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CISG CASE PRESENTATION

Ukraine 22 December 2004 Tribunal of International Commercial Arbitration Ukrainian Chamber of Commerce & Trade (No. 3-grade corn case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/041222u5.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20041222 (22 December 2004)

JURISDICTION: Arbitration ; Ukraine

TRIBUNAL: Tribunal of International Commercial Arbitration at the Ukrainian Chamber of Commerce and Trade

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: Unavailable

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Ukraine (respondent)

BUYER'S COUNTRY: Foreign company (claimant)

GOODS INVOLVED: No. 3-grade corn


Classification of issues present

APPLICATION OF CISG: Yes. In the absence of a governing law clause, the arbitrator elected to apply the CISG and otherwise applicable Ukrainian law, and "customs of business 'Lex Mercatoria'," and the UNIDROIT Principles

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: [-]

Classification of issues using UNCITRAL classification code numbers:

Unavailable

Descriptors: Unavailable

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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): Newspaper "Advopkatura", No. 35-36 of February 2005

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 Ukrainian Chamber of Commerce and Trade

Award of 22 December 2004

Translation [*] by Serhiy Petukhov [**]

The Tribunal of International Commercial Arbitration at the Ukrainian Chamber of Commerce and Trade (hereinafter Tribunal) heard at the hearing of 22 December 2004 the case that had arisen from the action of the Claimant [Buyer], a foreign company, against Respondent [Seller], a Ukrainian LLC, for the recovery of the sum of US $16,800 as a penalty for undelivered goods and compensation of arbitration fees.

The legal basis for the arbitration of this case by the Tribunal is para. 11 of Contract # 09-03 of 19 September 2003, according to which all disputes and disagreements between the parties, if they cannot be resolved by negotiation, shall be finally settled at the Tribunal in Kyiv. The parties agree that the Rules of the Tribunal shall apply in the course of consideration and adjudication of the dispute. The arbitration panel shall consist of one arbiter. The language of the arbitration shall be Russian. The law applicable to the contractual relations of the parties and the arbitration shall be the UN Convention on Contracts for the International Sale of Goods (Vienna, 1980), customs of business turnover "Lex Mercatoria", Principles of International Commercial Contracts (Principles UNIDROIT, Rome, 1994). The decision of the Tribunal shall be final and binding upon the parties and not subject to appeal.

In accordance with Art. 28(2) of the Law of Ukraine "On International Commercial Arbitration", when parties to a Contract fail to agree on the application of the substantive law of any State, the Tribunal may apply the law, as defined by the rule for the choice of law, which the Tribunal considers applicable.

In accordance with Art. 6 of the Law of Ukraine "On Foreign Economic Activity", when no national law of a party to the contract is chosen as the applicable law, the applicable law shall be the law of the country in which the [Seller] in a sales contract is founded or has its residence or principal place of business. Thus the substantive law of Ukraine, in particular the Ukrainian Civil Code and Ukrainian Commercial Code, is also applicable to the adjudication of this dispute.

Having reviewed the materials of the case and having heard the arguments of the parties' representatives the Tribunal found:

[Buyer] and [Seller] concluded Contract #09-03 on 19 September 2003 in Kyiv. In accordance with the terms of the Contract, the [Seller] undertook an obligation to deliver to the [Buyer] 3 thousand tons of 3-grade corn for the total of US $336,000, and the [Buyer] - to accept and pay for the goods. However, the [Seller] has unilaterally refused to perform its contractual obligations, of which he notified the [Buyer] by the Letter #27, transmitted through facsimile on 27 October 2003.

In this letter the [Seller] agreed to pay the penalty in the amount of 5% of the contract price (Contract #09-03 of 19 September 2003) pursuant to the para. 9.1 of this Contract.

On 11 November 2003 the [Buyer] sent the [Seller] Bill #308 for the payment of the penalty, and on 3 February sent a claim for the payment of the penalty in amount of US $16,800.

Whereas the [Seller] did not pay the bill, the [Buyer] filed a case with the Tribunal on 10 August 2004 against the [Seller] for the recovery of the penalty in the amount of US $16 800 (which is 5% of the contract price), and compensation of arbitration fees.

The Tribunal initiated proceedings in the case by its decree of 10 August 2004.

In accordance with this decree, the [Buyer] had to pay within 30 days the arbitration fee in the amount of US $886.40, and to take measures, in accordance with the arbitration clause, to reach agreement with the [Seller] as to the person of the arbiter, notifying the Tribunal of his name and surname.

After the full payment of arbitration fees by the [Buyer], the Tribunal on 1 September 2004 sent the [Seller] a registered letter containing copies of action materials and the set of documents of the Tribunal (Rules of the Tribunal, Recommended List of Arbiters) with the proposal to provide within thirty days a statement of defense and to choose the sole arbiter in agreement with the [Seller].

It was explained to the parties that in accordance with the Art. 11 (2) of the Law of Ukraine "On International Commercial Arbitration" and Art. 3.3 of the Rules of Tribunal, parties may independently agree on the procedure for the appointment of the sole arbiter with the due consideration of Arts. 11 (4) and 11 (5) of the said Law [on International Commercial Arbitration].

The Parties agreed the person of a sole arbiter through the exchange of letters.

In the statement of defense of 2 October 2004, the [Seller] asked to dismiss the claim because the [Buyer] in its facsimile Letter #131 of 22 October 2003 had unilaterally declined to execute its obligations pursuant to Contract #09-03 of 19 September 2003, and alleged that [Seller] has the right to recover the penalty in accordance with Art. 9.1 of the Contract. A copy of the relevant letter of the [Buyer] was attached to [Seller]'s statement of defense. Thus the [Seller] claimed that [Buyer]'s demands are unfounded.

A hearing of the case was appointed for 19 November 2004, of which the parties were given notice on 6 October 2004.

In his rebuttal, received by the Tribunal on 17 November 2004, the [Buyer] informed that the Letter #131 of 22 October 2003, presented by the [Seller] as evidence of a breach of the Contract by the [Buyer], is counterfeit, as no such letter has ever been sent to the [Seller].

On 19 November 2004 the Tribunal received a wire from the [Seller] with the request to adjourn the proceedings due to the illness of its representative.

Whereas [Seller]'s representative failed to appear before the Tribunal, and taking into account his request for adjournment of proceedings, as well as the need to receive the rejoinder of the [Seller], in accordance with Art. 7.5 of the Rules of Tribunal, the Tribunal adjourned the proceedings till 22 December 2004 and obliged the [Seller] to present his rejoinder by 8 December 2004.

The decision of the Tribunal of 19 November 2004 on the adjournment of the proceedings to 22 December 2004 was sent to the parties on 25 November 2004 and was handed over to the [Buyer] on 27 November 2004 and to the [Seller] on 26 November 2004.

[Seller] failed to present its rejoinder to the Tribunal.

In the hearings of the Tribunal [Buyer]'s representative fully supported the [Buyer]'s claim; [Seller]'s representative supported his statement of defense.

Taking into attention that:

     1. The parties concluded Contract #09-03 of 19 September 2003 according to the terms of which the [Seller] undertook an obligation to deliver to the [Buyer] within the period from 25 September till 31 October 2003 three thousand tons of 3-grade corn for the total of US $336,000, and the [Buyer] - to accept and pay for goods.

     2. In his Letter #27 transmitted through facsimile on 27 October 2003, the [Seller] unilaterally refused to perform its contractual obligations and agreed to pay the [Buyer] the penalty in the amount of 5% of the price of Contract #09-03 of 19 September 2003, as contemplated by para. 9.1 of this Contract in case of unilateral refusal to perform the Contract.

     3. [Seller]'s contention that the [Buyer] has refused to take delivery of the goods and perform its obligations under the Contract #09-03 of 19 September 2003 and [Seller]'s request to have the Tribunal recognize the right of the [Seller] to recover the penalty provided in the Contract may not be admitted by the Tribunal, as Letter #131 presented by the [Seller] as evidence of a breach of the Contract by the [Buyer] does not contain the necessary fax requisites, is not recognized by the [Buyer] and has no probative value.

     4. In this case, the [Buyer]'s claim for recovery of US $16,800 of penalty for non-delivered goods is reasonable, is evidenced by the materials of the case and shall be satisfied.

     5. However, the claim of the [Buyer] for the recovery of arbitration expenses in the amount of US $1,760 may not be satisfied. In accordance with para. 1(2) Section VII of the Regulation on Arbitration Fees and Expenses, expenses may be fixed with the adverse party to the extent that the Tribunal finds them founded and reasonable. In this case, the Tribunal does not consider the cited expenses of the party founded and reasonable, whereas the [Buyer] filed the claim after the expiry of limitation period. If the [Seller] in accordance with Art. 267(4) of Ukrainian Civil Code had made the respective submission, it would be a basis for dismissal of the action. However, in accordance with Art. 267(3) of the Ukrainian Civil Code, the limitation period may be applied by the court only upon request by a party in the proceeding, made before the rendering of the decision. [Buyer]'s right of action emerged on 1 November 2003, and the claim was made on 10 August 2004, while Art. 258(2)(1) of Ukrainian Civil Code provides for the special limitation period of one year for the recovery of a penalty, and Art. 232(6) of Ukrainian Commercial Code provides for a 6 months term for the recovery of the penalty for the delay in performance, unless otherwise provided for by the contract or law, that expired on 30 April 2004.

     6. In accordance with para. 1 of Section V of the Regulation on Arbitration Fees and Expenses, which provides for the obligation of the defeated party to pay arbitration fees, the [Seller] shall compensate the arbitration fees paid by the [Buyer] in the amount of US $1,286.40.

Guided by the terms of Contract #09-03 concluded by the parties on 19 September 2003, Arts. 28 and 31 of the Law of Ukraine "On International Commercial Arbitration", Art. 6 of the Law of Ukraine "On Foreign Economic Activity", Arts. 267 and 258 of Ukrainian Civil Code, Art. 232 of Ukrainian Commercial Code, the United Nations Convention on Contracts for the International Sale of Goods, Arts. 8.4, 8.5, 8.7-8.9 of the Rules of Tribunal, para. 1 of Section V and para. 1 of Section VII of the Regulation on Arbitration Fees and Expenses, the Tribunal rules:

   -    To oblige the [Seller] immediately upon the receipt of this decision to pay the [Buyer] penalty for undelivered goods in amount of US $16,800 and compensation of arbitration fees in amount of US $1,286.4, a total of US $18,086.40.
 
   -    To deny the claim for recovery of US $1,760.

The judgment is final.


FOOTNOTES

* For purposes of this translation, Claimant, a foreign company, is referred to as [Buyer] and Respondent of Ukraine is referred to as [Seller].

** Serhiy Petukhov is a Junior Associate with the law firm Danylko, Kushnir, Soltys & Yakymyak, Attorneys & Counselors at Law, Kiev, Ukraine <http://www.dksylaw.com/>. He is pursuing a Master of Laws at the Law Faculty of Kyiv National Taras Shevchenko University, and has completed an Internship Programme in Canadian Parliament in the office of the Hon. Dan McTeague.

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