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CISG CASE PRESENTATION

Russia 19 December 2008 Arbitration proceeding 14/2008 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/081219r1.html]

Primary source(s) of information for case presentation: Unilex database

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Case identification

DATE OF DECISION: 20081219 (19 December 2008)

JURISDICTION: Arbitration ; Russian Federation

TRIBUNAL: Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 14/2008

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russian Federation (claimant)

BUYER'S COUNTRY: Italy (respondent)

GOODS INVOLVED: [-]


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 53 ; 59 ; 62

Classification of issues using UNCITRAL classification code numbers:

53A [Obligation to pay price of goods (see arts. 54-59)];

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

Descriptors: Assignment ; Damages ; Penalty clauses

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1493&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (Russian): Unavailable

Translation (English): Text presented below; see also Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1493&step=FullText> [excerpt]

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [first draft]

The CISG Translation Network

Russian Federation arbitration proceeding 14/2008 of 19 December 2008

Translation [*] by Madina Lokova [**]

MERITS OF THE CASE:

A claim was filed with the ICAC of the limited liability company based in the Russian Federation (the “[Seller]”) on debt recovery against the company based in Switzerland (the “[Buyer]”).

Pursuant to the claim and annexes thereto, the [Seller], and the [Buyer]’s branch in Italy, entered into the sale and purchase agreement (the “Agreement”). Pursuant to the Agreement, the [Seller] undertook to supply the [Buyer] with the goods manufactured by the [Seller] in installments under the FCA terms (Incoterms 2000) in a quantity, at a price and in terms as provided in specifications to the Agreement. In accordance with the addendums to the Agreement, the parties adjusted the term of payment several times. Pursuant to the latest amendment thereto, the parties agreed on 200-days’ term for payment by wire bank transfer for the consignments to start from the date of supply, i.e., the date of drawing up of customs freight declaration and international delivery slip at the custom.

According to the Agreement, in case of a delay in payment the [Seller] is entitled to charge the penalty at a rate of 0.1 % of the supplied goods’ value per each day of delay.

The [Seller] supplied the [Buyer] with the goods, whereas the [Buyer] did not pay for the consignment which became due and payable. The payment was not made notwithstanding reiterated reminders and written notice by the [Seller].

Based on clause 9 of the Agreement, the [Seller] filed its claim against the [Buyer] with the ICAC for the recovery of [Buyer]’s indebtedness under the Agreement, penalty for payment’s delay, and legal, arbitration and registration costs.

WHEREAS:

      1. To substantiate ICAC’s jurisdiction to hear the case, the [Seller] referred to Clause 9 of the Agreement (arbitration clause). Pursuant to the arbitration clause, in case of parties’ inability to settle their dispute amicably, the dispute shall be submitted to the ICAC for resolution. The [Buyer] did not object to the jurisdiction of ICAC within the term prescribed by the Federal Law of the Russian Federation on international commercial arbitration.

In the course of the hearings, ICAC granted the [Buyer]’s’s motion to be replaced by its successor as provided for under the assignment agreement [a Swiss-based company]. The tribunal found that the dispute concerns a civil law relationship arising out of sale and purchase of goods, the party to which is a commercial legal entity of the [Buyer] based in Switzerland. Therefore, ICAC admitted that the dispute falls under the category of disputes over which ICAC has jurisdiction pursuant to section 2 Article 1 of the Federal Law of the Russian Federation on international commercial arbitration.

      2. ICAC found that the applicable law was not agreed to by the parties to the Agreement. Considering that the dispute arose out of the contract of international sale of goods and that commercial legal entities of the parties to the Agreement were, as of the date of the Agreement, based in the member states of the United Nations Convention on Contracts for the International Sale of Goods (the “Vienna Convention”), and that there were references to the Vienna Convention in the claim, ICAC found that Vienna Convention is a law applicable to the parties’ dispute.

To the matters which are not directly regulated in the Vienna Convention and cannot be resolved in accordance with the general principles underlying Vienna Convention, ICAC, based on section 2 Article 7 of the Vienna Convention, applied the conflict of laws rule of subsection 1 section 3 Article 1211 of the Civil Code of the Russian Federation. In accordance with this rule, the law of the [Seller]’s state shall apply to the sales contract, which is in the case at hand the Russian law as a subsidiary statute.

      3. Upon examination of the claim on recovery of the principal indebtedness from the [Buyer], ICAC decided as follows. The [Seller] and the [Buyer]’s branch based in Italy have entered into the Agreement, pursuant to which the seller agreed to supply the [Buyer] with the consignments of goods manufactured by the seller under the FCA (Incoterms 2000) term in numbers, at a price and in terms indicated in the specifications and annexes to the Agreement.

The payment terms were repeatedly subject to modification. In accordance with the latest modification - OK, the buyer should have paid for the goods by wire transfer within 200 (two-hundred) days after delivery of goods. The last installment was supplied by the [Seller] in accordance with the Agreement and accepted by the [Buyer]. However, the goods were not paid by the [Buyer], which fact is confirmed by the [Buyer] itself.

ICAC concluded that, although the [Buyer]’s obligation to pay for goods was imposed on the Italian legal entity, the payments for the goods were made by the company incorporated in Switzerland. Taking into consideration the parties’ relations, ICAC found that there was a transfer of payment obligations under the Agreement from the company based in Italy (the buyer) to the company based in Switzerland, and the [Seller] did not object to such transfer of obligations. [Seller]’s consent to the transfer is confirmed by acceptance by the Claimant of payment for the goods made by the Swiss company, parties’ correspondence and by the fact that the claim was filed against the Swiss company.

The mentioned way of transfer of obligations well known in the international trade was implemented into the UNIDROIT Principles – the document of private civil law unification of rules and usages commonly known in the international trade. In accordance with clause 9.2.1 “Means of Transfer”, a duty to pay the monetary funds or otherwise perform an obligation may be transferred from one person (the initial debtor) to another (a new debtor) as follows: (a) by an agreement between the initial debtor and new debtor under clause 9.2.3 (subject to the creditor’s consent); (b) by an agreement between the creditor and a new debtor, pursuant to which the new debtor takes over and accepts the obligation of the initial debtor.

Taking the above into consideration, ICAC decides that the Swiss company (a new debtor) to which the obligation of the buyer (the initial debtor) to pay for the goods under the Agreement passed was the proper respondent in the dispute.

ICAC rejected [Seller]’s counterclaim in which [Seller] stated that it was not [Seller] but [Buyer] obliged to pay to the [Seller] the amount of indebtedness under the Agreement as a result of set-off between the parties. In accordance with paragraph 31 of the Rules of ICAC the parties to the case are obliged to prove the circumstances to which they refer for substantiating their claims and counterclaims.

As it follows from the [Buyer]’s counterclaims and [Seller]’s explanations, the sum of money claimed by the [Buyer] was the difference between the [Seller]’s indebtedness towards [Buyer] for the alleged purchase of goods and the indebtedness of [Buyer] towards [Seller]. However, the [Buyer] did not provide the agreement pursuant to which such goods were purchased by [Seller] from Buyer, nor evidence confirming such purchase.

Taking these circumstances into consideration and based on Articles 53, 59 and 62 of Vienna Convention, ICAC found that [Seller]’s request on recovery from [Buyer] of the amount of indebtedness under the Agreement is well substantiated and shall be satisfied.

      4. Having reviewed the [Seller]’s request on recovery of penalty for payment’s delay from the Buyer accrued on the amount of principal indebtedness under the Agreement, the ICAC found that, as of the date of hearings of the case, the argued consignment was not paid by Buyer.

Pursuant to clause 7 of the Agreement, in case of payment’s delay the seller in entitled to charge penalty in the amount of 0.1 % of the cost of supplied goods per each day of delay. Based on these circumstances and section 1 Article 330, Article 331 of the Civil Code of the Russian Federation, ICAC finds the [Seller]’s request on charging the penalty as deserving satisfaction.

      5. According to section 1 paragraph 6 of the Regulation on arbitration costs and expenses, if the parties have not agreed otherwise, a duty to pay arbitration costs shall be imposed on the losing party. As there was no agreement on alternative spread of costs and the [Seller]’s request was satisfied in full, the [Buyer] is obliged to compensate the [Seller] with the amount of arbitration costs.

DECLARATION OF THE AWARD:

Taking the above findings into consideration and based on pp. 37 - 39 of its Rules, ICAC awarded to compel [Buyer] – a company based in Switzerland – to pay in favor of the [Seller] (open joint-stock company based in the Russian Federation) the amount of the principal debt under the Agreement, the penalty accrued thereon, and the arbitration costs borne by [Seller].


FOOTNOTES

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

** Translation is prepared by Madina Lokova, a Russian legal practitioner in the field of financial and corporate law.

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Pace Law School Institute of International Commercial Law - Last updated August 1, 2014
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