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CISG CASE PRESENTATION

Russia 18 July 2005 Arbitration proceeding 134/2004 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050718r1.html]

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

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Case identification

DATE OF DECISION: 20050718 (18 July 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: 134/2004

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: India (claimant)

BUYER'S COUNTRY: Russian Federation (respondent)

GOODS INVOLVED: [-]


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 7 ; 53

Classification of issues using UNCITRAL classification code numbers:

Unavailable

Descriptors: Unavailable

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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 3z 2005 g. [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. 32 [266-270]

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 134/2004 of 18 July 2005

Translation [*] by Gayane Nuridzhanyan [**]

1. SUMMARY OF RULING

      1.1 The [Seller]'s procedural petitions for the adjournment of the hearing of the case and additional proceedings in the case after the oral hearings were completed were not satisfied.

      1.2 Choice by the parties of Russian law as the applicable law was a basis for acknowledgement that relations of the parties under the international sale contract are governed by the Vienna Convention of 1980 although the [Seller] has its place of business in a State which is not a Contracting State to the Vienna Convention.

      1.3 The [Buyer] has proved that to the satisfaction of the Tribunal the accuracy of payment documents containing [Buyer]'s reference to the contract claims which are the subject of the present action. Therefore, the [Seller]'s viewpoint which considers the received sums not as payment for the deliveries under that contract but as settlement of accounts between the parties under other contracts is regarded as unfounded.

2. FACTS AND PLEADINGS

The claim was lodged by the [Seller], an Indian firm, against the [Buyer], a Russian company, in connection with non-payment for the goods delivered under an international sale contract concluded by the parties on 27 July 2001.

The [Seller] sought:

   -    Payment of the sum in arrears;
   -    Payment of the contractual penalty for the payment delay;
   -    Reimbursement of the expenses for payment of the arbitration fee and conduct of the case.

The [Buyer] presented its statement of defense in which it stated that most of the cost of the goods delivered by the [Seller] had been paid by the [Buyer] in twelve transfers which specified that payments were carried out under the contract on the basis of which the [Seller] lodged the action.

The [Buyer] acknowledged that part of the sum was not paid for and therefore the [Buyer] acknowledged the action claims of the [Seller] with regard to this part including [Seller]'s claim for the payment of the contractual penalty in respect to that sum.

In [Seller]'s opinion, the fact that transfers did not contain specific invoice numbers under which the payment was carried out made it impossible to ascribe the [Buyer]'s payment to the specific invoices.

The [Seller] has lodged a number of procedural petitions considered by the MKAC Arbitral Tribunal (hereinafter: Tribunal), including additional proceedings in the case after the oral hearings were completed.

3. TRIBUNAL'S REASONING

The award of the Tribunal contained the following basic points.

      3.1 The competence of the Tribunal

      The Tribunal's competence to adjudicate the present dispute ensues from para. 10 of the contract concluded by the parties envisaging that the parties shall strive to settle all disputes and disagreements which may arise from the present contract or in connection with it by means of negotiations and, in case the parties fail to reach an agreement, the dispute between the parties shall be adjudicated by the International Commercial Arbitral Tribunal at the Chamber of Trade and Commerce of Russian Federation, City of Moscow.

On the basis of the above, the Tribunal following arts. 1, 7 and 16 of the Law of Russian Federation "On International Commercial Arbitration" and para. 1(2), (3) and (5) of the Rules of the Tribunal rules that it is competent to adjudicate the present dispute.

      3.2 The applicable law

      Para. 10.3 of the contract from which the dispute has arisen envisages that the substantive law of the Russian Federation shall be applicable to disputes arising out of the contract or in connection with it.

Since Russia is a Contracting State to the Vienna Convention of 1980 and by virtue of art. 15 of the Constitution of the Russian Federation and art. 7 of the Civil Code of Russian Federation the international agreements of Russian Federation constitute a component part of its legal system, provisions of the Convention are applicable to the present dispute on the basis of art. 1(1)(b) of the Convention.

According to art. 7(2) of the Vienna Convention "questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law" (Russian law in this case).

      3.3 Having considered [Seller]'s petitions # 1, 2, 3 lodged by it at the session of the Tribunal on 16 June 2005, the Tribunal did not find any grounds which would allow it to satisfy the [Seller]'s petitions.

      [Seller]'s petition #1. As to petition # 1, the Tribunal, following para. 34 of the Rules of the Tribunal, found that parties should prove those facts to which they refer as to the grounds for their claims and objections. The [Seller] is obliged itself to take care of the search for and submission of the needed proof. Moreover, the Tribunal marked out that exactly due to the [Seller]'s petition of 7 April 2005 the hearing of the case was postponed in view of the necessity to receive original documents from the [Seller]'s place of business located in India. On the basis of the above, the Tribunal concluded that [Seller]'s petition # 1 shall not be satisfied.

      [Seller]'s petition #2. Having considered [Seller]'s petition # 2 in which it requested the Tribunal to oblige the [Buyer] to carry out a review of the mutual accounts settlement for the period beyond the validity terms of the contract and a review of the accounts under the contract which are subject of the dispute between the parties, the Tribunal concluded as follows.

The action claim covers the sum of five accounts under the contract of 27 July 2001 billed in November-December 2001. Taking into consideration that the [Seller] insisted on the conduct of a review of the mutual accounts settlement for a period exceeding the validity term of the contract (from 27 July 2001 till 31 December 2002) and taking into consideration [Buyer]'s objections to the conduct of the review of mutual account settlements and postponement of the case hearings thereof, the Tribunal refused to satisfy [Seller]'s petition # 2.

      [Seller]'s petition # 3. Since [Seller]'s request set forth in petition # 3 related to the reclamation of accounts which are not the subject of the present action and postponement of the oral hearing of the case thereof for forty-five days, the Tribunal rejected this petition of the [Seller].

      3.4 The Tribunal found that it is pointless to satisfy [Seller]'s petition for additional proceedings in the case lodged on 23 June 2005 after the oral hearings are completed as the petition was lodged with an unacceptable delay and concerned alteration or supplement of the action claim. In taking this decision, the Tribunal followed art. 23(2) of the Law of Russian Federation "On International Commercial Tribunal" and paras. 32(2) and 39(1) of the Rules of the Tribunal.

       3.5 Consideration of the merits of the case

      Addressing the merits of the claim, the Tribunal found that [Seller]'s claims for the recovery of the sum in arrears are based on the statement about the non-payment by the [Buyer] of invoices: # CPL/387 of 22 November 2001, CPL/462 and CPL/463 of 24 December 2001, and CPL/478 and CPL/479 of 31 December 2001. In [Seller]'s opinion, payments made by the [Buyer] specifying the number of the contract only and not the numbers or sum of the [Seller]'s invoices made it impossible for the [Seller] to ascribe the sum to the payment of the mentioned invoices and the payments were considered by the [Seller] as payment for the earlier deliveries of the goods.

At the session of the Tribunal, both parties confirmed the delivery of the goods in the amount of US dollars specified by the [Seller] under contract # CPIM/2001 of 27 July 2001. Twelve bank notifications presented by the [Buyer] confirm the payment of most of the sum for deliveries under the contract since these notifications contain reference to the contract. In the course of the proceedings, the [Seller] acknowledged that payments under the contract were accepted by it without any objections and that by the time the present dispute arose it had not requested the [Buyer] to specify the references to the specific invoices in the payment documents. Based on the above, the Tribunal believes that the sums paid by the [Buyer] should have been considered as payment of the invoices under the contract.

Under such circumstances, the Tribunal concluded that [Buyer]'s debt under the specified invoices constitute only the amount of underpayment which the [Buyer] acknowledges in its statement of defense of 7 April 2005.

References of the Indian "Bank of Baroda" of 19 April and 10 June 2005 cannot be taken by the Tribunal as proper evidence of the non-fulfillment by the [Buyer] of its obligation under the contract to pay for the delivered goods since the reference of 10 June 2005 contains invoices and payments since 1998 (the contract at issue was in force from 27 July till 31 December 2001) not specifying for what contracts and by which transfers the payments were carried out. (The reference of 19 April 2005 contains the bank's statement about the non-payment of the mentioned invoices). It does not follow from the content of the mentioned documents for which contracts of the parties the invoices were billed and in what way the bank ascribed the sums to specific invoices.

Since the [Buyer] has not fulfilled the obligation imposed on it by art. 53 of the Vienna Convention to pay in full for the delivered goods which is confirmed by the documents available from the materials of the case and by the fact of the acknowledgement of the indebtedness by the [Buyer], the Tribunal concludes that the sum of the underpayment is to be recovered from the [Buyer].

      3.6 According to para. 8.1 of the contract, the [Buyer], in case of delay of the payment for the goods delivered to its address, shall be obliged to pay the [Seller] a penalty in the amount of 0.5% of the cost of the goods not paid in time for each week of the delay, however, not more than 8% of the cost of the non-paid goods.

Since the payment delay of the sum in arrears acknowledged by the [Buyer] constituted more than twenty-four months the [Buyer] shall pay the [Seller] the penalty in the amount of 8% of this sum.

      3.7 According to para. 6(2) of the Regulations on Arbitration Fees and Expenses which is a Supplement to the Rules of the Tribunal, the arbitration fee is imposed on the [Buyer] in proportion to the amount of satisfied claims.

      3.8 As to the [Seller]'s claim for the recovery of the expenses related to the defense of its interest by the legal representative, the Tribunal does not find any grounds for the satisfaction of this claim since, in accordance with para. 9 of the Regulations, only the party in favor of which the decision was passed may claim the recovery of reasonable expenses incurred in connection with the arbitration proceedings to be imposed on the adverse party.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of India 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 7, 2007
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