

28 September 2004 [Case No. 157/2003]

Translation [*] by Kirill Lebedyanskiy [**]

1. SUMMARY OF RULING

     1.1 The [Buyer]'s arguments that the Tribunal of International Commercial Arbitration at the Russian Chamber of Commerce and Industry ["ICAC"] does not have competence to consider this case were rejected for the following reasons. First, an inaccuracy in the name of the arbitration body was not accepted as a valid reason for deeming the ICAC unable to hear this case: the ICAC is the only institution at the Russian Federation Chamber of Commerce and Industry ["RFCCI"] which could be responsible for the examination of this claim and the name of the RFCCI was stated in the arbitration clause. Second, the arbitration agreement to resolve all disputes in another arbitration proceeding, which had been concluded by the parties earlier was void after the parties amended it by mutual consent. Third, the natural person, who signed the agreement which changed the arbitration clause, had the authority to do it in his capacity as representative of the Claimant.

     1.2 The constitutional documents of the Claimant were subject to special examination by the Tribunal because the Respondent questioned the capacity of the persons who signed the documents. It was established that all the documents, including the contract, its appendixes, claim and powers of attorney were signed by persons who were authorized to do so by Constitutional documents of the Claimant company.

     1.3 Due to the fact that parties' places of business were located in Contracting States, the Vienna Convention of 1980 (the "CISG") was applicable to the relations between the parties. Taking into account that Russian law was chosen by the parties to be the governing law, it was stated to be applicable as a subsidiary law in this case.

     1.4 Taking into account that at the last session of the Tribunal, the Claimant amended the claim in respect to the calculation of the interest rate (proposing to use a different rate), but did not provide its reasoning behind the proposed amendment, the Tribunal decided that this amendment should not be considered by the Tribunal.

2. FACTS AND PLEADINGS

The action was brought by Claimant [Seller], a US firm, against Respondent [Buyer], a Ukrainian firm, over the failure to pay in full for goods supplied according to a contract for the international sale of goods concluded on 1 December 1997. The claims of the [Seller] included the payment of the sum due, a contractual penalty, interest and refund of the arbitration fee.

The [Buyer] disputed the competence of the Tribunal to examine the case claiming that there was a mistake in the arbitration clause contained in the Addendum to the agreement and also claiming a failure to determine the place where the trial should be considered. The [Buyer] asserted that these defects rendered the arbitration clause void. In addition, The [Buyer] claimed that the Addendum to the agreement was signed by the [Seller]'s representative without authority.

The [Seller] presented its plea in response to the [Buyer]'s objections.

3. TRIBUNAL'S REASONING

The Tribunal's decision contained the following key themes:

     3.1 The competence of the Tribunal

     In accordance with section 13.2 of Supplement No. 1 to the Contract of 1 December 1997 (as amended by the Addendum to Agreement No. 5 of 25 December 1998), the Tribunal is competent to consider this case. The above-mentioned section states that " if the parties are not able to agree between themselves, all contract disputes regarding the present contact and breaches thereof, as well as issues relating to the avoidance and repudiation of the Contract will be considered by The Moscow Commercial Tribunal of the Russian Federation Chamber of Commerce and Industry in Moscow, in accordance with the Rules of this Tribunal and the law of the Russian Federation".

In accordance with the Rules of the Tribunal, the [Seller] brought a claim to the ICAC with reference to this arbitration clause. [Seller] paid the arbitration fee and participated in the hearings.

Having been notified of the claim, the [Buyer] replied in a letter dated 4 December 2003 that the ICAC did not have the competence to consider this case due to an inaccuracy in the name of the Tribunal contained in clause 10 (arbitration clause) of Addendum No. 15 to the contract. The [Buyer] also noted that it did not consent to this dispute being considered by the ICAC. According to the [Buyer], pursuant to clause 13.2. of Addendum No. 1 to the contract, the parties intended to have disputes considered according to the Rules of the Arbitration Institute of the Stockholm Chamber of Commerce and Swedish law.

In addition, the [Buyer] claimed that Addendum No. 15 to the contract was void as it was singed on behalf of the [Seller] by an unauthorized person.

The [Seller], in response, explained that the inaccuracy in the name of the Tribunal was due to a technical mistake. [Seller] maintained that the words of the arbitration agreement (as amended by Addendum No. 15 of 25 December 1998), "Moscow Commercial Arbitration Tribunal of the RFCCI" should have in fact read "the ICAC", which is based in Moscow.

Hearing both parties' arguments, and reviewing the documents of the case, the Tribunal holds that the [Buyer]'s statement regarding the competence of the Tribunal is groundless.

The [Buyer] unreasonably refers to the original arbitration clause (Addendum No. 1 to the contact), since it was amended by Addendum No. 15 of 25 December 1998, which came into force on 1 January 1999. The Arbitration clause as amended by Supplement No. 15 states that all disputes between the parties will be considered by the Moscow Commercial Tribunal of the RFCCI based in Moscow. This Addendum also states that the Tribunal is based in Moscow. The main argument of the [Buyer] was that the inaccuracy in the arbitration clause meant that the parties had no intention to refer this case to the ICAC. This argument cannot be accepted because it is clearly stated in the arbitration clause that the parties shall refer all their disputes to the Tribunal of the RFCCI in Moscow. Taking into account the subject matter of the dispute and the character of the parties, the Tribunal holds that at the time when the contact was concluded it was the only Tribunal of the RFCCI which was competent to consider this case. This case arose from international business activities and the parties have their places of business abroad. The Tribunal also notes that Tribunal still has this competence at the present time

According to the Law of the Russian Federation "On International Commercial Arbitration" and para. 1 of the Rules of the Tribunal, the Tribunal is the only tribunal of the RFCCI which is competent to consider disputes of the given nature.

At the hearing of 18 August 2004, it was established that Addendum No. 15 to the contract was signed on behalf of the [Seller] by the President of the [Seller]'s company, which was acknowledged by this person himself in letters to the ICAC dated 25 March 2004 and13 August 2004.

Taking into account the above, and pursuant to Article 16 of the Law of the Russian Federation "On International Commercial Arbitration", the Tribunal declared itself competent to examine the present case.

     3.2 Applicable law

     Due to the fact that both Ukraine and USA are Contractual States of the CISG and the parties' places of business are located in these States, the Tribunal stated that the norms of the CISG should be applied to the relations of the parties (Article 1(1)(a) of the CISG).

It was also stated that, with regard to issues not determined by the CISG, Russian substantive law must be applied as the subsidiary law, in accordance with section 13.2.of Supplement 1 to the contract as amended by Supplement No. 15.

     3.3. Assessment of authority to sign documents on behalf of the Clamant

     Having considered the authority of the person who signed documents on behalf of the Clamant the Tribunal established the following:

It is clear from the letter dated 13 August 2004 that Contract No. 03-267 of 1 December 1997 and its addenda were signed by the Vice-President of the Company. Some documents (Supplement No. 4/1, Addenda No. 5, 6, 7, 9, and 10 to the contract) were also signed by this person in accordance with the power of attorney of 29 July 1997. Further, the authority of this person was confirmed by the President of the company and that person's actions were approved by the factual performance of the obligations under the contact as amended by the above-mentioned Supplement and Addenda. When this person signed all other documents on behalf of the Company, he acted according to section 7.4. of the Memorandum of Association, which has been in force since 1 January 1997. According to this section, in the absence of the President, the Vice President acts as the Executive Manager of the Company (a similar clause is stated in the amended Memorandum of Association dated 26 August 2003). The President of the company also confirmed in his letter of 13 August 2004 that the above documents were signed in his absence.

The Tribunal held that the documents presented by the [Seller] confirm the authority of the given persons to bring the claim dated 9 September 2003 on behalf of the [Seller] and the power of attorney stipulating powers of the [Seller]'s representative at the trial.

It is stated in the Certificate dated 4 April 2002 (issued by the Department of Companies' Registration and Real Estate, Nicosia, Cyprus) that, according to documents held by this Department, these persons are Directors of the company.

It is clear from the powers of attorney issued to the above representatives of the [Seller] that the company, of which these persons are Directors, is an executive organ of the [Seller] and can act on behalf of the [Seller] Company, registered in accordance with the laws of the USA.

The Tribunal held, that the above mentioned Directors' actions comply with Article 107 of the company's Articles of Association, which regulate the obligations of Directors.

     3.4. Assessment of the [Seller]'s grounds for recovery of the primary debt

     The Tribunal holds that [Seller]'s claim regarding the price of the supplied goods should be upheld.

It is clear from the following documents that [Seller] fulfilled its obligation to deliver the goods: delivery schedule, copies of the acceptance reports, copies of invoices for the period 22 February 1998 to 19 January 1999, and calculation reports dated 17 February 1999, 16 May 2000, 15 September 2001.

The fact of delivery can be also confirmed by reports concerning the revision of the supply volume in each quarter (copies of these reports are contained in the documents of the case).

It is clear from the documents of the case that [Buyer] only partly paid for the goods delivered. In particular, by 17 February 1999 the [Buyer] did not pay the sums set out in the report of 17 February 1999.

As the [Seller] took into account the goods delivered by the [Buyer] to the [Seller] as a partial payment for the goods that the [Seller] delivered to the [Buyer], payment remains to be paid to the [Seller] only in relation to some of the goods.

On the question of the non-attendance of the [Buyer] at the session, the Tribunal stated that the [Buyer] had been properly informed of the date and the place of the hearing. However, it did not provide any objections regarding to substance of the claim and had not appointed counsel for the trial. The Tribunal therefore finds that the [Buyer] did not contest the essence of the claim and its debt to the [Seller] in the given sum.

Taking into account that according to Articles 53 and 54 of the CISG, the Buyer must pay the price for the goods, but failed to fulfill this obligation, the Tribunal states that this part of the claim should be upheld.

     3.5 Assessment of the [Buyer]'s claim to recover the contractual penalty from the Seller.

     Having considered the claim of the [Seller] to recover from the [Buyer] the contractual penalty, the Tribunal concluded that this claim also should be upheld in full.

According to clause (vii) of the Contract, if a party breaches the terms of the contract regarding the payment for goods, the other party is entitled to charge the breaching party with a contractual penalty of 0.01% of the unpaid sum for each day of delay in payment for the first twenty days and thereafter 0.02% per day, subject to a cap of 10% of the total price of the unpaid goods. It can be seen from the calculations provided by the [Seller] that the contractual penalty due is 10% of the total price of the unpaid goods

     3.7 Interest rate

     At the session on 18 August 2004, the [Seller] changed its claim regarding calculation of the interest rate on the debt due and asked the Tribunal to add the interest, not in accordance with LIBOR, as had been proposed by the [Seller] earlier, but in accordance with the interest rate of the Commercial Bank of State of Florida (4% per annum). The [Seller] provided a letter from this bank to confirm this interest rate. However, due to the fact that these calculations were not delivered to the [Buyer], the Tribunal stated that it would not consider them.

     3.8 Arbitration expenses and fees

     The Tribunal, guided by section 6(1) of the Regulations on Arbitration Expenses and Fees (Supplement to the Rules of the Tribunal) holds that the arbitration fee is due to be paid by the [Buyer] because [Seller's] claim is upheld.


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].

** Kirill Lebedyanskiy is a qualified lawyer in Russia. He gained a law degree at Moscow State Social University (2000), and an LL.M. degree at University of London (2006), and is currently studying a CPE course at BPP School of Law (London).

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Pace Law School Institute of International Commercial Law - Last updated December 13, 2006
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