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CISG CASE PRESENTATION

Serbia 21 February 2005 Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce (Young chickens case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050221sb.html]

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

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Case identification

DATE OF DECISION: 20050221 (21 February 2005)

JURISDICTION: Arbitration ; Serbia

TRIBUNAL: Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: T-15/04

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Serbia and Montenegro/Serbia (claimants)

BUYER'S COUNTRY: Macedonia (respondent)

GOODS INVOLVED: Young chickens


Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 39 ; 78 [Also cited: Articles 35 ; 38 ; 44 ; 54 ]

Classification of issues using UNCITRAL classification code numbers:

4B3 [Scope of Convention (issues excluded): burden of proof a procedural issue governed by applicable procedural law];

39A ; 39C [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time (three months not reasonable)];

78B [Rate of interest]

Descriptors: Scope of Convention ; Burden of proof ; Lack of conformity notice, timeliness ; Interest

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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 (Serbian): Click here for Serbian text of case

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Serbian: [2008] Vladimir Pavic, Milena Djordjevic, Primena Becke konvencije u arbitraznoj praksi Spoljnotrgovinske arbitraze pri Privrednoj komori Srbije, Pravo i privreda br. 5-8/2008, cited at pp. 581, 600-602

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Case text (English translation)

Queen Mary Case Translation Programme

Foreign Trade Court of Arbitration
Attached to the Serbian Chamber of Commerce in Belgrade

Award of 21 February 2005 [Proceedings No. T-15/04]

Translation by [*] Ivana Nincic
Edited by Dr. Vladimir Pavic, Milena Djordjevic, LL.M. [**]

Claimant One (Serbia) [Seller] and Claimant Two [not a contracting party: an exporter acting on the account of Seller] v. Respondent (Macedonia) [Buyer]

The Sole Arbitrator [...], in a dispute before the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce in Belgrade, concerning the claim of Claimant One [Seller] and Claimant Two against the [Buyer] for payment of EUR 38,073.60 with interest and costs of the proceedings, upon conducting arbitration proceedings and a hearing of 18 February 2005, pursuant to Article 47 of the Rules of the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce, makes the following:

AWARD

   (1)    Claimant One [Seller]'s claim is granted and Respondent [Buyer] is ordered to pay to Claimant One [Seller] EUR 38,073.60 with a domiciliary interest within 15 days from the day of receipt of the award, subject to court enforcement in case of non-payment:
 
-  The amount of EUR 12,750 with interest from 16 February 2004 until payment;
 
-  The amount of EUR 12,750 with interest from 16 March 2004 until payment;
 
-  The amount of EUR 12,573 with interest from 16 April 2004 until payment;
 
-  Interest for the amount of EUR 12,500 from 16 December 2003 until 20 April 2002;
 
-  Interest for the amount of EUR 12,000 from 16 January 2004 until 10 June 2004.
 
   (2)    The claim of Claimant Two is rejected as ungrounded.
 
   (3)    Respondent [Buyer] is ordered to pay to Claimant One [Seller] the amount of Serbian dinars [RSD] 183,197.00 as compensation for the registration fee, arbitration costs and costs of representation (attorneys' fees), within fifteen days from the day of receipt of the award, subject to court enforcement in case of non-payment.

STATEMENT OF REASONS

A. Jurisdiction and the appointment of the Sole Arbitrator

Claimants addressed the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce on 20 July 2004 requesting payment of EUR 38,073.60 of the principal debt, with interest, as stated in the first point of the holding of the Award. The jurisdiction of this Court of Arbitration, according to Claimant One [Seller]'s statement of claim, is based on Art. 7 of the contract, which was signed by Claimant One [Seller] and Respondent [Buyer] on 11 August 2003, No. 150-03 (hereinafter 'the Contract'). Art. 7 of this Contract for the sale of young chickens with credit payment in installments provides for jurisdiction of the "Foreign Trade Arbitration with the Chamber of Commerce in Serbia."

[...]

B. Summary of facts

Claimant One [Seller] and Respondent [Buyer] concluded the Contract on 11 August 2003, No 150/03, by which [Buyer] purchased 45,000 eight-week-old female chickens, of "HISEX BROWN" sort, for the price of EUR 1.80/piece franco unloading, increased for 0.5% gartisa. The Contract contains specifications of diseases and vaccines against which the young chickens had to be vaccinated. Article 3 of the Contract fixes the times of delivery of the installments. The price was to be reduced by EUR 0.10/ piece upon the buyer's payment of the carrier's fees. The sales contract had determined credit payment terms, and payment was to be made through the exporter in six equal installments (each installment - EUR 12,750.00), on the 15th day of every month, from November 2003 through April 2004 inclusive. Finally, Article 4 of the Contract provides for a period of 21 days in which the state of health of the young chickens is to be controlled, and contains provisions regulating liability for diseases and expenses for treatment which would be incurred in this period. Quarantine was imposed, for the period of 19 August 2003 to 10 September 2003.

Claimant One [Seller] asserts that it performed all of its obligations in good faith: that it delivered healthy young chickens of appropriate weight, vaccinated against all the listed diseases, and Respondent [Buyer] did not have any objections and gave no notice of lack of conformity. According to Claimant One [Seller], Respondent [Buyer] did not have any objections with regard to the inappropriate time span of the quarantine, even after the quarantine was lifted, and did not give a notice of lack of conformity; therefore, Claimant One [Seller] performed all of its obligations in good faith, and the raising of the young chickens and their fate, according to Claimant One [Seller], was the responsibility of Respondent [Buyer].

Only when its second installment fee was due, around 15 December 2003 or, in other words, three months after lifting of the quarantine, did Respondent [Buyer] give notice of lack of conformity of the delivery over the telephone (alleging the belated laying of eggs, decreased egg-laying capacity, higher mortality rate) and made a request for damages for the amount of EUR 44,682.91, which represents 59.4% of the value of the whole transaction. Claimant One [Seller] asserts that Respondent [Buyer] did not sustain any damages, and, even if it had, it would have been within the scope of its own liability, and not Claimant One [Seller]'s. The subject of the Contract, as stated in its Article 1, are young chickens, and not raised chickens, as would be the conclusion arising from Respondent [Buyer]'s remarks.

As Respondent [Buyer] had paid only two installment fees, and even those later then agreed upon, Claimant One [Seller] requested the payment of the remaining installments with accrued interest and interest for the two irregular payments for the period of delay. Therefore, Claimants had made their request for payment for the amount of EUR 38,073.60, with interest on:

   -    The amount of EUR 12,750.00 with interest from 16 February 2004 until payment;
   -    The amount of EUR 12,750.00 with interest from 16 March 2004 until payment;
   -    The amount of EUR 12,573.60 with interest from 16 April 2004 until payment;
   -    Interest for the amount of EUR 12,500.00 from 16 December 2003 until 20 April 2002;
   -    Interest for the amount of EUR 12,000.00 from 16 January 2004 until 10 June 2004.

Respondent [Buyer] received the Statement of Claim with enclosed documents on 22 July 2004, of which there is evidence in the record. The [Buyer] failed to submit an Answer to the Statement of Claim, did not give a suggestion as to the naming of the arbitrator, and refused to take part in any way in the arbitral proceedings. There is evidence in the record that on more than one occasion Respondent [Buyer] refused to receive written notifications and other written communication from the Court of Arbitration, sent via DHL. It also refused to accept the written notice of the scheduled hearing.

At the hearing on 18 February 2005, the Arbitrator noted that Respondent [Buyer] was duly notified and refused acceptance of the summons for the hearing, of which there is evidence in the record. Claimants maintained their assertions in the Statement of Claim and requested that the arguments be held in the absence of the properly invited Respondent [Buyer], and that the arbitral proceedings proceed to a final award. The Arbitrator accepted this standpoint of Claimants in form of a conclusion.

C. Applicable law

The Arbitrator ascertained that the Parties to the Contract did not designate the applicable substantive law which is to be applied before the Court of Arbitration. As the case contained a foreign element, the Arbitrator had to determine the applicable law. Therefore, the Arbitrator applied the appropriate conflict of law rules pursuant to Article 46 paragraph 2 of the Rules of the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce (hereinafter the Rules), which are in accordance with the European Convention on International Commercial Arbitration of 1961. The Arbitrator concluded that the most appropriate rules for determining applicable law were the conflict of law rules of Serbia, as the country which is most closely connected to the Contract and the country whose Court of Arbitration has jurisdiction. They are contained in the Serbian Law on Resolution of Conflict of Laws (hereinafter the Law). According to Article 20 of the Law, the applicable law for a contract of sale of goods is the law of the country of the seat of the seller. As the seller in the case is a Serbian company, Serbian law is applicable, i.e., primarily the Law on Contracts and Torts (Official Gazette of SFRY no 29/78 with later amendments, hereinafter: the LCT).

However, as both States on whose territory the Parties had their seats were incorporated in the former Yugoslavia (SFRY), and as this is a contract for the sale of goods, and as the former Yugoslavia had ratified the UNCITRAL Convention on Contracts for the International Sale of Goods (hereinafter the CISG), the Arbitrator found that the CISG is also relevant as the applicable law, having in mind the automatic succession to multilateral conventions.

In such a situation, except for the provisions of the Contract and applicable trade usages (Article 46, para. 3 of the Rules), the CISG should be applied to this dispute, and secondarily, if need should arise, the substantive law of Serbia and Montenegro, in accordance with Article 20 of the Law.

As for the applicable procedural law, the relevant rules are the Rules of this Court of Arbitration and the rules of the Civil Procedure Act and the International Private Law Act, which are in force in Serbia.

D. The reasoning of the Arbitrator with respect to the claim

Principal debt and interest

From the record, it can be concluded that Claimant One [Seller] and Respondent [Buyer] concluded their Contract for the sale of young chickens with payment in installments, on 11 August 2003, No. 150/03. Claimant Two was not a contracting party to the Contract; it was an "exporter", which, according to its assertions from the Statement of Claim and the hearing, acted in the name and for the account of Claimant One.

Claimant One [Seller] proved with invoices and customs declarations that it delivered the goods in accordance with the Contract. Respondent [Buyer] did not dispute this, as its position was completely passive throughout the proceedings. The Arbitrator also established that Claimant One [Seller] itself asserts that a part of the debt was paid off, albeit with delay. Based on all the aforementioned, the unpaid debt, according to Claimant One [Seller], now stands at EUR 38,073.60, with interest on:

   -    The amount of EUR 12,750.00 with interest from 16 February 2004 until payment;
   -    The amount of EUR 12,750.00 with interest from 16 March 2004 until payment;
   -    The amount of EUR 12,573.60 with interest from 16 April 2004 until payment;
   -    Interest for the amount of EUR 12,500.00 from 16 December 2003 until 20 April 2002;
   -    Interest for the amount of EUR 12,000.00 from 16 January 2004 until 10 June 2004.

Therefore, it is evident from the record that Respondent [Buyer] did not pay the complete price for the goods agreed upon in the Contract, which can be seen from Claimants' submissions, the invoices and customs declarations, from which can be concluded that Respondent [Buyer] had breached Article 54 CISG. This article decisively states that the buyer's principal obligation is to pay the price for the goods. With the aforementioned in mind, the Arbitrator granted Claimant One [Seller]'s claim with respect to the principal debt, as stated in point (1) of the holding of the Award.

At the same time, Article 78 CISG provides for a right to interest on an unpaid debt, without prejudice to any claim for damages recoverable under Article 74. Claimants in this dispute requested the payment of interest, which was granted only to Claimant One [Seller], pursuant to Article 78 CISG.

Claimants had requested payment of interest with determination of the interest rate in accordance with the domiciliary rate for the EUR currency, for the sums, and as of the due dates stated in the Statement of Claim and the hearing. Article 78 CISG leaves a possibility to courts and arbitral tribunals to determine the amount of interest rate in accordance with national law. Relying on Serbian law as the applicable national law (the former law on the statutory interest rate and on the new law of the same name -Official Gazette of FRY 9/2001), on the practice of the Court of Arbitration for determining the amount of interest rate, and on the public policy of the country, the Arbitrator decided as stated in point (1) of the holding of the Award.

As it did not participate in the proceedings in any way, Respondent [Buyer] could not give any objection as to the quality of the delivered goods through its own submissions. However, Claimants stated that Respondent [Buyer] gave them notice of lack of conformity of the young chickens over the telephone three months after removal of the quarantine. The Arbitrator therefore took into account Article 35 et seq. CISG. These provisions provide that the goods must conform to the terms of the contract (Article 35), that the goods have to be expeditiously examined both with regards to the quality and quantity (Article 38) and that the notice of non-conformity has to be given quickly upon examination (Articles 39 and 44). The Arbitrator is of the opinion that even if a telephone call could be considered as a notice of lack of conformity, the notice in the present case was not given within a reasonable time, as required by Article 39 CISG, and that Respondent [Buyer] did not have any apparent excuse for such a delay, as provided by Article 44 CISG, which would grant him the right of price reduction for reason of non-conformity of the goods.

The Arbitrator concluded that Respondent [Buyer] acted passively in the dispute, that it did not attend the hearing, did not give an Answer to the Statement of Claim nor did it submit any other document. The Arbitrator called upon Article 25 of the Rules (paras. 1, 2, and 5) which pertains to proper notification of the parties and which provides that if the respondent, although duly notified, fails to submit his answer to the claim or to a written notification, or refuses to take part in the arbitral proceedings, the arbitration can proceed in the absence of the respondent in accordance with the provisions of these Rules. Any other possibility would open a possibility of obstruction of the proceeding by the respondent and would put into question the principle of procedural economy. Therefore, the Arbitrator relied on Article 25 of the Rules in conducting of the arbitral proceedings and in making of the award.

It is noted that the Arbitrator, in making the award, also took into account Article 221 para. a of the Civil Procedure Act, which is applied secondarily in this case (Article 44 of the Rules). According to this article, if the court could not come to a conclusion regarding the existence of a certain fact through the presentation of evidence, it will decide by applying the rule of burden of proof. According to this rule, every party has to prove the existence of the facts which according to substantive law go in its favor. Therefore, as Respondent [Buyer] did not prove any fact which would go in its favor, it can be considered that they do not exist. Respondent [Buyer]'s passive attitude led to this, therefore the final conclusion of the Sole Arbitrator that Claimant One [Seller]'s request for the stated amount is justified. Thus, he so decided in point (1) of the holding of the Award.

Claimant Two, on the other hand, was not a party to the Contract, nor the owner of the goods which were sold. This can be seen from the Contract itself as well as the invoices in which it is decisively stated that the owner of the goods is Claimant One [Seller], as well as the statements in the hearing. The relationship between Claimants could be regulated only by mutual agreement, ex. a mandate contract (Article 749 LCT), however, this relationship is completely irrelevant for the statement of claim and the arbitral proceedings. The Arbitrator is of the opinion that Claimant Two was not in a legal relationship with Respondent [Buyer], and therefore, that it has no standing in the arbitral proceedings. Therefore, the claim was refused with respect to Claimant Two, due to lack of standing, as stated in the second point of the holding of the Award.

Costs of proceedings

Claimants requested compensation for the amount of the paid registration fee and arbitration costs (RSD 5,850.00 + RSD 142,472.00), compensation for sums paid for the writing of the written submissions, primarily the statement of claim, and for the representation before the arbitration, all for the total amount of RSD 194,447.00.

Respondent [Buyer] did not request compensation of its expenses.

The Arbitrator concluded that the statement of claim was granted in full with respect to Claimant One [Seller]. The Arbitrator also concluded that the claim was refused with respect to Claimant Two.

Applying Article 55 etc. of the Rules and Article 155 etc of the Civil Procedure Act and considering the fact that Claimant One [Seller]'s request in the dispute against Respondent [Buyer] was granted in full, the Arbitrator decided with respect to the expenses as stated in point three of the holding of the Award; namely, for the amount of RSD 183,197.00, decreasing the amount of the claim for the amount paid for representation of Claimant Two.

Based on all aforementioned, it was decided as stated in point (3) of the holding of the Award.

This arbitral award is final and is not subject to appeal. It has the force of a final decision of a court of the State Union of Serbia and Montenegro, pursuant to Article 483 of the Civil Procedure Act and Article 54 of the Rules of this Court of Arbitration.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant One of Serbia is referred to as [Seller] and Respondent of Macedonia is referred to as [Buyer]

** Ivana Nincic is a graduate of the University of Belgrade Faculty of Law where she is currently attending Master studies in European Integration. Dr. Vladimir Pavic is an Associate Professor in Private International Law and Arbitration. Milena Djorjevic, LL.M. (U. of Pittsburgh) is a Lecturer in International Commercial Law at the University of Belgrade Faculty of Law.

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