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CISG CASE PRESENTATION

Russia 24 January 2005 Arbitration proceeding 66/2004 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050124r1.html]

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

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Case identification

DATE OF DECISION: 20050124 (24 January 2005)

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: 66/2004

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russian Federation (claimant)

BUYER'S COUNTRY: People's Republic of China (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 53 ; 78 ; 90 [Also cited: Article 62 ]

Classification of issues using UNCITRAL classification code numbers:

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

78B [Rate of interest];

90A [Relations to other conventions with provisions governing same matters]

Descriptors: Price ; Interest ; Other conventions

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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 3z 2005 g. [Arbitration decisions rendered by the International Commercial Tribunal at the Russian Federation Chamber of Commerce and Industry in 2005], published by "Statut" (2006), Case No. 2 [39-44]

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 66/2004 of 24 January 2005

Translation [*] by Alexander Morari [**]

1. SUMMARY OF RULING

      1.1 The imprecise wording of the arbitration clause contained in the contract cannot undermine the jurisdiction of the MKAC Arbitral Tribunal [hererinafter "Tribunal"] to arbitrate the present dispute since it is found that the parties' will was to refer their dispute to the jurisdiction of the Tribunal. The [Seller] brought the action to the Tribunal, and the [Buyer] did not submit any objections to Tribunal's jurisdiction over the present case.

      1.2 In the absence of an agreement between the parties concerning the applicable law, the Tribunal held that their relations are to be regulated by:

      -    The Vienna Convention 1980 [UN Convention on Contracts for the International Sale of Goods (1980), hereinafter CISG], the States of the parties' places of business (Russia and China) being Contracting States; and by
 
      -    The GTS [General Terms of Sale] between the USSR and the PRC [People's Republic of China].

By virtue of art. 90 CISG, the GTS USSR-PRC have a priority over the provisions of the CISG.

      1.3 Based on the CISG, the Tribunal rules that [Seller]'s claim for recovery from the [Buyer] of the debt for the delivered goods is to be granted. At the same time, [Seller]'s claim for recovery of the interest for use of another's monetary funds is granted with account taken of the upper limit set by the GTS USSR-PRC.

2. FACTS AND PLEADINGS

The action was brought by the [Seller], a Russian organization, against the [Buyer], a Chinese organization, in connection with an incomplete payment for the goods delivered under an international sales contract of 2 March 2002.

      2.1 [Seller]'s claims included:

      -    Recovery of the main sum in arrears for the delivered goods;
 
      -    Recovery of the interest for the use of its monetary funds, and
 
      -    Recovery from the [Buyer] of the arbitration fee.

      2.2 The [Seller] submitted evidence of [Buyer]'s admittance of its obligation to pay the main sum in arrears and its objections against payment of the interest for the use of another's monetary funds.

The [Buyer] did not submit a statement of defense nor did the [Buyer]'s representatives appear at the arbitration hearings.

3. TRIBUNAL'S REASONING

The award of the Tribunal contained the following main points.

      3.1 [Tribunal's jurisdiction]

      According to section 2 of the Tribunal's Regulations and section 1(2) of the Rules of the 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 2 March 2002 concluded between the [Seller] and the [Buyer] 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 Chinese organization.

The arbitration clause contained in clause 12 GTS (Supplement No. 2 to the Contract) provides that:

"Should the parties fail to reach an agreement amicably, all their disputes and differences 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, pursuant to the rules and procedure of the indicated Comission."

Having in mind that the parties to the contract imprecisely named the arbitration body at the Russian Chamber of Commerce and Industry to which they meant to refer their disputes, the Tribunal took into account the fact that on the day of conclusion of the contract the Arbitration Tribunal at the Russian CCI, which has the jurisdiction covering disputes arising in international economic activities if at least one party's place of business is abroad, was the Tribunal.

In accordance with the explanations presented at the hearing by [Seller]'s representative and contained in the materials of the case, by having provided in the arbitration clause "The Tribunal at the CCI, Moscow", the parties indicated the city of Moscow as the location of the Tribunal.

With this in mind, the Tribunal came to the conclusion that by indicating in their contract the Tribunal at the CCI, Moscow the parties intended to refer their disputes to the Tribunal at the Russian CCI, determining its location in the city of Moscow.

In accordance with section 1(3) of the Rules of the Tribunal, the Tribunal has the jurisdiction to arbitrate disputes provided there is a written agreement between the parties to refer to it a dispute that has arisen or that may arise in future. Taking into consideration that the dispute is covered by the subject-matter jurisdiction of the Tribunal, as well as explanations presented by [Seller]'s representative concerning the fact the Tribunal did not receive any objections by the [Buyer] as to its jurisdiction, the Tribunal rules that it has the jurisdiction to consider the present case.

      3.2 [Default by a party]

      In accordance with section 28(2) of the Rules of the Tribunal, the Tribunal found it possible to consider the present case in the absence of [Buyer]'s representatives. The Tribunal's reasoning is based on the fact that the summons to the hearings with the indication of the place and time of the hearings of the case was timely sent to the parties, of which there are notifications of the messenger service contained in the materials of the case. According to art. 3 of the Russian Federal Law "On International Commercial Arbitration", any written communication is deemed to have been received if it is delivered to the addressee's last-known place of business by registered letter or any other means which provides a record of the attempt to deliver it.

Default by a party duly notified of the place and time of the hearing does not preclude the Tribunal from continuing the arbitral proceedings and making an award unless the defaulting party submits a written application to postpone the proceedings for a valid reason. Since no such application was received, and since the [Seller] insisted on arbitrating the case, the Tribunal considered it possible to hear the case on the merits in the absence of [Buyer]'s representative.

      3.3 [Applicable law]

      In accordance with art. 28 of the Law of the Russian Federation "On International Commercial Arbitration" and section 13 of the Rules of the Tribunal, the Tribunal arbitrates disputes on the basis of the substantive law determined by the agreement between the parties, and, when there is no such agreement, on the basis of the law determined by the Tribunal in compliance with the conflict-of-laws rules which it considers applicable.

The parties did not determine the applicable law in the contract of 2 March 2002. That being the case, the Tribunal was guided by international treaties applicable to a sales contract.

Taking into account that Russia and China are Contracting States to the CISG, and that the parties did not exclude the applicability of the CISG to the relations arising out of the contract, the Tribunal, by virtue of art. 1(1) CISG, concluded that the CISG is applicable to the relations between the parties.

Guided by art.90 CISG, which provides for application of any international agreement which has already been or may be entered into and which contains provisions concerning the matters governed by the CISG, and taking into consideration the Tribunal's practice, which recognizes the GTS USSR-PRC as an international agreement between Russia and China, the Tribunal concluded that the GTS USSR-PRC shall be applied to the parties' relations out of the contract, the GTS USSR-PRC prevailing over the CISG.

      3.4 [The merits of the case]

      [Seller]'s claim for payment by the [Buyer] for the delivered goods is based on the provisions of the contract and art. 53 CISG, which provide that the buyer must take delivery of the goods and pay the contract price for them.

It follows from the materials of the case that the [Seller] performed its contractual obligation to deliver the goods. This is confirmed by the materials of the case (shipping document and verification certificate) and is not contested by the [Buyer]. Also, the materials of the case confirm that the [Buyer] admits the main sum in arrears that is claimed by the [Seller] and is reduced by a sum in US dollars paid by the [Buyer] as payment of the debt after the [Seller] brought the action.

Therefore, in accordance with the contract, the [Buyer] has an indebtedness to the [Seller] arising out of the obligation to pay for the goods in the amount of US dollars indicated by the [Seller]. The Tribunal, guided by the provisions of the contract and arts. 53 and 62 CISG, considers that [Seller]'s claim for recovery of the main sum in arrears under the contract is well-grounded and, therefore, is to be granted.

      3.5 [Recovery of the interest]

      The [Buyer] does not acknowledge [Seller]'s claim for recovery of the interest for making use of another's monetary funds. However, the Tribunal concluded that during the period of time, for which the [Seller] claims recovery of the interest from the [Buyer], the [Buyer] did commit a delay in performing a pecuniary obligation and that, therefore, there are grounds for recovery of the interest on the delayed sums.

However, [Seller]'s calculation contained in the materials of the case that was based on rules contained in art. 395 of the Russian Civil Code, cannot be taken into consideration since, in the present case, the provisions on payment of interest for a failure to perform a pecuniary obligation in due time that are contained in the GTS USSR-PRC shall be applied.

[Seller]'s calculation is based on the amount of interest applicable by virtue of art. 395 of the Russian Civil Code in reference to pecuniary obligations in Russian rubles. In accordance with section 55(1) GTS USSR-PRC, when there is a delay of performance of a pecuniary obligation, the interest rate of 6 per cent of the delayed payment shall be applied starting from the day when the delay in payment commenced.

It follows from Supplement to the Contract No. 3 of 10 September 2002 that [Buyer]'s obligation to pay for the delivered goods arose from the moment when the goods crossed the border between Russia and China, which, as found in the course of the hearings, happened on 27 September 2002. Having in mind that the [Seller] claims interest only for the period starting from 1 November 2002 to 23 November 2003 inclusively, the Tribunal concluded that it is possible to recover the interest for the period of delay indicated by the [Seller], that is, for 388 days, in the amount of 6 per cent of the delayed payment.

Taking into consideration the payments effected by the [Buyer] in performance of its contractual obligations, the Tribunal ruled that the [Buyer] committed a delay of payment of corresponding sums for the corresponding periods of time.

Having calculated the interest for the mentioned periods of time, the Tribunal concluded that the sum of the interest claimed by the [Seller] that was calculated at the rate of 6 per cent and that was provided for by the GTS USSR-PRC, must be paid by the [Buyer] to the [Seller].

      3.6 [Arbitration fee]

      Having considered [Seller]'s claim for recovery from the [Buyer] of the arbitration fee and the arguments made the [Seller] at the hearings, the Tribunal, following section 6 (2) of the Rules of Arbitration Expenses and Fees, which provides for imposition of the arbitration fee on the [Buyer] in proportion to the amount of the satisfied claims and on the [Seller] in proportion to the amount of the claims that were not satisfied, concluded as follows.

The [Seller] reduced the sums claimed as recovery of the main sum in arrears. Since the [Buyer] partially paid the main sum in arrears after the action was admitted for consideration by the Tribunal and after the [Seller] paid the arbitration fee, the Tribunal found it reasonable to impose on the [Buyer] the arbitation fee paid for the main sum in arrears, which was initially included in the statement of action.

The arbitration fee for the sum of recoverable interest for making use of another's monetary funds is to be imposed on the parties in proportion of the claimed sum of the interest to the granted sum of the interest.


FOOTNOTES

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

** 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 September 4, 2007
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