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CISG CASE PRESENTATION

Serbia 10 November 2009 Foreign Trade Court attached to the Serbian Chamber of Commerce (Original DVD recordings case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/091110sb.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20091110 (10 November 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-23/08

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Serbia (claimanat)

BUYER'S COUNTRY: Bosnia and Herzegovina (respondent)

GOODS INVOLVED: Original DVD recordings


Classification of issues present

APPLICATION OF CISG: Yes [Article 1]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 7 ; 59 ; 78 [Also cited: Article 4 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Issues excluded – computation of time periods];

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

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

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

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 10 November 2009 [Proceedings No. T–23/08]

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

Edited by Dr. Milena Djordjevic, LLM (U. Pittsburgh) and Marko Jovanovic [**]

Claimant (Serbia) [Seller] v. Respondent (Bosnia and Herzegovina) [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] from Serbia, represented by [V], against [Buyer] from Bosnia and Herzegovina on the grounds of the main debt for in the amount of EUR 9.400,00, the interest and the costs of the proceedings, upon the conducted proceedings and oral hearing of 15 October 2009, in accordance with the Article 34, Article 37 paragraph 6 and Article 49 of the Rules of the Foreign Trade Court of Arbitration, on this 10 November 2009, makes the following

AWARD

  1. [Seller]’s claim is granted and [Buyer] is ordered to pay the debt in the amount of EUR 9.400,00 for the outstanding price for delivered goods, within 15 days from the day of receipt of the Award.

  2. [Seller]’s claim regarding the interest is granted and [Buyer] is ordered to pay 3.36% annual interest rate in Euros for a period from 10 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 the registration fee and arbitration costs in the amount of RSD 161.305,00 along with the Claimant’s costs arising from the proceedings (drafting the Statement of Claimant costs of representation with the flat rate) in the amount of RSD 16.000,00 that totals to RSD 177.305,00 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 24 December 2008, the [Seller] submitted that, pursuant to Article 15 of the Contract concluded on 15 December 2007 between the [Seller] and the [Buyer], the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce has jurisdiction. The article 15 of the Contract states:

"Disputes and disagreements arising from this Contract or regarding its execution, the contracting parties shall attempt to settle 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 Serbian Chamber of Commerce. The Parties commit to execute the arbitral award within the time period specified in the award itself."

2. Following the [Seller]’s payment of the registration fee and arbitration costs, the Secretariat of Arbitration, pursuant to Article 30 paragraph 7 of the Rules of the Foreign Trade Court of Arbitration (hereinafter the Rules) sent the Statement of Claim with Appendices to the [Buyer] on 27 February 2009 and invited him to, pursuant to paragraph 1 and 2 Article 31 of the Rules, submit the Statement of Defence and to, in agreement with the [Seller] within 30 days from the Reply to the Statement of Claim, appoint a sole arbitrator in accordance with Article 21 Paragraph 1 and 2 of the Rules and to notify the Arbitration in writing about it. The Secretariat also notified the [Buyer] that the sole arbitrator shall be appointed by the President of the Court of Arbitration, should the Parties fail to appoint the sole arbitrator by mutual agreement within the prescribed time period.

The Statement of Claim that the Secretariat had sent to [Buyer] to the address indicated in the Statement of Claim by registered mail with confirmation of receipt, was delivered to the [Buyer] on 6 March 2009, as can be seen from the confirmation of receipt in the case file.

3. Having in mind that the [Buyer] had not filed the Statement of Defence 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 18 May 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. The arbitration agreement is incorporated in the Article 15 of the Contract concluded on 5 December 2007 between the [Seller] and the [Buyer] in this dispute and filed with [Seller] under number 86 on 10 December 2007.

II. APPOINTMENT OF ARBITRATORS

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

2. Pursuant to Article 21 paragraph 3 of the Rules, since the [Buyer] has not filed the Statement of Defence by the specified deadline, on 18 May 2009 the President of the Court of Arbitration appointed [X], 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 24 December 2008, the [Seller] submitted the Contract concluded on 5 December 2007 between the [Seller] and the [Buyer]. The Contract in the article 15 contains the following clause:

"Disputes and disagreements arising from this Contract or regarding its execution, the contracting parties shall attempt to settle 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 Serbian Chamber of Commerce. The Parties commit to execute the arbitral award within the time period specified in the award itself."

2. From this clause it stems that it is, by its nature, an arbitration clause and that the contracting Parties – the [Seller] and the [Buyer] in this dispute – in order to settle a dispute arising from the Contract or its execution agreed on the jurisdiction Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce.

3. The arbitration agreement incorporated in the article 15 of the Contract concluded on 5 December 2007 between the [Seller] and the [Buyer] 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 12 of the Rules), which stems from the Contract between the [Seller] from Serbia and the [Buyer] from Macedonia, concluded on 5 December 2007, whose subject matter is regulation of mutual rights and responsibilities related to the export and distribution of original DVD editions of the publisher and exporter [Seller] to the territory of Federation of Bosnia and Herzegovina, to the [Buyer] as distributor and representative of the exporter in the wholesale and retail on the territory in question (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 15 of the Contract concluded in writing on 5 December 2007 between the [Seller] and the [Buyer], and it applies to all future disputes arising from the Sales Contract.

4. 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 24 December 2008 for payment of debt. In the Statement of Claim it stated that it concluded the Contract with the [Buyer] on 5 December 2007, and accordingly the [Buyer] became the distributor of DVD editions on the territory of Bosnia and Herzegovina, and the [Seller] obliged himself on delivery of these goods under the agreed conditions. According to the Statement of Claim, on 11 December 2007 the [Seller] delivered to the [Buyer] consignment of DVD editions in total value of EUR 9.400,00 that the [Buyer] was due to pay "no later than 180 days from the delivery date specified on the customs declaration" (article 7 of the Contract). That time period, according to the Statement of Claim, has expired on 13 June 2008, and the [Buyer] has not paid its debt. The [Seller], based on default of the [Buyer] that consists of payment of payment of the invoiced amounts owed for delivered goods (article 7 of the Contract, requires the payment of the debt in the amount of EUR 9.400,00.

Together with the request for payment of the main debt, the [Seller] requires the payment of interest in Euros on the discount rate calculated by the European Central Bank, starting from 13 June 2008 as the due date until the date of payment. The [Seller] also set the request for payment of the costs of the proceedings.

2. The [Seller] delivered the following evidences: photocopy of the Contract concluded on 5 December 2007; photocopies of the invoice no. 780/07 of 11 December 2007 and translations of the invoices from English, accompanying customs documentation for the goods in question, and the special power of attorney authorising the attorneys to represent the [Seller] before the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce in the dispute against the [Buyer] regarding the payment of debt.

3. Following the [Seller]’s payment of the registration fee in the amount of RSD 17.575,00 and in accordance with Article 57 of the Rules on 31 December 2008, that the Arbitration was notified about on 14 January 2009, and also following the payment of the arbitration costs in the amount of RSD 143.730,00 pursuant to the Article 57 paragraph 1 of the Rules, the Arbitration on 27 February 2009 has sent the notice to the [Buyer] inviting him to its submit the Statement of Defence within 30 days and to give its opinion regarding the [Seller]’s suggestion that appointment of a sole arbitrator should be done by the President of the Court of Arbitration, but also to, in case of disagreement with the [Seller]’ s proposal, appoint the sole arbitrator by mutual agreement with the [Seller], and to notify the Arbitration in writing within 30 days, otherwise sole arbitrator shall be appointed by the President of the Court of Arbitration, pursuant to the Article 21 paragraph 3 of the Rules. The [Buyer] has also been notified that, pursuant to the Article 34 paragraph 7 of Rules, the arbitration procedure shall be continued in accordance with the provisions of the Rules if the duly invited [Buyer] fails to reply to the Statement of Claim or the call, or refuses to participate in the arbitration procedure.

4. The [Buyer] failed to reply to the Statement of Claim, that was sent via registered mail with confirmation of receipt, nor had it stated its opinion regarding the appointment of the arbitrator. It can be seen from the confirmation of receipt in the case file that the [Buyer] has received the Statement of Claim on 6 March 2009.

5. The President of the Court of Arbitration pursuant to article 21 paragraph 3 of the Rules nominated the sole arbitrator on 18 May 2009, of which, following the arbitrator’s declaration of acceptance of duty and statement of independence, the Parties were notified in accordance with article 25 paragraph 2, and invited to give their declarations pursuant to article 25 paragraph 3 of the Rules. The [Seller], according to the case file, received the notification from the Secretariat on 4 June 2009, whereas the [Buyer] received it on 9 June 2009. Following this, pursuant to article 35 paragraphs 1 and 6 of the Rules (Official Gazette of the Republic of Serbia no.52/07 of 8 June 2007) the sole arbitrator scheduled the oral hearing for 15 October 2009 in the premises of the Court of Arbitration.

6. The representatives of the [Seller] participated at the hearing held on 15 October 2009. The invitation to the hearing was sent to the [Buyer] on 18 September 2009 by registered mail with confirmation of receipt. It can be seen from the confirmation of receipt that the [Buyer] has received the Statement of Claim on 23 September 2009.

7. Having in mind all the facts presented, the sole arbitrator has established that the [Buyer] was duly invited to the hearing and that there is no legitimate reason for the absence, therefore, pursuant to the article 37 paragraph 6 of the Rules, the arbitrator ascertained that the oral hearing can commence even though one of the Parties – the [Buyer] in this case – is not present.

8. The representative of the [Seller] stated at the hearing that it remains with the Statement of Claim, as specified in the Statement of Claim itself.

9. Together with the request for payment of the main debt, the [Seller] set the request for payment of interest in Euros at the discount rate calculated by the European Central Bank, starting from 13 June 2008 as the due date until the date of payment.

10. In the evidentiary procedure, the sole arbitrator has presented the evidences by reading the documents that the [Seller] enclosed with the Statement of Claim. The evidence procedure was completed by reading the documents that the [Seller] enclosed with the Statement of Claim.

11. The [Seller]’s attorney submitted the Tariff of Attorney’s Fees, according to which the costs amount to RSD 16.000,00 (for drafting the Statement of Claim RSD 7.500,00 and for representation at the hearing RSD 8.500,00). The [Seller]’s costs are also the costs of registration fee in the amount of RSD 17.575,00 and arbitration costs in the amount of RSD 143.730,00, which totals to RSD 177.305,00.

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

1. The arbitration clause, incorporated in article 15 of the Contract concluded on 15 December 2007 between the [Seller] and the [Buyer] in this dispute states the following:

"Disputes and disagreements arising from this Contract or regarding its execution, the contracting parties shall attempt to settle 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 Serbian Chamber of Commerce. The Parties commit to execute the arbitral award within the time period specified in the award itself."

2. From this arbitration clause, that the sole arbitrator found to be valid, (see above III.1-4.) 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.

3. 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).

4. When it comes to the applicable law in the matters of substance, the sole arbitrator acted in accordance with Article 48 of the Rules. Since the Parties have not agreed upon the applicable material law, the sole arbitrator determined the applicable law in accordance with Article 48 paragraph 2 of the Rules. Pursuant to that provision, the sole arbitrator ought to decide the conflict-of-laws rule that is the most appropriate to apply.

The Contract concluded on 5 December 2007 between the [Seller] – which is, according to the Contract the exporter - and the [Buyer] – which is, according to the Contract the buyer and distributor – is not specifically nominated by the contracting Parties, however, it stems from the subject matter of the Contract, which is specified in its article 1, that it is about export and distribution of original DVD editions of the exporter, who is at the same time the publisher of these. Article 10 of the Contract designates that subject matter is sales of goods, i.e. audio and video sound carriers, whose publisher and exporter is [Seller] in this dispute. In article 5, which defines the rights and responsibilities of the exporter - [Seller] in this dispute – it is determined, among others, that he will regularly send its goods to the distributor and [Buyer] in this dispute; article 6 of the Contract determines that the exporter will regularly supply the distributor with all ordered goods at the price of 1 EUR per DVD, and article 7 prescribes that the distributor "shall pay the exporter the invoiced sums that he owes for delivered quantity of goods immediately, upon executed payment by the [Buyer], and no later than 180 days from the day of delivery of goods specified on the customs declaration…". The sole arbitrator from the mentioned provisions came to the conclusion that relation between the [Seller] and the [Buyer] in the case which is the subject of these proceedings, has characteristics of the Sales Contract, regardless the other rights and responsibilities of the Parties determined by the Contract.

Having in mined the above mentioned, the sole arbitrator considers that 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. 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 6 March 1992 in Bosnia and Herzegovina, 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.

5. 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 pay the main debt and the interest to the main debt to the [Seller]; 
2)  Whether the [Buyer] is obliged to pay the costs of these proceedings to the [Seller].

VI.1. Obligation of [Buyer] to pay the main debt and the interest to the main debt

1. The Contract concluded on 5 December 2007 between the [Seller] and the [Buyer] in this dispute is not specifically nominated by the contracting Parties, however, it stems from the provisions of the Contract that it is the contract on sales and distribution. In introductory part of the Contract the [Seller] in this dispute is nominated as the exporter, and the [Buyer] is nominated as the buyer and distributor. The subject matter of the Contract, according to article 1 of the Contract, is regulation of mutual rights and responsibilities related to the export and distribution of original DVD editions, of the publisher and exporter [Seller] on the territory of Federation of Bosnia and Herzegovina, to the [Buyer] in this dispute as distributor and representative of the exporter in the wholesale and retail on the territory in question. Based on article 3 of the Contract it can be ascertained that the subject matter of the Contact is delegation of the right of placement and sales of the goods in question on the territory of Bosnia and Herzegovina, whereas it stems from article 10 that the subject matter of the Contract is the sales of audio and video sound carriers by the exporter to the buyer and distributor and from provisions in articles 5-8 of the Contract it stems that that relation between the [Seller] and the [Buyer] in this dispute, and regarding which the dispute that is the subject of this proceedings before the Court of Arbitration arose, has characteristics of a sales contract. Pursuant to article 5 of the Contract the exporter – [Seller] in this dispute – has the right and obligation to regularly send its goods to the distributor – the [Buyer] in this dispute – immediately after receipt of an order; delivery of goods is conducted in accordance with the type and quantity specified in orders given in writing, electronically or by telephone as prescribed in the article 8; article 6 confirms the obligation of the exporter to regularly supply the distributor with all ordered products of the standard quality, at the price expressed in Euros according to the current price list of exporters at the time of delivery of goods, which amounts to EUR 1,00 per a DVD piece. Article 7 prescribed the obligation of the distributor to pay the exporter the invoiced sums that he owes for delivered quantity of goods immediately, upon executed payment by the [Buyer], and no later than 180 days from the day of delivery of goods specified on the customs declaration, by making all the non-cash payments by remittance to the foreign currency account of the exporter, according to the instructions in the invoice itself.

The [Seller] enclosed the evidence with the Statement of Claim, i.e. the invoice no. 7780/07 from 11 December 2007 which specifies delivered goods – the DVDs – by names, quantity and price per unit, to the total amount of EUR 9.400,00; receipt no. 2254 of an international shipping and transport company, showing that the goods were handed over to the freight forwarder in order to be delivered to the place X; the customs document itself from 11 December 2007; the document – calculation of the customs debt no. 11568-1701-030124 from 11 December 2007; the international waybill no.123968 from 11 December 2007.

The sole arbitrator conducted the evidentiary procedure at the oral hearing by examination of the [Seller]’s counsel and reading of all evidence presented.

Based on the facts established through the evidence procedure, the sole arbitrator found that, pursuant to Article 59 of the Vienna Convention, the [Seller]’s request for payment of the purchase price for delivered goods is founded. Pursuant to that provision the buyer must pay the price on the date fixed by or determinable from the contract and this Convention without the need for any request or compliance with any formality on the part of the seller. Considering that the [Buyer], as the buyer, has not fulfilled his obligation to pay the price by the date determined in the Contract, he has violated his obligation from the Article 59, therefore he is obliged to pay to the [Seller] total amount of 9.400,00 EUR on this basis.

2. The [Seller] in the Statement of Claim also set the request for payment of the interest to the main debt, starting from 13 June 2008 as the due date until the date of payment. According to the Article 78 "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." Pursuant to this provision, the [Buyer] in this dispute owes the statutory interest to the [Seller], if he is in delay.

It can be seen from the previous point of this part of the Statement of reasons that the [Buyer] has not paid the purchase price for the goods the [Seller] delivered on 5 December 2007, and that he was obliged to pay by the date determined in the article 7 of the Contract. It stems from this provision that [Buyer] was due to pay the price not later than 180 days from the date of delivery specified on the customs declaration. The date specified on the customs declaration is 11 December 2007, in respect of which it should be determined when the [Buyer] in this dispute was in default (delay). Since the Vienna Convention does not regulate this question, the applicable law is the Serbian law, as has been explained above (point V.4). It stems that in the case at hand, the deadline, i.e. the time calculation is to be made in accordance with Article 77 of the Law on Obligations of Republic of Serbia (The official Gazette of SFRJ, no.29/78, 39/85, 45/89 I and 57/89, and the Official Gazette of SRJ, no. 31/93). According to Article 77 paragraph 1 "A time limit specified in days shall commence on the first day after the event serving as the beginning of calculating the time limit, and shall terminate with the expiry of the last day of the time limit" whereas paragraph 3 prescribes that "Should the last day of the time limit fall on the day determined by law as a holiday, the following workday shall be counted as the last day of the time limit". In line with the mentioned provisions of the applicable substantive law, the sole arbitrator has determined that the time limit for the payment of the price commenced on 12 December 2007 and it terminated on 9 June 2008. Since the [Buyer] in this dispute had not paid the purchase price, he was in default starting from 10 June 2008. From that date the [Seller] in this dispute is entitled to the statutory interest on the sum of EUR 9.400,00 based on Article 78 of the Vienna Convention.

3. The [Seller] in the Statement of Claim set the request for payment of the statutory interest rate in Euros on the discount rate calculated by the European Central Bank. Article 78 of the Vienna Convention determines the general right to interest [1] on the amounts of money due, but it does not expressly settle the same, as it does not define the interest rate or the way to fix it.

The sole arbitrator considers that this is the situation where the solution should be searched for in accordance with Article 7 of the Vienna Convention. Pursuant to paragraph 2 of this Article "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." Settling the issues that have hot been expressly settled in the Convention in conformity with the general principles on which the Convention is based on, is in accordance with the provision from Article 7 paragraph 1 prescribing that in interpretation of the 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.Since the objective of the Vienna Convention, 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, this provision 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 Schiedsgerichtder Bundeskammerdergewerblichen Wirstchaft – Wien, No. SCH 4318 from 15.06.1994.).

Even though the Convention itself does not determine these general principles, in comparative theory and practice these are drawn out of the purpose and analysis of individual articles and their place in the system established by the Convention.[2] The general principle referring to the obligation of paying the purchase price and failure to comply with it, is the principle of full compensation for the loss suffered, in order to enable the aggrieved party to be in a situation to benefit from the contract concluded with the other party. The appropriate interest rate should be decided in accordance with this principle, having in mind Article 7 paragraph 1. Comparative theory and arbitration practice advocate the position that the appropriate rate would be the one corresponding to the price of a loan the seller would have taken for the needs of his business due to inability to use the sum the buyer.[3] Arguments in favour of this solution point out that it is promoting the international trade, by promotion of uniformity and good faith in application of law. The specific rate would be determined by 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. If such interest would not exist in that specific place, the interest rate would be determined by the average rate applied in the country of the currency in which the payment is arranged. 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 set the request for payment of the statutory interest rate in Euros at the discount rate calculated by the European Central Bank. Since the sole arbitrator considers that it is in the interest of promotion of international trade, to determine the interest rate in accordance with Article 7 paragraph 2 of the Vienna Convention, the [Seller] is entitled to the interest rate equal to the average interest rate that applies to short-term loans applied in the country of the currency in which the payment is arranged. Although in Serbia there is a possibility of obtaining short-term loans in Euros, commercial banks approve these under different conditions and with different interest rates, depending on the conditions themselves, which makes its determination unreliable,[4] therefore the sole arbitrator considers it would be more reliable to determine the interest rate based on the information published by the European Central Bank, relying on the practice in the countries of European Union where Euro is used as the method of payment/currency. Consequently, the [Seller] is entitled to the interest by the average interest rate that is applied to short-term loans in the member countries of European Union. According to the statistical bulletin of the European Central Bank available at the web page <http://www.ecb.europa.eu/press/pdf/mfi/mir0911.pdf> such average interest rate in September 2009 amounted to 3,36% on annual basis.

5. Since the [Buyer] in this dispute – buyer and distributor according to the Contract – was in default on 10 June 2008, the [Seller] in this dispute, based on Article 78 of the Vienna Convention, is together with the purchase price entitled to the interest on EUR 9.400,00. In accordance with the above mentioned under points 3-4. of this Statement of Reasons, the [Seller] is entitled to interest on the annual rate of 3,36%, and – in accordance with what has been said in point 2 of this part of the Statement of Reasons –starting from 10 June 2008 until the day of payment.

VI.2. 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 RSD 16.000,00 (for drafting the Statement of Claim RSD 7.500,00 and RSD 8.500,00 for representation at the hearing held on 15 October 2009). The [Seller]’s costs are also the costs of registration fee in the amount of RSD 17.575,00 and arbitration costs in the amount of RSD 177.305,00 which totals to RSD 177.305,00.

2. Pursuant to the Article 149 paragraph 1 of the Serbian Law on Civil Procedure: ‘The party who loses the case shall reimburse the costs of the other party’. The [Buyer] in the case at hand, based on the established facts and presented evidences, lost the case in its entirety.

3. 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 were necessary. Based on that, the [Buyer] is obliged to pay the costs of the proceedings in total amount of RSD 177.305,00 as determined in the point 3. of the Disposition of this Award.

VII. FINALITY OF THE AWARD

Pursuant to the Article 64 paragraph 1 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. [U. Cambridge]. 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.

1. <http://cisgw3.law.pace.edu/cisg/biblio/ho78.html>, <http://cisgw3.law.pace.edu/cisg/biblio/loo78.html>, <http://www.cisg.law.pace.edu/cisg/biblio/thiele.html#N_2>

2. <http://cisgw3.law.pace.edu/cisg/biblio/koneru.html#90>.

3. Ibid.

4. <http://www.nbs.yu/export/internet/cirilica/50/rlinks/uslovi_kreditiranja_msp.pdf>

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Pace Law School Institute of International Commercial Law - Last updated September 4, 2012
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