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CISG CASE PRESENTATION

Serbia 5 January 2007 Foreign Trade Court attached to the Serbian Chamber of Commerce (Frozen plums and raspberries case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/070105sb.html]

Primary source(s) of information for case presentation: Text of award

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Case identification

DATE OF DECISION: 20070105 (5 January 2007)

JURISDICTION: Arbitration ; Serbia

TRIBUNAL: Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: T-13/05

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: United States [Claimant]

BUYER'S COUNTRY: Serbia [Respondent]

GOODS INVOLVED: Frozen plums and raspberries


UNCITRAL case abstract

SERBIA: Foreign Trade Court of Arbitration, attached to the
Serbian Chamber of Commerce in Belgrade
Proceedings No. T-13/05 (Frozen Plums case) 5 January 2007

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/116],
CLOUT abstract no. 1138

Reproduced with permission of UNCITRAL

An American buyer and a Serbian seller signed contracts for the purchase of frozen fruits. The buyer paid for the entire contracted quantity of goods to the seller in advance. The seller moreover failed to deliver a certain amount of the contracted goods. Moreover, there were several tons of the delivered fruits that were not in conformity with the contract. The buyer initiated arbitration proceeding. Since the parties failed to choose the applicable substantive law the sole arbitrator decided that the CISG would apply as both the United States of America and Serbia are members of the Convention.

The buyer’s request for compensation of the purchase price of the goods which were not delivered was granted. Pursuant to articles 35 and 50 CISG, the seller was thus ordered to pay the buyer the proportionate amount of the contracted price because of its failed delivery. Applying article 78 CISG the sole arbitrator awarded interest on this amount. The interest was due as of 8th August 2005, i.e. the day of the submission of the claim, until final payment. The claim that the interest was due for a longer period, starting before the commencement of the proceeding, was denied, because the buyer had granted the seller an additional deadline for delivering the missing amount. Only when the buyer initiated the proceeding the seller knew of its decision to terminate the agreement on the additional delivery and only from the moment, i.e. 8th August 2005, the seller was in default. Since Article 78 does not set the interest rate, the arbitrator referred to the legislation in effect in the Republic of Serbia, as the Serbian law was the applicable substantial law pursuant to the Law on Conflict of Laws with Regulations of Other Countries.

The buyer’s claim for compensation for the alleged poor quality of the goods was rejected. For the sole arbitrator it was not possible to determine with certainty whether the deliveries that lacked conformity caused the buyer to incur any damages whatsoever, irrespective of their amount. The buyer failed to prove the fundamental breach of contract and failed to rely on a lack of conformity within a reasonable time according to Articles 38, 39 and 46 CISG.

The buyer’s claim for damages due re-sorting and repackaging of a certain amount of non-conforming goods was partly granted. The sole arbitrator refused it for the amount that exceeded the actual damage suffered by the buyer.

The sole arbitrator rejected the seller’s objection that the buyer was precluded from raising any claims, since the limitation period had expired, as unfounded. The seller referred with its objection to the Serbian Law on Contracts and Torts and the Convention on the Limitation Convention. The sole arbitrator stated that the Serbian Law on Contracts and Torts was not applicable at the case at hand. Since at the time of the conclusion of the contracts (which dealt with international sale of goods) the parties had their respective place of business in two Contracting States of the Limitation Convention, the Convention applied (Article 3). According to Article 8 Limitation Convention, the limitation period shall be four years. Pursuant to the contracts, the seller was obliged to deliver the goods between 15th September 2001 and 1st October 2001 and between 15th August 2001 and 1st September 2001. Since the buyer commenced arbitration proceedings on 8th August 2005 the limitation period was not up. The seller’s argument was thus rejected.

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Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 35 ; 39 ; 46 ; 50 ; 74 ; 78 [Also cited: Articles 4 ; 8 ; 25 ; 38 ]

Classification of issues using UNCITRAL classification code numbers:

35A [Quality, quantity and description required by contract];

39A [Buyer must notify seller within reasonable time];

46B ; 46B1 ; 46B2 [Requiring delivery of substitute goods ; Remedy available only for fundamental breach ; Request in conjunction with notice of non-conformity];

50A [Buyer's right to reduce price for non-conforming goods];

74A [Loss suffered as consequence of breach];

78A ; 78B [Interest on delay in receiving price or any other sum in arrears ; Rate of interest]

Descriptors: Non-conformity; Delivery of substitute goods; price reduction; Damages; Interest; Limitation Period

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Serbian): Click here for Serbian text of case

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: [2009] Vladimir Pavić, Milena Djordjević, Application of the CISG Before the Foreign Trade Court of Arbitration at the Serbian Chamber of Commerce - Looking Back at the Latest 100 Cases, 28 Journal of Law and Commerce 1, 15, 34, 35, 53, 54.

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Case text (English translation)

Queen Mary Case Translation Programme

Foreign Trade Court of Arbitration
attached to the Serbian Chamber of Commerce in Belgrade

Award of 5 January 2007 [Proceedings No.T-13/05]

Translation [*] by Sonja Gitaric

Edited by Milena Djordjevic, LLM and Marko Jovanovic [**]

Claimant (USA) [Buyer] v. Respondent (Serbia) [Seller]

Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce in Belgrade, in the proceedings conducted by A as sole arbitrator , with minutes taken by Mrs. O, in the dispute between [Buyer] from USA as Claimant represented by counsels Dr. Ing L and Mr. M, and [Seller] from Serbia as Respondent, concerning payment of EUR 13,865.00 and US$1,500.00, upon conducting the arbitral proceedings and the hearing held on 4 October 2006, on 5 January 2007 renders the following:

AWARD

1.    [Buyer's] claim is partially granted and [Seller] is therefore ordered to pay to [Buyer]:
  -    the amount of EUR 3,323.40 for reimbursement of purchase price for the undelivered goods,
with a monthly interest set at 0.5% to be determined in accordance with the conform method,
due as of 8 of August 2005 until final payment, as well as
  -    the amount of US$950- for the compensation of the damage caused, with a monthly interest
set at 0.5%, due as of 8 of August 2005 until final payment, all of which is due within
15 days from the receipt of this Award.
2.    [Buyer]'s claim is denied:
  -    for the amount of EUR 10,541.60 with the statutory interest due from 1 September 2001 until
final payment, claimed as compensation for the damage incurred as well as
  -    for the amount of US$550.00 with statutory interest due from 1 September 2001 until final payment.
3.  [Buyer]'s request for statutory interest in the amount of EUR 3,323.40 and in the amount of US$950.- since 1 September 2001 until 7 August 2005 is denied.
4.    [Seller] is ordered to pay to [Buyer] compensation for the costs of proceedings
  -    in the amount of US$550- and in the amount of RSD 7,600.00, within 15 days from the day of receipt of this Award.
5.    [Buyer's] claim is refused regarding compension of the costs of proceedings in any amount exceeding the one established in this Award.

STATEMENT OF REASONS

In the claim submitted by [Buyer] to the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce in Belgrade on 8 August 2005 against [Seller], [Buyer] requested that the Court of Arbitratrion order [Seller] to pay to [Buyer] the amount of EUR 13,865.00 and US$ 1,500.00 with the statutory interest due as of 1 September 2001 until final payment. [Seller] also requested that [Seller] be ordered to pay the compensation for the costs of arbitral proceedings. In the claim [Buyer] stated that it had concluded several contracts for sale of frozen fruit with [Seller] - namely Contract number 24/01 of 3 July 2001 concerning purchase of 90 tons of frozen raspberries, and Contract number 29/01 of 28 August 2001 concernig purchase of 90 tons of frozen plums. Moreover, [Buyer] stated that it had payed to [Seller] the full amount of the stipulated price in advance, through three payments made in Szeged: on 11 July 2001 in the amount of DEM 251,000.00, on 11 August 2001 in the amount of DEM 64,900.- and on 22 August 2001 in the amount of DEM 164,800.-. [Buyer] proposed that, if necessary, witnesses P, R, and S from _ be heard regarding the payments which had been made. Further in its claim [Buyer] stated that the delivery of the contracted raspberries was partially inadequate, due to the fact that one of the trucks delivered raspberries of the quality that did not comply with the contractual requirements, and which- according to the Statement of Claim- caused [Buyer] to incur damage in the amount of DEM 19,000.-. According to the Statement of Claim, out of the contracted 100 tons of plums not more than 90 were delivered, namely 10 tons less. [Buyer] notified [Seller] that one of the trucks contained 19 tons of inadequate goods, so these goods were subsequently repackaged at the price of US$1,500.- . Further to this, in another truck delivering the plums, there were 18% of useless goods, i.e. 3,422 kg, which represents the value of DEM 2,225.00. According to [Buyer]'s claim, [Seller] was unjustly enriched by DEM 27,725.-, i.e. EUR 13,865.00 and US$1,500.00. [Buyer] submitted in its claim that the jurisdiction of the Foreign Trade Court of Arbitration was stipulated in the Contract number 24/01 concluded on 3 July 2001, and it suggested the appointment of B as arbitrator.

In addition to the Statement of Claim, [Buyer] submitted the following evidence in support of its statements: Sales contract number 24/01 concluded between [Buyer] and [Seller] in Belgrade on 3 July 2001, Sales contract number 29/01 concluded between [Buyer] and [Seller] in Belgrade on 3 July 2001, Sales contract number 24/01 concluded between [Buyer] and [Seller] in Belgrade on 10 August 2001,the letter of the company Z sent to [Buyer] by fax on 4 February 2002, the letter sent to [Buyer] by the same company by fax on 2 October 2001, as well as the expert report on receipt of the goods which was done on 12 February 2002 by examiner E - in regard to the delivery of plums without pits in the amount of 20,090 kg transported by trucks.

[…]

On 31 October 2005, [Seller] submitted its Answer to the Statement of Claim. In the accompanying letter [Seller] informed the Court of Arbitration that it would not accept [Buyer]'s proposal of sole arbitrator and that it would instead, within 30 days, attempt to reach an agreement with [Seller] regarding the appointment of a sole arbitrator. [Seller] also informed the Court of Arbitration of insolvency proceedings which had already been initiated against [Buyer] before the Commercial Court in Valjevo, Serbia.

In its answer to the Statement of Claim, [Seller] denies [Buyer]'s submissions and requests the Court of Arbitration to refuse [Buyer]'s claims as unfounded. [Seller] acknowledged that, over the course of the year 2001, it maintained business relations with [Buyer] in regard to the sales contracts referred to in the Statement of Claim, concerning the sale of frozen plums and raspberries. [Seller] contested the amount required by [Buyer] in the Statement of Claim affirming that, according to [Seller]'s accounting balance, [Buyer] was entitled to not more than EUR 2,836.00. [Seller] also proposed the expertise on the existence and the content of business relations between the parties to the dispute, with professional opinion provided by an expert in finance and economy.

In its answer to the Statement of Claim [Seller] submitted that [Buyer] was precluded from requesting any payment from [Seller] since the limitation period has already expired. [Seller] based this submission on the provisions of the Serbian Law on Contracts and Torts and the Convention on the Limitation Period in the International Sale of Goods.

In addition to its Answer to the Statement of Claim, [Seller] submitted the court order, issued by the Commercial Court in Valjevo, instigating insolvency proceedings against [Buyer].

On 1 November 2005 the Secretariat of the Court of Arbitration sent the Answer to the Statement of Claim to the counsel for [Buyer] and instructed [Buyer] to reach an agreement with [Seller] regarding the appointment of sole arbitrator within 30 days from the day the Answer to the Statement of Claim was received by the Court of Arbitration.

On 15 November 2005 [Buyer] submitted a brief to the Court of Arbitration, informing the Court of Arbitration that it does not seem likely that the parties to the dispute would reach an agreement with respect to the appointment of sole arbitrator. Consequently, [Buyer] suggests that the decision on the appointment of sole arbitrator should be made by the President of the Court of Arbitration. In the same brief, [Buyer] explained that it had found out about the damage caused from a letter sent to it by the company Z on 21 July 2005. [Buyer] submitted the abovementioned letter along with its brief. [Buyer] ascertained that, in its correspondence with the company Z, [Seller]'s counsel admitted that the delivered goods were not conforming and promised to pay compensation for the damage caused. [Buyer] suggested that the same witnesses named in the Statement of Claim should be heard regarding this matter as well.

The Secretariat of the Court of Arbitration sent [Buyer]'s brief and the accompanying letter to [Seller] on 15 November 2005.

On 5 February 2005 the President of the Court of Arbitration decided to appoint A as sole arbitrator in this legal matter. A informed the Court of Arbitration that he accepts his appointment, confirmed the appointment in writing and signed a statement of independence on 7 December 2005.

[…]

A hearing for oral argument was held in the seat of the Court of Arbitration on 30 January 2006.

[…]

During the pleadings, [Buyer]'s counsel reaffirmed the submissions brought out in the Statement of Claim, as well as those in the brief submitted to the Court of Arbitration on 15 November 2005. The counsel added that the end-buyer had agreed with [Seller] to repack the goods. However, notwithstanding the repackaging, [Seller] accepted to make a new delivery of the goods in the quantity equal to the one of the non-conforming delivery.

The counsel for [Seller] reaffirmed the submissions made in the Answer to the Statement of Claim, not disputing the existence of three contracts between [Buyer] and [Seller]. Additionally, [Seller]'s counsel acknowledged the fact that [Buyer] had paid the full price of the ordered goods in advance. The counsel informed the Arbitral Tribunal that the request for commencement of insolvency proceedings against [Seller] had been refused. The counsel emphasized in particular that [Buyer] should bear the burden of proving that it had notified [Seller] of non-conformity of the goods.

Sole arbitrator set a deadline for the parties to submit answers to the assertions of the opposing party and postponed the hearing.

On 27 February 2006 the Secretariat of the Court of Arbitration received [Buyer]'s written submission in which it stated that, on 28 September 2001, company Z sent to [Seller] the letter of intent, expressing its interest for a long-term business cooperation with [Buyer]. Namely, that the company Z would like to purchase raspberries and plums from [Buyer] over a longer period of time. Moreover, [Buyer] ascertained that [Seller] was delivering non-conforming goods, causing the end-purchaser to complain. The authorized representatives of [Seller], P and R, accepted the complaints as justified and made a commitment to compensate for the missing goods by new deliveries from the next harvest. According to the [Buyer]'s assertions, additional complaints were filed on 4 February 2002 when the end-purchaser found unidentified objects in the boxes containing the plums, after which it was necessary to repack the goods. According to [Buyer]'s assertions, another complaint was filed on 12 February 2002, with regard to the delivery of the frozen plums. With respect to these complaints as well the authorized representatives of [Seller] acknowledged the default and accepted to provide substitute goods. Bearing in mind that the substitute deliveries were never made, on 21 July 2005 the company Z filed a claim for damages against [Buyer] for the amount of EUR 23,736.00. In order to support these submissions, [Buyer] submitted the letter of intent of the company Z of 28 September 2001, Z's claim for damages against [Buyer] concerning delivery of raspberries of 21 July 2005, the written notice of non-conformity that the company Z sent to [Buyer] on 2 October 2001, the fax that the company Z sent to [Buyer] on 4 February 2002, and certified translations of all of the aforementioned documents, as well as the certified translation of the expert report on the delivered goods made by the examiner E on 12 February 2002.

The Secretariat of the Court of Arbitration served [Buyer]'s written submission to [Seller] on 28 February 2006.

On 17 March 2006 the Secretariat of the Court of Arbitration received [Seller]'s written submission. [Seller] reaffirmed its submissions presented in the previous course of the proceedings and contested the probative value of the documents submitted by [Buyer]. [Seller] also emphasized that its statement concerning the documented debt towards [Buyer] should not be construed as an acceptance of debt, but rather as an illustration of the conflicting state of the relations between the parties to the dispute. [Seller] suggested that the evidence should be produced on the basis of the analysis made by an expert in finance and economy. [Seller] reiterated its position that [Buyer] is precluded from raising any claims, due to the expiration of the period of limitation. [Seller] noted that [Buyer] did not provide evidence in support of the assertion that it had duly informed [Seller] about the alleged non-conformity of goods. Finally, [Seller] repeated its request for [Buyer]'s claim to be dismissed.

[…]

Sole arbitrator scheduled a new hearing for the oral argument, for 19 June 2006.

The counsel for [Buyer] reaffirmed all of his previous assertions and proposals, in particular the proposal to summon S and R as witnesses. The counsel for [Buyer] withdrew the proposal to hear P as witness as well.

The counsel for [Seller] reaffirmed all of his previous assertions and proposals, but he withdrew the proposal to produce evidence by expertise. The counsel for [Seller] objected to the proposal to produce evidence by hearing witnesses S and R. When asked by sole arbitrator whether the company J had made qualitative receipt of the goods according to the contract stipulated between the parties, the counsel for [Seller] was unable to respond so he asked to be granted an additional deadline.

Sole arbitrator decided to postpone the hearing for oral argument, and scheduled a new hearing for 6 September 2006. The counsel for [Buyer] was given a deadline of 15 days to produce the address of witness S, and the counsel for [Seller] was given a deadline of 15 days to provide the evidence of the quantitative receipt of the disputed goods made by company J.

The counsel for [Buyer] sent the address of witness S by electronic mail to the Court of Arbitration on 4 July 2006. Subsequently, the Arbitral Tribunal summoned the witnesses R and S to appear at the oral argument on 6 September 2006.

The oral argument was held before Sole Arbitrator, on the 6th September 2006 at the seat of the Court of Arbitration. Dr. L and Mr. M appeared on behalf of [Buyer] at the hearing. No one appeared on behalf of [Seller]. Despite having received the summons on the 13 July 2006, witness R did not appear.

Sole arbitrator decided that the oral argument would be held in the absence of the duly summoned counsel for [Seller].

The counsel for [Buyer] reaffirmed all of the assertions and proposals previously brought out before the Tribunal.

Evidence was produced by hearing witness S. In order to hear the witness R, sole arbitrator postponed the hearing and a scheduled a new hearing for 4 October 2006.

On 7 September 2006 the Secretariat of the Court of Arbitration informed [Seller] about the course of the oral argument held on 6 September 2006 and summoned it to appear at the argument scheduled for 4 October 2006. [Seller] was served with the notice from the Court of Arbitration on 11 September 2006, which can be verified by the delivery confirmation issued by the Post Office.

The witness R was summoned to appear at the hearing scheduled for 4 October 2006 by a letter dated 7 September 2009.

On 3 October 2006 the Court of Arbitration received a letter from the counsel for [Seller], in which he informs the Court of Arbitration that, as of 1 September 2006, he is no longer an employee of [Seller], so he would no longer be authorized to represent [Seller] in this matter. However, in the same letter, the counsel for [Seller] gives an analysis of the statement made by witness S at the hearing held on 6 September 2006. The counsel finds the statement of witness S imprecise and biased. The counsel for [Seller] also informed the Arbitral Tribunal that no qualitative receipt of the controversial goods was made by company J.

The hearing for oral argument was held before sole arbitrator on 4 October 2006. Mr. L, a retired attorney-at-law, and Prof. Dr M appeared on behalf of [Buyer]. No one appeared on behalf of [Seller]. Witness R also appeared at this oral argument.

Sole arbitrator decided that the argument would be held in the absence of the duly summoned [Seller].

The counsel for [Buyer] reaffirmed the positions and proposals already made and the witness R was heard.

Upon the concluded hearing of witness R, the counsel for [Buyer] stated that Claimant had no more proposals in regard to the taking of evidence. He suggested that all the written submissions delivered to the Court of Arbitration in the course of these proceedings should be publicly read by the sole arbitrator and thus included as evidence, and that the hearing should now be concluded. The counsel for [Buyer] also requested the Arbitral Tribunal to grant the [Buyer]'s claim in its entirety, and to order [Seller] to pay the full amount required in the Statement of Claim, as well as the costs of the arbitral proceedings.

The sole arbitrator publicly read the written submissions delivered to the Court of Arbitration in the course of these proceedings and concluded the hearing.

On 12 September 2006, [Buyer]'s counsel specified the sum due as compensation of the costs of the arbitral proceedings in the amount of RSD 37,600.00 and US$1,500.

The sole arbitrator considered the following documents as evidence:

-   Sales Contract number 24/01, registered with [Seller] under number 25 on 4 July 2001, which the Claimant, as buyer, and the Respondent, as seller, concluded in Belgrade on 3 July 2001;
-   Sales Contract number 29/01 which the Claimant, as buyer, and the Respondent, as seller, concluded in Belgrade on 3 July 2001;
-   Sales Contract number 24/01 which the Claimant as, as buyer, and the Respondent, as seller, concluded in Belgrade on 10 August 2001;
-   Fax message which the company Z sent to [Buyer] on 28 September 2001;
-   Fax message which the company Z sent to [Buyer] on 2 October 2001;
-   Fax message which the company Z sent to [Buyer] on 4 February 2002;
-   Expert report on the receipt of goods, made on 12 February 2001 by examiner E regarding the delivery of plums without pits, in the amount of 20,090 kg, transported by truck;
-   The brief that company Z sent to [Seller] on 21 July 2005;
-   Order of the Commercial Court in _ made on 18th October 2005 under number

In addition to the abovementioned, evidence was produced by hearing witnesses S from _ and R from _.

Pursuant to Article 18 Paragraph 1 of the Rules of Arbitration of the Foreign Trade Court of Arbitration attached to the Yugoslav Chamber of Commerce, sole arbitrator determined that the Foreign Trade Court of Arbitration was competent to hear the dispute at hand. Namely, [Buyer] ascertained in its Statement of Claim that the jurisdiction of the Foreign Trade Court of Arbitration was agreed upon in the Sales contract concluded between the parties to the dispute under number 24/01 on 3 July 2001. The abovementioned contract, as well as the subsequent sale contracts between the parties, provided for the jurisdiction of the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce. On 28 October 2005 [Seller] submitted its answer to the claim in which it rejected [Buyer]'s claims. [Seller] also objected to the proposal concerning the appointment of sole arbitrator, and put forward certain facts as undisputed- namely, the fact that [Buyer] and [Seller] maintained business relations based on the sales contracts submitted in addition to the claim. Therefore, [Seller] started arguing the merits of the dispute already in the answer to the Statement of Claim. Considering that the parties provided for the jurisdiction of the Foreign Trade Court of Arbitration in all of the three contracts concluded, sole arbitrator determined that the parties have accepted the jurisdiction of the Foreign Trade Court of Arbitration attached to the Yugoslav Chamber of Commerce, for the resolution of disputes that may arise from: Sales Contract number 24/01 concluded on 3 July 2001 in Belgrade, Sales Contract number 29/01 concluded on 3 July 2001 in Belgrade,and Sales Contract number 24/01 concluded on 10 August 2001 in Belgrade. During the time period between the conclusion of the forementioned sales contracts and the beginning of these proceedings, the Constitutional Charter of the State Union of Serbia and Montenegro was promulgated ("Official Gazette of the Republic of Serbia" number 1 of 4 October 2001 in Belgrade). In its Article 63, the Constitutional Charter contains a provision by which all the rights and obligations of the Federal Republic of Yugoslavia shall be transferred to the State Union of Serbia and Montenegro. In exercising its rights provided by the Charter and acting pursuant to Article 83(3) of its own Constitution, the Republic of Serbia adopted a Law abolishing the Law on the Yugoslav Chamber of Commerce ("Official Gazette of the Republic of Serbia" number 55/03). According to the provisions of this act, the Foreign Trade Court of Arbitration attached to the Yugoslav Chamber of Commerce continues its work within the Serbian Chamber of Commerce in Belgrade, maintaining its composition and organization, under the same conditions and with the same autonomy and independence, in accordance with the Rules of Arbitration. Therefore, the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce continues the work of the Foreign Trade Court of Arbitration attached to the Yugoslav Chamber of Commerce. Based on the aforesaid, sole arbitrator concluded that the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce is competent to hear the dispute at hand.

In the sales contracts concluded between [Buyer] and [Seller] on 3 July 2001 and on 10 August 2001, pursuant to which [Buyer] instigated these proceedings, the Parties failed to choose the applicable substantive law. Bearing this in mind, sole arbitrator decided that the United Nations Convention for the International Sales of Goods adopted in Vienna on 11 April 1980, and subsequently published in the "Official Gazette of the Socialist Federal Republic of Yugoslavia" appendix "International Conventions and Other Agreements" number 10/84, which came into force on 1 January 1988 (CISG) will apply. The CISG was ratified by Yugoslavia on 31 December 1984, and by the United States of America on 11 December 1986. Pursuant to Article 1 of the CISG, the Convention applies to contracts for sale of goods between parties whose places of business are in different States when the States are Contracting States. Considering that all of the three contracts adverted to by [Buyer] were concluded in 2001, when the Convention had already entered into force both in Yugoslavia and in the United States of America, and in view of the fact that the subject-matter of all of the three contracts was the sale of goods, and that [Buyer] has its place of business in the United States of America whereas [Seller] has its place of business in the Federal Republic of Yugoslavia, the CISG constitutes the relevant source of law for resolving the case at hand.

In the sales contracts concluded between [Buyer] and [Seller] during the course of the year 2001, in respect to which this dispute arose, the parties failed to designate the rules of procedure to be applied in case of a dispute. Consequently, pursuant to Article 44 of the Rules of Arbitration of the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce, the sole arbitrator applied the Rules of Arbitration and the relevant provisions of the Serbian Law on Civil Procedure ("Official Gazette" of the Republic of Serbia number 125/04).

On the basis of the evidence gathered, namely the Sales Contract number 24/01 concluded on 3 July 2001 in Belgrade, Sales Contract number 29/01 concluded on 3 July 2001 in Belgrade, Sales Contract number 24/01 concluded on 10 August 2001 in Belgrade, and the witness statements of R and S, it was established that the Claimant as buyer and the Respondent as seller, contracted for the sale of 90 tons of frozen raspberries and 350 tons of frozen and hand cut plums. In the abovementioned contracts, [Buyer] and [Seller] stipulated all the necessary elements of the sale of the forementioned products, including the quality, the packaging, the price and some such, as well as the frequency and the deadline of the deliveries during the course of 2001.

Based on the parties' statements during proceedings, it was established that the total price for the whole contracted amount of goods, was paid in advance during the course of the year 2001.

In view of the letter of the company Z sent to [Buyer] on 21 July 2001 and based on the statements of witness S, general manager of [Seller] during the time period between December 2001 and November 2002, and witness R, general manager of [Seller] untill December 2001, sole arbitrator established that [Seller] failed to deliver to [Buyer] 10 tons of plums out the contracted amount of 350 tons of this product. Considering that [Buyer] paid for the entire contracted quantity of goods to [Seller] in advance, [Buyer]'s request for compensation of the part of the purchase price for the goods which were not delivered, namely for 10 tons of frozen plums, is founded. Under Article 35 of the CISG, the seller must deliver goods which are of the quantity, quality and description required by the contract. Under Article 50 of the CISG, if the goods do not conform with the contract whether or not the price has already been paid, the buyer may reduce the price in the same proportion as the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time. Since [Seller] in concreto delivered the goods in a quantity smaller than the one required by the contract, and failed to deliver the lacking quantity afterwards, [Buyer] is entitled pursuant to Article 50 of the Vienna Convention, to request the proportionate part of the contracted price. [Buyer] and [Seller] contracted for the sale of frozen plums for the purchase price of DEM 0.65 (65/100 German marks) per kilogram of these goods. For 10,000 kg of this product [Buyer] paid to [Seller] in advance the amount of DEM 6,500.-, which leads to the conclusion that [Buyer] is entitled to compensation of that part of the contracted price it had paid. As of 1 January 2001 the German mark ceased to be used as currency in Germany and the euro was introduced instead. The conversion of all of the debts and claims from German marks into euros was to be done according to the fixed exchange rate of 1.95583 German marks for one euro, as determined by the European Central Bank. Therefore, when converted into the newly introduced currency, the [Buyer]'s request for payment of DEM 6,500.- corresponds to the amount of EUR 3,323.40. In view of this, sole arbitrator decided to order to [Seller] to pay to [Buyer] the amount of EUR 3,323.40 as the reimbursement of the purchase price for the non-delivered goods.

Article 78 of the CISG provides that, 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. Pursuant to this provision, sole arbitrator ordered to [Seller] to pay to [Buyer] the interest for the amount of EUR 3,323.40, due from the 8 August 2005, i.e. the day of the submission of the claim, until final payment. Since it was established during the course of the proceedings, pursuant to the letter of company Z of 21 July 2005 and the witness statements of R and S, that [Buyer] fixed an additional deadline to [Seller] for delivering the missing amount of 10 tons of frozen plums, sole arbitrator refused the [Buyer]'s request for payment of the interest for the amount of 3,323.40 from 1 September 2001 until 7 August 2005. It was only when it submitted its claim to the Foreign Trade Court of Arbitration that [Buyer] made [Seller] known of its decision to terminate the agreement on the additional delivery. Therefore, it is only from that moment that [Seller] is to be regarded as in default regarding the payment of EUR 3,323.40. [Buyer] is thus entitled to the default rate from the day the claim was submitted. For this reason, the third paragraph of the operative clauses of this Award contains the decision of sole arbitrator to refuse [Buyer]'s claim for interest for the aforementioned amount from 1 September 2001 until 7 August 2005.

The Vienna Convention binds the party in default to pay interest to the other party to the contract. It does not, however, set the interest rate. Therefore, sole arbitrator determined the interest rate on the basis of the legislation in effect in the Republic of Serbia, as the Serbian law represents the applicable substantial law pursuant to the Law on Conflict of Laws with Regulations of Other Countries ("Official Gazette of the Socialist Federal Republic of Yugoslavia" number 43/82 and 72/82, "Official Gazette of the Socialist Federal Republic of Yugoslavia" number 46/96 and "Official Gazette of the Republic of Serbia" number 46/06). Namely, Article 20 of the aforementioned Law contains a provision according to which the contracts for sale of nobilities shall be governed by the law of the place in which the seller had its place of business at the time of the receipt of the offer, unless the parties had agreed otherwise or the particular circumstances of the case indicate that a different law should be applied. In the course of proceedings it was established that the contract concluded between [Buyer] and [Seller] contained no agreement on the applicable law in case of a dispute. Moreover, it was determined that no particular circumstance indicated the application of any other laws. Bearing in mind the abovementioned, and [Seller] being a commercial entity with its place of business in the Republic of Serbia, the sole arbitrator decided that the applicable law for determining the rate of the domiciliary interest is the law of the Republic of Serbia.

In the Republic of Serbia the piece of legislation relevant for this matter is the Law on the Default Interest Rate ("Official Gazette of the Federal Republic of Yugoslavia" number 9/01). Article 1 of this Law provides that, if the debitor is in arrears regarding its pecuniary obligations, it is obliged to pay the statutory interest for the sum owed until final payment, at the rate set by the Law. Article 2 determines that the statutory interest rate consists of (1) the monthly rate of rise in retail prices and (2) the fixed rate of 0.5% per month. The debt thus increased by the statutory rate, is calculated by multiplying the fixed rate of 0.5% by the sum of the main debt increased by the monthly rise in retail prices in accordance with the conform method. Sole arbitrator also considered that the foremost intention of the legislator by providing the statutory rate, was to protect creditors from the Dinar-denominated claims, and that this was the primary motif for the legislator to introduce under Article 2 of the Law on the Default Interest Rate, the additional criterion of the monthly rate of the rise in retail prices, in order to protect the debitors' claims denominated in the national currency from devaluation- which would occur as a consequence of a possible depreciation of the national currency. In view of the fact that [Buyer] was the creditor of the claim denominated in a solid currency, in concreto in euro, sole arbitrator found that it was entitled to no more than the fixed monthly rate of 0.5%. This interpretation of the Law on the Default Interest Rate complies, beyond any doubt, with the core of the Law in question which under Article 3 provides that, in the case of absence of the rise in retail prices, the default interest is to be calculated solely by implementing the fixed monthly rate of 0.5%, in accordance, nevertheless, with the conform method.

On the basis of the fax of the company Z sent to [Buyer] on 4 February 2002, the letter of the company Z sent to [Buyer] on 21 July 2005 and the witness statements of R and S, it was established that the frozen plums delivered in one of the trucks to the end-buyer in Israel, were not in conformity with the contract, since impurities were found in the delivered goods. It was also established that the parties to the dispute had agreed for the sorting and repackaging of the controversial goods to be undertaken by the end-buyer at the expense of [Seller] at the price of US$50.- per ton. Considering [Buyer]'s submission that in the disputed delivery there was 19 tons of inadequate goods, [Seller] owes to [Buyer] US$950.-, the amount which constitutes the compensation for the sorting and the repackaging of 19 tons of goods at the price of US$50.- per ton. The initial agreement between the parties provided that this sum would be compensated through new deliveries made by [Seller] to [Buyer]. Since [Seller] failed to comply with this agreement until the submission of the claim and remained passive until the conclusion of the argument, sole arbitrator ordered to [Seller] to pay to [Buyer] the compensation for this damage in the amount of US$950. [Buyer]'s request for compensation of the damages in the amount that exceeded US$950 was refused. Claiming compensation for damages caused by sorting and packaging of the goods, [Buyer] requested the payment of US$1,500 i.e. US$ 550 more than what the actual damage amounted to. [Buyer]'s claim was therefore partially refused.

[Buyer] is entitled to the interest for the sum of US$950 due as of 8 August 2005 until final payment. [Buyer]'s claim for the interest for the aforementioned amount already since 1 September 2001 was refused for the same reasons which led the sole arbitrator to decide on the [Buyer]'s claim for payment of the amount of EUR 3,323.40. When rendering the aforementioned decisions, sole arbitrator deemed inappropriate to increase the fixed monthly interest rate by the monthly rate of rise in retail prices.

In its Statement of Claim, [Buyer] requested the Tribunal to order [Seller] to pay the total amount of EUR 13,865.00. A part of this claim is granted by the first paragraph of this Award according to which [Buyer]'s claim shall be granted in the amount of EUR 3,323.40 for the reimbursement of the purchase price of the non-delivered goods. [Buyer] also requested the payment of EUR 10,541.40 for the alleged poor quality of the plums and the raspberries delivered during the course of the year 2001, pursuant to the three abovementioned sales contracts concluded between [Buyer] and [Seller] in Belgrade on 3 July 2001 and on the 10 August 2001. Namely, under Article 35 of the CISG, the seller must deliver goods which are of the quantity, quality and description required by the contract. Article 38 of the CISG provides that the buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances, and the Article 39 stipulates that the buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it. Finally, Article 46 of the CISG provides that, if the goods do not conform with the contract, the buyer may require delivery of substitute goods only if the lack of conformity constitutes a fundamental breach of contract and a request for substitute goods is made either in conjunction with notice given under Article 39 or within a reasonable time thereafter. In the proceedings conducted by the Tribunal, [Buyer] affirmed that [Seller] delivered to [Buyer] raspberries which did not conform with the contracted quality, allegedly causing [Buyer] to incur damages in the amount of DEM 19,000. Moreover, [Buyer] sumbitted that part of the delivered plums was useless, causing [Buyer] to incur further damages in the amount of DEM 3,225. During the course of the arbitral proceedings, [Seller] rejected [Buyer]'s claims, particularly wth respect to the damages incurred for the inadequately delivered goods. In view of the evidence gathered during the course of the proceedings, it was not possible to determine with certainty whether the deliveries that lacked conformity caused [Buyer] to incur any damages whatsoever, irrespective of their amount. In particular, the difficulties arose while determining whether the lack of conformity of goods in concreto was such that it constituted a fundemantal breach of contract referred to under Article 46 of the CISG, and whether it entitled [Buyer] to act pursuant to Article 39 of the CISG and require delivery of substitute goods. In addition to this, it proved impossible for the Tribunal to establish with certainty whether a request for substitute goods was made by [Buyer] in conjunction with its notice specifying the nature of the lack of conformity (Articles 39 and 46 of the CISG). Considering the aforesaid, sole arbitrator assessed as potential evidence the fax which company Z sent to [Buyer] on 2 October 2001, the expert report on the delivered goods drafted by examiner E on 12 February 2002 and the witness statements of R and S, and concluded that these pieces of evidence did not provide sufficient basis for the [Buyer]'s claim for compensation of damage in the amount of EUR 10.542,6. On 2 October 2001 the company Z sent a fax pointing out the unsatisfactory quality of the delivered raspberries and requiring a better quality of the subsequent delivery. However, the fax message did not indicate that any claim would be submitted in regard to the delivery in question. The expert report drafted by examiner E indicates certain characteristics of the goods that would probably fail to conform to the top-class quality that was contractually agreed upon between [Buyer] and [Seller]. Nonetheless, in the conclusion of the expert report it is stated that the truck carrying the goods was to be unloaded and that the goods were approved. In view of the aforesaid, this document also fails to provide sufficient basis for establishing that [Buyer] informed [Seller] about the lack of conformity of the delivered goods, or that [Buyer] requested substitute goods to be delivered. It was also impossible to draw a conclusion from the statements of R and S on whether [Buyer] required from [Seller] to deliver substitute goods in the amounts claimed in the Statement of Claim, namely the raspberries worth DEM 19,000 and the plums worth DEM 2,225. Witness S recalled that certain complaints were made, but only those regarding the presence of impurities in the goods, which is why [Buyer] undertook the sorting and repackaging of the goods. Additionally, witness S recalled that a certain quantity of plums remained undelivered. However, he had no recollection regarding any other complaints regarding the quality of the plums, and although he did remember that certain complaints concerning the quality of the delivered raspberries were made, he does not recall any agreement stipulating the manner in which these complaints should be handled. Also, witness R remembers that [Buyer] did not receive the entire quantity of the plums contracted and paid for. In addition to this, witness R recalls that repackaging of goods was discussed. The witness R also remembers certain objections regarding the quality of the goods, but he stated that, at the time when he was working as general manager, he was not involved in resolving problems of that nature. Considering the abovementioned and pursuant to Article 223 of the Serbian Law on Civil Procedure, sole arbitrator found that [Buyer] failed to prove that it had incurred damages in the amount of EUR 10,541.60. Sole arbitrator, thus, made the decision as stated in the beginning of this Award. Sole arbitrator gave particular attention to the claim for damages submitted by company Z against [Buyer], and concluded that this piece of evidence, too, fails to provide the Tribunal with sufficient grounds to grant [Buyer]'s claim in the amount of EUR 10,541.60.

During the course of the proceedings [Seller] raised the objection that [Buyer] was precluded from raising any claims, since the limitation period had expired in the case at hand. Sole arbitrator found that this objection is unfounded. When stating the grounds for its objection, [Seller] referred to the Serbian Law on Contracts and Torts and the Convention on the Limitation Period in the International Sale of Goods. Sole arbitrator found that the Law on Contracts and Torts is not applicable in the case at hand and that the Convention on the Limitation Period in the International Sale of Goods adopted in New York on 17th June 1974, published in the "Official Gazette of the Socialist Federal Republic of Yugoslavia", Appendix "International contracts and other agreements" number 5/78 (hereinafter the Limitation Convention) should be applied. The Limitation Convention applies if, at the time of the conclusion of the contract, the places of business of the parties to a contract for international sale of goods are in Contracting States (Article 3). Since the Limitation Convention was ratified by Yugoslavia on 27 November 1978, and by the United States of America on 5 May 1994. Bearing in mind that, at the time of conclusion of the contract, [Seller] and [Buyer] had their places of business in the respective Contracting States, the Limitation Convention is applicable in the case at hand. Article 8 of the Limitation Convention provides that the limitation period shall be four years. In the case at hand [Buyer]'s claims stem from the two contracts for sale of frozen plums, according to which [Seller] was obliged to deliver to [Buyer] the contracted goods between 15 September 2001 and 1 October 2001 (for the goods to be delivered pursuant to the contract of 3 July 2001), and between 15 August 2001 and 1 September 2001 (for the goods to be delivered pursuant to the contract of 10 August 2001). Since [Buyer] submitted its claim on 8 August 2005, the arbitral proceedings were clearly instigated by [Buyer] prior to the end of the four year limitation period. Consequently, the sole arbitrator rejected [Seller]'s objection.

[Buyer] also requested compensation of costs of the arbitral proceedings. The sum claimed on this account was presented in the brief submitted by [Buyer] on 12 October 2006. [Buyer] requested compensation for the registration fee in the amount of US$1,500, the costs of its legal representation in the amount of RSD 30,000.00, the costs of translation of documents in the amount of RSD 6,000.00 and the travel expenses paid for the witnesses in the amount of RSD 1,600.00. In total, [Buyer] requested is the sum of RSD 37,600.00. When deciding on the claim for reimbursement of the costs of proceedings, pursuant to Articles 149 and 150 of the Serbian Law on Civil Procedure, sole arbitrator granted [Buyer] the sum of US$100 for the registration fee [Buyer] had previously paid upon registering its request with the Secretariat of the Court of Arbitration, and the additional fee of US$450 for a dispute of value up to US$5,000.00, since the value of [Buyer]'s claim granted by the Arbitral Tribunal falls within that range. [Buyer] is also granted compensation for the costs of the translation of documents in the amount of RSD 6,000.00, as well as compensation for the travel expenses of witnesses R and S.

The sole arbitrator refused [Buyer]'s claim for compensation of the amount that exceeds US$550, since [Buyer] failed to prove that the value of its claim is superior to US$5,000. Moreover, sole arbitrator did not grant [Buyer]'s claim for compensation of the costs of legal representation in the amount of RSD 30,000.00, since [Buyer] was not represented by active attorneys-at-law, so it is not entitled to compensation of such expenses.

Pursuant to Article 64 of the Law on Arbitration ("Official Gazette of the Republic of Serbia" number 46/06) and pursuant to Article 54(1) of the Rules of Arbitration, this Arbitral Award is final and is not subject to appeal. It has the force of a final court judgment of a court of the Republic of Serbia.

Belgrade, 5 January 2007  
 
Minutes taken by Mrs. O
     [Signed]
  Sole arbitrator A
[Signed]     


FOOTNOTES

* All translations should be verified by cross-checking against the original text.

** Sonja Gitaric is a student at the University of Belgrade Faculty of Law. Milena Djordjevic, LL.M (U. Pittsburgh) and Marko Jovanovic are lecturers at University of Belgrade Faculty of Law.

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