Russia 14 December 2005 Arbitration proceeding 150/2004 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/051214r1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 150/2004
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Russian Federation (claimant)
BUYER'S COUNTRY: Kazakhstan (respondent)
GOODS INVOLVED: [-]
APPLICATION OF CISG: Yes [Article 1(1)(b)]
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
78B [Rate of interest]
78B [Rate of interest]
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
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. 43 [341-346]
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Case text (English translation) [second draft]
Queen Mary Case Translation Programme
Translation [*] by Sophie Tkemaladze [**]
1. SUMMARY OF RULING
1.1 In view of the objections of Respondent to the competence of the International Commercial Arbitration Court (MKAC) to take up the present dispute, the Tribunal, noting an inaccuracy in the arbitration clause of the contract, came to a decision taking into consideration the intent of the parties at the moment of conclusion of the contract.
1.2 In the absence of an applicable law clause in the contract, the Tribunal, applying conflict of law norms of the 1992 Kiev Covenant of the CIS countries on the procedure of settlement of economic disputes, found Russian law to be applicable. Thus, it was established that relationships between the parties are governed by the Vienna Convention of 1980 based on art. 1(1)(b) (place of business of the other party was Kazakhstan, not a party to the Convention).
1.3 The rate and calculation of the applicable annual interest for the use of another's monetary resources is made in accordance with directions of art. 395 of the Civil Code of the Russian Federation, taking into account Resolutions of the High Court of the Russian Federation and the High Court of Arbitration of the Russian Federation, dated 8 October 1998, # 13/14. Since the creditor is a Russian organization and payments between the parties are made in Russian rubles, calculation of percentages is made based on the Bank of Russia refinancing rate.
2. FACTS AND PLEADING
An action has been filed by a Russian organization [Seller] against an organization from Kazakhstan [Buyer] regarding partial non-payment for goods shipped under the international sales contract concluded between the parties on 20 November 2002. Claimant [Seller] requested payment of the debt, payment of annual interest for use of its monetary resources as well as reimbursement of arbitration fees. The parties have twice made additional agreements setting out new deadlines for payment; however, as [Seller] asserts, Respondent [Buyer] never respected them.
[Buyer], not presenting pleadings under the claim, has challenged the competence of the MKAC to decide the present dispute, basing its argument on the inaccuracy of the arbitration clause. [Buyer] interpreted the clause as the parties' agreement to refer their disputes to arbitration at the Moscow Chamber of Commerce and Industry.
3. TRIBUNAL'S REASONING
The MKAC award contained following main provisions:
3.1 In considering the issue of competence of the MKAC, the Tribunal derived from the following:
The application of [Seller]'s attorney, which was received by the MKAC on 22 August 2005, requested the MKAC to consider its own competence and to render a pre-decision. Deriving from section 3 of art. 16 of the Law of the Russian Federation "On International Commercial Arbitration," the Tribunal deemed it appropriate not to render a pre-decision, rather to reflect its decision in the final award on the merits.
The present dispute arose out of an international sales contract between [Seller] and [Buyer]. The parties have their places of business in different countries. Section 2 of art. 1 of the Law of the Russian Federation "On International Commercial Arbitration" provides that where a dispute arises out of an international sales contract and the place of business of at least one of the parties is abroad, such dispute, by agreement of the parties, can be resolved by recourse to international commercial arbitration. Competence of the MKAC, representing such international commercial arbitration, to decide this sort of dispute is stipulated in section 2 § 1 of the Regulation. Under art. 7 of the Law and section 3 § 1 of the MKAC Regulation, the dispute can be settled by international commercial arbitration if there is a written agreement of the parties.
Art. 6.2. of the contract provides that "all disputes and controversies, except for those under jurisdiction of common courts, shall be settled by the Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry of the City of Moscow." Given this clause of the contract and the fact that in the course of hearings parties have not raised the issue of jurisdiction of common courts, it can be derived that the parties have preferred international commercial arbitration to other methods of dispute resolution.
The [Seller] has lodged its claim with the MKAC and in the course of hearings has argued that the arbitration clause of the contract referred to the MKAC. However, the statement of Respondent [Buyer]'s representative, received at the MKAC on 22 August 2005 and also asserted at the hearings, takes the position that art. 6.2. of the contract referred to arbitration at the Moscow Chamber of Commerce and Industry.
Thus, the parties' common intent to refer their dispute to arbitration in Moscow can be ascertained. In these circumstances and given that both arbitral bodies noted by the parties are competent to resolve disputes such as the present one, the Tribunal considers the main issue is to determine which arbitral body, the MKAC or the Moscow Chamber of Commerce and Industry, is referred to in the clause.
The arbitration clause in dispute contains an exact name of the arbitral body, the MKAC. It notes, that this body is attached to the Chamber of Commerce and Industry. In considering the interpretation of the words "of the City of Moscow" which are at the end of the arbitration clause, the Tribunal came to the conclusion that the words refer to the location of the arbitral body and are not part of the name of the arbitral body or CCI. The Tribunal also took into consideration arguments of the [Seller] regarding possible mistyping in the words "of the City of Moscow", made at the time of drafting of the contract.
[Buyer]'s contention that the clause refers to arbitration at the Moscow CCI, is not considered by the Tribunal to be convincing. The name of this arbitral body does not contain the words "Court of International Commercial Arbitration". It is based with the "Moscow Chamber of Commerce" and not the "Chamber of Commerce and Industry of the City of Moscow". In its statement lodged with the MKAC on 22 August 2005, [Buyer] alleges that the arbitration clause refers to permanent arbitration at the Moscow CCI, the Regulation and Articles of which are approved by the Board Decision of the MCCI dated 24 February 2005. [Buyer] failed to answer the question of the arbiters as to what the name of this arbitral body was at the time of conclusion of the contract.
The Tribunal disagrees with [Buyer]'s contention that the [Seller] has deliberately distorted the naming of the arbitral body at the time of agreement on the terms of the contract. Such contention has not been supported by any kind of evidence.
In view of the abovementioned, the MKAC has sustained its jurisdiction.
3.2 In deciding the issue of applicable law, the Tribunal has considered the following:
The contract does not determine the applicable law. Based on section 2 of art. 28 of the Law of Russian Federation "On International Commercial Arbitration" and section 1 § 13 of the Regulation of the MKAC, the applicable law shall be determined in accordance with the conflict of law norms which the Tribunal shall deem applicable. Kazakhstan and Russia are parties to the 1992 Kiev Covenant of the CIS Countries on the Procedure for Settlement of Economic Disputes. Under section "e" of art. 11 of the present Covenant, rights and obligations of the parties to a contract shall be determined according to the law where it was concluded. Since the contract, from which the present dispute arises was concluded in Moscow, Russian law should be applied to the present dispute.
Given that at the time of conclusion of the contract Russia was a party to Vienna Convention 1980 (Kazakhstan is not a party), the Convention should be applied to the present dispute under art. 1(1)(b).
3.3 In relation to the claim regarding payment of the outstanding amount for the goods, the Tribunal has determined that the present request is proved by the evidence. The claim itself and its amount is not contested by the [Buyer]. Therefore, based on art. 53 of the Vienna Convention 1980, the MKAC rules that the principal amount is to be collected from the [Buyer].
3.4 In considering the issue of interest rate claimed for use of another's monetary resources by delaying payment, the Tribunal has concluded a follows:
Calculation of the interest rate attached to the claim is made for the period starting 26 March 2003 till 25 October 2004 at 14% annually. The Tribunal has noted that the deadline for payment of the indebtedness for the delivered goods has been postponed twice, by additional agreements of the parties. In one of the additional agreement dated 5 July 2004, the parties have extended the deadline for payment of the whole sum for the goods till 31 October 2004. In the course of the hearing, [Seller]'s representative has petitioned for collection of interest up till the date of rendering the award.
The Tribunal considers that the [Seller] is authorized to claim interest for usage of another's monetary resources. Under art. 78 of the Vienna Convention 1980, if a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it. Since the Convention does not determine method of calculation of such interest, it should be calculated in accordance with applicable national law, based on art. 7(2) of the Convention. As noted above, the MKAC has determined Russian law is applicable to the present dispute.
In accordance with art 395 of the Civil Code of the Russian Federation, the applicable interest rate is determined based on the bank-rate at the creditor's place of business on the date of performance of monetary obligation or its corresponding part. In cases of judicial debt recovery, the court may satisfy a creditor's claim based on the bank-rate interest on the date of lodging the claim or on the date of rendering the decision. Given that [Seller] is the creditor in the present case, the Bank of Russia refinancing rate shall be applied. As of the date of rendering the present decision, the rate of 13% annually is applied, set from 15 June 2004, by the decision of directors of the Bank of Russia dated 11 June 2004.
In view of all the abovementioned, the MKAC has decided that interest for usage of another's monetary resources should be applied in the amount of 13% for the period starting 1 November 2004 till the date of rendering the present award, namely, 2 November 2005. Thereby, interest shall be calculated for the period of one year and one day.
Based on section 2 of the Resolution of the High Court of the Russian Federation and the High Court of Arbitration of the Russian Federation dated 8 October 1998, # 13/14 "On the Practice of Use of Provisions of the Civil Code of the Russian Federation on Percentages for Usage of Another's Monetary Resources", in calculating outstanding annual interest rate in accordance with the Central Bank of Russia refinancing rate, the number of days per year shall be equal to 360 unless otherwise is set by the agreement of the parties, the rules mandatory to both parties, or by trade usages. Accordingly, the amount of interest for one day and the whole interest sum levied on the [Buyer] have been ascertained.
3.5 In relation to [Seller]'s request for reimbursement of its arbitration fees, the MKAC notes that the claim with regard to collection of interest for use of another's monetary resources has not been satisfied in full. Under section 2 § 6 of the Regulation on Arbitral Fees and Expenses, the arbitration fee shall be levied on the [Buyer] in proportion to the amount of satisfied claims.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of the Russian Federation is referred to as [Seller] and Respondent of Kazakhstan is referred to as [Buyer].
** Sophie Tkemaladze, LL.M. Central European University, Budapest, Hungary; Lecturer at Tbilisi State University; Coach of the TSU team for the Willem C. Vis International Commercial Arbitration Moot.Go to Case Table of Contents