Russia 9 February 2005 Arbitration proceeding 69/2004 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050209r1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 69/2004
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Russian Federation (claimant)
BUYER'S COUNTRY: Ukraine (respondent)
GOODS INVOLVED: [-]
APPLICATION OF CISG: Yes [Article 1(1)(a)]
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
53A [Obligation of buyer to pay price of goods]; 78A [Interest on delay in receiving price or any other sum in arrears]
53A [Obligation of buyer to pay price of goods];
78A [Interest on delay in receiving price or any other sum in arrears]
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (Russian): M.G. Rozenberg, Praktika Mezhdunarodnogo kommercheskogo arbitrazhnogo suda pri TPP RF 3a 2005 z.. [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. 7 [73-76]
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Case text (English translation) [second draft]
Queen Mary Case Translation Programme
9 February 2005 [Case No. 69/2004]
Translation [*] by Alexander Morari [**]
1. SUMMARY OF RULING
1.1. Since the places of business of the parties to the international sales contract are located in Contracting States to the Vienna Convention 1980 [UN Convention on Contracts for the International Sale of Goods (1980), hereinafter CISG], the Convention is applicable to their relations with the Russian law applicable as a subsidiary statute.
1.2. Default by [Buyer]'s representatives, who were duly notified of the date of the hearing, does not preclude the Tribunal from continuing the arbitral proceedings and making an award since the defaulting party did not submit a written application to postpone the proceedings for a valid reason.
1.3. While considering [Seller]'s claims for recovery of interest in connection with delayed payment, the Tribunal took account of art. 78 CISG and art. 395 of the Civil Code of the Russian Federation [hereinafter, Russian Civil Code] for matters not covered in CISG. While calculating the amount of interest to be paid, account was taken of the contractual terms and the provisions of the Russian Civil Code concerning the procedure of determining the term, defined by a period of time.
2. FACTS AND PLEADINGS
The action was brought by the [Seller], a Russian organization, against the [Buyer], a Ukrainian organization, in connection with an incomplete payment for the goods delivered by motor transport on FCA terms, point of departure in Russia, under an international sales contract of 13 August 2002. The claims included:
|-||Recovery of the debt; and|
|-||Recovery of interest in connection with delayed payment.|
2.1. The [Buyer] did not submit a statement of defense and its representatives did not appear at the arbitration hearings.
3. TRIBUNAL'S REASONING
The ruling of the Tribunal contained the following main points.
3.1. [Jurisdiction of the Tribunal]
Art. 9.1 of the contract concluded on 13 August 2002 provides that if the parties cannot reach an agreement amicably, all disputes and differences out of or in connection with the contract, including matters related to its performance, breach, termination or invalidity, are subject to settlement, excluding the jurisdiction of general courts, at the International Commercial Arbitration Tribunal in Moscow at the Chamber of Commerce and Industry of the Russian Federation [Tribunal] in accordance with the Rules of the Tribunal.
Awards by this Tribunal shall be final and binding on both parties. Taking this into account, and pursuant to section 1(2) and (3) of the Rules of the Tribunal, the Tribunal declared itself competent to arbitrate the present case.
3.2. [Default by the Buyer]
Turning to the question of [Buyer]'s non-appearance at the arbitral hearing of 14 January 2005, the Tribunal stated that the summons to the scheduled hearing was sent to the [Buyer] on 24 November 2004 and was received by the [Buyer] on 26 November 2004, which fact is confirmed by the notation of [messenger service] contained in the materials of the case.
In compliance with section 28(2) of the Rules of the Tribunal, default by a party duly notified of the date, time and place 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 due to a valid reason. Since no such application was received, and since [Seller]'s representative insisted on arbitrating the case, the Tribunal considered it possible to hear the case in the absence of [Buyer]'s representative.
3.3. [Applicable law]
Turning to the matter of law applicable to the relations under the contract for international sale of goods of 13 August 2002, the Tribunal took into consideration the fact that the States in which the parties to the dispute have their places of business are States parties to the CISG (Russia since 1 September 1991, Ukraine since 1 February 1991).
By virtue of art. 1(1)(a) CISG, this Convention applies to the parties' relations under the contract.
The arbitration clause contained in art. 9 of the disputed contract indicates that the parties to the contract chose Russian law as the applicable law. Since the wording of this article does not exclude applicability of the CISG, the latter is to be applied as an international agreement wirh the Russian law as a subsidiary statute.
3.4. [The merits of the case]
Turning to the merits of the claims, the Tribunal takes into consideration the fact the [Seller] performed in full its obligations by delivering the contractual goods worth the amount in rubles indicated in the statement of action, which is confirmed by copies of the cargo customs declaration, waybill No. 21469, and [Buyer]'s power of attorney (No. 638769 ßÄ of 9 September 2002) given to its authorized representative in order to accept the cargo.
The [Seller]'s invoices No. 086140, 086141, 086166 and 086167 of 10 September 2002 were, in violation of the contract, only partially paid by the [Buyer]. This is confirmed by credit letters of advice of 25 October 2002, of 5 December 2002, of 18 December 2002, of 5 February 2003, of 26 February 2003, of 15 May 2003, of 5 June 2003, and of 1 July 2003.
The [Buyer] had not paid the amount of debt in rubles indicated in the statement of action. Despite [Seller]'s claim and receipt of materials of the case, the [Buyer] neither paid the said debt nor contested its amount.
Accordingly, based on art. 53 CISG, the Tribunal rules that the [Buyer] must pay to the [Seller] the amount of the debt in rubles.
3.5. [Recovery of interest]
The Tribunal states that art. 78 CISG entitles the [Seller] to interest on the sum that is in arrears, which the [Buyer] failed to pay in due time. However, as the CISG does not settle the procedure of calculation of the interest rate, the Tribunal applied art. 395 of the Russian Civil Code as part of the subsidiary statute.
In accordance with art. 395(1) of the Russian Civil Code, the interest rate is to be determined by the discount rate of the bank interest existing at the creditor's place of business as of the date on which the pecuniary obligation or a corresponding part thereof is to be performed. When making a ruling on the recovery of the debt, the Tribunal can grant creditor's claim taking into consideration the discount rate of the bank interest existing on the day of bringing the action.
Since the claim was made in Russian rubles, the [Seller] lawfully applied the refinancing interest rate of the Bank of Russia [Central Bank of the Russian Federation] fixed for the day of bringing the action, that is, 14%.
In the calculation of the interest for use of another's monetary funds attached to the statement of action, the day on which the term started to proceed was indicated incorrectly. Instead of the date on which the goods were declared at the point of departure, which date (in accordance with art. 6.1 of the contract) starts the 30-day term for payment, the [Seller] indicated the date of the actual shipment of the goods by [Buyer]'s motor transport. Besides, according to art. 191 of the Russian Civil Code the proceeding of the term defined by a period of time starts on the next day after the calendar date or after the occurrence of the event, by which its start has been defined. Therefore, the term for payment shall be considered expired on 14 October 2002. [Seller]'s representative admitted the mistake made in the calcuation.
Thus, [Buyer]'s delay of the payment of the first part of the sum in arrears is to be considered 11 days and not 13 days, which means that the amount of interest on the first item of calculation must be reduced accordingly.
With above in mind, the Tribunal grants [Seller]'s claim for recovery from the [Buyer] of the interest for making use of its monetary funds for all terms of delayed payment.
3.6. [Arbitration expenses]
According to section 6(2) of the Rules of Arbitration Expenses and Fees (Supplement to the Rules of the Tribunal), the arbitration fee is imposed on the [Buyer] in proportion to the amount of the satisfied claims.
* 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 the [Seller], and the Respondent of Ukraine is referred to as the [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 the Russian team.Go to Case Table of Contents