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CISG CASE PRESENTATION

Russia 15 November 2006 Arbitration proceeding 98/2005 (Feedstock equipment case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/061115r1.html]

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

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Case identification

DATE OF DECISION: 20061115 (15 November 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: 98/2005

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Austria (respondent)

BUYER'S COUNTRY: Russian Federation (claimant)

GOODS INVOLVED: Feedstock equipment


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 74 ; 84 [Also cited: Articles 7 ; 45 ]

Classification of issues using UNCITRAL classification code numbers:

74A [General rules for measuring damages: loss suffered as consequence of breach];

84A [Restitution of benefits received: seller bound to refund price must pay interest]

Descriptors: Damages ; Interest

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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 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. 35 [282-294]

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 98/2005 of 15 November 2006

Translation [*] by Andriy Kril [**]

1. SUMMARY OF RULING

      1.1 Where an international sales contract provides for the application of domestic material law, in cases in which the commercial enterprises of the parties are situated in States parties to Vienna Convention of 1980 (CISG), the relations of the parties shall be regulated first by that Convention and, in any part not regulated by the CISG, by the otherwise applicable domestic material law of the Russian Federation.

      1.2 The non-conformity of the goods with the characteristics guaranteed by the contract was proved by the materials of the case, and the [Seller] did not present proof that such non-conformity was caused by actions or inaction of the [Buyer]. The Tribunal therefore sustained the [Buyer]'s claims for:

   -    Refund of price of the goods;
   -    Removal of the non-conforming goods at the expense of the [Seller]; and
   -    Payment of damages.

      1.3 Taking into account violations committed during the sampling for conducting tests, the Tribunal refused to consider the expert findings and the opinion of the independent expert organizations provided by the [Seller] since they were based on the results of that sampling.

      1.4 In accordance with the provisions of the CISG (Article 84), the [Seller] was obliged to pay interest on the price of the goods in the amount determined (in the absence of the corresponding provisions in the CISG) according to provisions of the subsidiary statute (Art. 395 of the Civil Code of the Russian Federation [RF]). The Tribunal took into account approaches to this question provided in Joint Resolution No. 6/8 adopted by the Plenums of the Supreme Court and the Supreme Commercial Court of the Russian Federation, dated 1 July 1996.

2. FACTS AND PLEADINGS

      The claim was lodged by the [Buyer], a Russian organization, against the [Seller], an Austrian firm, on the basis of the international sales contract concluded by the parties on 26 November 2003. The [Buyer] alleged that the goods delivered did not conform with the characteristics guaranteed by the contract.

The [Buyer] sought:

   -    Refund of the price of the goods;
   -    Removal of the non-conforming goods; and
   -    Reimbursement of expenses.

Simultaneously with this contract, the [Buyer] and the [Seller] entered into two more agreements:

   -    The second was for the delivery of equipment for the same production line as the equipment delivered under the first contract; and
   -    The third contract was for installation and erection supervision, performance of balancing and commissioning, test operations and training of [Buyer]'s staff in control and service of the equipment delivered under the first and the second contracts.

Since the expenses borne by the [Buyer] under the first and the second contracts were in the form of total sums that could not be related concretely to the first or the second contact, the [Buyer], while determining the amount of its demands under this claim, proceeded from the ratio of the prices of the equipment under the first and the second contracts.

The specific claims of the [Buyer] were repeatedly changed during the proceedings.

The [Buyer] presented three protocols signed by [Buyer]'s and [Seller]'s representatives on the results of the engineering set-up works as well as a report of an independent expert examination in support of its statements that the equipment delivered did not conform with the contractual guarantees.

The [Seller] did not recognize the [Buyer]'s claim and raised objections against [Buyer]'s demands. The [Seller]'s objections contained the following basic points.

      First, the equipment delivered under the first and second contracts did not form a complete-cycle production line. This line consisted partly of equipment provided by the [Buyer] itself. Non-conformity of the equipment with the contractual guarantees was caused by the malfunction of the equipment provided by the [Buyer]. In support of this, the [Seller] presented expert findings of an Austrian firm and opinion of a German research institute.

      Second, the [Seller] did not refuse to perform necessary works on engineering set-up. The [Buyer] started erection of the equipment with the delay against the terms set up in the contract and consequently dragged out performance of the final works and did not give the [Seller] enough time to set up and test the equipment.

      Third, the feedstock, used by the [Buyer], did not conform to established requirements.

      Fourth, an expert that performed expertise by [Buyer]'s order did not possess the necessary specific knowledge. Therefore this expert's report should not be taken into account as evidence.

      Fifth, examination of the equipment had to be done during a relatively long term which is proved by the letter of the Russian research institute. In fact, such examination was performed during short terms. In [Seller]'s opinion, requirements that were developed by the mentioned Russian research institute shall be recognized as the customs of trade or as the other common requirements that shall be observed by the parties according to Article 309 of the Civil Code [CC] of the RF.

      Sixth, the [Buyer] did not give necessary support in engineering set-up works, which was [Buyer]'s obligation under provisions of the CC of the RF, regulating parties' relations under the contractor's agreement.

The [Buyer] presented objections to all of the arguments in the [Seller]'s statement of defense. The [Seller], in turn, objected to the [Buyer]'s arguments in the entirety. During oral hearings of the case, the parties' positions did not change.

[Buyer]'s demands, as changed by it during the hearings, in their final form included the following:

   -    Refund of the price paid for the goods together with the annual interest rate;
   -    Reimbursement of the [Buyer]'s expenses for the payment of the custom duties, as well as for the installation and de-installation of the equipment;
   -    Payment of the arbitration fees and expenses as well as expenditures for legal representatives.

The case was considered during five hearings that were held on 21 February, 4 April, 23 May, 27 June and 27 September 2006.

3. TRIBUNAL'S REASONING

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

      3.1 The competence of the Tribunal

      The competence of the Tribunal to adjudicate this case is based on the arbitration agreement that is set forth in Article 11.1 of the Contract (No. 5705/TB/RUS/1) dated 26 November 2003, according to which:

"Any disputes or disagreements that may originate from or in connection with the following contract shall be whenever possible settled by means of negotiations between the parties. In case of failure to reach agreement, the parties shall submit the dispute for adjudication at the International Commercial Arbitration Court (the MKAC) at the Russian Federation Chamber of Commerce and Industry (in the City of Moscow), in accordance with the Rules and Procedures of the Tribunal and with application of the provisions of the material law of the [Buyer]'s State."

According to Article 11.2 of the Contract, "the award of this Tribunal is final and obligatory for the parties".

The Tribunal took into account that the parties did not object to the competence of the MKAC and therefore confirmed their agreement for settlement of this dispute by the Arbitration Tribunal.

The Tribunal noted that arbitration agreement of the [Seller] and the [Buyer] was concluded in accordance with the requirements of the RF Law "On International Commercial Arbitration".

Given this and taking into account Articles 7 and 16 of the RF Law on International Commercial Arbitration and Article 1(5) of the Rules and Procedures of the Tribunal, the MKAC ruled that it is competent to arbitrate this dispute.

      3.2 Applicable law

      The Tribunal established that Article 11.2 of the Contract foresaw application of the law of the [Buyer]'s State. Having considered this, the Tribunal concluded that, according to the parties' agreement, the dispute shall be settled on the basis of the provisions of the material law of the Russian Federation. The Tribunal then proceeded from the fact that Russian Federation and Austria are States parties to the Vienna Convention of 1980 (CISG) and that the enterprises of the [Buyer] and the [Seller] are situated in those States.

According to the Constitution of the RF (Article 15(4)), international agreements of the Russian Federation are parts of its legal system. If an international agreement of the RF provides rules different from the rules foreseen by the otherwise applicable law of the RF, the rules of the international agreement shall be applied. An analogous rule can be found in Article 7 of the CC of the RF.

Basing on the above and following Article 13(1) of the Rules and Procedures of the Tribunal, Article 28 of the RF Law on International Commercial Arbitration and Articles 1(1)(a) and 7(2) CISG, the Tribunal ruled that the relations of the parties shall be regulated, first, by the Vienna Convention of 1980 (CISG), and, in any part not regulated by the CISG, by the otherwise applicable Russian law.

4. Having considered the question of [Buyer]'s claims on the merits, the Tribunal ruled the following.

      4.1 Contracts concluded by the parties

      On 26 November 2003, the [Seller] and the [Buyer] concluded Contract No. 5705/TB/EUS1 (hereinafter, the "Contract"), according to which the [Seller] undertook to deliver to the [Buyer] equipment on CIP terms. Simultaneously the parties entered into a second contract dated 26 November 2003 (No. 5706/TB/RUS/1) for the delivery of other equipment and a third contract dated 26 November 2003 (No. 5707/HB/RUS/1) for installation and erection supervision, performance of balancing and commissioning, test operations and training of the [Buyer]'s staff in control and service of the equipment delivered under the first and second contracts.

      4.2 Contractual guarantees of the [Seller]

      According to Article 1.1 of the Contract, technical characteristics of the contractual goods are determined in specification No. 1 and Annex No. 1 to the Contract. According to Article 7.1 of the Contract, the [Seller] undertook to ensure high quality of the goods and its full conformity with the contractual provisions. According to Annex No 1 to the Contract, the [Seller] undertook to ensure efficiency of the goods per day and content of dry substances in finished goods not less than 96%.

Evidence presented by the parties and arguments expressed during this hearing led the Tribunal to the conclusion that the merits of the parties' dispute, in the final analysis, came to the question whether the equipment delivered by the [Seller] conformed with the guarantees established in the Contract. In other words, whether this equipment was able to produce final products with content of dry substances in them not less than 96%.

If the evidence presented by the parties does not help to answer this question affirmatively, the Tribunal shall examine also the question, raised by the [Seller]: in which degree action or inaction of the [Buyer] itself might have been the reason why during the tests of the equipment delivered by the [Seller] it appeared to be impossible to make products which would correspond with the guarantees established in the contract.

      4.4 Installation works and further tests of the equipment

      Equipment was delivered to the [Buyer] in accordance with the contractual provisions. No complaints regarding terms of delivery and kitting of the equipment were made by the [Buyer]; that is proved by the report dated 30 March 2004 that was signed by the parties' representative.

In May-June 2004 during [Seller]'s performance of the erection supervision, the [Buyer] performed installation of the equipment, after which the parties started balancing and commissioning.

According to Article 2.10 of the report dated 16 June 2004, signed by the [Seller] and the [Buyer], the [Seller] stated that "final adjustment of the equipment will be made by the [Seller] within 3 weeks". In Article 2.1-2.6 of the report, there were established settings that had to be ensured by the [Buyer] to perform acceptance tests of the equipment.

During the period from 28 till 30 September 2004, employees of the [Seller] stayed at the [Buyer]'s plant and performed equipment adjustment and took part in trial tests of the equipment.

On 1 October 2004, the [Buyer] refused to provide the [Seller] with and to sign the acceptance certificate for the equipment. Instead, [Buyer] sent a letter to the [Seller] which indicated existing defects of the equipment, including notification that qualitative measures of the finished goods produced during tests do not correspond with requirements guaranteed by the [Seller] in the Contract. In this letter, the [Buyer] also expressed its demand for repair of defects of the equipment. In its reply to this letter, the [Seller] informed the [Buyer] that to overcome the existing situation the equipment should be adjusted further in the [Seller]'s presence.

From 18 till 21 October and from 25 till 28 November 2004, the [Buyer] independently performed testing works. In letters dated 25 and 29 October, the [Buyer] indicated that after the tests, in spite of [Buyer]'s observance of the requirements for the feedstock, the finished goods did not reach the characteristics established by the Contract.

From 14 till 20 December 2004, the parties jointly performed balancing and commissioning and acceptance tests of the equipment. As the result of it, the parties signed three bilateral protocols dated 16, 17 and 20 December 2004.

According to Article 1 of the protocol dated 16 December 2004, "installation of the equipment's parts foreseen by the third contract (No. 5707/HB/RUS1) dated 26 November 2003, Art. 4.1, has been performed by the [Buyer]'s specialists in full. The supplier of the equipment under the Contract (No. 5705/HB/RUS1) and the second contract (No 5706/HB/RUS1) dated 26 November 2003 does not have any claims against the [Buyer] concerning quality of the installation of equipment's parts; the equipment is complete". The protocol was signed by the Executive Director of the [Buyer], the General Manager of the [Seller] and by other employees of both parties.

In Article 2 of the protocol dated 16 December 2004, the parties confirmed that [Buyer]'s representatives installed the mentioned equipment by the terms of installation, binding and assembly. The [Seller] did not have remarks concerning works performed: they were made qualitatively and in full. The [Buyer] ensured supply of everything necessary (water, electricity, air, feedstock etc.) to perform acceptance tests in accordance with requirements of Art. 4.3 of the third contract (No. 5707/HB/RUS1) dated 26 November 2003.

Article 3 of the protocol dated 17 December 2004 and Article 1 of the protocol dated 20 December 2004 established that "results of the analysis and acceptance tests evidence non-conformity of the characteristics obtained during acceptance tests with requirements established in Contract No. 5705/HB/RUS1 and in the second contract (No. 5706/HB/RUS1) dated 26 November 2003 and Annex No 1 to them". These protocols were also signed by the Executive Director of the [Buyer], the General Manager of the [Seller] and by other employees of both parties.

The protocols dated 16, 17 and 20 December 2004 indicated that works on the equipment were performed in the presence of the [Seller]'s representatives and under their direct supervision. The abovementioned protocols also include information on qualitative measures of the finished goods produced by the [Buyer]. The [Seller] did not fix in the protocols any remarks concerning the feedstock that was used.

According to the protocol dated 15 February 2005, which was also signed by the parties' representatives, joint tests of the equipment resulted in production of the finished goods, "the qualitative measure of which does not correspond to the contractual provisions." In this protocol, the parties fixed that qualitative measures of the feedstock met the requirements of the [Seller] and that the [Buyer] ensured constant and sufficient supply of everything necessary for the drying. The General Manager of the [Seller] confirmed that he entrusted employees of the [Buyer] to perform tests of the equipment since, during the tests, he familiarized himself with preparedness of the [Seller]'s employees to work.

      4.5 Non-conformity of the equipment with contractual technical characteristics

      On the basis of circumstances set forth in para. 4.4 of this award, the Tribunal came to the conclusion that the [Buyer] duly executed its obligations, established by Articles 9.1 and 9.2 of the Contract. The Tribunal also concluded that the acceptance tests resulted in production of goods that contained less than 96% of the dry substances, i.e., they revealed non-conformity of the factual technical characteristics of the equipment with the characteristics guaranteed by the [Seller] in Annex 1 to the Contract.

      4.6 [Buyer]'s execution of its contractual obligations

      The Tribunal cannot agree with [Seller]'s arguments that the [Buyer] eluded its obligations foreseen by the contract because of the following.

As it follows from the letters of the [Seller] attached to the statement of claim, according to the protocol dated 16 June 2004, the [Buyer] tried to adjust components of the equipment and the [Seller] gave corresponding recommendations and inquired about the results of the adjustment.

In para. I of the [Seller]'s statement of defense, it indicated that on 29 September 2004, for a period of 5.5 hours, the equipment processed without malfunction 16 tons of feedstock and produced, in its opinion, a product that corresponded to the characteristics established by the Contract. By doing this, the [Seller], in fact, recognized that there were no claims from its side against the [Buyer] concerning its execution of obligations fixed in Articles 9.1 and 9.2 of the Contract.

No other documents in the case evidence that the [Buyer] delayed finishing of the works under the contract. The Tribunal noted that 4.5 months have passed from the delivery to the [Seller] of the [Buyer]'s letter dated 1 October 2004, in which the [Buyer] listed defects of the equipment and demanded repair of defects until the performance of the last joint test of the equipment on 15 February 2005.

Having taken into account that Article 4.7 of the third contract (No. 5707/HB/RUS/1) established six weeks for the performance of the erection, balancing and commissioning and acceptance tests, the Tribunal concluded that [Seller]'s allegation that it was not provided with a sufficient period of time to perform all necessary works foreseen by the Contract did not reflect the factual circumstances of the case.

The Tribunal also noted that the Contract does not contain any provisions that lead to the conclusion that equipment's tests require adjustment of the equipment during its non-interruptible work that shall continue for at least 72 hours. The [Seller] did not present evidence that, while performing its contractual obligations, it made a demand on the [Buyer] to ensure fulfillment of the abovementioned condition. As well as [Seller] did not present evidence that the [Buyer] by its actions hampered the [Seller] in adjustment of the equipment in the way and during the period that was necessary in [Seller]'s opinion and that corresponded with contractual provisions. Being given this, the Tribunal considered that information contained in the letter of the research institute dated 18 January 2006 to which the [Seller] made references cannot be taken into consideration.

      4.7 Use of the proper feedstock

      [Seller]'s arguments that the non-conformity of the factual technical characteristics of the equipment with the characteristics guaranteed by Annex No 1 to the Contract was caused by the [Buyer]'s use of improper feedstock and its peripherals cannot be taken into account because of the following.

The Contract concluded by the parties does not contain provisions establishing that execution by the [Seller] of its guarantee on the equipment's quality depends on [Buyer]'s use of particular feedstock and particular peripherals during the production.

The Contract does not include obligations to deliver corresponding strains or on preparation of the corresponding raw materials or indications of characteristics of the feedstock to be used.

As it followed from the protocols signed by the parties, which are mentioned in para. 4 of this award, the qualitative measures of the feedstock that was used during the tests of the equipment met the requirements of the [Seller]. They also indicated that the [Buyer] ensured supply of everything necessary (water, electricity, air, feedstock, etc.) to perform acceptance tests. The [Seller] than had no complaints against the mentioned works and therefore considered that the works were made qualitatively and in full.

Also, in the mentioned protocols there were no complaints against the [Buyer] concerning work of the equipment's parts that were provided by it.

It did not follow from the materials of the case that the [Buyer] did not grant the [Seller] the opportunity to check any parts of the equipment.

The Tribunal could not take into consideration findings of the Austrian expert firm dated 21 January 2005 since these findings were obtained as the result of laboratory research that was conducted with certain violations. Particularly, there are no documents signed by the parties that prove sampling for the analysis. Also, the [Seller] did not present evidence that samples of the finished goods that were taken were duly sealed and passed to the independent laboratory.

Similarly, the Tribunal could not take into account expert findings of the German research institute dated 8 May 2006 since these findings were made on the basis of analysis of the laboratory research of the Austrian expert firm that was conducted with certain violations, as mentioned above.

5. Refund of the purchase price of the equipment

Having considered the [Buyer]'s claims to require the [Seller] to refund the price of the equipment delivered and to remove the equipment, the Tribunal established the following.

      According to Article 8.3 of the Contract, in case of non-conformity of the factual technical characteristics of the equipment that was revealed during the acceptance tests with the characteristics guaranteed in Annex No. 1 to the Contract, the [Seller] is obliged to remove the equipment delivered on its own account within four calendar weeks and return to the [Buyer] funds previously paid by it within five calendar weeks.

      Article 2.1 of the Contract and specification No. 1 establish the equipment's price in Euros. It was paid by the [Buyer] in full which is proved by application for the currency transfer No. 20 dated 22 December 2003.

Being given this, the Tribunal considered that the [Seller] shall refund to the [Buyer] the sum paid for the equipment.

The Tribunal also considered that the [Seller] shall remove the equipment delivered on its own account within a reasonable period of time that, in Tribunal's judgment, shall not exceed 30 days starting with the day when the award is handed down.

      5.1 Reimbursement of the customs duties

      Having considered claims to require the [Seller] to pay for [Buyer]'s expenditures for the customs duties payment, the Tribunal established the following.

            According to Article 8.3 of the Contract, in case of non-conformity of the factual technical characteristics of the equipment with the characteristics guaranteed by the [Seller] in Annex 1 to the Contract, the [Seller] shall within five weeks reimburse the [Buyer] for all the expenditures borne by the latter concerning custom clearance of the equipment for the importation.

            Cargo customs declaration No. 37907878 and payment order No. 879 dated 25 March 2004 confirm the sum paid by the [Buyer] as customs duties for the equipment delivered.

            Also, according to the payment order dated 30 March 2004, the [Seller] paid for the customer's broker's services for the customs clearance of the equipment delivered by the [Seller] under this Contract and the second contract (No. 8706/TG/RUS/1).

The price for the customs clearing services concerning equipment delivered under this Contract was established based on the percentage ratio of the price of the equipment delivered under this Contract and the second contract (61.68 and 38.32%). The correctness of this calculation was not disputed by the [Seller].

      5.2 Payment of the interest

      Having considered claims to oblige the [Seller] to pay interest on the purchase price of the equipment, the Tribunal ruled the following.

            According to Article 84 CISG, if the seller is bound to refund the price, he must also pay interest on it, from the date on which the price was paid.

            According to the application for the currency transfer No. 20, the equipment price was paid by the [Buyer] on 22 December 2003.

The [Buyer] claimed interest payment for the period from January 2004 till April 2006. Consequently, the interest shall be paid for 28 months (840 days).

Since the CISG does not regulate the rate of the interest to be paid, the Tribunal ruled to apply provisions of the Russian legislation, i.e., Article 395 of the CC of the RF. According to Article 395(1) of the CC of the RF, the interest rate shall be defined by the discount rate of the bank interest, existing by the date of the discharge of the pecuniary obligation or of the corresponding part thereof at the creditor's location, if the creditor is a legal entity. If the debt is exacted through the court, the court may satisfy the creditor's claim, proceeding from the discount rate of the bank interest on the date of filing the claim or on the date of its adopting the decision.

According to Article 52 of the Joint Resolution No. 6/8, adopted by the Plenums of the Supreme Court and Supreme Commercial Court of the RF dated 1 July 1996, if according to the currency regulation and control legislation a pecuniary obligation is expressed in foreign currency and there is no official discount rate of the bank interest on currency credits at the day of execution of the pecuniary obligation in the creditor's location, the interest rate shall be determined on the basis of publications in the official sources of information concerning average discount rates of the bank interest on short-term currency credits in the creditor's location.

According to the Bulletin No. 10 (161) of Banking Statistics of the Bank of Russia published in 2006 (table 4.3.3), average weighted interest rates on nonfinancial organizations' and personal loans in Euro at the moment of the decision's adoption amounted to 7.1%.

The amount of the interest rate to be paid by the [Seller] was determined in accordance with the abovementioned.

      5.3 Reimbursement of damages

      Having considered the claim for reimbursement of the [Buyer]'s installation and binding expenses as well as expenses for de-installation of the equipment delivered, the Tribunal ruled the following.

            5.3.1 General grounds for damages payment

            According to Article 45(1)(b) CISG, if the seller fails to perform any of his obligations under the contract or this Convention, the buyer may claim damages as provided in articles 74 to 77 CISG.

According to Article 74 CISG, damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach.

Article 9.1 of the Contract provides that installation of the equipment by the terms of installation, binding and assembly shall be made by the [Buyer] on its own account. If the equipment is to be returned to the [Seller] de-installation of the equipment shall be made at the expense of the [Seller]. All [Buyer]'s expenses resulted from the installation and de-installation of the equipment shall be reimbursed by the [Seller].

            5.3.2 Reimbursement of the expenses on installation and binding of the equipment

            The [Buyer] presented an expense certificate for the installation and binding of the equipment delivered under this and another contract. The price of the installation works of this particular equipment was established based on the percentage ratio of the price of the equipment delivered under this Contract and the second contract (61.68 and 38.32%).

Having taken into consideration that the [Seller] did not presented grounded objections either concerning calculations of the expenses presented by the [Buyer] or concerning the documents presented by the [Buyer] to substantiate the [Seller]'s position, the Tribunal considered this claim of the [Buyer] as established.

Together with this, the Tribunal also took into account that in the [Buyer]'s statement of claim, in requesting amendment of the claims and during the oral pleadings, the [Buyer] asked for the reimbursement of its expenses on installation and binding of the equipment in the amount which was smaller compared to the sum indicated in the expenses certificate.

Being given this, the Tribunal ruled that the [Seller] shall reimburse expenses for installation and binding of the delivered equipment in this smaller amount.

            5.3.3 Reimbursement of the expenses for de-installing the equipment

            To empty space from the equipment delivered by the [Seller], the [Buyer] de-installed it. De-installation works were performed by a specialized organization on the basis of the additional agreement dated 1 March 2006 No. 38 to the contract dated 9 January 2003 No. 06/03.

This additional agreement determined the general cost of the works. Total work content included both de-installation of the equipment delivered under this Contract and the second contract (No. 5706/TB/RUS/1).

From the materials of the case, it follows that the de-installation works concerning this particular equipment were listed in the local estimate No 1 attached to the additional agreement. General works that applied both to de-installation of this equipment and equipment delivered under the other contract were listed in local estimates Nos. 2, 4 and 5 attached to the additional agreement.

Following from the percentage ratio of the price of the equipment delivered under this Contract and the second contract (61.68 and 38.32%) was established the price of works that applied directly to de-installation of this equipment.

Expenses of the [Buyer] are proved by the payment order No. 399 dated 16 March 2006.

Being given this, the Tribunal ruled that the [Seller] shall reimburse expenses of the [Buyer] on de-installation of the equipment delivered.

6. Reimbursement of attorneys' fees

Having considered [Buyer]'s claim to reimburse its expenses on the legal assistance services and representation of its interest in MKAC, the Tribunal ruled the following.

18 April 2005, the [Buyer] entered into agreement with the law firm concerning provision of legal services connected with [Buyer]'s representation in MKAC.

In connection with protection of the [Buyer]'s interests in this case the law firm made out bills No. 29 and 30 dated 19 April 2005 and bill No. 6 dated 1 February.

According to Article 9 of the Regulations on Arbitration Fees and Expenses, the winning party may request the other party to reimburse its reasonable expenses in connection with the arbitral proceedings, in particular, the expenses connected with defending his interests through legal representatives.

Having taken into account the abovementioned, the Tribunal ruled that the [Seller] shall reimburse [Buyer]'s reasonable expenses connected with defending its interests through legal representatives.

7. Apportionment of the arbitration fees

Having considered the question of apportionment of the arbitration fees, the Tribunal, on the basis of Article 6 of the Regulations on Arbitration Fees and Expenses, ruled to charge the arbitration fee to the [Seller] in proportion to the satisfied claims, and to the [Buyer] proportionally to the dismissed part of the claim.


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 [Buyer] and Respondent of the Austria is referred to as [Seller].

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

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