Serbia 28 January 2008 Foreign Trade Court attached to the Serbian Chamber of Commerce (Siemens Telephone Booths case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/080128sb.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: T -15/06
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Hungary (Seller)
BUYER'S COUNTRY: Serbia (Buyer)
GOODS INVOLVED: Siemens Telephone Booths
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
7A33 [Applications of good faith standards]; 8C4 [Interpretation in light of surrounding circumstances - Conduct subsequent to agreement]; 25B [Delivery at the place other than the agreed one is not, as a matter of principle, to be considered a fundamental breach, unless the circumstances indicate otherwise]; 60B1 [Failure to take delivery gives rise to seller’s rights]
7A33 [Applications of good faith standards];
8C4 [Interpretation in light of surrounding circumstances - Conduct subsequent to agreement];
25B [Delivery at the place other than the agreed one is not, as a matter of principle, to be considered a fundamental breach, unless the circumstances indicate otherwise];
60B1 [Failure to take delivery gives rise to seller’s rights]
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
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
Serbian:  Vladimir Pavić, Milena Djordjević, Primena Becke konvencije u arbitraznoj praksi Spoljnotrgovinske arbitraze pri Privrednoj komori Srbije, Pravo i privreda br. 5-8/2008, pp. 589, 590.
English:  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, 30-31Go to Case Table of Contents
Queen Mary Case Translation Programme
Award of 28 January 2008 [Proceedings No. T-15/06]
Translation [*] by Marija Marošan [**]
Edited by Milena Djordjevic, LLM and Marko Jovanovic
Claimant of Hungary v. Respondent of Serbia
Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce in Belgrade and its arbitral panel comprising of……, in a dispute concerning a claim of [Seller] from Hungary against the Respondent [Buyer] from Serbia for payment of the principal debt in the amount of EUR 480,420.00, with interest and compensation for the costs of the proceedings, upon the conducted arbitration proceedings (hearings held on 25 April 2007, 7 June 2007 and 11 October 2007, and in camera meeting of the arbitrators held on 28 May 2008), at a meeting held in camera on 28 January 2008, pursuant to Article 49 of the Rules of the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce, makes the following:
STATEMENT OF REASONS
1. Jurisdiction, applicable substantive law, place, and language of the proceedings
Article 5 of the Import Contract concluded between [Buyer] and [Seller] on 3 February 2006 (hereinafter: Contract) stipulated that the contracting parties will attempt to settle all controversies amicably, and that "the arbitration before the Chamber of Commerce in Belgrade shall have jurisdiction in case of a dispute". Both in the Statement of claim and the Answer to the statement of claim, as well as during the arbitral proceedings, neither of the parties disputed the jurisdiction of the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce.
[Buyer] and [Seller] did not designate the applicable substantive law in their Contract. Also, during the arbitral proceedings, the parties were silent on this issue. Considering these facts, the Arbitral Tribunal decided that the UN Convention on Contracts for the International Sale of Goods from 1980 (hereinafter: Convention) is to be applied.
Since the parties did not suggest any other place for the proceedings, pursuant to the Rules of Foreign Trade Court of Arbitration, the place of the proceedings was the seat of the Court of Arbitration.
Since the parties failed to select the language for the proceedings, pursuant to the Rules of Foreign Trade Court of Arbitration, the language of the proceedings was Serbian.
[Seller] submitted its Statement of Claim on 19 June 2006 (the Statement of Claim was received in the Secretariat on 23 June 2006) submitting that [Buyer] failed to perform the Contract and setting the sum in dispute at EUR 480,420.00 (four hundred eighty thousand four hundred and twenty euros) with the appropriate interest and compensation for the costs of the proceedings. Attached to the Statement of Claim was the Contract concluded with [Buyer] on 3 February 2006, with specification of spare parts, customs documentation, unified customs document, summary declaration and storage certificate issued by company X on 11 February 2006, performance invoice from 14 February 2006 and a notice before submission of the Statement of Claim from 4 April 2006.
During the proceedings, [Seller] submitted four more written submissions: on 25 July 2006, 30 October 2006, 21 December 2007 and 17 October 2007 respectively (dates are indicated according to the date on which they were received at the Secretariat).
[Buyer] responded to the Statement of Claim on 5 December 2006. Additionally, it submitted two more written submissions: on 16 January 2007 and 23 October 2007, respectively (dates are indicated according to the date on which they were received at the Secretariat).
In its submission from 25 July 2006, [Seller] appointed Prof. Dr. A as arbitrator, and, in its Answer to the Statement of claim, Buyer appointed Prof. Dr. B as arbitrator. The party-appointed arbitrators chose Prof. Dr. C as the Chairman of the Tribunal. All the Arbitrators accepted their appointment and gave their statements on independence. Statements were communicated to the parties for objections. The parties did not object.
Arbitral Tribunal held three hearings - on 25 April 2007, 7 June 2007 and 11 October 2007. Both parties attended all the hearings.
Arbitral Tribunal also held two meetings in camera, on 28 May 2007 and 28 January 2008, when the award was made.
Arbitral Tribunal considered and took into account all the submissions, written evidence and other written communication, all the arguments and evidence presented in written communication and at the hearings, as well as all witness statements. Arbitral Tribunal also considered and took into account arguments and evidences that were not explicitly mentioned in this Award.
3. The reasoning with respect to the claim
3.1. The claim
When making the Award, the Arbitral Tribunal first determined that it is undisputed between the parties that the valid Contract was concluded on 3 February 2006 in which [Seller] undertook to deliver 86 telephone booths Siemens TMA/BO and spare parts for them to [Buyer], and [Buyer] undertook to pay 480,420.00 EUR.
[Seller] requested payment of EUR 480,420.00 for the purchase price, interest at the rate set by the European Central Bank for the demand deposits on the amount EUR 240,210.00 starting from 13 February 2006 until the final payment, and on the amount of EUR 240,210.00 starting from 10 May 2006 until the final payment. It also requested the compensation for the costs of the proceedings in the amount of RSD 110,700.00 and USD 10,756.00.
[Buyer] contested the grounds of the claim.
3.2. Reasoning with respect to the grounds of the claim
[Seller] based its claim on the assertion that it performed its contractual obligation and that [Buyer] did not pay the purchase price within the agreed time, although it did not have any objections to the quality and quantity of the delivered goods.
In its submissions and at the hearings, [Buyer] argued that the Statement of Claim does not contain all the necessary elements and that the claim is unfounded.
In the Answer to the Statement of Claim, [Buyer] pointed out that the Statement of Claim was unfounded and suggested that it should be dismissed because it does not contain all the necessary elements. Namely, the Statement of Claim referred to [Buyer]'s name that had been previously changed in the proper legal procedure.
In the case that the Arbitral Tribunal does not dismiss the claim, [Buyer] contests the validity of the grounds for several reasons. Firstly, [Buyer] stated that [Seller] did not prove in any way that it delivered contracted goods to [Buyer] or its carrier. Further, [Buyer] contests that it hired the company Y as its carrier for this business dealing. It also stated that it never hired the companies W and Z, or any other legal or natural entity for performance of any activity with regards to the realization of the Contract. [Buyer] also pointed out that it did not accept goods or receive any written notice from [Seller] that the goods were ready for delivery pursuant to the sale term stipulated in the Contract. It also pointed out that it did not receive any invoice from [Seller] or above mentioned carriers, that it never paid any cost for any kind of service related to the import, and that it did not give order with regards to the import or taking over of the contracted goods. It also pointed out that, except for the Contract, all the documents attached to the Statement of Claim, including the specification of spare parts, lacked its signature. Finally, it stated that the goods were not stored at the Public storage of the Customs Department in Subotica, since the storage of the company Y cannot be considered as a Public Storage.
For all the above-mentioned reasons, [Buyer] requested that the Arbitral Tribunal dismiss the claim as unfounded, and order [Seller] to compensate the costs of the proceedings.
When considering the claim and [Buyer]'s objections, the Arbitral Tribunal primarily examined [Buyer]'s objection that the Statement of Claim does not contain all the necessary elements and that, therefore, it should be dismissed. In this regard, the Arbitral Tribunal determined that the Statement of Claim was dated 22 June 2006, and that the Court of Arbitration received it on 23 June 2006. According to the Decision of the Serbian Business Registers Agency, [Buyer]'s business name was changed on 11 July 2006. This means that the change was made after the submission of the Statement of Claim. Therefore, the Arbitral Tribunal did not accept Buyer's objection that the Statement of Claim does not contain all the necessary elements. [Seller] specified its claim in its submission from 21 December 2006 when it used [Buyer]'s new name. When considering the grounds of the claim, the Arbitral Tribunal started with facts that were undisputed between the parties.
It is undisputed that the parties concluded a valid Contract on 3 February 2006, in which [Seller] undertook to deliver to [Buyer] 86 telephone booths Siemens TMA/BO and spare parts for them, and [Buyer] undertook to pay 480,420.00 EUR. It can be derived from the wording of the Contract (Art. 2, para. 1) that [Seller] undertook to deliver goods EXW Szeged, loaded on a truck as means of transport. In terms of the time of delivery, it was stipulated by para. 3 of Article 2 of the Contract that the more precise time of delivery will be specified later, in writing, by fax.
The parties do not dispute that the time of delivery was not specified afterwards, as well as that the delivery was not performed under the contracted clause EXW Szeged, loaded on a truck as means of transport.
However, it is disputed whether the delivery took place at all, i.e. whether [Buyer] accepted the delivery.
According to [Seller]'s allegations and assertions in the Statement of Claim, other submissions and hearings, instead in Szeged, [Seller] performed the delivery at the border crossing Horgos, in Hungary on 10 February 2006. On the very same day [Buyer] took the delivery at this border crossing through carrier Y, whom it hired for this business. According to [Seller]'s assertions, this carrier stored the goods at the Public storage of the Customs Department in Subotica on 11 February 2006.
Contrary to [Seller]'s assertions, [Buyer] argued in the Answer to the Statement of Claim, other submissions and at the hearings that [Seller] did not prove that it delivered contracted goods to the [Buyer] or its carrier. Further on, [Buyer] contested that it hired the company Y as its carrier in this business dealing. It also stated that it did not hire the companies W and Z, or any other legal or natural entity for performance of any activity with regards to the realization of the Contract. [Buyer] also pointed out that it did not accept goods or receive any written notice from [Seller] that the goods were ready for delivery pursuant to the sale term stipulated in the Contract. It also pointed out that it did not receive any invoice from [Seller] or above mentioned carriers, that it never paid any costs for any kind of service related to the import, and that it did not give order with regards to the import or taking over of the contracted goods. It also stated that, except for the Contract, all the documents attached to the Statement of Claim, including the specification of spare parts, lacked its signature. Finally, it stated that the goods were not stored in the Public storage of the Customs Department in Subotica, since the storage of the company Y does not have that character.
Therefore, it was disputed between the parties whether the delivery of goods was performed at all, considering the contracted time and place of delivery, and in connection to that, whether [Buyer] accepted the goods, by itself or through another company.
Based on the submitted evidence, the Arbitral Tribunal determined that [Seller] did not deliver goods as it was stipulated by the Contract i.e. EXW Szeged, loaded on a truck as means of transport. Also, the Arbitral Tribunal determined that there is no evidence that the parties subsequently, in writing (by fax), specified the time of delivery, as it was required by the Contract.
The disputed issue whether the [Buyer] directly, or indirectly through another company, accepted the goods, could not have been examined only on the basis of the submitted documents and oral statements of the parties. Therefore, on the basis of a joint proposal of the parties, the Arbitral Tribunal produced evidence by hearing the proposed witnesses.
Mr. L, director of the company W from Subotica, stated that he was hired as a carrier by [Seller]. Pursuant to [Seller]'s instructions, he transported goods from the public storage in Szeged to Subotica. However, he did not deliver goods to the carrier Z from Subotica as it was stipulated in the instructions, but to the carrier Y from Subotica. Namely, the company Z refused to take over the goods because of the value of guarantee, so Mr. L acted in accordance with the telephone instruction given by Mr. Dj. who introduced himself as representative of the [Buyer], outlining that his company is the importer and owner of the goods. The telephone call from Mr. Dj. came half an hour after Z's refusal to take over the goods. Based on this telephone instruction, Mr. L delivered goods to company Y and the goods were placed at its storage. Mr. L outlined that he delivered the goods only after the telephone conversation with Mr. A, director of the company Y, who informed him that he knew Mr. Dj and that he accepts for goods to be stored in his storage since he was previously informed of the arrival of goods. However, because of the value of the goods, he asked for a written order. After the witness gave the written order, the goods were placed in the Y's storage. The witness also stated that he was sure that Mr. Dj was [Buyer]'s representative, not just because of the conversation with Mr. A, but also because he contacted company Y a week later and got the information that they were contacted by [Buyer] with regards to the storage of the goods.
Witness Mr. A, director of the company Y from Subotica stated that he knows Mr. Dj, director and owner of [Buyer], for several years. He got the order from Mr. L to take over the goods and store them. He placed the goods in the storage under customs supervision and encumbered his guarantee for the value of the goods. He stated that at the moment of storage he did not have any instructions from [Buyer]. He got the instructions from [Buyer] only later, with regards to the organization of re-export of the goods. These instructions were related only to the re-export of goods, not the takeover from company W. When asked how he usually performed his duty of a carrier in the matters of re-export, he answered that he would normally accept an order from the owner of the stored goods. He stated that he did not have any reason to doubt that the order for re-export was not issued by the owner of the goods because, on the basis of the customs documents, he established that the goods were sent from [Seller] to [Buyer]. He also stated that when he was making the so-called summary customs declaration he marked [Buyer] as the owner of the goods. He also stated that the problems with re-export appeared when the contract for re-export with the Bulgarian company was terminated. Subsequently, new instructions were given by [Buyer] - he was instructed to revoke the request for re-export which was already submitted. Concerning the acceptance of the goods to his storage, the witness stated that he had a meeting with Mr. Dj. and two other people and that Mr. Dj. was interested in exploring the possibility to store his goods which were supposed to arrive to customs inspection. However, during the meeting it was not specified what kind of goods were in question. The witness confirmed that he talked with Mr. L. about the storage of the good in the Y's storage in the morning of 11 February 2006, and that he demanded a written order. Accordingly, he placed the goods into his storage under customs inspection. Finally, the witness stated that he found out from the documents that the owner of the goods was Mr. Dj, i.e. [Buyer].
Based on the witness statements, and other evidence taken, the Arbitral Tribunal established that the company Y got written order from W to store the goods, but also that [Buyer] agreed with that takeover. Before the goods were taken over, such storage was only considered in principle, as a possibility. However, after the goods were stored, this possibility became concrete, confirmed by a tacit consent. Namely, when giving the order for re-export to the company Y, [Buyer] was, without any doubt, familiar with the fact that the goods were in the storage of that company. [Buyer] did not have any objections to the fact that the company Y took over the goods. Even if Mr. L's statement regarding the telephone order from Mr. Dj. to deliver goods to company W was false, the subsequent consent for takeover was nevertheless given. If this telephone order were to be considered credible, that order could be considered as a new instruction from [Buyer] regarding the designation of the company that will take over the goods, after the refusal of the previously designated company Z to do so.
Based on the established facts, the Arbitral Tribunal took the standpoint that the key issue for determining whether the claim is founded is the question whether [Seller] has the right to demand the purchase price i.e whether the delivery of goods was performed.
The Contract stipulated that the goods were to be delivered EXW Szeged, loaded on a truck as the agreed means of transport. It is undisputable that, by delivering the goods to the storage of the company Y in Subotica, [Seller] did not act in accordance with the contractual provision. There is no evidence that the parties subsequently specified the time of delivery. Therefore, the delivery was non-conforming in the sense of the UN Convention on the International Sale of Goods.
Whether the buyer will approve this kind of delivery depends not only on the seriousness of the non-conformity, which should be determined according to the objective criteria, but also based on whether there is a subjective (personal) reason to nevertheless accept the delivery, no matter how serious the violation may be. In any case, the buyer has to manifest his will in a recognizable way and make the seller aware of it. If the buyer does not manifest its will in an explicit way, as it is the case in this dispute, then its conduct is assessed according to the circumstances of the case and factual conduct he undertook.
Based on the evidence taken, the Arbitral Tribunal took the standpoint that [Buyer] approved and indirectly accepted the delivery of the goods. Namely, [Buyer] was enabled to accept the goods both factually and legally. [Seller] made this possible to [Buyer] by putting [Buyer]'s name on the transport and customs documents. In addition to that, [Seller] handed over the goods for transmission to [Buyer], and transported it to Subotica.
Therefore, it can be concluded that the outcome of the contractual relationship was completely in the hands of [Buyer]. [Buyer] could have refused the delivery i.e. it could have considered as if there was no delivery. Even its complete indifference could have been considered as refusal. This could be explained by the fact that it did not know that the place of delivery was changed (although, only the opposite can be concluded from the witness statements). In that case, it could not and would not have to act. This could even be considered as bona fide i.e as if it acted in good faith. However, [Buyer] did not remain passive. [Buyer]'s director, Mr. Dj. had a telephone conversation with the representative of the company Y, he had a telephone conversation and a meeting with the director of the company W, and also acted with regards to two concluded contracts for re-export of goods.
As far as the time factor is concerned, the abovementioned telephone conversations were conducted within a reasonable time period after the delivery of goods, albeit non-conforming, was performed or was in progress. These conversations were related to the subject matter of the contract and [Seller]'s obligation to deliver goods. On the basis of the evidence taken, especially the witness statements, it can be concluded that [Buyer] knew that the goods were delivered and that they were delivered to another place instead of the one contractually agreed. In such state of affairs, [Buyer] was obliged to state within a reasonable time whether it accepts the delivery or not. It did not do so in an unambiguous way nor within reasonable time, but only in the Answer to the Statement of Claim. From that fact and the fact that it was familiar that it was designated as the recipient or importer of the goods in the unified customs document and in storage certificate, it can be concluded that it violated its obligation to take delivery of goods and by failing to refuse to take over the goods, it tacitly accepted the delivery.
During the proceedings it has not been proved that [Buyer] acted in connection with the non-conforming delivery, or that he requested the termination of the Contract. Namely, it did not act at all; it did not inform [Seller] that it would not accept the delivery, nor that it would terminate the Contract. Therefore, these acts cannot be considered as a refusal of delivery in legal terms, but only as a factual refusal of [Buyer] to take over the goods. If the performance of the obligation to deliver the goods were to be judged or conditioned by acceptance of the goods by a buyer, on which [Buyer] is insisting, then the fate of a seller would be in the buyer's hands. If this was the case, by every refusal (regardless of whether there are grounds for such refusal or not) to accept goods, a buyer could prevent a seller from performing its obligation. Precisely for that reason, there is a rule that the performance of obligation to deliver the goods should be assessed according to the acts of the seller, and not the buyer. It is important to note that even a non-conforming delivery was still sufficient to put the goods at [Buyer]'s disposal.
It is undisputed that [Buyer] legally disposed with the stored goods - during the resale - re-export. By doing this, it demonstrated that it knew that the goods were delivered. Therefore, the question is not whether the goods were delivered or not, but what are the consequences of the non-conforming delivery and what is [Seller]'s responsibility for the non-conforming delivery. During the arbitral proceedings [Buyer] has shown that delivery was non-conforming since the place of delivery was changed. Additionally, [Buyer] claimed that the delivered goods were not in conformity with the Contract. However, there is no evidence that [Buyer] objected with regards to those violations of the terms of the contract. What is more, these violations were not qualified as fundamental breach nor did [Buyer] require the termination of the Contract.
3.3. Reasoning with respect to the value of the claim
[Seller] requested the purchase price agreed in the Contract i.e. the amount of 480,420.00 EUR. It also requested the interest at the rate set by the European Central Bank for the demand deposits on the amount 240,210.00 EUR starting from 13 February 2006 until the final payment, and on the amount of 240,210.00 EUR starting from 10 May 2006 until the final payment.
The Arbitral Tribunal established that the claim is founded, and granted the claim with respect to the main debt.
Also, the Arbitral Tribunal granted the claim with regards to the interests, since the domiciliary interest rate was requested. Namely, according to the laws of Republic of Serbia, there are no provisions that would set interest rate for claims in foreign currency. The Law on Default Interest (Official Gazette of Republic of Yugoslavia, No. 2/2001) determines the methodology for calculating the interest rate appropriate for claims in Serbian dinars. However, that methodology takes into account the increase in prices in the Republic of Serbia. Since claims in foreign currency do not depend on that increase, this methodology cannot be applied. Therefore, the Arbitral Tribunal took a standpoint that, in lack of contractual provisions on the interest, only domiciliary interest can be awarded. This is in accordance with the usages in this area of business, and it is also consistent with the practice of the Arbitral Court. Consequently, the domiciliary interest was awarded in this case.
4. Costs of the proceedings
[Seller] requested compensation for the costs of the proceedings in the amount of 11,700.00 RSD, for the costs of representation in the proceedings, and 10,756.00 USD for the registration fee and deposit for the costs of the arbitral proceedings. Considering that [Seller] was successful in this dispute and that mentioned costs were necessary, the Arbitral Tribunal accepted [Seller]'s request for the compensation of the costs.
Based on all presented reasons, the Arbitral Tribunal reached the above stated decision.
5. Finality of the Award
This arbitral award is final, is not subject to appeal and has the force of a final decision of a court.
In Belgrade, 28.01.2008.
* All translations should be verified by cross-checking against the original text.
** Marija Marošan is an associate at Belgrade law firm Baklaja Igric Mujezinovic in cooperation with Clyde & Co. Milena Djordjevic, LL.M (U. Pittsburgh) and Marko Jovanovic are lecturers at University of Belgrade Faculty of Law.Go to Case Table of Contents