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CISG CASE PRESENTATION

Russia 27 October 2005 Arbitration proceeding 132/2004 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/051027r1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20051027 (27 October 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: 132/2004

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russian Federation (respondent)

BUYER'S COUNTRY: Turkey (claimant)

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(2) ; 30 ; 78 ; 84

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

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1200&step=Abstract>

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. 37 [305-310]

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 132/2004 of 27 October 2005

Translation [*] by Gayane Nuridzhanyan [**]

1. SUMMARY OF RULING

      1.1 In addition to claiming against the [Seller], the [Buyer] sought to claim against a third party which had guaranteed the fulfillment of the obligations of the [Seller]. The Tribunal ruled that it does not have competence to adjudicate the dispute between the [Buyer] and the third party since there does not exist an arbitration agreement between the [Buyer] and this party on the adjudication of the dispute by the Tribunal.

      1.2 With respect to the [Buyer]'s claim against the [Seller], in the absence of the agreement of the parties to the international sale contract on the applicable law, the Tribunal applied the conflict of laws norms of the Civil Code of the Russian Federation on the basis of which it was determined that relations of the parties were governed by the Russian law as the law of the seller's country. In view of this it is found that Vienna Convention of 1980 is the main statute and the civil legislation of the Russian Federation is the subsidiary statute.

2. FACTS AND PLEADINGS

The claim was lodged by the [Buyer], a Turkish firm, against the [Seller], a Russian company, in connection with an underdelivery of goods for which an advance payment was carried out under the contract concluded by the parties on 24 October 2002.

The [Buyer] sought:

   -    Return of the advance payment sum for the non-delivered goods;
   -    Payment of interest for the use of another's monetary funds;
   -    Recovery of the expenses for the arbitration fee.

In the letter it sent to the Tribunal after the action was brought, the [Buyer] petitioned for the involvement in the trial of a German firm as second respondent. The German firm had issued a guarantee for the repayment of the monetary funds paid by the [Buyer] to the [Seller] in case of the partial delivery of the goods.

The [Seller] has not presented its statement of defense and its representatives did not participate in the Tribunal's session.

The German company stated that the Tribunal lacks competence to consider claims against it since there does not exist an arbitration agreement between this company and the [Buyer].

3. TRIBUNAL'S REASONING

The award of the Tribunal contained the following basic points.

      3.1 The competence of the Tribunal

      The dispute between the [Buyer] and the [Seller] has originated from the contract concluded by the parties on 24 October 2002. Para. 8.2 of this contract provides that "in case of the impossibility to settle disputes and disagreements, they shall be submitted to the adjudication at the International Commercial Arbitral Tribunal at the Chamber of Commerce and Trade of Russia, city of Moscow, in accordance with the Rules and Procedures of the Tribunal "

The [Seller] has not contested the Tribunal's competence to adjudicate the dispute between it and the [Buyer].

Taking into consideration the above and following para. 1(3) of the Rules of the Tribunal, according to which the Tribunal is competent to adjudicate the dispute in the presence of the agreement between the parties on the submission of disputes which have arisen or may arise for the adjudication by the Tribunal, the latter rules that it is competent to adjudicate the dispute between the [Buyer] and the [Seller].

      3.2 However, considering the issue of the Tribunal's competence to adjudicate the dispute between the [Buyer] and the German company which has arisen because of the [Buyer]'s petition for the engagement of that company as second respondent in the proceedings and the objections by that company to the Tribunal's competence, the Tribunal found the following:

   -   The guarantee of 29 October 2002 issued by the German company in order to secure fulfillment of the [Seller]'s obligation to deliver the goods under contract #275 is an independent transaction. Claims brought against the guarantor by the [Buyer] are not within the scope of the arbitration agreement contained in para. 8.2 of the contract;
 
   -   The guarantee of 24 October 2002 is also an independent transaction; it does not contain agreement of the parties on the consideration of disputes by the Tribunal.

There does not exist an arbitration agreement for consideration by the Tribunal of the dispute between the [Buyer] and German company.

The Tribunal believes that [Buyer]'s reference to the fact that the letter of the German company of 21 January 2005 sent to the Tribunal with a request for an additional term for selection of the arbiter and deputy arbiter should be regarded as confirmation of the Tribunal's competence to adjudicate the present dispute is unfounded, since, as it is envisaged in art. 16(2) of the Law of Russian Federation "On International Commercial Arbitration", participation of a party in the arbiter selection does not deprive the party of the right to make a statement on the lack of the arbitration tribunal's competence to adjudicate the dispute.

Taking into consideration the above and following para. 1(5) of the Rules of the Tribunal, the Tribunal ruled that adjudication of the dispute between the [Buyer] and the German company is not within the scope of the Tribunal's competence. In view of that, the Tribunal holds that [Buyer]'s petition of 6 December 2004 for the involvement of the German company in the proceedings in the case as second respondent shall not be satisfied.

      3.3 Absence of the [Seller]'s representatives

      Considering the issue of hearing the case in the absence of the [Seller]'s representatives, the Tribunal held the following:

The summons with the date of the hearings of 14 September 2005 was sent to the address of the [Seller] and was returned to the Tribunal by the courier service with a note: "Addressee is not registered by the indicated address".

The action materials as well as other correspondence which was repeatedly sent by the Tribunal's Registry to two known addresses (factual and postal) were returned to the Tribunal with a note: "Addressee is not registered by the indicated address".

The Tribunal stated that the [Buyer] has taken all the reasonable measures in accordance with para. 12(5) of the Rules of the Tribunal to obtain the specific address of the [Seller] and presented relevant information to the Tribunal in time (letters of the [Buyer] of 6 December 2004 and of 16 February 2005, extract from the Unified States Companies Registry of 9 February 2005).

As it follows from para. 12(5) of the Rules of the Tribunal, any written notification is regarded as received if it is sent to the last known location of the business company or to the mailing address of the party by registered letter or in any other way foreseeing registration of the attempt to deliver this notification. Thus, taking into account that reiterated attempts to notify the [Seller] by means of the courier service at two addresses known to the Tribunal as well as taking into consideration the [Buyer]'s opinion expressed in its letters of 22 March and 1 August 2005, the Tribunal, following para. 12(5) and para. 28(2) of the Rules of the Tribunal, believes that the [Seller] may be regarded as having been duly notified of the date, time and place of the arbitration proceedings.

Based on the above and following para. 28(2) of the Rules of the Tribunal according to which non-appearance of a party that was duly notified of the date, time and place of the hearing does not impede the proceedings in the case and passing of the award, the Tribunal concluded that absence of the [Seller]'s representatives does not hamper the proceedings in the case and the passing of the award.

      3.4 Applicable law

      The applicable law was not determined by the parties. Following art. 28(2) of the Law of the Russian Federation "On the International Commercial Tribunal" and para. 13(1) of the Rules of the Tribunal, the Tribunal holds that it is appropriate to apply the conflict of laws norms of Russian law, in particular art. 1211 of the Civil Code of Russian Federation in order to determine the applicable law.

According to art. 1211(1) of the Civil Code of the Russian Federation, in the absence of the agreement on applicable law, the law of the State with which the contract is most closely linked shall apply. Following assumptions of paras. 2 and 3(1) of art. 1211, this law is the law of the country where the place of business of the company carrying out fulfillment of the acts of decisive importance for the contract is located. The seller is regarded as the party which carries out such fulfillment under a sales contract (the Russian company in this case). Based on the above, the Tribunal concluded that Russian law is to be applied to this dispute.

Taking into account that the Russian Federation is a Contracting State to the Vienna Convention which according to art. 15(4) of the Constitution of the Russian Federation and art. 7 of the Civil Code of the Russian Federation is a constituent part of the legal system of the Russian Federation and that provisions of the international agreement predominate over the norms of the national law, following art. 1(1)(b) of the Vienna Convention, the Tribunal holds that the Vienna Convention shall be applicable to the relations in the present dispute.

By virtue of art. 7(2) of the Vienna Convention, questions which are not expressly settled in the Convention 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 Russian law.

      3.5 Having considered [Buyer]'s claim for the recovery of the main sum in arrears from the [Seller], the Tribunal found the following:

In accordance with the conditions of the contract of 24 October 2002, the [Buyer], on the basis of invoices #275/01 and 275/02 of 24 October 2002 that were billed by the [Seller], transferred to the [Seller] payment for the first consignment of the goods as an advance payment in the amount specified in the action, which is confirmed by the bank documents of 1 and 12 November 2002 and is not contested by the [Seller].

The [Seller] has delivered to the [Buyer] only part of the goods with delay, which is confirmed by the bills of lading of 15 March and 8 April 2003 and is not contested by the [Seller].

Hence, in contravention to art. 30 of the Vienna Convention, the [Seller] incompletely delivered to the [Buyer] the goods to the amount of the US dollars repayment of which the [Buyer] claims having carried out advance payment for the non-delivered goods.

On the basis of the above, the Tribunal, following art. 30 of the Vienna Convention, finds that the [Buyer]'s claim for the recovery of the indebtedness from the [Seller] should be satisfied.

      3.6 Payment of interest for the use of monetary funds

      As to the issue of the recovery of the interest from the [Seller] for the use of another's monetary funds, the Tribunal found the following:

Initially, the [Buyer]'s claim contained a request for the recovery from the [Seller] of the interest for the use of another's monetary funds which were accrued in accordance with art. 78 and art. 84(1) of the Vienna Convention as well as art. 395 of the Civil Code of Russian Federation, in particular for the period starting on the date of the prepayment by the date when the action claim was lodged on the basis of the discount rate of the bank interest at the creditor's location which amounted to 7% and was confirmed as of 1 November 2004 by the reference of the respective Turkish bank.

In its application for the clarification of the interest sum of 7 December 2004, the [Buyer] presented the calculation of the reduced interest sum accrued for the period starting from the date of the prepayment by the date of the arbitration hearing based on the reduced rate in the amount of 3.7% use of which reduced the amount of the claimed sum. In confirmation of the applied rate, the [Buyer] presented the publication from the "Komersant" newspaper of 14 September 2005 # 172 ("Marker" section) containing the information about the lending rates LIBOR in US dollars. The [Seller] has not presented any objections to the submitted calculation.

Taking into consideration the above and following art. 78, art. 84(1) of the Vienna Convention and art. 395 of the Civil Code of the Russian Federation, the Tribunal finds that [Buyer]'s claim for the recovery from the [Seller] of the interest for the use of another's monetary funds is to be satisfied in the claimed amount.

      3.7 Recovery of the expenses for the payment of the arbitration fee

      Having considered the [Buyer]'s claim for the recovery from the [Seller] of the amount of the arbitration fee paid by the [Buyer], the Tribunal, following para. 6(1) of the Regulation on the Arbitration Fees and Expenses (Supplement to the Rules of the Tribunal) envisaging that the arbitration fee should be imposed on the party against which the award was passed, ruled that the [Seller] was obliged to reimburse the [Buyer] the amount of the arbitration fee expenses paid by it in US dollars.


FOOTNOTES

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

** 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 March 24, 2008
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