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CISG CASE PRESENTATION

Serbia 21 February 2005 Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce (Chicken case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050221sb2.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-14/04

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: FYR Macedonia (respondent)

GOODS INVOLVED: Young chickens and food for chickens


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 78 [Also cited: Article 53 ]

Classification of issues using UNCITRAL classification code numbers:

78A ; 78B [Interest on delay in receiving price or any other sum in arrears; Rate of interest].

Descriptors: 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

English: [2010] Vladimir Pavic, Milena Djordjevic, Application of the CISG before the Foreign Trade Court of Arbitration at the Serbian Chamber of Commerce - Looking Back at the Latest 100 cases, 28 Journal of Law and Commerce 1, cited at p. 18.

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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 23 February 2004 [Proceedings No. T- 14/04]

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 (FYR 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 of Serbia against the [Buyer] of FYR Macedonia for payment of EUR 14,780.00 with interest on the said sum and costs of arbitration, upon conducting the arbitration proceedings and hearings of 24 January 2005 and 16 February 2005 pursuant to Article 47 of the Rules of the Foreign Trade Court of Arbitration (hereinafter: the Rules), makes the following:

AWARD

  1. Claimant One [Seller]'s claim is granted and Respondent [Buyer] is ordered to pay to Claimant One [Seller] EUR 14,695.25 with 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 1,255.75 with interest from 27 July 2002 until payment;
    -    The amount of EUR 6,720.00 with interest from 1 November 2002 until payment;
    -    The amount of EUR 6,720.00 with interest from 1 December 2002 until payment;
    -    Interest for the amount of EUR 3,500.00 from 27 July 2002 until 16 November 2002;
    -    Interest for the amount of EUR 2,500.00 from 27 July 2002 until 3 January 2003; and
    -    Interest for the amount of EUR 2,500.00 from 27 July 2002 until 1 April 2003.

  2. Claimant Two's claim is rejected as ungrounded.

  3. It is hereby declared that Claimants have withdrawn their claim for the amount of EUR 84.25 with interest.

  4. Respondent [Buyer] is ordered to pay to Claimant One [Seller] RSD 127,689.00 for the costs of arbitration and representation within 15 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 initiated the arbitration on 20 July 2004 submitting a claim for payment of EUR 14,780.00 with interest on the said sum, as stated in point 1 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 two contracts concluded with [Buyer]; namely Art. 7 of both the contract for sale of young chickens (Contract 1) and the contract for sale of concentrate food for their diet (Contract 2) provided for jurisdiction of the Foreign Trade Court of Arbitration attached to the Chamber of Commerce of Yugoslavia in Belgrade in the case of a dispute. […]

In accordance with the Art. 26 para 1 and article 27 para 3 of the Rules, the President of the Court of Arbitration has appointed Prof. X as sole arbitrator in this case, given that the value of a dispute does not exceed US $70,000. […]

B. Summary of facts

Claimant One [Seller] and Respondent [Buyer] concluded two contracts.

  1. With the contract of 11 June2002, no. 146-1/02, Respondent [Buyer] bought 15,000 one-day-old female young chickens, with a delivery date of 20 July 2002, quality and quantity control upon unloading, for the price of 0.615 EUR/ piece. The price did not include costs of transportation which fell on the [Buyer]. The payment was to be effected within a 15 day period from delivery of goods/chickens, on the foreign currency account of Claimant Two, as the exporter.

  2. With the second contract of 30 July 2002 no. 160/02, 48,000 kg of food for the chickens was bought, the delivery of which was to be effected in installments, until 30 August 2002, at the price of 0.28 EUR/kg.

Claimant One [Seller] claims to have fulfilled its obligations emerging from both contracts, which it proves through the invoices of Claimant Two and the customs documents, and that Respondent [Buyer] did not have any objections as to the quality and quantity of the goods upon their delivery, which it proves with the Records of delivery, take-over, death of chickens and their discarding upon take-over.

From the entire debt of EUR 23,280, Respondent [Buyer] had partially fulfilled its obligation, by paying EUR 3,500 on 16 October 2002; EUR 2,500 on 3 January 2003; and EUR 2,500 on 1 April 2003. By this the principal debt was decreased and amounts to EUR 14,780, which is the claimed amount of principal debt in the initial statement of claim. At the same time, through a submission of 27 January 2005 and at the hearing of 16 February 2005, Claimant One [Seller] waived the claim and withdrew the statement of claim for the amount of EUR 84.25 due to the discarding of 137 pieces of young chickens. Thereby, Claimants reduced their claim to EUR 14,695.25 of the principal debt.

The duly summoned Respondent [Buyer] made only one written submission to the Court of Arbitration on 24 January 2005 and did not appear at the hearing. It did not dispute either the existence of a legal basis for the claim, the contracts, or the delivery of both types of goods. Objections related exclusively to the discarded goods, i.e., the quantity of chickens that had to be discarded due to death, Claimants responded to these objections by waiving part of the claim.

On the other hand, in its submission, the [Buyer] reiterated the weak financial status of its company. Due to its inability to pay, the [Buyer] proposed and submitted to the arbitration tribunal a statement of a three-way set-off (cession) among 1. X, 2. XY and 3. Claimant One [Seller]. From the document it can be seen that it is not signed by Claimant One [Seller], while it bears signatures of the other two companies.

Claimants disputed such a ser-off (cession) arrangement through their submission on 27 January 2005, stating that it was not signed by them, and if it had been, it would not have been legally allowed. With respect to the rest, they adhered entirely to the specified statement of claim.

Claimants reiterated the same position at the hearing on 16 February 2005 in addition to giving a proposal to conclude the discussion and make an award. The Arbitrator accepted Claimants' proposal.

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, 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 this 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 in whose territory the Parties had their seats were part of the former Yugoslavia (SFRY), and as this is a contract for the sale of goods, and as the former Yugoslavia had ratified the UN 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 Law on Resolution of Conflicts of Laws, 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 two contracts for sale of goods: Contract of 11 June 2002, no. 146-1/02, and Contract of 30 July 2002, no. 160/02. Claimant Two was not a contracting party in either of the contracts; it was the "exporter", which, according to its assertions from the Statement of Claim and the hearing, acted in the name of 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 the existence of a legal basis for the claim (the contract) or the fulfilled delivery. Its objections were only as to the existence of the discarded goods in somewhat of a greater quantity than was calculated by the Claimants in the statement of claim. Claimants accepted the objection and in their submission, as well as at the hearing, and waived their claim for the disputed amount.

The Sole Arbitrator also determined that the Claimants do not dispute that Respondent [Buyer] partially and successively paid a part of the debt, for the amount for which its initial obligation is decreased.

Based on the aforementioned, it can be concluded that the unpaid debt amounts to EUR 14,695.75, with interest on:

-    The amount of EUR 1,255.75 with interest from 27 July 2002 until payment;
-    The amount of EUR 6,720.00 with interest from 1 November 2002 until payment;
-    The amount of EUR 6,720.00 with interest from 1 December 2002 until payment;
-    Interest for the amount of EUR 3,500.00 from 27 July 2002 until 16 October 2002;
-    Interest for the amount of EUR 2,500.00 from 27 July 2002 until 3 January 2003; and
-    Interest for the amount of EUR 2,500.00 from 27 July 2002 until 1 April 2003.

As it is in fact not disputed between the parties that the [Respondent Buyer] did not pay the full amount of the contract price, which can be seen from Respondent [Buyer]'s submissions from 24 January 2004 and based on the delivered goods, i.e., fulfilled obligation of the seller, it can be concluded that the buyer had committed a breach of Article [53] of the CISG. This article explicitly states that the basic obligation of the buyer is payment of the price of the goods. With the aforementioned in mind, the Arbitrator granted Claimant One [Seller]'s claim with respect to the principal debt.

At the same time, Article 78 of the CISG grants the seller the right to interest on the unpaid debt of the buyer, without prejudice to any claim for further damages, Claimants have requested the payment of interest and it has been granted to Claimant One [Seller], based on Article 78 of the CISG.

Claimants had requested payment of interest with determination of the interest rate in accordance with the domiciliary rate of the EUR currency, for the sums, and as of the due dates stated in the Statement of Claim and at the hearing of 27 January 2005. The CISG leaves a possibility to courts and arbitral tribunals to determine the amount of interest rate in accordance with national law (Article 78). 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.

On the other hand, Respondent [Buyer] had called upon the existence of a contract on cession, i.e., a three-way set-off, and had suggested that the payment of the remaining debt be made in such a way.

Claimants had objected to this in their submission and at the last hearing with the objection of prohibition of cession and set-off in relations with a foreign element, as well as pointing out the fact that the agreement was never concluded and signed by them.

The Arbitrator decided that the proposed contract is not a legal cession, i.e., transfer of claim pursuant to Article 436 and further of the Law on Contracts and Torts, but that it can only be an assumption of debt pursuant to Article 446 of the Law on Contracts and Torts. As a party's erroneous understanding should not be relevant for the arbitrator, the Arbitrator concluded that for the application of an assumption of debt the acceptance of the creditor is lacking, which is necessary pursuant to Article 446 para. 1 of the Law on Contracts and Torts. Lack of such an acceptance emerges from the document submitted by Respondent [Buyer] which was not signed by Claimant One [Seller] as well as well as from its statement given at the hearing and through a written submission.

On the other hand, the Arbitrator holds that it cannot be a case of set-off from Article 336 and further of the Law on Contracts and Torts, for the simple reason that Respondent [Buyer] did not have any claim against Claimants, but instead, had only the debt. For the stated reasons, it is decided with respect to Claimant One [Seller] as stated in point 1 of the operational part 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]. 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.

As Claimants had withdrawn their statement of claim and waived the claim towards Respondent [Buyer] with respect to an amount of 84.25 EUR, the Arbitrator concluded and stated this fact in point 3 of the operative part of the Award.

Costs of proceedings

Claimants requested the costs of proceeding for the amount of paid registration fee and arbitration costs (RSD 5,850 + RSD 78,339), further, compensation for sums paid for the writing of the statement of claim and other written submissions, and for the representation at the two hearings, all for the total amount of RSD 135,939.00.

Respondent [Buyer] did not request compensation of its expenses in its submission of 24 January 2005.

The Arbitrator concluded that the statement of claim was granted in the most part with respect to Claimant One [Seller], and that Claimants had waived their claim for a minimal amount. Also, the Arbitrator concluded that the statement of claim was not granted with respect to Claimant Two.

By applying Article 55, etc., of the Rules and Article 155 of the Law on Civil Procedure 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 4 of the holding of the Award; namely, for the amount of RSD 127,689, decreasing the amount of the claim for the amount paid for representation of Claimant 2.

At the same time, the Sole Arbitrator is aware of the fact that Claimant One [Seller] had withdrew the statement of claim and waived the respective claim for a certain amount, but considers this as irrelevant for the success of Claimant One [Seller] in the dispute.

Based on all the aforementioned, it has been decided as stated in point 4 of the Arbitration Award.

This decision 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.

Belgrade, 21 February 2005

Sole arbitrator [signed]


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 FYR 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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