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CISG CASE PRESENTATION

Serbia 19 October 2009 Foreign Trade Court attached to the Serbian Chamber of Commerce (Mineral water case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/091019sb.html]

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

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Case identification

DATE OF DECISION: 20091019 (19 October 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-6/08

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Serbia (claimant)

BUYER'S COUNTRY: Macedonia (respondent)

GOODS INVOLVED: Mineral water


Classification of issues present

APPLICATION OF CISG: Yes [Article 1]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 7 ; 74 ; 78 [Also mentioned: Article 35 ]

Classification of issues using UNCITRAL classification code numbers:

7B [Materials for interpretation: international case law and scholarly studies];

7C22 [Recourse to general principles on which Convention is based - principle of full compensation];

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: Unavailable

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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

Unavailable

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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 19 October 2009 [Proceedings No. T - 6/08]

Translation [*] by Marija Šcekic, LL.M.

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

Claimant (Serbia) [Seller] v. Respondent (Macedonia) [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 [L], against [Buyer] on the grounds of the main debt for unreturned packaging in the amount of 437.831,00 RSD, upon the conducted proceedings and hearing of 15 April 2009 and in accordance with the Article 37 paragraph 6 and Articles 34 and 49 of the Rules of the Foreign Trade Court of Arbitration, makes the following

AWARD

  1. [Seller]'s claim is partially granted and [Buyer] is ordered to pay the sum in the amount of 364.743,00 RSD as damages for the unreturned packaging, within 15 days from the day of receipt of the Award.

  2. [Seller]'s claim is partially refused in the amount of 73.088,00 RSD due to the lack of jurisdiction of this arbitration.

  3. [Seller]'s claim regarding the interest is granted and [Buyer] is ordered to pay 13.35% annual interest rate for the debt awarded in the clause 1 of this Award for a period from 31 December 2005 until the day of the payment, within 15 days from the day of receipt of the Award, subject to the court enforcement in case of non-payment.

  4. [Buyer] is ordered to pay the registration fee and arbitration costs in the amount of 78.530,00 RSD along with the costs of representation in the amount of 41.000,00 RSD, that totals to 119.530,00 RSD within 15 days from the day of receipt of the Award.

STATEMENT OF REASONS

I. ESTABLISHING THE EXISTENCE OF THE ARBITRATION AGREEMENT

1. In the Statement of Claim dated 31 March 2008, the [Seller] submitted that, pursuant to Article 14 of the Sales Contract no. 157/04 concluded on 4 January 2005 between the [Seller] and the [Buyer], the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce has jurisdiction. Article 14 of the Sales Contract provides that 'Contracting parties agree to resolve all the problems arising from the Contract in an amicable manner, by mutual agreement; if the amicable resolution is not possible Parties recognize the jurisdiction of the Foreign Trade Court of Arbitration attached to the Chamber of Commerce of Serbia and Montenegro and the Commercial Court in Leskovac'.

2. The Secretariat sent the Statement of Claim with Appendices to the [Buyer] on 5 December 2008 and invited him to, pursuant to paragraph 1 and 2 Article 31 of the Rules of the Foreign Trade Court of Arbitration (hereinafter the Rules), submit the Statement of Defense and to, in agreement with the [Seller] within 30 days from the Reply to the Statement of Claim, appoint a sole arbitrator, or to leave the appointment of the arbitrator to the President of the Court of Arbitration, in accordance with Article 21 Paragraph 1 and 2 of the Rules and to notify the Arbitration in writing about that.

The Statement of Claim that the Secretariat had sent to [Buyer] to the address indicated in the Statement of Claim by registered mail returned as undelivered specifying 'non existing recipient' on 19 January 2009. The Secretariat resent the Statement of Claim to the address indicated on 20 January 2009 via DHL courier service. Between 21 January and 23 January 2009 the courier service attempted to deliver the parcel four times to the recipient, but the attempts remained unsuccessful due to incomplete/incorrect address. The parcel was destroyed in accordance with the standard procedure and the Secretariat was informed about it by the courier service.

3. Having in mind that the [Buyer] had not filed the Statement of Defense by the specified deadline, the Board of the Foreign Trade Court of Arbitration comprising of: Prof. PhD X, president of the Court of Arbitration, Prof. PhD Y, vice-president of the Court of Arbitration and Z, secretary of the Court of Arbitration, at the meeting held on 2 February 2009, based on the records and documents submitted by the [Seller] found that the arbitration agreement related to the dispute exists in the records of the dispute, i.e. that the agreement is incorporated in the Article 14 of the Sales Contract no. 157/04 concluded on 4 January 2005.

II. APPOINTMENT OF ARBITRATORS

1. Pursuant to Article 20(1) of the Rules, since the value of the dispute is under US$ 70.000,00 this dispute is to be resolved by a sole arbitrator.

2. Pursuant to Article 21(3) of the Rules, since the [Buyer] has not filed the Statement of Defense by the specified deadline, the president of the Court of Arbitration appointed [X], a University professor, as a sole arbitrator, who made a declaration of acceptance of duty and statement of independence.

III. ESTABLISHING JURISDICTION OF THE ARBITRATION

1. Together with the Statement of Claim filed on 31 March 2008, the [Seller] submitted the Sales Contract no. 157/04 concluded on 4 January 2005 between the [Seller] and the [Buyer], that the article 14 contains the following clause: 'Contracting parties agree to resolve all the problems arising from the Contract in an amicable manner, by mutual agreement; if the amicable resolution is not possible Parties recognize the jurisdiction of the Foreign Trade Court of Arbitration attached to the Chamber of Commerce of Serbia and Montenegro and the Commercial Court in Leskovac'.

2. From this clause it stems that it is, by its nature, an arbitration clause and a clause of selection of internationally competent court, and that the final choice between them is left to the contracting party that initiates the proceedings. The [Seller] in this dispute has chosen arbitration as the way to settle this dispute, by filing the Statement of Claim to the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce.

3. The [Seller] filed the Statement of Claim against the [Buyer] to the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce which, pursuant to the Law on Abrogation of the Law on Yugoslav Chamber of Commerce (Official Gazette of the Republic of Serbia 55/2003), presents the successor of the Foreign Trade Court of Arbitration attached to the Yugoslav Chamber of Commerce and continues operating, in the existing composition, and under the same organization and conditions, fully autonomous and independent, within the framework of the Serbian Chamber of Commerce.

4. Arbitration agreement contained in the article 14 of the Sales Contract no. 157/04 fulfils the conditions of validity in accordance with Article 5(1) of the Serbian Law on Arbitration (Official Gazette of the Republic of Serbia 46/2006) and Articles 12-13 of the Rules, specifically:

(1)    subject matter of the dispute is an international business relation (Article 13 of the Rules), which stems from the Sales Contract between the [Seller] from Serbia and the [Buyer] from Macedonia, concluded on 4 January 2005, whose subject matter is purchase of the mineral water […] (article 1 of the Contract); and as such, the subject matter of the dispute does not fall within exclusive jurisdiction of Serbian courts, and it fulfils arbitrability requirement pursuant to Article 5(1) of the Serbian Law on Arbitration (Official Gazette of the Republic of Serbia 46/2006);
 
(2)  the arbitration agreement is incorporated in the article 14 of the Sales Contract no. 157/04 concluded on 4 January 2005 between the [Seller] and the [Buyer], and it applies to all future disputes arising from the Sales Contract.

5. Based on these elements and the evidence contained in the record, the sole arbitrator found there is arbitration jurisdiction in this dispute.

IV. THE STATEMENT OF CLAIM AND ARBITRAL PROCEEDINGS

1. The [Seller] filed the Statement of Claim to this Arbitration on 31 March 2008 for payment of debt for the unreturned packaging. In the Statement of Claim it stated that it concluded the Sales Contract with the [Buyer] on 4 January 2005, whose subject matter was purchase of mineral water […]. Based on the Contract, the [Seller] was delivering mineral water to the [Buyer], packed in the glass bottles 1/1 that were packed in plastic carrier-crates 1/12, which were further packed in wooden pallets. The [Buyer] was obliged to provide adequate replaceable packaging to the [Seller] when accepting the goods. According to the [Seller], the [Buyer] owes him packaging since June 2004, based on the [Seller]'s evidence on 20 March 2008: 480 plastic crates, type 1/12, price per piece 250,00 RSD; 5760 glass bottles, type 1/1, price per piece 17,82 RSD and 212 wooden pallets, price per piece 700,00 RSD. Based on the above, the total claim for the packaging is 437.831,00 RSD. [Seller]'s allegations are supported by the evidence, specifically dispatch notes no.317 from 4.6.2004; no.3365 from 22.6.2004; no.4046 from 19.7.2004; no.4631 from 11.8.2004; no.4981 from 26.8.2004; no.3088 from 19.10.2004; no.6657 from 17.11.2004; no.552 from 9.2.2005; no.1149 from 17.3. 2005; no.1149 from 17.3.2005; no.547 from 17.3.2005; no.1249 from 22.3.2005; no.1511 from 11.4.2005; no.762 from 11.4.2005; no.1932 from 25.4.2005; no.1970 from 26.4.2005; no.2381 from 17.5.2005; no.2548 from 24.5.2005; no.2691 from 31.5.2005; no.1285 from 31.5.2005; no.3361 from 29.6.2005; no.2345 from 5.9.2005; no.4860 from 5.9.2005. According to the abovementioned dispatch notes the [Buyer] received the mineral water packed in the glass bottles, plastic crates and wooden pallets, but it has not returned the packaging he owes until the day when the Statement of Claim was submitted. The [Seller] gathered the information regarding the prices of packaging and, based on the letters from Serbian glass factory dated 24 January 2005 and 20 January 2006, supported by the evidence, it drew up a specification on 20 March 2008, that is attached to the statement of Claim. On that basis, the [Buyer] owes to the [Seller] total amount of 437.831,00 RSD. Based on the above mentioned, the [Seller] requested the Arbitration to render the award obliging the [Buyer] to pay 437.831,00 RSD of the main debt and the default interest rate starting from the date when the Statement of Claim was submitted until the payment. The [Seller] has also set a request for payment of the costs of the proceedings.

2. [list of evidence submitted]

3. [payment of registration fees]

4. [delivery of the Statement of Claim to the [Buyer]]

5. [appointment of sole arbitrator]

6. [scheduling of the oral hearings]

7.-11. [oral hearings: parties present, evidence read, claim requested as in the Statement of Claim]

V. LAW APPLICABLE TO THE ARBITRATION PROCEEDINGS AND SUBJECT MATTER OF THE DISPUTE

1. The arbitration clause, incorporated in article 14 of the Sales Contract no. 157/04 concluded on 04 January 2005 between the [Seller] and the [Buyer] states: 'Contracting parties agree to resolve all the problems arising from the Contract in an amicable manner, by mutual agreement; if the amicable resolution is not possible Parties recognize the jurisdiction of the Foreign Trade Court of Arbitration attached to the Chamber of Commerce of Serbia and Montenegro and the Commercial Court in Leskovac'.

2. From this arbitration clause, that the sole arbitrator found to be valid, see above III.1-5. it can be seen that the Parties have not agreed on the applicable law, neither for the procedural part nor for the merits of the dispute. Accordingly, the sole arbitrator applied the articles of the Rules, pursuant to Article 45 of the Rules and subsidiary the Serbian Law on Civil Procedure (Official Gazette, No. 125/04).

3. When it comes to the applicable law in the matters of substance, the sole arbitrator notes that it is being determined in accordance with Article 48 of the Rules. Since the Parties have not agreed upon the applicable material law, the sole arbitrator considers that in this case it is most appropriate to apply the conflict-of-laws rule prescribing that, in case that the parties did not choose the applicable law, it is being determined by the law of the seat of the party who provides characteristic performance, i.e. in this case by the seat of the seller. This rule is contained in the vast majority of national rules on conflict of laws and thus, seams most appropriate according to the sole arbitrator. In accordance with this solution, the applicable substantive law in this case is Serbian law, as the law of the seat of the seller - the [Seller] in the case at hand. In relation to that, the sole arbitrator noted that in the case of international sales of goods the UN Convention on Contracts for International Sale of Goods - CISG (hereinafter: the Vienna Convention) is primarily applied. According to the UN Commission for International Trade Law (UNCITRAL) data, available at http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html, the Vienna Convention came into force on 27 April 1992 in Serbia, on the basis of succession, and on 17 November 1991 in Macedonia, also on the basis of succession. Purusant to Article 1 (1(a)) of the Convention that defines its sphere of application, 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.

4. Pursuant to the Article 7 paragraph 2 of the Vienna Convention 'Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.' In line with this, the sole arbitrator notes that in relation to these types of questions, the applicable law is determined pursuant to Article 48 (3) of the Rules which prescribes that in all cases the decision is made in accordance with the contract and considering the trade customs that can be applied to certain business transactions.

VI. ISSUES IN QUESTION

The subject matter of these proceedings relates to the following questions:

1)    Whether the [Buyer] is obliged to return the packaging that the mineral water was delivered in, based on the Sales Contract no. 157/04;
2)  Whether the [Seller] is entitled to require payment of value of the unreturned packaging;
3)  Whether the [Buyer] is obliged to pay the interest on the value of the unreturned packaging;
4)  Whether the [Buyer] is obliged to pay the costs of these proceedings to the [Seller].

VI.1. Obligation of [Buyer] to return the packaging

1. The subject matter of the Sales Contract no. 157/04 concluded on 4 January 2005 is purchase of mineral water […] (article 1), according to the type and price of goods as defined in the article 2. It steams from the Contract that the [Seller] is obliged to deliver to the [Buyer] the goods of the type and in the amount that is agreed upon on monthly bases (article 3). The goods are delivered successively, in accordance with article 3 (article 4). Packaging of the goods is standard - glass bottles in plastic crates stored on the pallets size 1200 x 1000 mm (article 8). The [Buyer] is obliged to provide suitable replacement packaging when accepting the goods (glass bottles, plastic crates and wooden pallets), which is controlled during discharge, and only proper packaging is taken (article 9).

The sole arbitrator conducted the evidence procedure at the oral hearing by reading all the evidence presented. On the basis of such evidence and according to the [Seller]'s records of the packaging on 23 March 2008 - evidence: specification of goods on 20 March 2008, the sole arbitrator concluded the following facts:

a) The [Seller] delivered photocopies of the following dispatch notes showing the type and the quantity of the packaging that the [Buyer] returned to the [Seller] on the delivery of the mineral water:

b) The [Seller] with its Statement of Claim enclosed the specification of goods written by its in-house lawyers in accordance with the dispatch notes above on 20 March 2008. According to that specification the [Buyer], based on the [Seller]'s records of the packaging on 20 March 2008, owes to the [Seller]: 480 plastic crates type 1/12, 5.760 glass bottles type 1/1 and 212 wooden pallets.

c) The [Seller] submitted its Statement of Claim to this Arbitration in accordance with article 14 of the Sales Contract no. 157/04, concluded on 4 January 2005. The Contract, based on Article 15, came into force on the same day and, in accordance with Article 17, it expired on 31 December 2007. Based on these facts, the sole arbitrator determined that it has jurisdiction to settle the dispute arising from this Contract only in the part of the Statement of Claim that is supported by the evidence of delivery of goods in accordance with the terms of the Contract while the Sales Contract no. 157/04 from 4 January 2005 was in force. Those evidence are the dispatch notes enclosed with the Statement of Claim from 31 March 2008, listed under point a) of this Statement of Reasons, numbers 8. to 22. It stems from the evidence submitted that the [Seller] dispatched 321 pallets to the [Buyer] and 118 pallets were returned, meaning that on 31 March 2008 [Buyer] owed to [Seller] 203 wooden pallets, 480 plastic crates type 1/12 and 5.760 glass bottles type 1/1.

d) Evidence - dispatch notes - enclosed with the Statement of Claim on 31 March 2008, listed under point a) of this Statement of Reasons, numbers 1 to 7 date from the year 2004, while the Sales Contract no. 157/04 was concluded and came into force on 4 January 2005. Accordingly, the [Seller's] deliveries to the [Buyer] proven by the above mentioned dispatch notes, were not made under the Sales Contract no. 157/04, which is the subject matter of these proceedings. Therefore, the [Seller]'s claim, in the part that refers to undelivered packaging from 2004 does not fall under jurisdiction of this Arbitration, since the jurisdiction is based on the arbitration clause contained in the article 14 of Sales Contract no. 157/04 from 4 January 2005.

2. Based on the facts established through the evidence procedure, the sole arbitrator found the [Seller], pursuant to Article 35 paragraphs 1 and 2 point (d) of the Vienna Convention, delivered the goods that is the subject matter of the Contract packaged in the manner usual for such goods, and that in terms of conformity of the goods there was no deviation from the usual manner of packaging. Article 9 sets a special obligation for the [Buyer] - to provide adequate replacement packaging on acceptance of goods. It can be seen from the evidences enclosed that the [Buyer] was returning certain quantity and type of packaging to the [Seller] on delivery, but that it had not fulfilled that obligation completely. Based on these facts, it stems that the [Seller's] claim for restitution of packaging for deliveries from the Contract no. 157/04 is founded.

VI.2. Obligation of [Buyer] to pay for the value of the unreturned packaging

1. Having in mind that the [Buyer] had not fulfilled its obligation from article 9 of the Sales Contract no. 157/04 and breached the Contract in that way, the [Seller] pursuant to the Article 74 of the Vienna Convention has the right to claim damages. Those damages, according to the Convention, 'may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract.'

2. Damages that the [Seller] suffered are equal to the loss that occurred as a consequence of [Buyer]'s breach of contract. At the moment of conclusion of the contract, the [Buyer] could have foreseen that not returning the packaging contrary to the obligation from the article 9 of the Sales Contract no. 157/04 will result in the loss for the [Seller] in the amount equal to the value of received and unreturned packaging. Based on these facts established through the evidence procedure, the sole arbitrator found that the [Seller] suffered the loss in the amount of 374.743,00 RSD, which is the total value of the packaging the [Buyer] was obliged to return, but had not done so. Calculation was made based on the price list of the company Y and glass factory Z on 20 January 2006 when the [Seller] filed the Statement of Claim to the Foreign Trade Court of Arbitration, specifically:

-    480 plastic crates, type 1/12, price 250,00 RSD per piece - 120.000,00 RSD
5.760 glass bottles, type 1/1, price 17,82 RSD per piece - 102.643,00 RSD
203 wooden pallets, price 700,00 RSD per piece - 142.000,00 RSD.

3. Since the [Seller]'s claim in the part related to the unreturned packaging as specified in the dispatch notes listed under numbers 1 to 7 under VI.1.1 of this Statement of Reasons, dated from 2004, does not fall under jurisdiction of this Arbitration as it does not stem from the Sales Contract no. 157/04, which was in force between the [Seller] and the [Buyer] from 4 January 2005 to 31 December 2005, the claim is partially refused in the amount of 73.088,00 RSD.

4. Based on the above, the [Buyer] owes to the [Seller] 364.743,00 RSD of damages for the breach of the Sales Contract no. 157/04 from 4 January 2005.

VI.3. Obligation to pay the interest rate on the value of the unreturned packaging, i.e. on damages suffered due to the breach of the Contract

1. The [Seller] set the request for payment of the statutory interest rate on the amount equal to the value of the unreturned packaging from the date of submitting the claim until the date of payment. The [Seller] most probably set this request bearing in mind the Serbian law as the applicable one. Whether this request is founded should be determined in the light of the Article 78 of the Vienna Convention, as noted above - V.3.: '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, without prejudice to any claim for damages recoverable under Article 74.' Both theory and practice interpret this provision in a way that it establishes the general right to interest.

Since in the case at hand the subject matter is not the payment of the price, condition for application of this provision is existence of the obligation to pay a certain amount of money and the delay in fulfilment of that obligation. The term 'any other sum' is interpreted in a way to cover costs that one party has against the other party (http://www.cisg.law.pace.edu/cisg/biblio/thiele.html#N_4). Even though the case law regarding the application of the Article 78 of the Vienna Convention is predominately related to the payment of the purchase price, some cases in litigation and arbitration practice (Delchi Carrier Spa v. Rotorex Corp, 71 F.3d 1024, 2nd Cir. 1995 and arbitral decision SCH 4318, Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft Wien from 15 June 1994, source: UNILEX, arbitral decision ICC Case no. 9187, source: CISG online, case no. 705 http://www.globalsaleslaw.org/content/api/cisg/urteile/705.htm) indicate that 'any other sum' is covering the damages as well. Since the Vienna Convention determines only the time of payment of the purchase price, answer to the question whether the contracting party is in arrears should be found in interpretation of the Vienna Convention, pursuant to the Article 7 paragraph 1. According to this provision 'In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.'

According to the majority of academics any other sum is due at the time when the payment is due (http://www.cisg.law.pace.edu/cisg/biblio/thiele.html#N_4). In connection to that and in order to decide whether the party that owes payment of damages is in delay, the question when are the damages due is arising. According to one opinion, that obligation is due when it is determined, for example in a court decision (http://cisgw3.law.pace.edu/cisg/biblio/loo78.html), while according to another, obligation to pay the sum is due when the obligation is created, i.e. when the contract is breached , regardless the fact that the sum due has not been determined yet. The argument in favour of this opinion is that the claim for damages is related to monetary sum even in cases when the sum itself has not been determined, and that the party that breached the contract owes indemnification to the other party. If the indemnification fails, the party is considered to be in delay in payment of the 'sum'. Consistent with this opinion, it is undisputed that the [Seller] in this case is requesting payment of the sum for the unreturned packaging based on the Article 74 of the Vienna Convention that regulates damages for the breach of contract. Having in mind the circumstances of the case, i.e. that the Sales Contract no. 157/04 between the [Seller] and the [Buyer] in this dispute expired on 31 December 2005 and the [Buyer] has not returned all the packaging contrary to the article 9 of the Sales Contract until that date, which resulted in the fact that the [Seller] suffered loss, the [Buyer]'s obligation to pay the damages became due on the day when the contract expired.

2. Article 78 of the Vienna Convention determines the general right to interest on the amounts of money due, but it does not determine the interest rate. Litigation and arbitration case law takes note of this situation, whereas the legal doctrine points out different opinions on whether this matter is to be considered as excluded from the scope of the Convention or whether it falls within the matters referred to in Article 7 paragraph 2 of the Convention, i.e. the matters governed by but not expressly settled in the Convention. Having in mind the Article 4, which provides that the Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract, the sole arbitrator is of the opinion that the Article 78 governs the right to the interest, but does not expressly settle the same as it does not define the interest rate or the way to fix it. Consequently, determination of interest rates is determined pursuant to Article 7 paragraph 2, i.e. 'in conformity with the general principles on which [the Convention] is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.' Since the objective of the Vienna Convention, stated in the preamble, is the adoption of uniform rules which govern contracts for the international sale of goods and removal of the legal obstacles in international trade and promotion and development of international trade, Article 7 paragraph 2 offers the basis to determine the interest rate 'autonomously, in accordance with the general principles the Convention is based on' as stated in one arbitral award (Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirstchaft - Wien, No. SCH 4318 od 15.06.1994.).

3. Since this dispute is basically related to the claim for damages that the [Buyer] caused to the [Seller] by not returning the packaging, that the latter is entitled to pursuant to the Article 74 of the Vienna Convention, the sole arbitrator considers that, while deciding on this issue, he should be guided by the general principle upon which the Article 74 is based, i.e. the principle of full compensation for the loss suffered. The application of this principle is warranted in order to enable the aggrieved party to be in a situation it would have been in had there been no loss caused by the other party, and to benefit from the contract concluded with the other party . In the situation at hand, it could have been expected that the [Seller], in order to compensate for the unreturned packaging had to buy other packaging in order to continue its trading operations, and that for those purposes, in the ordinary course of business, it would have to take a loan. In consistence with that, in international trade the [Seller] is entitled to the interest rate equal to the average interest rate that applies to short-term loans for the currency in which the payment would be made, in the country where the [Seller] has its seat.. This solution is inspired by the similar solutions in international trade, contained, for example, in the UNIDROIT Principles of International Commercial Contracts from 2004 (Article 7.4.9) and the Principles of European Contract Law from 2009 (Article 9.508).

4. The [Seller] in this dispute requested the damages in Serbian dinars (RSD) which is understandable, since it was purchasing the packaging it used to deliver the mineral water to the [Buyer] in Serbia using the Serbian currency. Since the sole arbitrator decided to determine the interest rate autonomously pursuant to Article 7 paragraph 2 of the Vienna Convention and in accordance with the general principles the Convention is based on, the [Seller] is entitled to the interest calculated by the average rate that applies to short-term loans in Serbia. According to the statistical bulletin of the National Bank of Serbia no. 8 from August 2009 that rate, in the moment this decision was made, was 13,35% annually. That bulletin is available on the web page http://www.nbs.rs/export/internet/cirilica/90/index.html .

5. Since the [Buyer] in this dispute is in delay, together with the damages, pursuant to the Article 78 of the Vienna Convention, [Seller] is entitled to the interest on the amount of 364.743,00 RSD. In accordance with the above - point 3. of this Statement of Reasons, the [Seller] is entitled to the annual interest rate of 13,35%, and - based on what has been said under point 1. of this Statement - from the date when the damage was caused until the date of payment.

VI.3. Obligation to pay the costs of the proceedings

1. The [Seller] requested the reimbursement of costs of the arbitral proceedings. The [Seller]'s attorney submitted the Tariff of Attorney's Fees, according to which the costs amount to 41.000,00 RSD (for drafting the Statement of Claim and preparing the case for the proceedings 21.000,00 RSD and for representation at the hearing held on 15 April 2009 20.000,00 RSD). The [Seller]'s costs are also the costs of registration fee in the amount of 16.642,00 RSD and arbitration costs in the amount of 77.880,00 RSD, which totals to 96.262,00 RSD.

2. Pursuant to the Article 149 paragraph 2 of the Serbian Law on Civil Procedure: 'If a party is partially successful in the proceedings, the Court may, with regards to the success achieved, decide that each party should bear its own costs or that one party reimburses the proportional part of costs'. The [Seller] in the case at hand, based on the established facts and presented evidences, succeeded in 83,31%. Applying this percentage to the total amount of registration and arbitration costs of 94.262,00 RSD results in 78.530,00 RSD.

3. The sole arbitrator found that the [Seller]'s representation costs are 41.000,00 RSD. The sole arbitrator accepted that the [Buyer] should reimburse the representation costs to the [Seller] in the full amount, since the amount of these costs would have been the same if the claim was fully accepted.

4. Accordingly, the sole arbitrator, pursuant to the Article 150 paragraph 1 of the Serbian Law on Civil Procedure, with respect to all circumstances, found that the costs of the arbitral proceedings determined in points 2. and 3. of this part of the Statement of Reasons were necessary. Based on that, the [Buyer] is obliged to pay the following costs of the proceedings: 78.539,00 RSD for the registration and arbitration costs and 41.000,00 RSD for the representation costs, which totals to 119.530,00 RSD as determined in the point 4. of the Disposition of this Award.

VII. FINALITY OF THE AWARD

Pursuant to the Article 64 of the Serbian Law on Arbitration and the Article 56 paragraph 1 of the Rules of the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce, this Award is final and is not subject to appeal. It has the force of a final decision of a Court of the Republic of Serbia.

  Sole Arbitrator
[Signed]     


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation.

** Marija Šcekic, LL.M. [...]. 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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Pace Law School Institute of International Commercial Law - Last updated October 24, 2011
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