Russia 27 December 2005 Arbitration proceeding 41/2005 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/051227r1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 41/2005
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Russian Federation (claimant)
BUYER'S COUNTRY: Switzerland (respondent)
GOODS INVOLVED: [-]
APPLICATION OF CISG: Yes [Article 1(1)(a)]
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. 47 [362-365]
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 Where the parties have chosen Russian law to be applicable to their relationships, the relationships are subject to the Vienna Convention of 1980, given that the countries of the contracting parties are parties to this Convention. Russian law (namely, the Civil Code of the Russian Federation) shall be used as a subsidiary law.
1.2 Claimant sought an annual interest payment for usage of its money, based on art. 78 Vienna Convention 1980 and art. 395 of the Civil Code of Russian Federation. Claimant submitted a request for payment of interest in US dollars according to the contract, but failed to present relevant evidence on the amount of the applicable rate. Claimant's request for interest was rejected. Calculations based on the rate fixed by Bank of Russia for payments in rubles (refinancing rates) cannot be used for payments in foreign currency, as established by rulings of the High Court of the Russian Federation and the High Court of Arbitration of the Russian Federation.
2. FACTS AND PLEADINGS
This action has been filed by a Russian organization [Seller] against a Swiss company [Buyer]. It involves partial non-payment for goods shipped under an international sales contract concluded between the parties on 28 July 2004. Claimant [Seller] requested payment of outstanding sums, payment at an annual interest rate for usage of its financial resources and reimbursement of arbitration fees.
Respondent [Buyer] did not file a response and its representatives did not appear at the arbitral proceedings.
3. TRIBUNAL'S REASONING
The MKAC (International Commercial Arbitration Court) award contained the following main provisions:
3.1 The contract concluded between the parties (art. 10.2) stipulated that disputes, controversies or claims in connection with or deriving from non-performance of the contract, are to be settled by the International Commercial Arbitration Court [MKAC] attached to the Chamber of Commerce and Industry of the Russian Federation in the City of Moscow. Given that the controversy falls within the subject matter jurisdiction of the MKAC, the Tribunal, based on art. 16 of the Law of Russian Federation "On International Commercial Arbitration" and sections 2 and 5 §1 of the Regulation of the MKAC, sustained its jurisdiction to resolve the present dispute.
3.2 As stipulated in Section 10.3 of the contract, the parties, in performing the contract, are guided by the substantive law of the Russian Federation. Having inserted this provision in the contract, the parties thus have made their choice of applicable law, which according to art. 28 of the Law of Russian Federation "On International Commercial Arbitration" and § 13 of the Regulation of the MKAC, is also acknowledged by the Tribunal.
At the same time, the Tribunal states that the places of business of the contending parties are in two different countries (Russian Federation and Switzerland), both parties to the Vienna Convention of 1980 and thus, the Convention applies to the present dispute.
Given that provisions of international agreements have priority over national legal norms, the Tribunal finds that the Convention applies to the contractual relationships of the parties, while Russian legal norms apply to that part of their relationships which are not governed by the Convention.
3.3 The dispute arose out of partial non-payment by the [Buyer] for the goods delivered by the [Seller]. The fact of shipment of the goods is proved by the joint delivery-acceptance act, signed by the parties on 15 September 2004, Railway Bill (TD 1) 40950608, Invoice No. 1 dated 1 September 2004. During the period from August to October, 2004 only partial payment has been made by the [Buyer].
Considering [Seller]'s evidence in accordance with § 34 of the Regulation of the MKAC and given that upon receipt of the copies of the claim papers from the Secretariat of the MKAC, [Buyer] has not contested arguments presented therein and has not sent a counter-case by the date of the arbitral proceedings, the Tribunal rules that [Buyer], in violation of art. 7 of the Contract and art. 53 of the Convention, has failed to perform its obligation of full payment of the price for the goods and, under art. 62 of the Convention, [Seller]'s request for collecting outstanding sums from [Buyer] is well founded and should be satisfied.
3.4 In relation to [Seller]'s request for annual interest, applied to the outstanding amount in US dollars, the Tribunal states the following:
The [Seller] is entitled to annual interest (art. 78 of the Convention), since [Buyer] is in arrears in payment for the basic outstanding sum (see art. 3 for support for this decision).
However, this claim should be properly founded in terms of the amount corresponding to calculations and such calculation should have a due legal basis (subsection "g" section 1 § 15 of the MKAC Regulation).
Evidently, from the materials presented by the [Seller] and his pleadings during the arbitral proceedings [Seller] is basing the claim for interest on art. 395 of the Civil Code of Russian Federation and calculates the requested amount based on the refinancing rate of the Central Bank of Russia. The Tribunal acknowledges that basing the terms of applying annual interest rate on the provisions of art. 395 of the Civil Code of the Russian Federation is correct, since art. 78 of the Convention does not regulate these terms and conditions. Consequently, national norms should be used as the subsidiary law, which in the present case is art. 395 of the Civil Code of Russian Federation. However, [Seller]'s calculations are based on the annual 13% refinancing rate of the Central Bank of Russian Federation, a rate which is applied only to rubles, as monetary means, and cannot be used for calculation of the interest rate on the indebtedness of the [Buyer], which is expressed in US dollars.
The present finding of the Arbitral Tribunal corresponds to sec. 52 of the Resolution of the High Court of the Russian Federation and the High Court of Arbitration of the Russian Federation # 6/8 dated July 1, 1996 "On Some Issues Related to Application of Part 1 of the Civil Code of the Russian Federation", which states that:
"In cases in which, according to the legislation on currency regulations and currency control, a monetary obligation is expressed in foreign currency (art. 317) and there is no official bank interest discount rate on currency credits for the day of usage of the monetary obligation at the creditor's place, the amount of interest rate is determined based on publications of the official sources of information on medium rates of bank interest in short term currency credits, given at the creditor's place.
If no such publications exist, the amount of the interest rate is determined based on the creditor presenting as evidence a certificate, issued by one of the first class banks at creditor's place, showing the rate used by it for short term currency credits."
Although the present provision determines the enforcement practice of the courts of common jurisdiction and arbitration (state) courts, the Tribunal, on the basis that when Russian law applies to the relationships of the parties, the enforcement practice of the norms of Russian law should as well be uniform, no matter which organs -- common jurisdiction courts, state arbitral courts or courts of arbitration -- enforce them, deems it possible to take into account the above mentioned provisions, characterizing the practice of applying art. 395 of the Civil Code of Russian Federation. Since the calculations of the annual interest rate presented by the [Seller] do not correspond to the above provisions, they cannot warrant collection of the annual interest amount from the [Buyer].
Taking into consideration the abovementioned, the Arbitral Tribunal rules that [Seller]'s request for collection of annual interest is not to be satisfied.
3.5 Under sec. 2 § 6 of the Statute on Arbitral Fees and Expenses (Statute for the Regulation of the MKAC), the [Buyer] shall be charged to pay arbitration expenses in proportion to the amount of satisfied requests of the [Seller] and [Seller] shall be charged proportionally to the non-satisfied part of his 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 Switzerland 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