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CISG CASE PRESENTATION

Russia 22 October 2004 Arbitration proceeding 4/2004 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/041022r1.html]

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

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Case identification

DATE OF DECISION: 20041022 (22 October 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: 4/2004

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russian Federation (respondent)

BUYER'S COUNTRY: Ukraine (claimant)

GOODS INVOLVED: [-]


Classification of issues present

APPLICATION OF CISG: Yes. The parties stated in the contract that their contract is governed by Russian substantive laws. The Tribunal found that this provision did not preclude the application of the CISG since it is a component part of the Russian legal system. Since Russia and the Ukraine have subscribed to the CISG, the Tribunal fund the CISG applicable pursuant to Article 1(1)(a). This is the only mention of the CISG in this case.

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 6

Classification of issues using UNCITRAL classification code numbers:

6B [Choice of law: agreement to apply law of a Contracting State equals agreement to apply Convention]

Descriptors: Choice of law

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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): M.G. Rozenberg, Praktika Mezhdunarodnogo kommercheskogo arbitrazhnogo suda pri TPP RF za 2003 g./Sost. [Arbitration decisions rendered by the International Commercial Tribunal at the Russian Federation Chamber of Commerce and Industry in 2003], published by "Statut" (2004), Case No. 42 [304-309]

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

22 October 2004 [Case No. 4/2004]

Translation [*] by Alexander Morari [**]

1. SUMMARY OF RULING

      1.1 The goods were delivered on the basis of FCA Incoterms 2000 according to which the [Buyer] assumed the risk of loss or damage to the goods once the goods were handed over by the [Seller] to the carrier. If the [Buyer] discovers a shortage in the quantity of goods at the final point of destination, it must undertake measures, in keeping with applicable rules of transportation, necessary to maintain its right to make claims against the carrier. Without undertaking such measures (by not insisting on drawing a carrier's statement), the [Buyer] is not entitled to present claims against the [Seller].

      1.2 The [wagon] inspection report cannot be used as evidence, since it only contains assumptions by the experts and does not allow one to conclude for sure at what moment of time the [wagon] defects appeared (at the point of departure, en route, or at the point of destination).

2. FACTS AND PLEADINGS

The action was brought by the [Buyer], a Ukrainian company, against the [Seller], a Russian company in connection with discovery in the wagon at the point of destination of a shortage in the quantity of goods delivered by the [Seller] under the contract for the international sale of goods concluded by the parties on 11 August 2003. Since the [Buyer] paid for this consignment of goods in full, it demanded a supplementary delivery of the missing goods (in the wagon there were only 610 cargo pieces whereas according to railroad waybill and [Seller]'s invoice some 2,000 cargo pieces had to be delivered). The inspection, commissioned by the [Buyer], established a number of technological defects of the wagon. This led [the [Buyer]] to the conclusion that the wagon was not duly prepared for the transportation of goods.

      2.1 The [Seller] did not acknowledge the action brought against it. The [Seller] alleged that the goods were duly loaded and transported. The [Seller] contested the inspection report and goods inspection certificate presented by the [Buyer] and pointed out non-compliance of the procedure of acceptance of goods from a railroad carrier, provided for in the Agreement of International Goods Transport by Railway [hereinafter AIGTR].

      2.2 With both parties' consent, a representative of the carrier of goods took part in the arbitral proceedings as a third party. The representative of the carrier denied that the shortage in the quantity of goods might have taken place at the point of departure.

3. TRIBUNAL'S REASONING

The ruling of the Tribunal contained the following main points.

      3.1 [Jurisdiction of the Tribunal]

      According to section 2 of Tribunal's Regulations and section 1(2) of the Rules of Tribunal, the Tribunal's jurisdiction covers disputes arising out of contracts and other civil-law relationships in international economic activities if at least one party's place of business is abroad. The Tribunal stated that the contract of 11 August 2003 concluded between the [Buyer] and the [Seller] is a contract for the international sale of goods, and the parties to this contract are: the [Seller], a Russian organization, and the [Buyer], a Ukrainian organization.

The Tribunal found that the arbitration clause in clause 9.1 of the contract provides that:

"All disputes and differences that can arise out of the present contract or in connection thereof shall be settled by arbitration, excluding the jurisdiction of general courts, at the International Commercial Arbitration Court at the Russian Federation Chamber of Commerce and Industry, Moscow, on the basis of an action brought by the interested party "

In accordance with section 1(3) of the Rules of Tribunal, the Tribunal has the jurisdiction to arbitrate disputes provided there is a written agreement between the parties to refer an existing or potential dispute to it. Based on clause 9.1 of the contract, the Tribunal concluded that between the [Buyer] and the [Seller] there is a written agreement to refer to its jurisdiction an existing or potential dispute.

Taking into consideration the above stated as well as:

   -    the fact that the [Buyer] submitted a statement of action and the [Seller] submitted a statement of defense, and
 
   -    since representatives of both parties took part in arbitral hearings of the case and made no objections to Tribunal's jurisdiction,

the Tribunal, subject to clause 9.1 of the contract and section 1 of the Rules of Tribunal, and taking account of art. 7 of the Russian Federal Law "On International Commercial Arbitration", acknowledged its jurisdiction to arbitrate the present dispute.

Additionally, the Tribunal noted that the third party, that took part in the arbitral proceedings, presented no objections as to the jurisdiction of the Tribunal. The Tribunal also noted that at the hearing of 9 September 2004, the third party's representative entirely agreed to the Tribunal's jurisdiction.

      3.2 [Applicable law]

      The Tribunal found that, according to the second sentence of clause 9.1 of the contract of 11 August 2003, the parties agreed to choose the Russian law as the applicable substantive law.

Such wording of the contract does not exclude application of the CISG, which, pursuant to art. 7 of the Russian Civil Code, must be applied as an international agreement of the Russian Federation. In compliance with the Russian Constitution, such an agreement is a component part of the Russian legal system. Since both Russia and Ukraine are States parties to the CISG, and the places of business of the two parties to the present dispute are in these States, the CISG shall be applied by virtue of art. 1(1)(a) CISG.

Furthermore, to arbitrate the present case, the Tribunal finds it admissible to apply provisions of the AIGTR, since Russia and Ukraine are State parties to this agreement.

Russian substantive law is applied as subsidiary law to matters not expressly settled in the CISG or AIGTR.

      3.3 [Succession to rights and obligations of original Buyer]

      Having examined the documents, which are included into the materials of the case, presented by the [Buyer] at the hearing of 9 September 2004, and namely an extract from the charter of [Buyer]'s organization, a certificate of its registration and an extract from the register of Ukrainian Statistics Committee, the Tribunal stated that the said documents confirm the fact that there was a transfer of rights and obligations from the organization that was the original buyer under the contract to the [Buyer] [a party to the dispute]. Therefore, the Tribunal found that the organization that brought the action [Buyer] is the valid Claimant in the present case as the successor of the organization that was originally a party to the contract.

      3.4 [Ruling on the merits of the case]

      Turning to the claims presented by the [Buyer], the Tribunal came to the following conclusions. Having considered [Buyer]'s demand to oblige the [Seller] to perform a supplementary delivery of the missing goods to the [Buyer], the Tribunal ruled that, according to the contract of 11 August 2003 and Supplement 2 thereof, the [Seller] shipped a consignment of goods in wagon No. 26009795 as indicated in railroad waybill No. -269044. At the arrival of the goods to the station of destination, there was discovered a shortage of goods in the wagon mentioned above in the amount of 41,661 tons.

The [Seller] did not contest the very fact of the shortage of goods nor the price of the missing goods. Neither did the third party.

The [Buyer] made a supposition that the shortage of goods was [Seller]'s fault, since the wagon was not properly prepared to transportation of goods.

As for the [Seller], it entirely denied its fault. So did the third party, the carrier, who believed it fully performed its obligations under the contract and that the shortage of goods was a result of theft which took place en route.

Turning to the provisions of the contract, the Tribunal stated that according to clause 1 of Supplement No 2 to the contract, the goods were to be delivered on the basis of FCA Incoterms 2000. Under this basis of delivery, the risk of loss or damage to the goods passes from the seller to the buyer once the goods were handed over to the carrier.

Subject to clause 6.1 of the contract, the goods are considered handed over to and accepted by the buyer in their quantity in accordance with the weight indicated in the railroad waybill at the station of departure. It follows from the railroad waybill that the goods were accepted by the station of departure in the quantity of 60,000 tons (2,000 cargo pieces). The [Buyer] failed to submit any documents confirming that the goods were loaded on to the wagon in lesser quantity.

Besides, the Tribunal notes that by virtue of section 8.1 of Instructions to AIGTR, the station of departure must verify that the consignor of goods observed the provisions of AIGTR, which the consignor must fulfill prior to and at the moment of handing over the goods for transportation; and if the station of departure discovers that the consignor of the goods did not fulfill relevant requirements of AIGTR, it must refuse acceptance of the goods for transportation. Since the goods were accepted by the railway at the station of departure without any comments, this fact, in the Tribunal's opinion, can only be taken as evidence that the [Seller] duly performed its obligations to deliver the goods.

In accordance with section 34(4) of the Rules of Tribunal, the Tribunal scrutinized an inspection report issued by the Kiev Oblast Chamber of Commerce and Industry of 29 September 2003 presented by the [Buyer] as evidence. However, the Tribunal stated that the content of the inspection report does not allow one to establish for sure at what moment of time the [wagon] defects appeared (at the station of departure, en route or at the station of destination); and the data contained in the inspection report are merely assumptions by the experts. Under such circumstances, the Tribunal notes, the said report cannot be used as evidence of the fact that the [Seller] was the only one who did not properly perform its contractual obligations.

The Tribunal takes into account the fact that the [Buyer] did not submit a carrier's statement which had to be drawn up in accordance with art. 18 AIGTR.

Additionally, the Tribunal took into account the documents submitted by the third party, and in particular a report of 17 September 2003 and a customs inspection report of 17 September 2003. According to these documents, wagon No. 26009795 was duly loaded and sealed in compliance with relevant requirements. Further, the Tribunal took into account findings of commission inspection of locking/sealing device of the wagon in question. The inspection of the wagon discovered that:

a) the wire, in its characteristics (the diameter, grade of metal, technology of twisting, and shape of cutting), is different from the one used by the carrier's organization;

b) there are trails of recent welding on the wagon.

This, in Tribunal's opinion, leads to a conclusion that there was an unauthorized unsealing en route or at the station of destination.

The Tribunal considers that the case materials and parties' explanations presented at the arbitral proceedings do not lead to a conclusion that the [Buyer] did not undertake all measures necessary to make a claim to the carrier (to the railway) concerning the shortage in the quantity of goods; and that the [Buyer] did not obtain from the carrier a carrier's statement stipulated by art. 18 AIGTR, whereby the [Buyer] deprived itself of the opportunity to satisfy its claims to the carrier. At the same time, the evidence presented by the [Seller] and the third party confirm that the goods were accepted by the carrier without any comments, the [Seller] performed its obligations to the [Buyer] in accordance with the basis of delivery agreed upon by the parties in clause 1 of supplement No 2 of the contract (FCA-free carrier). By so doing, the [Seller] fully performed its contractual obligations.

Therefore, [Buyer]'s claim to oblige the [Seller] to perform an additional delivery in the amount of 41,661 tons cannot be considered well-grounded and shall not be granted.

      3.5 [Arbitration fee]

      [Buyer]'s claim for recovery from the [Seller] of the arbitration fee shall not be granted, since section 6(1) of the Rules of Arbitration Costs and Expenses (Supplement to the Rules of Tribunal) provides that the arbitration fee is imposed on the party against which the Tribunal made an award, that is, the [Buyer],


FOOTNOTES

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

** Alexander Morari, born in the Republic of Moldova; has taken part in a number of international moot courts as a member of Moldovan Team and as the coach of Russian Teams.

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Pace Law School Institute of International Commercial Law - Last updated October 10, 2006
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