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CISG CASE PRESENTATION

Russia 7 April 2006 Arbitration proceeding 20/2005 (Equipment case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/060407r1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20060407 (7 April 2006)

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: 20/2005

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russian Federation (claimant)

BUYER'S COUNTRY: France (respondent)

GOODS INVOLVED: Equipment


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 33 ; 53 ; 61 ; 62 ; 78

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=1462&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (Russian): M.G. Rozenberg, Praktika of Mejdunarodnogo Kommercheskogo Arbitrazhnogo Suda pri TPP Za 2006 g. [Arbitration decisions rendered by the International Commercial Tribunal at the Russian Federation Chamber of Commerce and Industry in 2006], published by "Statut" (2008) No. 14 [124-128]

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 20/2005 of 7 April 2006

Translation [*] by Andriy Kril [**]

1. SUMMARY OF RULING

      1.1 Taking into account that the commercial enterprises of the parties of the international sales agreement are situated in States party to the Vienna Convention of 1980, this Convention is recognized as applicable to the parties' relations.

      1.2 Inasmuch as, in the proceedings before the Tribunal, the [Buyer] did not defend on the basis of alleged defects of the equipment delivered by the [Seller], which had been the subject of prior correspondence between the parties, the Tribunal did not find reasons to consider this question in this adjudication.

      1.3 Interest was determined in accordance with provisions of the contract whereby the parties agreed to determine the amount of interest which should be paid in case of non-payment, a subject to addressed in the Article 78 of CISG. Due to the manner in which the contract is phrased, the abovementioned claim cannot be qualified as a fine or a penalty.

2. FACTS AND PLEADINGS

      The claim was lodged by the [Seller], a Russian organization, against the [Buyer], a French firm, in connection with the non-payment for the equipment delivered in August 2004 in accordance with the international sales contract concluded by the parties on 21 April 2003.

The [Seller] sought:

   -    Payment of the debt by the [Buyer];
 
   -    Interest payment in the amount provided by the contract in connection with delay in payment for the equipment;
 
   -    Recovery of the expenses for the arbitration fee and expenses for the protection of the [Seller]'s interests with the help of legal representatives.

The [Buyer] did not present any defense and its representatives did not participate in the Tribunal's session.

It follows from the correspondence presented by the [Seller] that the [Buyer] had claimed that there were defects of the equipment, claims were declined by the [Seller].

3. TRIBUNAL'S REASONING

The award of the Tribunal of International Commercial Arbitration at the Russian Federqation Chamber of Commerce and Industry [MKAC] contained the following basic points.

      3.1 The competence of the Tribunal

      Having considered the question of competence of the MKAC to adjudicate this case, the Tribunal established that the competence of the MKAC is based on the arbitration clause in Article 11.1 of the contract from 21 April 2003, which provides that:

"All disputes and disagreements that may originate from or in connection with the following contract shall be submitted for adjudication in the City of Moscow, at the International Commercial Arbitration Court at the Moscow Chamber of Commerce and Industry (MKAC), in accordance with the Rules and Procedures of the Tribunal."

Taking into consideration this, Article 16 of the Russian Federation Law on International Commercial Arbitration, and Article 1(3) of the Rules and Procedures of the Tribunal, the Tribunal ruled that it is competent to arbitrate this dispute.

      3.2 Absence of the [Buyer]'s representatives

      Considering the issue of hearing the case in the absence of the [Buyer]'s representatives, the Tribunal established the following. The claim papers were sent to the [Buyer] and were delivered to the [Buyer] on 29 April 2005. This fact was proved by the courier service's notice which was added to the materials of the case. The notice that the first hearing was scheduled for 3 November 2005 and the notice that the second hearing was scheduled for 17 January 2006 were duly delivered to the [Buyer]. This fact was also proved by the courier service's notice which was added to the materials of the case.

Thus the Tribunal both during the first sitting of MKAC on 3 November 2005 and the second sitting on 17 January 2006 established that the [Buyer] was duly notified of the dates of sittings. The Tribunal received no motions from the [Buyer] to remand the hearings of the case.

Based on the above and following Article 25 of the RF Law on International Commercial Arbitration and Article 28(2) of the Rules of the Tribunal, the Tribunal concluded that absence of the [Buyer]'s representatives does not hamper the proceedings in the case and the passing of the award.

      3.4 Applicable law

      Having examined the question of the applicable law, the Tribunal established that it was not determined by the parties in the contract of 21 April 2003. Taking into account that the commercial enterprises of the [Buyer] and the [Seller] are situated in the Russian Federation and France, which are the States party to the Vienna Convention of 1980, this Convention, pursuant to provisions of its Article 1(1)(a), is recognized as applicable to the present dispute.

      3.5 The [Seller]'s claims

      Having considered the [Seller]'s claims, the Tribunal ruled as follows: Pursuant to Articles 1.1 and 2.1 of the contract concluded by the parties the goods were delivered on terms and prices of FCA, indicated destination in Russia (Incoterms 2000) (Free Carrier - with goods' transfer in the indicated destination in Russia). According to the contract, the loading was performed at the [Buyer]'s territory on the motor transport provided by the [Seller]. Delivery was made on 26 August 2004, which is proven with the international waybill CMR, copies of which are included into the materials of the case.

In amendment No. 2 to the contract, dated 30 September 2003, the parties agreed on the terms of delivery -- May 2004. In this amendment to the contract, the parties agreed that the equipment must be supplied with utilities of the concrete firm which must be delivered to the [Seller] by the [Buyer] in January 2004. However, as indicated in Customs Cargo Declaration No 39374242, the delivery of utilities was not performed by the [Buyer] until 1 April 2004. In Article 3 of amendment to the contract No. 1, dated 9 October 2003, and in amendment No. 2, the parties agreed that they would change the terms of delivery in case of delay in the delivery of the utilities. The terms for the delivery of the goods were extended in proportion with the delay in the delivery of the utilities.

Taking into consideration abovementioned circumstances, the Tribunal concluded that the delivery of the goods in August 2004 was performed within the terms agreed by the parties. Pursuant to Article 33(b) of the CISG, "if a period of time is fixed by or determinable from the contract", the seller has a right to deliver the goods within the stated period.

      3.6 Payment for the delivered equipment

      The goods that were delivered were not paid for by the [Buyer] in spite of repeated appeals by the [Seller]. This is confirmed by the copies of the letters included in the materials of the case. At the same time, the Tribunal established that the [Buyer] in its letters, including letters of 29 October 2009 and 14 March 2005, admitted its debt for the equipment delivered by the [Seller].

Considering the question of the complaints sent by the [Buyer] to the [Seller] during their correspondence alleging defects in the equipment and damages suffered by the [Buyer]:

   -    The [Buyer] did not raise any such claims during the proceeding concerning this or any other questions arising from the contract. The [Buyer] had the right to bring this question before an arbitration court at its will. The following decision of the Tribunal shall not be an obstacle to such action of the [Buyer].
 
   -    The mere fact of references made by the [Buyer] beyond the scope of the arbitration cannot be a reason to discharge [Buyer]'s obligation under the contract to pay for the equipment delivered to the [Buyer] and accepted by the [Buyer].

Accordingly, the Tribunal found that the [Seller]'s claims for payment for the delivered equipment, according to terms of the contract, the provisions of the Incoterms (Article B1) and Articles 53, 61 and 62 of the CISG, are reasonable and should be sustained in full.

      3.7 Interest payment for the delay

      Considering the question of contractual interest payment for the delay in payment for the delivered equipment, the Tribunal established that [Buyer] had breached the contract and that, in accordance with Article 2 of amendment No. 1 of 9 October 2003 to the contract of 21 April 2003 and amendment No. 2 of 30 September 2003, this entitled the [Seller] to demand such a payment. The amount of the interest was calculated by the [Seller] at the time of the first hearing of the case (3 November 2005) taking into account the contractual limitation (not more that 10% of the amount of non-payment).

In defining the meaning of these contractual provisions, the Tribunal takes into consideration that amendment No. 1 of 9 October 2003 provides for, first, "delay in delivery of the goods" (Article 1) and, second, "delay in payment for the goods" (Article 2). While Article 1 defines the sanction for the delay in delivery of the goods as a payment of a fine, i.e., a penalty, in Article 2 the parties agreed to pay not a fine or a penalty, but "interest on the amount of the unexecuted liabilities", i.e., interest calculated from the full price or from the part of the price, which was not duly paid by the buyer pursuant to the contract.

The formulation chosen by the parties enables the Tribunal to qualify their arrangement in Article 2 as aimed at establishment of the interest rate payable in case of non-payment of the price. Such an arrangement comes within the scope of Article 78 of the CISG, pursuant to which "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." In this case, the interest rate, not fixed in the Convention, was agreed by the parties. Pursuant to their agreement, accrued interest reached the agreed limit, i.e., 10% of the amount of the non-payment and should be subject to recovery together with the price of the goods.

      3.8 Payment for the [Seller]'s expenses for attorneys' fees

      Resolving the question of [Seller]'s claim to oblige the [Buyer] to pay for [Seller]'s expenses, the Tribunal established that, as the result of [Buyer]'s non-fulfillment of its contractual obligations, the [Seller] had to register a claim at the MKAC. The [Seller] had to hire a legal representative to plead the case and to conclude with such a representative agreement for legal services from 17 January 2005.

In accordance with Article 8 of the Regulations on Arbitration Fees and Expenses (Supplement to the Rules of the Tribunal), the Tribunal found it appropriate to sustain the [Seller]'s claim in the amount claimed, which is recognized as reasonable.

      3.9 Payment of the registration and arbitration fees

      Since, because of [Buyer]'s non-fulfillment of its obligations, the [Seller] had to apply to the MKAC to protect its rights, pursuant to Article 6(1) of the Regulations on Arbitration Fees and Expenses, the registration and arbitration fees shall be payable by the party against which the decision was made. The [Seller]'s claim to oblige the [Buyer] to pay the registration and arbitration fees is recognized as reasonable and is sustained as full.


FOOTNOTES

* 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 France is referred to as [Buyer].

** Andriy Kril, student at National University "Kyiv-Mohyla Academy", trainee at the law firm Kushnir, Yakymyak and Partners Attorneys & Counselors at Law, Kyiv, Ukraine.

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Pace Law School Institute of International Commercial Law - Last updated November 20, 2009
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