Russia 10 February 2005 Arbitration proceeding 133/2003 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050210r1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 133/2003
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Russian Federation (claimant)
BUYER'S COUNTRY: Poland (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:
78B [Rate of interest]
78B [Rate of interest]
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. 8 [77-80]
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
10 February 2005 [Case No. 133/2003]
Translation [*] by Alexander Morari [**]
1. SUMMARY OF RULING
1.1 Although the [Buyer] received all case-related materials and refused to receive any further correspondence (including the first summons with the time of the hearings) sent to him by the Tribunal's Secretariat and [Buyer]'s representatives failed to appear at the arbitral hearings, this does not preclude the Tribunal from continuing the arbitral proceedings and making an award.
1.2 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 held applicable to their relations under the international sales contract and the Russian substantive law, chosen by the parties, is applicable as a subsidiary statute.
1.3 Since, contrary to contractual terms, the [Buyer] failed to send to the [Seller] any notice of lack of conformity concerning the quality of the goods, the Tribunal cannot admit [Buyer]'s allegations that the delivered goods were of non-conforming quality, which served as an alleged basis for partial payment of the goods.
1.4 The Tribunal granted [Seller]'s claim for recovery from the [Buyer] of interest in accordance with art. 78 CISG and art. 395 of the Civil Code of the Russian Federation [hereinafter, the Russian Civil Code] to the date of bringing the action. At the same time, the Tribunal did not grant [Seller]'s claim for recovery of the interest to the date of the arbitral hearings since [Seller] failed to submit the calculation of the claimed amount and failed to pay the relevant arbitration fee.
1.5. The Tribunal did not consider [Seller]'s claim for recovery of the penalty for delayed payment because it was based on the specifications not indicated in the statement of action and [Seller]'s representatives failed to provide reasonable grounds for this claim.
2. FACTS AND PLEADINGS
The action was brought by the [Seller], a Russian organization, against the [Buyer], a Polish organization, in connection with an incomplete payment for the goods delivered under the international sales contract of 20 June 2001.
2.1. [Seller]'s claims included:
|-||Recovery of the debt,|
|-||Recovery of interest,|
|-||Recovery of a contractual penalty for delayed payment, and|
|-||Recovery of the arbitration fee and other expenses incurred by [Seller]'s legal representation.|
2.2. With reference to the terms of the contract in this connection, the [Seller] reserved its right to increase the amount of the claim in case Russian currency-exchange-regulation bodies levy penalties on the [Seller] for violation of currency-regulating legislation by [Seller]'s failure to follow the terms set for the receipt of payments.
2.3 In accordance with the contract, the goods were to be paid for within a term of sixty days from the shipment date. In its statement of defense, the [Buyer] alleged that its incomplete payment was justified by the fact that, due to the bad quality of the goods the [Seller] delivered, the [Buyer] suffered losses, the amount of which the [Buyer] deducted when paying for the goods. In addition, the [Buyer] alleged that the [Seller] did not perform in full its contractual obligations to deliver the goods. Therefore, [Buyer]'s position is that the [Seller] cannot make a reference to the expiration of the contract validity term since this reference is unfounded. The [Buyer] contested [Seller]'s interpretation of the contractual provision dealing with the term for notifications of lack of conformity (thirty days from delivery date). In [Buyer]'s opinion, this term is to be applied to notifications of lack of conformity concerning the quantity and not the quality of the goods.
2.4 The [Buyer] refused to accept the Tribunal's notification of the time of the arbitral hearings.
3. TRIBUNAL'S REASONING
The ruling of the Tribunal contained the following main points.
3.1 [Jurisdiction of the Tribunal]
The Tribunal's competence to arbitrate the present case is provided in the arbitration clause contained in clause 11 of the contract concluded between the [Seller] and the [Buyer] and is not contested by the parties. Taking into account arts. 7 and 16 of the Law of the Russian Federation "On International Commercial Arbitration" and section 1(5) of the Rules of the Tribunal, the Tribunal declared itself competent to examine the present case.
3.2 [Non-appearance of a party]
Turning to the question of non-appearance of [Buyer]'s representatives at the hearings, the Tribunal established that the materials of the case were duly handed over to the [Buyer] (the notification concerning the handing over of the materials of the case dated 5 January 2004). The subsequent correspondence forwarded by the Secretariat of the Tribunal to [Buyer]'s address was returned since the [Buyer] refused to accept it.
In compliance with section 28(2) of the Rules of 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 for a valid reason. Since no such application was received from the [Buyer], and since the [Seller] 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]
The Tribunal stated that in clause 11 of the contract, the parties agreed that when considering disputes arising in connection with the contract, the provisions of Russian substantive law shall be applied.
In accordance with art. 28(1) of the Law of the Russian Federation on International Commercial Arbitration and section 13(1) of the Rules of the Tribunal, the Tribunal concluded that Russian substantive law is applicable to the relations between the parties to this dispute, and that, above all, applies the CISG, to which both Russia and the Republic of Poland are States parties.
3.4 [Recovery of the price for the goods]
The materials of the case confirm that the [Seller], following its contractual obligations, delivered to the [Buyer] the goods in the quantity and for the amount indicated in the statement of action. On the day of shipment of the goods, an invoice of 27 February 2003 for the amount of the price of the goods was sent to the [Buyer] based on the specifications mentioned in the statement of action.
The shipment is confirmed by CCD [cargo customs declaration] with the Customs' note of permission to release dated 27 February 2003, and by waybill (CMR) No. 0536339, the carrier being Evro-Transasia Ltd.
The [Buyer] did not pay in full for the goods received, which is confirmed by the amount received by the [Seller] on 30 May 2003. By the date of making this statement of action, [Buyer]'s debt was in the amount claimed by the [Seller] for recovery and is confirmed by the materials of the case.
The [Buyer] failed to forward to the [Seller] any notice of lack of conformity concerning quality as stipulated by the contract.
Based on the above and persuant to arts. 53, 61(1) and 62 CISG, the Tribunal rules that [Seller]'s claim for recovery from the [Buyer] of the debt for the delivered goods in the amount specified is well-founded and, therefore, is to be granted.
3.5 [Recovery of interest]
[Seller]'s claim for recovery of interest is to be granted based on the following:
[Seller]'s right to the recovery of interest is based on art. 78 CISG, since, keeping in mind that the existence of [Buyer]'s debt in the specified amount is proved by the [Seller], the [Seller] is entitled to interest on the main sum in arrears.
According to [Seller]'s calculation, the interest is calculated for the period starting from 29 April 2003 to the date of bringing the statement of action, that is, 23 July 2003. However, in the arbitration hearing of 14 January 2005, [Seller]'s representative applied for re-calculation of the amount of the interest to the date of making an award [by the Tribunal]. However, the Tribunal states that the [Seller] did not make this claim earlier, failed to submit a new calculation of the claimed interest, and did not pay the corresponding arbitration fee. Therefore, the Tribunal grants [Seller]'s claim for recovery of the interest only for the period from 29 April to 23 July 2003.
According to art. 395 of the Russian Civil Code, the bank rate for the calculation of interest in the amount of 9% is confirmed by the [Seller] by the certificate issued by a Russian bank at [Seller]'s place of business.
Accordingly, [Seller]'s claim for recovery of the interest is to be granted in the amount indicated in the statement of action.
3.6 [Recovery of contractual penalty]
As for the amount of the penalty for delayed payment, the Tribunal, persuant to section 45 of the Rules of Tribunal, did not consider this claim since the said penalty was calculated on the basis of the invoices issued for goods that were delivered under different specifications. These other specifications were not included in the statement of action and the representative of the [Seller] failed to provide the necessary grounds for this claim. As soon as these grounds are found, the [Seller] is entitled to make this claim in an independent action.
3.7 [Arbitration expenses]
[Seller]'s claim for recovery of the arbitration expenses is to be granted in accordance with section 6 of the Rules of Arbitration Expenses and Fees (Supplement to the Rules of the Tribunal) 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 the Republic of Poland 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