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CISG CASE PRESENTATION

Russia 2 June 2005 Arbitration proceeding 131/2004 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050602r1.html]

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

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Case identification

DATE OF DECISION: 20050602 (2 June 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: 131/2004

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Bulgaria (claimant)

BUYER'S COUNTRY: Russian Federation (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 4 ; 7 [Also cited: Articles 53 ; 61 ; 62 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Scope of Convention (issues excluded): statute of limitations];

7A3 [Observance of good faith]

Descriptors: Scope of Convention ; Statute of limitations ; General principles ; Good faith

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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 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. 28 [232-236]

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 131/2004 of 2 June 2005

Translation [*] by Gayane Nuridzhanyan [**]

1. SUMMARY OF RULING

      1.1 The arbitration agreement between the parties conforms to the provisions of the Moscow Convention of 1972 to which the States of the parties are Contracting States. Accordingly, the Tribunal concluded that it is competent to adjudicate the present dispute.

      1.2 The places of business of the parties to the contract are Contracting States to the Vienna Convention of 1980. The Convention is, therefore, applicable to the relations of the parties. On the grounds of the Basics of Civil Legislation of 1991, Bulgarian law as the law of the [Seller]'s country is determined as the subsidiary statute.

      1.3 The [Buyer]'s statute of limitations objection with regard to the main sum in arrears was rejected. Taking into account the specific circumstances of the case, the [Buyer]'s statement that the agreement was signed by an unauthorized person is considered to contravene to the good faith principle of international trade.

      1.4 The [Seller]'s claim for the recovery of the penalty was rejected since that claim is precluded by the applicable statute of limitation under Bulgarian law.

2. FACTS AND PLEADINGS

The [Seller], a Bulgarian firm, has lodged a claim against the [Buyer], a Russian company, in connection with non-payment for the goods delivered under an international sales contract concluded by the parties on 27 June 1996. The [Seller] sought:

   -    paying off of the debts;
   -    payment of the contractual penalty; and
   -    reimbursement of the expenses for the arbitration fee and conduct of the case.

Initially the [Seller] lodged an action with the arbitration court at the regional Chamber of Trade and Commerce at the place of [Buyer]'s location. However, that claim was rejected and it was explained to the [Seller] that adjudication of such disputes is within the competence of the International Commercial Arbitral Tribunal.

The [Buyer] contested [Seller]'s claim. The [Buyer] stated that it had carried out payment for the goods by ceding to the [Seller] the right to claim the money from a third party to whom, in [Buyer]'s opinion, the [Seller] should address its claim. Moreover, the [Buyer] referred to the statute of limitation envisaged by the law of the Republic of Bulgaria with regard to the main sum in arrears as well as in respect to the contractual penalty. In [Buyer]'s opinion, there does not exists any grounds to hold that there was an interruption of the period of limitation since the Agreement of 8 July 1999 which fixed new terms for the set-off of the indebtedness was signed by an unauthorized person on behalf of the [Buyer] and the letter of 22 November 1999 to which the [Seller] refers was not signed at all by the Director General of the [Buyer]'s company.

The [Seller] presented objections to all of the [Buyer]'s arguments.

3. TRIBUNAL'S REASONING

The award of the Tribunal contains the following basic points.

      3.1 The competence of the Tribunal

      Considering the issue of the Tribunal's competence to adjudicate the present dispute, the Tribunal found that para. VII.4 of the contract envisaged that "in case the agreement is not reached or in case of unilateral refusal to voluntarily fulfill the obligations undertaken earlier, disputes shall be adjudicated at the Arbitration Tribunal at the Chamber of Commerce and Trade of the Respondent's country."

As of the date of the conclusion of the contract, the Republic of Bulgaria and Russian Federation were States Parties to the Moscow Convention on the Adjudication by Means of Arbitration of Civil Law Disputes Arising out of Relations of Economic and Scientific and Technical Cooperation (Moscow Convention of 1972), foreseeing adjudication of the mentioned disputes between the commercial organizations of the States Parties to the Convention in the arbitration tribunal at the chamber of trade in the Respondent's country.

Taking into account that the Claimant in the present case is a Bulgarian company and the respondent is a Russian firm -- in accordance with the terms of the contract, the dispute should be adjudicated by the International Commercial Arbitral Tribunal at the Chamber of Trade and Commerce of Russian Federation. In conformity with para. 2 of the Regulations on the Tribunal (Supplement 1 to the Law of the Russian Federation "On International Commercial Arbitral Tribunal") and para. 1(2) of the Rules of Tribunal, the subject competence of the Tribunal includes the adjudication of disputes originating from civil law relations connected with the conduct of foreign trade and other types of international economic activity. There is no other arbitration tribunal at the Chamber of Trade and Commerce except for the Tribunal adjudicating such disputes.

      3.2 Absence of the [Seller]'s representatives

      Taking into consideration the [Seller]'s petition of 26 April 2005 for the hearing of the case in the absence of its representatives (on the grounds of the documents presented), the Tribunal, following para. 28(3) of the Rules of the Tribunal, finds that hearing of the present case and passing of the award can be carried out in the absence of the [Seller].

       3.3 Applicable law

      With regard to the applicable law, the Tribunal finds that the contract, which is an international sales contract, does not contain the agreement of parties on the applicable law.

Art. 28(2) of the Law of the Russian Federation "On International Commercial Arbitral Tribunal" envisages that, in the absence of the parties' directions, the arbitration tribunal shall apply the law` determined by the conflict of laws norms which it regards applicable. On the grounds of art. 166 of the Basics of the Civil Legislation which was effective at the time of the conclusion of the contract by the parties, the Tribunal holds that law of the [Seller]'s country, i.e., the law of the Republic of Bulgaria, which is referred to by the parties in the [Seller]'s claim as well as in the [Buyer]'s statement of defense, shall be applicable to the legal relationship at stake.

Since the Republic of Bulgaria and the Russian Federation are Contracting States to the Vienna Convention of 1980, the provisions of the Convention, with the substantive law of Republic of Bulgaria as the subsidiary norms, shall be applicable to the relations of the parties to the present dispute.

      3.4 Consideration of the dispute on the merits

      The dispute between the parties arose because of the non-payment by the [Buyer] for the goods delivered to it. The fact of the delivery of goods under the contract is confirmed by the materials of the case and is not contested by the [Buyer]. The indebtedness of the [Buyer] with regard to payment of the received goods is completely confirmed by the materials of the case and the amount of the indebtedness is not contested by the [Buyer].

Under such circumstances, the Tribunal concludes that the [Buyer] did not fulfill its obligations with regard to the payment for the goods delivered to it and, by virtue of arts. 53, 61(1) and 62(1) of the Vienna Convention, the [Seller]'s claim for the recovery of the indebtedness from the [Buyer] is well-founded and is subject to satisfaction (with the deduction of the sum which was paid by the [Buyer] according to the [Seller]'s statement of 8 July 1999).

As to the period of limitation, the legislation of the Republic of Bulgaria (art. 110 of the Law on Obligations and Agreements, 1950) foresees a general five-year period of limitation. According to art. 114 of this law, the period of limitation is calculated from the day when the right to claim arose, i.e., in the present case, starting from 30 November 1999 in conformity with Agreement of 8 July 1999 to the contract concluded between the parties, fixing terms for the offset of debts.

Since as of the moment of the lodging of the action -- 27 September 2004 (according to the post office note) -- the general five-year term of the statute of limitation provided by the applicable law has not expired, the [Buyer]'s raising a statute of limitation defense to [Seller]'s claim for the payment of the main sum in arrears is unfounded.

[Buyer]'s arguments that the Agreement was signed on 8 July 1999 by an unauthorized person cannot be taken into consideration. As follows from the materials of the case, the Agreement of 8 July 1999 was signed in 1996 by the person who served as Director General of the [Buyer]'s firm at the time the parties concluded the contract from which the disputes arose. The same person signed the specification order for the delivery of the goods; the correspondence was conducted with the [Seller] with regard to the issues of the payment of the debts and this payment was guaranteed.

At present, this person is again Director General of the [Buyer]'s company and has signed the statement of defense in the present case. Moreover, according to [Seller]'s statement, the Agreement of 8 July 1999 was signed in the presence and with the consent of the person who at that time was Director General of [Buyer]'s company.

Thus, it follows from materials of the case as well as from the [Buyer]'s statements that the [Buyer] knowingly misled the [Seller] acting clearly in contravention with the basic business practice principle of good faith which, according to the Vienna Convention, prevails over national legislation.

Taking into consideration the above, the Tribunal concludes that general five-year term of the limitation period in the present case has not expired.

[Buyer]'s reference to the contract concluded by the parties on ceding the right to claim monetary funds from the debtors of 27 June 1996 cannot be taken into consideration since it is not connected with the delivery contract and does not contain provisions on the offset of the debts for the goods delivered under the contract of 27 June 1996 by means of the cession of the right to claim monetary funds.

      3.5 [Seller]'s claim for the recovery of the penalty

      According to art. 111(c) of the Law of Republic of Bulgaria "On the Obligations and Agreements" (redaction of 1993), a three-year limitation period is applicable to claims for recovery of interest and other recurring payments. Therefore, [Seller]'s claim for the recovery of the penalty in the amount of 10% of the cost of the non-paid goods is not to be satisfied due to the application of the limitation period.

      3.6 The payment of the arbitration fee

      According to para. 6(2) of the Regulations on Arbitration Expenses and Fees, the reimbursement to the [Seller] of the expenses on the payment of the arbitration fee is imposed on the [Buyer] in proportion to the amount of the satisfied claims. The sum of other incurred expenses in connection with the arbitration proceedings including expenses for the legal consultations which the [Seller] requests to recover from the [Buyer] was not determined and confirmed by documents.


FOOTNOTES

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

** Gayane Nuridzhanyan, junior associate at the law firm Danylko, Kushnir, Soltys & Yakymyak, Attorneys & Counselors at Law, Kyiv, Ukraine <http://www.dksylaw.com/>, student at Kyiv International University with major in private international law; participant of Canada-Ukraine Parliamentary Program, member of Ukrainian team at 2005 Telders International Moot Court Competition, The Hague.

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Pace Law School Institute of International Commercial Law - Last updated August 3, 2007
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