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CISG CASE PRESENTATION

Serbia 18 June 2008 Foreign Trade Court attached to the Serbian Chamber of Commerce (One-day old female chicken case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/080618sb.html]

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

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Case identification

DATE OF DECISION: 20080618 (18 June 2008)

JURISDICTION: Arbitration ; Serbia

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: T -16/07

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Serbia (Claimant)

BUYER'S COUNTRY: FYR Macedonia (Respondent)

GOODS INVOLVED: One-day old female chicken


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 53 ; 54 ; 59 ; 78

Classification of issues using UNCITRAL classification code numbers:

53A [Obligation to pay price of goods];

54A [Obligation to pay includes enabling steps];

59A [Payment due at time fixed or determinable by contract or Convention];

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

Descriptors: Payment of price ; 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 (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, 17, 52

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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 18 June 2008 [Proceedings No. T-16/07]

Translation [*] by Ivan Cavdarevic

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

Claimant [Seller] (Serbia) v. Respondent [Buyer] (FYR Macedonia)

The sole arbitrator A, in a dispute before the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce in Belgrade, concerning the claim of [Seller] against [Buyer] for payment of the principal debt in the amount of EUR 13,185.00, upon conducting the arbitration proceedings and hearings on 21 April 2008, makes the following:

AWARD

1.  [Seller]'s claim is granted and [Buyer] is ordered to pay to [Seller] the amount of EUR 13,185.00 for the principal debt within 15 days from the day of receipt of the Award, subject to court enforcement in case of non-payment;
2.  [Seller]'s claim for interest is granted and [Buyer] is ordered to pay to [Seller] the interest at the annual rate of 3.25% on the amount of EUR 13,185.00 starting from 23 October 2007 until the final payment, within 15 days from the day of reception of the Award, subject to court enforcement in case of non-payment;
3.  [Seller]'s claim for reimbursement of costs of arbitral proceedings is granted, and [Buyer] is ordered to pay to [Seller] the costs of arbitral proceedings in total amount of EUR 1,386 within 15 days from the day of the reception of the Award, subject to court enforcement.

STATEMENT OF REASONS

1. Jurisdiction of the Foreign Trade Court of Arbitration attached to Serbian Chamber of Commerce and the appointment of the Sole Arbitrator

The Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce in Belgrade has received [Seller]'s claim with attachments on 11 December 2007. The Jurisdiction of this Arbitration was agreed upon between the parties in an arbitration agreement in the form of the arbitration clause contained in Art. 10 of the Contract concluded on 12 September 2007. Since the Arbitration had received the Statement of Claim on 11 December 2007, the meeting of the Board of the Arbitration was held on 13 February 2008. The Board examined all documents and papers which [Seller] had submitted along with its Statement of Claim and established that the arbitration agreement exists in the Contract for sale concluded between [Seller] and [Buyer] on 12 September 2007. The said arbitration agreement unambiguously points to the jurisdiction of Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce in Belgrade.

Arbitration has in due time served the claim with attachments to [Buyer], as well as the Rules of the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce (hereinafter: the Rules) and the list of arbitrators. In its act of 26 December 2007, the Arbitration has also informed [Buyer] that in its Statement of Claim of 11 December 2007 [Seller] had suggested […] for a sole arbitrator, and invited [Buyer] to state its position regarding this suggestion. [Buyer] was left a 30-day time limit for submitting a statement of defense and the position with respect to the proposal for appointment of the sole arbitrator. [Buyer] dully received the aforementioned documents, which is confirmed by a return receipt enclosed in the case file.

[Buyer] failed to submit a statement of defense and the declaration with respect to the appointment of the arbitrator. [Buyer] has also failed to address the Arbitration in any other way in given time.

In accordance with Articles 20 and 21(3) of the Rules, the president of the Foreign Trade Court of Arbitration has, considering that the value of the claim in the case at hand is less than US $ 70,000 and that the parties failed to reach an agreement with respect to the appointment of arbitrator in due time, appointed A as sole arbitrator in a conclusion dated 13 February 2008.

The decision on the appointment of the sole arbitrator was delivered to A, who has accepted his duty since he considers himself independent and neutral in relation to parties in dispute.

The Secretariat has delivered the decision on the appointment of the sole arbitrator along with the statement of independence to the parties in due time. The Parties duly received the abovementioned documents, as established from return receipt which is enclosed in the case file. Since neither of the parties had raised an objection with respect to the said conclusion, the sole arbitrator was appointed in accordance with Article 25(3) of the Rules.

During the entire course of proceedings the sole arbitrator was ex officio valuating whether the Arbitration was competent for hearing the case at hand, and he estimated that the case was completely arbitrable.

On the basis of all existing and established facts and pursuant to the Rules and the applicable law, it was determined that the Foreign Trade Court of Arbitration was competent to settle the dispute at hand and that the sole arbitrator was properly appointed.

2. The course of proceedings

2.1.1 Initiation of proceedings

Arbitration proceedings began on 11 December 2008, when the Foreign Trade Court of Arbitration received [Seller]'s Statement of Claim with attachments.

On 25 December 2008, the Arbitration informed [Buyer] that the proceedings were instituted against it and, in accordance with Article 30(7) of the Rules, served it with the Statement of Claim and the attachments thereto. [Buyer] was instructed to submit an answer to the Statement of Claim and to propose the evidence for its submissions. [Buyer] was given 30 days from the day of reception to submit an answer to the Statement of Claim to the Arbitration. [Buyer] dully received the abovementioned documents (which is established from return receipt enclosed in the case file), but it has not sent any brief or in any other way addressed the Arbitration.

In accordance with the Rules and the Tariff, the Arbitration has acknowledged the receipt of the Statement of Claim on 11 December 2007 and, pursuant to Article 57(2), instructed [Seller] to pay the registration fee in the amount of RSD 10,820.00. [Seller] complied with this obligation on 12 December 2007 and provided a proof thereof. The Arbitration acknowledged the receipt of the payment and, at the same time, in accordance with Article 57(1) of the Rules, instructed [Seller] to make an advance payment of the costs of proceedings in the amount of RSD 75,227.00. [Seller] complied with this obligation on 25 December 2007 and provided proof thereof.

2.1.2 Scheduling and the course of the hearing

Since the jurisdiction of the Arbitration was established and the arbitrator was appointed as described under the point 1 of this Award, none of the parties objected, and [Buyer] failed to submit an answer to the Statement of Claim in due time, the sole arbitrator scheduled a hearing for 21 April 2008. The parties were dully summoned to the hearing.

At the scheduled hearing, the attorney […] appeared on behalf of [Seller]. [Buyer] did not appear at the hearing nor did it send its legal representative.

2.2.1. Claimant's ground

In the Statement of Claim as well as at the hearing of 21 April 2008 [Seller] submitted that it had concluded the Contract with [Buyer] on 12 September 2007. Pursuant to the Contract, [Seller] delivered one-day old female chicken ("HISSEN BROWN" and "HISSEN WHITE") from its selling program, in quantity, sort and value specified in the documents and invoices attached to the Statement of Claim.

On the basis of the fixed price for the entire delivery, [Seller] determined the value of its claim for main debt in the amount of EUR 13,185.00. [Seller] produced the appropriate evidence for this submission.

[Seller] also requested the interest on the main debt, as well as the reimbursement of the costs of arbitration proceedings, according to scale of costs, which it had enclosed at the hearing. At the same time, [Seller] requested the payment to be made within 15 days, subject to court enforcement.

At the hearing, counsel for [Seller] reaffirmed the submissions made in the Statement of Claim of 11 December 2007. Counsel for [Seller] further defined the Statement of Claim in the part dealing with the quantity of delivered goods, sort of goods as well as period and interest rate.

When asked by the sole arbitrator whether there were conditions for alternative dispute resolution, counsel for [Seller] declared that those conditions did not exist.

2.2.2. Respondent's position

[Buyer] remained passive until the hearing, it failed to submit an answer to the Statement of Claim. Furthermore, [Buyer] failed to address the Arbitration in any way until the end of proceedings. It did not appear at the hearing (which was scheduled and held) even though it was dully summoned, and failed to justify its absence. The Arbitration has duly delivered a copy of a record from the hearing (which was held on 21 April 2008) to [Buyer]. [Buyer] was given 15 days to submit remarks with respect to the facts stated at the hearing, but it remained passive and failed to address the Arbitration in any other way until the end of the proceedings.

3. Material and procedural law applied in the proceedings

The Jurisdiction of this Arbitration was established in the arbitration agreement concluded between the parties on 12 September 2007. Apart from Article 7(2) of the Contract (which provides that the seller has the right on interest for overdue payments, at the interest rate applicable in FYR Macedonia), the Contract does not specify applicable substantive and procedural law.

Therefore, the arbitrator had to determine the applicable substantive and procedural law in accordance with the Rules.

Considering that this is a dispute from a contract for international sale of goods and that the parties have their registered offices in countries which had acceded to United Nations Convention on Contracts for the International Sale of Goods (CISG), the arbitrator established that the conditions for the application of this Convention in the case at hand are met (Article 1(1) CISG). Since the respective countries in which [Seller] and [Buyer] have their registered offices are signatories of the CISG, the parties could have excluded or restricted the application of the CISG (opting out). In the case at hand, the parties failed to exercise this right, so it should be presumed that the CISG is applicable.

The arbitrator has established that the additional criterion for indirect application of the CISG is also satisfied, because the provision of the Law on Resolution of Conflicts of Laws with Regulations of other Countries, which is in force in the respective countries where the parties have their registered offices, states that the applicable law for purchase agreements concerning the movables is the law of the country where seller had his registered office at the moment of acceptance of the offer. In the case at hand, [Seller] has its registered office in the Republic of Serbia, which has ratified the CISG, so the CISG represents a part of Serbian legislation in force. Therefore, the CISG should be deemed applicable in the case at hand.

With respect to the issue of interest, the arbitrator gave consideration to the principle of party autonomy. In their Contract the parties had provided that "…the seller is entitled to interest for overdue payments, at the interest rate applicable in FYR Macedonia". Consequently, the Macedonian Law on Default Interest Rate ("Official Gazette of the Republic of Macedonia" 65/92, 70/93) is the applicable source of law.

Alongside the abovementioned applicable substantive law, the arbitrator has determined the necessity for additional application of trade usages, as well international arbitral jurisprudence.

Additionally, the parties failed to designate the applicable procedural law in case of a dispute. In the absence of agreement on arbitration proceedings, the arbitrator has firstly resorted to the Rules. Article 45 thereof states that the proceedings before arbitration are governed by the Rules. If the Rules do not contain provision which regulates certain issue, the arbitrator can establish the appropriate rule, in accordance with the Serbian Law on Arbitration. The application of the Rules does not only stem from Article 45, but it is also mandatory pursuant to Article IV(1)(a) of European Convention on International Commercial Arbitration (Geneva, 1961), as well as Article V(1)(d) of Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10th of June 1958).

3.1 Legal and factual grounds for the award

The fundamental issue in the dispute between [Seller] and [Buyer], about which the arbitrator had to decide, was whether [Seller] is entitled to claim from [Buyer]:

a) the amount of EUR 13,185.00 for the main debt
b) the interest on the main debt
c) reimbursement of costs of arbitration proceedings.

4.1 The issue of the main debt

In its Statement of Claim [Seller] contends that [Buyer] owes him the amount of EUR 13,185.00 as the main debt for delivered goods.

The legal ground of [Seller]'s claim is the Contract concluded with [Buyer] on 12 September 2007, as well as documents of delivery of goods (invoices, customs documents) and the rules of applicable law. From factual standpoint, [Seller] stated that it had duly and in accordance with the Contract fulfilled its obligation to deliver the goods while [Buyer] had neither paid the purchase price for the received goods nor tried to argue this submission in any way. On the other hand, [Buyer]'s obligation to pay the price within the time set by the Contract is undisputable, since the price represents the agreed pecuniary equivalent for the value of the goods received.

That obligation is also provided by the CISG (Articles 53, 54 and 59) which is applicable law in this dispute.

According to Article 3 of the Contract, is the parties agreed that [Seller] would deliver goods in two parts, and according to Article 6, [Buyer] is obliged to pay for the received goods in three installments in the following order: the first installment was to be paid within 25 days limit from the day of reception of the goods, the second installment within 55 days from reception and the third installment within 85 days from reception. Article 7 of the Contract provides that, in case [Buyer] does not pay the first or the second installment as agreed in Article 6, […] the whole amount of debt starting from the day of the delivery of goods will immediately become due. Since [Buyer] failed to perform its obligation to pay the first installment in the amount of EUR 4,395.00 within 25 days from the day of reception of little chicken (i.e. until 17 November 2007), [Seller], in a letter of 21 November 2007, notified and warned [Buyer] that its debt became due, as provided by Article 7(2) of the Contract. At the same time, [Seller] requested from [Buyer] to pay the amount of the whole debt (EUR 13,185.00) within 8 days from the day of reception of the said letter. Since the [Buyer] failed to reply to [Seller]'s letter and did not comply with its obligation to pay the price, [Seller] submitted a Statement of Claim on 11December 2007 and requested the Arbitration to order [Buyer] to pay EUR 13,185.00 for the main debt with interest starting from 19 October 2007 (the day of reception of little chicken), within 15days, subject to court enforcement.

[Seller] has proposed evidence for its submissions that it duly performed its contractual obligations, namely that the goods were delivered in the agreed time, quality and quantity. Additionally, [Seller] suggested the evidence that the delivery and the acceptance of the goods were performed in accordance with the provisions of the Contract. On the other hand, [Buyer] neither had any objections with respect to the amount claimed, the quality or other features of the goods, nor did it have any objections with respect to the time and the way of delivery or any other objections whatsoever.

In Article 3 of the Contract the parties agreed that the total quantity of the goods would be delivered in two parts. In accordance with the Contract, [Buyer] received the delivery in two parts:

The first part was delivered on 19 October 2007, at 3 pm (Art. 3(1)(2) of the Contract), and [Buyer] received 10.585 little chicken, which is established from duly produced documents (cited bellow), enclosed to the case file:

a) "Notice of reception of little chicken" completed on 19 October 2007, at 3 pm;
b) Invoice from 18 October 2007, no. 08/IZ/07;
c) Bill of lading no. 69/2007 from 18 October 2007;
d) Customs documents from 18 October 2007;

The second part was delivered on 23 October 2007 as agreed(Art. 3(1)( 2) of the Contract), and [Buyer] received 10.500 little chicken, which is established from duly produced documents (cited bellow), enclosed to the case file:

a) "Notice of reception of little chicken" completed on 23 October 2007, at 1.30 pm;
b) Invoice from 18 October 2007, no. 09/IZ/07;
c) Bill of lading no. 70/2007 from 22 October 2007;
d) Customs documents from 22 October 2007.

Sole arbitrator was presented with relevant evidence that Claimant had submitted to the Arbitration and produced at the hearing.

The arbitrator applied Articles 53, 54 and 59 of the CISG on established facts. According to these provisions, buyer's main obligation is to pay the price and to take delivery of goods in the way provided in the contract and in the Convention. Buyer's obligation to pay the price implies both assuming the measures and completing the formalities provided in the contract or the rules of applicable law in order to enable the payment. The buyer is obliged to pay the price in the way and within the time provided in contract.

In the Contract of 12 September 2007, is the parties agreed that the payment would be made by bank transfer in three installments in the following order: the first installment within 25 days from the day of reception of little chicken, the second installment within 55 days from reception of little chicken and the third installment within 85 days from reception of little chicken (Art. 6 of the Contract). However, in Article 7 of the Contract, it is provided that, in case [Buyer] does not pay the first or the second installment within the agreed time, the whole debt would immediately become due, i.e. on the day of delivery of goods - 19 October 2007 for the first part of delivery or on 23 October 2007, when the delivery was completed and [Buyer] received the second part of the goods. Since [Buyer] failed to perform its contractual obligation and pay the price, [Seller] sent a letter dated 21 November 2007 in which it warned and notified [Buyer] that its debt became due (according to Art.7(2) of the Contract) and requested the payment of the whole amount without delay. Considering that [Buyer] failed to answer to [Seller] or comply with its obligation to pay the price, [Seller] initiated the arbitral proceedings.

According to the Contract, [Buyer] was obliged to pay for the duly received goods in the way and within the time provided in the Contract. Since it is undisputedly established that [Buyer] failed to comply with this obligation, and [Seller] refused the initiative for alternative dispute resolution with [Buyer], the sole arbitrator granted [Seller]'s claim for the main debt and ordered [buyer] to pay the main debt to [Seller], as stated in the point 1 of the operative part of this Award.

4.2 The issue of interest

On the basis of the documents and evidence presented with the Statement of Claim, which [Buyer] has not challenged, the sole arbitrator established that [Seller] delivered goods in two successive part. In each of the invoices which followed goods, [Seller] indicated the price of the goods in euros, as required by the Contract concluded with [Buyer].

Article 7(2) of the Contract provides that "in case [Buyer] does not pay the first or the second installment, [Seller] is entitled to claim interest on overdue payments, at the interest rate applicable in FYR Macedonia, from the day of reception of little chicken until the day on which the payment has been transferred to [Seller]'s account". [Buyer] remained completely passive even after the warning in written form which [Seller] had directed to it on 21 November 2007. In that letter, [Seller] warned [Buyer] about the consequences that might arise from the application of Article 7 of the Contract, including […], the time limits for payment of the debt and the right to claim interest. [Buyer] failed to comply with its obligation in the additional time period of 8 days that [Seller] fixed for the payment of the debt. Consequently, [Seller] initiated arbitral proceedings and requested [Buyer] to pay the main debt with interest on overdue payments starting from 19 October 2007, in accordance with Article 7(2) of the Contract. At the hearing held on 21 April 2008, counsel for [Seller] modified the claim for interest by changing the day on which the obligation to pay the price started to run from 19 October 2007 to 23 October 2007, the day when the second installment of little chicken i.e. the aggregate amount of agreed goods was delivered (in accordance with Art.3 of the Contract). Also, [Seller] requested the interest at the annual rate of 3.25 %, which, as the domiciled interest, corresponded to the average interest rate in relevant period for fixed financial deposits in euros with the European Central Bank.

The Arbitration has delivered the minutes of the hearing held on 21 April 2008 to [Buyer]. [Buyer] duly received the minutes, which was established by receipt of delivery enclosed to the case file. [Buyer] failed to make any submissions with respect to the facts presented at the hearing. Furthermore, [Buyer] did not object to the modification of the starting day for calculation of interest which Claimant has defined on hearing (23 October 2007) and which was, in comparison to the starting day indicated in the Statement of Claim (19 October 2007), more favorable for [Buyer]. Finally, [Buyer] did not object to interest rate of 3.25% par annum, which was also more favorable for it in comparison to the interest rate provided in the relevant provision of the Contract, i.e. the interest rate on overdue payments applicable in FYR Macedonia.

In FYR Macedonia the issues of the interest rate and the calculation of interest on overdue payments are regulated by the Law on Default Interest Rate. According to that Law, the interest on overdue payments is calculated on annual basis and corresponds to the discount rate of the National Bank of FYR Macedonia, increased for a specific percentage (Art.1). Since the discount rate of the National Bank of FYR Macedonia in the period starting from 23 October 2007, was on the annual level of 6.5%, it is clear that the annual interest rate of 3.25% - the rate which [Seller] requested at the hearing, is lower than the interest rate for overdue payments applicable in FYR Macedonia. In considering this issue, the arbitrator limited its attention to the fact that the application of the interest rate provided for in the Contract would be less favorable for [Buyer] and did not examine other details of implementation of the interest on overdue payments.

Considering that [Buyer] failed to pay the price of the delivered goods indicated in the invoices, the arbitrator applied Article 7 of the Contract, as well as Article 78 of the CISG, according to which, "If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it…". The arbitrator ordered [Buyer] to pay the interest for the main debt of EUR 13,185.00, which represents the basis for calculating the interest.

The implementation of annual interest rate of 3.25%, which is considered legitimate because of the abovementioned reasons, on the amount of EUR 13,185.00 as the basis for calculation, will represent the sum that [Buyer] owes to [Seller] on the basis of interest for the time period starting from 23 October 2007, as the first day of its calculation, until the final payment to [Seller].

On the basis of the evidence gathered and the circumstances of the case, the sole arbitrator has rendered the decision on the issue of interest as stated in point 2 of the operative part of this Award.

4.3 The issue of costs

In its Statement of Claim [Seller] requested the reimbursement of the costs it incurred with respect these proceedings. Counsel for [Seller] presented the calculation of costs, which is enclosed to the case file, and, on that account, he requested the reimbursement of:

a) registration fee in the amount of RSD 10,820, which corresponds to an equivalent of EUR 136 according to the exchange rate on the day of payment;

b) arbitration fee in the amount of RSD 75,227 which corresponds to an equivalent of EUR 960 according to the exchange rate on the day of payment;

c) costs of preparing the Statement of Claim in the amount of RSD 11,000 which corresponds to an equivalent of EUR 139 according to the exchange rate on the day of rendering of this Award;

d) attendance at the hearing in the amount of RSD 12,000 which corresponds to an equivalent of EUR 151 according to the exchange rate on the day of rendering of this Award.

In the arbitrator's opinion, the costs in the total amount of EUR 1,386, as presented and specified in the calculation presented by [Seller], were reasonable and necessary for [Seller]'s participation in this proceedings.

Since [Buyer]'s claims were fully granted, it is entitled to reimbursement of the total amount of costs it incurred in the proceedings. Because of these reasons, in point 3 of operative part of this Award, sole arbitrator has fully granted [Seller]'s request for reimbursement of costs which it incurred in this proceedings.

5. Final, effect and enforcement of the Award

Pursuant to Article 56 of the Rules of the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce, as well as the Law on Arbitration, this Award has the force of a final decision of a court. It is final and not subject to appeal. By accepting the jurisdiction of this Arbitration, the parties committed themselves to enforce this Award.

Belgrade, 18 June 2008
[signed]


FOOTNOTES

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

** Ivan Cavdarevic 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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