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CISG CASE PRESENTATION

Serbia 16 March 2009 Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce (Paper production lines case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/090316sb.html]

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

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Case identification

DATE OF DECISION: 20090316 (16 March 2009)

JURISDICTION: Arbitration ; Serbia

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: T-13/08

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Serbia (claimant)

BUYER'S COUNTRY: Slovakia (respondent)

GOODS INVOLVED: Paper production lines


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

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

Classification of issues using UNCITRAL classification code numbers:

59A ; 59B [Payment due at time fixed or determinable by contract or Convention; No need for request by seller or other formality]

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: [2010] Vladimir Pavic, Milena Djordjevic, 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, cited at pp. 10, 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 16 March 2009 [Proceedings No. T-13/08]

Translation by [*] Filip Kovacevic
Edited by Milena Djordjevic, LL.M., Marko Jovanovic, LL.M.[**]

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

The Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce in Belgrade and its sole arbitrator in the legal matter of [Seller], represented by [], against [Buyer] on the grounds of the main debt in the amount of EUR 37,425.00, upon the conducted proceedings and hearing of 9 March 2009, makes the following

AWARD

  1. [Seller]’s claim regarding the main debt is granted and [Buyer] is ordered to pay the debt, within 15 days from the day of receipt of the Award, in the amount of EUR 37,425.00 to [Seller], subject to court enforcement in case of non-payment.

  2. [Seller]’s claim regarding interest is granted and the [Buyer] is ordered to pay a 3.5% yearly interest for the main debt of EUR 37,425.00, for a period from 24 June 2008 to the day of the payment, within 15 days from the day of receipt of the Award, subject to court enforcement in case of non-payment.

  3. [Buyer] is ordered to pay to [Seller] EUR 4,988.00 for registration fee and arbitration costs, along with the costs of representation, within 15 days from the day of receipt of the Award, subject to court enforcement in case of non-payment.

STATEMENT OF REASONS

1. Jurisdiction of the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce

      1.1. The Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce in Belgrade (hereinafter: the Arbitration) has received a claim from [Seller], with exhibits on 9 June 2008. The jurisdiction of this Arbitration has been established by the arbitration agreement between Parties in the form of arbitration clause contained in Article 17 of the Contract concluded between the Parties on 28 March 2008.

      The Arbitration has forwarded the claim, with exhibits, to [Buyer] on 24 September 2009, along with the Rules of Arbitration and the List of Arbitrators. [Buyer] has been instructed to submit an Answer to the Statement of Claim within 30 days from the day of receipt thereof and to appoint its arbitrator. [Buyer] has received the claim with exhibits on 9 October 2008, which can be seen on the return receipt, stored in the files of this case.

      [Buyer] failed to submit an answer to the Statement of Claim and to appoint its arbitrator. It remained passive from the beginning to the end of the proceedings, and had not addressed the Arbitration in any way.

      Since the Claim was duly delivered to [Buyer] on 9 October 2008, a session of the Board of the Arbitration has been held on 27 November 2008, pursuant to Article 15 of the Rules of Arbitration. At this session, all case files and documents submitted by [Seller] have been reviewed, and the Board established that the arbitration agreement was contained in the Article 17 of the Contract.

      The sole arbitrator had established that the Parties have agreed, in Article 17 of their Contract, that “all disputes that come up in the realization process of the Contract, shall be settled before the International Arbitration Court in Belgrade...” Given that the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce in Belgrade is the only international arbitration court for settling disputes with a foreign element in Belgrade, the sole arbitrator concluded that the wording of Article 17 of the Contract undoubtedly shows that the true intention of the Parties was to provide for the jurisdiction of this Arbitration.

[...]

3. Arbitral proceedings

[...]

      3.2. Scheduling of the hearing and the main hearing

      After the jurisdiction of the Arbitration has been established and the Arbitrator has been appointed, in a way described in Points 1-2 of this Statement of Reasons, to which Parties have not objected, and [Buyer] failed to submit the Answer to the Claim, even after all the deadlines have passed, the sole arbitrator scheduled a hearing for 9 March 2009. The Parties were duly summoned to the hearing.

      In the scheduled hearing a counsel appeared on behalf of [Seller]. No one has appeared on behalf of [Buyer]. After having established that the Secretariat of Arbitration has duly summoned [Buyer] to the hearing, and that it had not justified his failure to appear at the hearing, the sole arbitrator considered all relevant circumstances and, pursuant to Article 37(6) of the Rules of Arbitration, decided to grant [Seller]’s request to hold the hearing in absence of [Buyer].

            3.2.1. [Seller]’s Arguments

            [Seller] has stated in the Claim, and on the hearing of 9 March 2009, that, on the basis of the Contract concluded with [Buyer] on 28 March 2006, it sold and delivered three lines for the production of paper handkerchiefs Type [...] and one line for the production of toilet paper, Type [...], of the producer [...] from Serbia.

            Beside the equipment referred to in the previous paragraph, which is not an issue between the Parties, [Seller] has sold to [Buyer] a line for the production and packaging of paper handkerchiefs, Type [...], in the equivalent of EUR 105,500.00 from the same producer, and delivered it, according to the Contract, on 4 August 2006. It is the payment of the price for this equipment that is disputed between the Parties in the case at hand.

            [Seller] submits that [Buyer] made a partial payment on 31 December 2006 in the amount of EUR 68,075.00 out of the initial debt amounting to EUR 105,500.00. Consequently, the amount of EUR 37,425.00 remained unpaid.. [Buyer]’s initial debt of EUR 105,500.00 is evidenced by the Invoice [...] of 11 July 2006 and is stated in the Specification of goods, as well as by the Customs declaration [...]. The remaining part of [Buyer]’s debt, in the amount of EUR 37,425.00, the parties have, among other things, made indisputable by signing four Annexes to the main Contract. [Seller] and [Buyer] have, by Annexes to the main Contract [...] of 28 March 2006, extended deadlines in which [Buyer] was obliged to pay the remaining part of the debt to [Seller] for the delivered production line [...] in the amount of EUR 37,425.00. In the last Annex, no. IV from 27 December 2007, the parties have determined 24 June 2008 to be the last day for [Buyer] to settle the debt owed to [Seller] in the amount of EUR 37,425.00. However, [Buyer] again disregarded the deadline, and therefore the remaining amount of EUR 37,425.00 of his debt has been left unsettled, which was the cause for [Seller] to submit the Claim and to initiate the proceedings before this Arbitration.

            [Seller] claims the amount of the unpaid part of [Buyer]’s debt, and justifies its claim by the following pieces of evidence: the Contract [...] of 28 March 2006; specification of goods signed and stamped by the Parties, indicating the type of the goods, units of measurement, quantity, prices shown in Euros and dates of delivery; 4 Annexes to the main Contract – Annex I dated 6 August 2006, Annex II dated 1 January 2007, Annex III dated 30 June 2007 and Annex IV dated 27 December 2007; [Seller]’s Invoice dated 11 November 2006, for the amount of EUR 105,500.00; Customs declaration [...] from 4 August 2006, Certificate EUR 1 [...] from 4 August 2006.

            [Seller] claimed the interest along with the main debt, as well as the reimbursement of costs of the arbitration proceedings, according to the specification of costs which it had submitted during the hearing, in the total amount of RSD 384,635.00. [Seller] requested [Buyer] to be ordered to pay the amount claimed within 15 days from the receipt of the arbitral award, subject to court enforcement in case of non-payment.

            Counsel for [Seller] has declared at the hearing that [Seller] remains at its position expressed in the Statement of Claim from 9 July 2008.

            When questioned by the sole arbitrator whether there was a chance for an amicable resolution of this dispute, counsel for [Seller] responded that those circumstances do not exist in the case at hand.

            3.2.2 [Buyer]’s Arguments

            [Buyer] has remained inactive during the proceedings, has not answered to the Claim, nor has it in any way addressed the Arbitration until the end of the entire course of proceedings. It failed to appear at the hearing, even though it was duly summoned, and failed to justify its absence. By signing the annexes to the main Contract of 28 March 2006, namely Annex no. IV of 27 December 2007, [Buyer] made the existence of the main debt in the amount of EUR 37,435.00, for the exported Automatic line for the production and packaging of paper handkerchiefs indisputable. [Buyer] failed to settle the sum owed to [Seller] even in the additional deadlines, that were postponed several times.

4. Applicable substantive and procedural law

      Article 17 of the Contract of 28 March 2006 provided for application of the Rules of the Arbitration and of the law of the Republic of Serbia to the dispute at hand. The sole arbitrator accepted such contractual provision, as it represents the expression of free will of the Parties, allowed by law and based on fundamental legal principles. Considering that the Republic of Serbia ratified the United Nations Convention on Contracts for the International Sale of Goods of 1980 (hereinafter: the Vienna Convention or CISG), this Convention is a part of Serbian law and represents the applicable source of substantive rules that govern the international sale of goods. The Arbitrator has, therefore, decided to apply the Vienna Convention to the dispute at hand.

      As far as the applicable procedural norms are concerned, the sole arbitrator first applied the Rules of Arbitration, as agreed between the Parties. Apart from the agreement between the Parties, Article 45 of the Rules also requires the application of the Rules of Arbitration. However, the application of the Rules of Arbitration is not only required by Article 45 thereof, but also by Article IV(1)(a) of the European Convention on International Trade Arbitration (Geneva, 1961) and by Article V(1)(d) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958).

5. The Statement of Claim

      The basic issues in reference to which the dispute arose between [Seller] and [Buyer] are – whether [Buyer] owes to [Seller]:

      a)   With respect to the main debt – the amount of EUR 37,435.00, which represents the unpaid part of the sales price for the Automatic line for the production and packaging of paper handkerchiefs [...], as provided for by the Contract, concluded between the Parties on 28 March 2006;
 
      b)   interest on the Main debt and
 
      c)   the reimbursement of costs of arbitral proceedings.

      5.1. The facts and legal basis for the arbitral award

            5.1.1. The issue of main debt

            In its Statement of Claim and at the main hearing [Seller] submitted that [Buyer] owes him the amount of EUR 37,425.00, as the unpaid part of the price of EUR 105,500.00 for the delivered Line for production and packaging of paper handkerchiefs, as agreed upon by the Contract.

            [Seller]’s claim is based upon the Contract [...] concluded with [Buyer] on 28 March 2006. As evidence, [Seller] has enclosed, besides the Contract: specification of goods signed and stamped by the Parties, which is an integral part of the main Contract, with the specification of type of goods, units of measurement, quantities, prices shown in Euros and dates of deliveries; 4 Annexes to the main Contract – Annex I from 6 August 2006, Annex II from 1 January 2007, Annex III from 30 June 2007 and Annex IV from 27 December 2007; invoice issued by the [Seller] [...] from 11 November 2006, for the amount of EUR 105,500.00; Customs declaration [...] from 4 August 2006; Certificate EUR 1 [...] from 4 August 2006.

            [Seller] has produced appropriate evidence that it had fulfilled all of his obligations towards [Buyer]. This was not disputed by [Buyer].

According to the [Seller]’s submissions, [Buyer] paid the amount of EUR 68,075.00 on the 31 December 2006 [...], but the difference of EUR 37,425.00 to the full amount of EUR 105,500.00 remained unpaid. [Seller]’s claim has been made indisputable by the Parties themselves. By signing four annexes to the main Contract, [Buyer] has unambiguously admitted and accepted the existence of the remaining debt to [Seller] for the export of the Automatic line for the production and packaging of paper handkerchiefs [...], for the amount of EUR 37,435.00. By the last Annex IV from 27 December 2007, [Buyer] undertook to pay the remaining sum, no later than 24 June 2008. However, since [Buyer] failed to pay in full the owed amount, [Seller] has filed a Claim and initiated the arbitral proceedings.

            It is a general and an indisputable duty of the buyer to pay to the seller the price in the full amount, as the agreed upon monetary equivalent to the value of the delivered goods, within the time limit set in the contract.

            This obligation is also confirmed by the United Nations Convention on Contracts for the International Sale of Goods (Articles 53, 54 and 59), which has been determined as the applicable law in this dispute. This duty is also prescribed by Article 277(1) of the Law on Contracts and Torts of the Republic of Serbia, which is applied as a complementary source of law, pursuant to Article 7(2) of the Convention.

            The Arbitrator applied Articles 53, 54 and 59 of the Vienna Convention. According to these provisions, one of the basic obligations of the buyer consists in paying the price for the delivered goods in a way stipulated by contract and the Convention. The buyer must pay the price in full on the agreed day, with no need for the seller to issue a demand, or to perform any other formalities. 

            Since [Buyer] failed to pay the price in full amount and on time, [Seller] filed a Claim to the Arbitration.

            [Buyer] was obliged to pay for the goods bought in the stipulated way and in full amount, within the deadline from the Contract, i.e. by the Annex IV to the main Contract. Considering that it failed to do so, and that [Seller] has declined the initiative to settle this dispute in an amicable way, the Sole arbitrator has evaluated individually and together all of the submitted pieces of evidence, granted [Seller]’s claim regarding the Main debt, and ordered to [Buyer] to pay the unsettled part of the sales price for the delivered goods in the amount of EUR 37,425.00, according to Point 1 of the holding of  this Award.

            5.1.2. Interest

            Considering that [Buyer] failed to pay the price for the delivered goods in full and on time, the Sole Arbitrator applied Article 78 of the Vienna Convention. This Article 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 (...)”. Consequently, the Arbitrator decided to order to [Buyer] to pay the interest for the unpaid part of the main debt to [Seller]. Since the unpaid part of the main debt amounts to EUR 37,425.00, this sum represents the basis for calculating the amount owed on the grounds of interest, the payment of which [Seller] demanded in its Claim.

            Arbitrator has taken 24 June 2008 as the beginning of the period for the calculation of interest. This date was stipulated in Annex IV to the main contract as the final deadline for settling the debt. It was [Seller] who suggested that this date should be taken as the first day of the period for the calculation of interest, was and this represents the most favorable solution for the [Buyer].

            Considering that the Claim was expressed in Euros, the Arbitrator has decided to use domiciliary interest rate for Euro. The Arbitrator has determined the interest rate on the basis of Reuter's review of the ranging of interest on six-month deposits for the period from July 2008 until the day on which this Award has been made (http:/.www.homefinace.nl/English/international-interest-rates/libor/euro/libor-rates-6-months-eur.asp), according to which the rates for deposits in Euro in the said period were ranging from 5.5% to 1.8% on yearly level (EUROLIBOR on six-month deposits). The Arbitrator then decided to apply the interest rate which corresponds to the approximate average value of the rates in the said period, as specified in Point 2 of the holding of this award.

            The sum owed as interest shall be determined by applying a 3.5%  yearly interest rate to the main debt of EUR 37,425.00, from 24 June 2008 until the payment.

            5.1.3. Costs of proceedings 

[...]       

            The sole arbitrator decided that the total sum of EUR 4,988.00 claimed by [Seller] as a reimbursement for costs of proceedings was reasonable and necessary for the [Seller]’s participation in the proceedings.

            Considering that all [Seller]’s claims were granted, [Buyer] is ordered to pay to [Seller] the reimbursement for the costs of proceedings.

6. Finality, effect and the execution of the Award

      Pursuant to Article 56 of the Rules of Arbitration, and Article 64(1) of the Law on Arbitration of the Republic of Serbia ("Official Gazette RS", no. 46/2006, this arbitral award has the force of a final and binding decision of a state court. The award is final and is not subject to appeal. By accepting the jurisdiction of this Arbitration the Parties agreed to comply with this award.

In Belgrade, 16 March 2009

Note taker, Sole arbitrator,
[signed] [signed]
                                                                                                     


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Serbia is referred to as [Seller] and Respondent of Slovakia is referred to as [Buyer].

** Filip Kovacevic is a fourth year student at the University of Belgrade Faculty of Law. Milena Djordjevic, LL.M. (U. of Pittsburgh) is a Lecturer in International Commercial Law at the University of Belgrade Faculty of Law. Marko Jovanovic, LL.M. is a Lecturer in Private International Law at the University of Belgrade Faculty of Law.

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