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CISG CASE PRESENTATION

Serbia 6 May 2010 Foreign Trade Court attached to the Serbian Chamber of Commerce (Agricultural products and cereals case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/100506sb.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20100506 (6 May 2010)

JURISDICTION: Arbitration ; Serbia

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: T -5/09

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Serbia (claimant)

BUYER'S COUNTRY: Bosnia and Herzegovina (respondent)

GOODS INVOLVED: Agricultural products and cereals


Classification of issues present

APPLICATION OF CISG: Yes [Article 1]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 6 ; 7 ; 59 ; 78

Classification of issues using UNCITRAL classification code numbers:

6A [Exclusion or modification of Convention by contract - choice of law of the contracting state does not amount to exclusion of the Convention];

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

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 6 May 2010 [Proceedings No. T-5/09]

Translation by [*] Uroš Živković

Edited by Dr. Milena Djordjevic, LL.M. and Marko Jovanovic, LL.M. [**]

Claimant (Serbia) vs. Respondent (Bosnia & Herzegovina)

Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce in Belgrade, with its sole arbitrator [….], in a case between the [Seller] as Claimant, represented by Ms. X as to the enclosed Power of Attorney against the [Buyer] as Respondent represented by its legal representative and director Mr. Y, concerning the payment of debt in the amount of EUR 9,138.34 with interest and costs of the arbitral proceedings, after the hearing held on 7 April 2010 and pursuant to Articles 35, 47 and 49 of the Rules of the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce, on 6 May 2010 made the following

AWARD

1.    The claim of the [Seller] is granted and the [Buyer] is ordered to pay the principle amount of EUR 7,663.08 as a purchase price for delivered goods within 15 days from the receipt of the award.

2.1    The [Seller]’s claim for payment of EUR 2,418.91 by the [Buyer] as a compensation for due interest accrued on the principle debt up to 12 April 2010 as well as the default interest calculated on the RSD counter-value of the principal debt from 13 April 2010 to the date of payment is refused as ungrounded.

2.2. The [Buyer] is ordered to pay to the [Seller], apart from the principal debt, the interest in EUR at the interest rate of 3,778% annually as follows:

-    On the amount of EUR 3,154.48 as of 15 December 2008 to 12 August 2009, within 15 days from the receipt of the award;
-    On the amount of EUR 2,654.48 from 13 August 2009 to the date of payment, within 15 days from the receipt of the award;
-    On the amount of EUR 4,936.00 from 23 December 2008 to the date of payment, within 15 days from the receipt of the award;

3.1. The [Buyer] is ordered to pay to the [Seller] the costs of the proceedings in the total amount of EUR 2,108.67 within 15 days from the receipt of the award.

3.2.     The [Seller]’s claim for payment of interest on the amount of costs of the arbitral proceedings from the moment of finality of the award to the date of payment is refused.

STATEMENT OF REASONS

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

In its Statement of Claim dated 28 April 2009 the [Seller] alleged that the jurisdiction of the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce (hereinafter referred to as: FTCA) stems from the Article 13 of the Contract for Sale and Delivery of Goods concluded on 16 June 2008 between the parties to the dispute. The Article 13 provides that:

"In case of dispute between the parties relating to execution of any contractual or legal obligation, legal representatives of the Seller and the Buyer by their signatures hereto confirm that any such dispute will be finally settled before the Foreign Trade Court of Arbitration attached to Serbian Chamber of Commerce in Belgrade.

The Contracting Parties agree that provisions of the Law on Arbitration of the Republic of Serbia and the Rules of the Foreign Trade Court of Arbitration attached to Serbian Chamber of Commerce are to be applied in relation to the procedure before the Foreign Trade Court of Arbitration, while the decision on the merits is to be based on the applicable laws of the Republic of Serbia.

Accepting the jurisdiction of the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce, the Contracting Parties have undertaken an obligation to enforce the final award of that Arbitration."

Upon payment of the registration fee and the costs of arbitral proceedings by the [Seller], pursuant to the Article 30 paragraph 7 of the Rules of the Foreign Trade Court of Arbitration (hereinafter referred to as: FTCA Rules) on 13 October 2009 the Secretariat of the FTCA forwarded the Statement of Claim with appendixes to the [Buyer] and invited it to file an Answer to Claim in accordance with the Article 31 paragraphs 1 and 2 of the FTCA Rules. The [Buyer] made no objections to jurisdiction of the FTCA in its Answer to Claim received by the Secretariat of the FTCA on 9 November 2009.

Based on the submitted Contract for Sale and Delivery of Goods concluded on 16 June 2008 between the [Seller] and the [Buyer] and the documents of the file, the sole arbitrator has concluded that the arbitration agreement is contained in the form of an arbitration clause and that the parties – the [Seller] and the [Buyer] – are submitting their dispute to be resolved before the FTCA.

Arbitration agreement contained in the Article 13 of the Contract concluded between the [Seller] and the [Buyer] on 16 June 2008 fulfils the validity preconditions stipulated by the Article 5 paragraph 1 of the Law on Arbitration (Official Gazette of the Republic of Serbia no. 46/2006) and Articles 12-13 of the FTCA Rules, as follows:

(1)    the subject of the dispute arises out of an international business relation (Article 12 of the FTCA Rules), as per the Contract concluded on 16 June 2008 between the [Seller] and the [Buyer] calling for a sale, purchase and delivery of goods – agricultural products and grains from Serbia to Bosnia & Herzegovina (Article 1 of the Contract); the subject of the dispute as such does not fall within the exclusive jurisdiction of the Serbian courts and is deemed as arbitrable under the Article 5 paragraph 1 of the Serbian Law on Arbitration (Official Gazette of the Republic of Serbia no. 46/2006);

(2)    The arbitration agreement contained in the Article 13 of the Contract for Sale and Delivery concluded in writing on 16 June 2008 between the [Seller] and the [Buyer] relates to disputes between the parties concerning non-performance of contractual obligations.

In accordance with all the previous elements and evidence submitted, the sole arbitrator concluded that FTCA has jurisdiction to hear the dispute.

II. Appointment of the Arbitrator

Having in mind that pursuant to the Statement of Claim the value of the dispute is below 70,000.00 EUR, the Article 20 paragraph 1 of the FTCA Rules provides that the dispute is to be resolved by a sole arbitrator.

In its Statement of Claim dated 28 April 2009, the [Seller] suggested that the Chairman of the FTCA should appoint the sole arbitrator. The [Buyer] agreed with this suggestion in its Answer to Claim dated 9 November 2009 and declared that the appointment of a sole arbitrator should be made by the Chairman of the FTCA.

Having in mind that the parties agreed to leave the appointment of the sole arbitrator to the Chairman of the FTCA, on 24 November 2009 pursuant to Article 21 paragraph 2 of the FTCA Rules, the Chairman appointed Ms. X as the sole arbitrator who subsequently accepted her mandate and submitted a statement of independence.

III. The [Seller]’s Claim and the Arbitral Proceedings

The [Seller] submitted its claim for payment of debt to FTCA on 29 April 2009. Statement of Claim clarified that the [Seller] and the [Buyer] have concluded the Contract for Sale and Delivery of Good dated 16 June 2008 that called for successive sale and delivery of agricultural products and grains from the territory of the Republic of Serbia to the territory of the Republic of Bosnia & Herzegovina during 2008/2009 (hereinafter referred to as: Contract). Pursuant to the Statement of Claim, in 2008 the [Seller] has on several occasions delivered agricultural products to the [Buyer], for which partial timely payments were made in accordance with Article 4 of the Contract. At the moment when the Statement of Claim was filed before the FTCA, the [Buyer]’s outstanding debt towards the [Seller] for the goods purchased in September 2008 comprised of the amount of 3,154.48 EUR under invoice no. 111/08 dated 15 September 2008 and 4,936.00 EUR under the invoice no. 112/08 dated 23 September 2008. The [Seller] has notified the [Buyer] multiple times via telephone and in writing of its obligations and evidenced such attempts by a letter addressed to the [Buyer] dated 21 November 2008. The [Seller] claims that the outstanding amounts under the stated invoices became due on 15 December 2008 and 23 December 2008 respectively, whereas the [Buyer] failed to settle its obligations and remit the debt. Accordingly, the [Seller] claims that the failure on the side of the [Buyer] to settle its obligations entitles the [Seller] to request the principal amount of debt under the stated invoices as well as the interest accrued until 24 April 2009, that is the amount of 9,138.34 EUR.

Apart from the principal amount and accrued interest until 24 April 2009 (Article 4 paragraphs 2 and 3), the [Seller] requests the payment of the default interest on the RSD counter value of 8,090.48 EUR running from 25 April 2009 until the date of final payment. The [Seller] has additionally requested the reimbursement of the costs of arbitral proceedings to be awarded by the sole arbitrator, with interest running from the date of finality of the award until the final payment.

After the [Seller] had paid the registration fees and costs of the arbitral proceedings, the Secretariat of the FTCA forwarded the Statement of Claim to the [Buyer] on 13 October 2009 pursuant to the Article 30 paragraph 7 of the FTCA Rules and invited the [Buyer] to file its Answer to Claim in accordance with the Article 31 paragraphs 1 and 2 of the FTCA Rules.

The [Buyer] submitted its Answer to Claim dated 4 November 2009 that was received by the Secretariat of the FTCA on 9 November 2009, whereby it fully contested the Statement of Claim. In accordance with its submissions, the [Buyer] argued that the attorney of the [Seller] - Company M represented by Mr. Z from Novi Sad - authorized to undertake any and all actions with respect to collection of the claim from the [Buyer] reached an agreement with the [Buyer] to settle the outstanding debt towards the [Seller] in a larger number of installments. Accordingly and in line with this agreement, the [Buyer] gave 500.00 EUR to Mr. Z on 12 August 2009, 250.00 EUR on 21 September 2009 and 250.00 EUR on 15 November 2009. Moreover, the [Buyer] pleaded that, in accordance with its records, the outstanding debt towards the [Seller] on 1 January 2009 amounted to 8,187.54 EUR and not 9,138.34 EUR. The [Buyer] reinstate its willingness to repay the debt towards the [Seller] in installments and suggested to the FTCA to reject the claim of the [Seller] as ungrounded.

As a proof for its claims, the [Buyer] provided the following evidence: confirmation of receipt of 500.00 EUR from the owner of the [Buyer] as a partial compensation of the outstanding debt towards the [Seller] dated 12 August 2008, issued by the company M and signed by Mr. Y; confirmation of receipt of 250.00 EUR on 15 September 2009, received by Mr. Z, issued by the company M; confirmation of receipt of 250.00 EUR as a compensation of claim towards Company M dated 21 September 2009, issued by the Company M; balance sheet with the initial total of 15,965.78 KM on 1 January 2009 that states that the debt amount to 8,187.57 EUR.

The [Seller]’s submission dated 19 November 2009 that was received by the Secretariat of the FTCA on 24 November 2009, contested all the arguments of the [Buyer] from the Answer to Claim dated 4 November 2009 apart from one. Namely, the official representative of the [Seller] does not contest that 500.00 EUR was received from an employee of Company M on 14 August 2009. This amount was initially received by the official representative of Company M from the [Buyer] for the purposes of providing a deposit as a security that the debt – the subject matter of this dispute – will be paid to the [Seller]. The deed provided confirms the foregoing submission of the [Seller].

The [Seller] confirmed that it will decrease the value of the claim for the amount of 500.00 EUR that, as stated above, was considered as a deposit securing the payment of the outstanding debt, taking it as a partial payment instead of a security.

Based on the amended financial expert findings dated 20 November 2009, the [Seller] amended its claim within submission dated 24 November 2009 (received on 26 November 2009) so that it requests: the payment of 8,869.78 EUR as a principal amount and accrued interest until 20 November 2009; default interest running on the RSD counter value of 8,869.78 EUR from 21 November 2009 until the date of final payment; and the costs of arbitral proceedings to be awarded by the sole arbitrator, with interest running from the date of finality of the award until the final payment.

In its submission dated 17 December 2009, the [Buyer] contested the [Seller]’s claims raised in its submission from 24 November 2009, stating that it maintains its position from previous submissions. Further evidence in support of the [Buyer]’s claims were not submitted.

The [Seller] confirmed its previous standing and argumentation as well as the amended claim from 24 November 2009 in its submission dated 28 December 2009.

In its Statement of Claim, the [Seller] suggested to the FTCA to render an award without conducting an oral hearing. The [Buyer] made no reference to this suggestion in its previous submissions. Based on the status of the proceedings, the sole arbitrator concluded that oral hearing will be necessary and scheduled the session for 7 April 2010. The Secretariat of the FTCA duly notified the parties and the oral hearing took place on 7 April 2010 starting at 12:00 hours in the premises of the FTCA. The attorney and official representative of the [Seller] as well as the official representative of the [Buyer] and their counsel were presented.

The [Seller] stated at the hearing that it maintains its position and argumentation in light of the amended claim from 24 November 2009 whereby it confirmed the receipt of 500.00 EUR and decreased the amount claimed accordingly. With respect to all its other submissions and stated facts, the [Seller] keeps its previous standing.

The [Buyer] confirmed its position from the Answer to Claim at the hearing, insisting that it is undisputed that part of the debt has remained unpaid contesting at the same time the alleged inexistence of the power of attorney given by the [Seller] towards Company M to negotiate the means of settling the outstanding debt of the [Buyer] in this dispute. In addition to the previous, the [Buyer] stated that it possesses the order form no. 56/09 dated 25 May 2009 that clearly indicates that the [Seller] authorized Company M to negotiate and reach a settlement agreement with the [Buyer] regarding this claim.

After the statements made by the [Seller] and the [Buyer], the sole arbitrator conducted evidentiary proceedings by hearing the parties and reading the submitted evidence.

The evidence read included: the Contract for Sale and Delivery of Goods concluded on 18 June 2008; corporate information of the [Seller] from the website of the Serbian Business Registers Agency and the Confirmation no. XXX dated 10 July 2007 of the [Buyer]; the [Seller]’s invoice no. 111/08 dated 15 September 2008, CMR no. XXX on the amount of 3,186.00 EUR whereby the [Seller] requests 3,154.48 EUR as a part of the principal debt; the [Seller]’s invoice no. 112/08 dated 23 September 2008 with confirmation on delivery of the goods (dispatch no. XX dated 23 September 2008 and JCI from the same day, CMR no. XXX) in the amount of 4,936.00 EUR as a part of the principal amount; the letter of the [Seller]’s attorney dated 21 November 2008 with sending and delivery confirmations; the calculation of the accrued interest prepared by the financial court expert; the [Buyer]’s Answer to Claim dated 4 November 2009 (received by the Secretariat of the FTCA on 9 November 2009); Confirmations of Company M in regard to the receipt of: 500.00 EUR from the owner of the [Buyer] as partial compensation for the claim of the [Seller] dated 12 August 2009, the receipt of 250.00 EUR by Mr. Z on 15 September 2009 with no specified legal grounds, the receipt of 250.00 EUR as payment of the debt towards Company M dated 21 September 2009; balance sheet from the [Buyer]’s records on 1 January 2009 with the initial total of 15,965.78 KM, hand written total of 8,187.57 EUR; the submission of the [Seller] as a response to the [Buyer]’s Answer to Claim dated 24 November 2009; Statement of Company M regarding the nature of its business relationship with the [Seller] as well as the business relationship it had with the [Buyer] dated 17 November 2009; submission of the [Seller] dated 26 November 2009 with the amended and decreased claim for the amount of 500.00 EUR received on 14 August 2009; amendments to the financial expert finding of Dr. D dated 20 November 2009; the [Buyer]’s submission dated 17 December 2009.

The [Seller] stated that due to the outstanding debt of the [Buyer] from 2008, after several attempts to contact the [Buyer] with respect to the settlement if its claims and a notice before legal action, it hired Company M to investigate the solvency of the [Buyer]. After conducting their investigation, Company M contacted the representative of the [Buyer], Mr. R that provided 500.00 EUR as a deposit for securing the settlement of the outstanding debt by the [Buyer]. On the same day, 14 August 2009, the official representative of the [Seller] received this security deposit, revoked the power of attorney given to Company M and accordingly paid for provided services.

The [Seller] further stated that in November 2009 it contacted Company M again for the purposes of confirming the status of the alleged partial cash payments of 250.00 EUR that the [Buyer] claimed to have executed in its Answer to Claim dated 4 November 2009. In addition, the [Seller] argued that it had not received any payments on 15 and 21 September 2009, which was confirmed by the Statement of Company M submitted in attachment to the submission dated 19 November 2009.

The [Buyer] confirmed at the hearing that it does not contest the existence of the principal debt that, pursuant to its own records, amounts to 8,187.57 EUR minus 500.00 EUR that were given to Company M on 12 August 2009.

The [Buyer] provided more details as to its financial problems and difficulties that blocked its accounts up until a few days prior to the oral hearing, that it is highly likely for a loan to be approved and that it is willing to settle its debts under the Contract. In light of these submissions, the [Buyer] invited the [Seller] to amicably resolve the dispute and reach an agreement regarding the settlement of the outstanding debt.

The [Seller] rejected the invitation and stated that it maintains its position as well as the claim that will be amended in accordance with the sole arbitrator’s instruction so that the principal amount of debt and the request for payment of interest are presented separately.

Following the evidentiary proceedings, the sole arbitrator ordered the [Seller] to submit the amended claim and provide evidence that was missing in its Statement of Claim dated 29 April 2009 as well as the Request for reimbursement of costs, all within the period of 7 days following the issuance of the order: the [Buyer] was ordered to submit the evidence it relied upon on the hearing but which were not submitted prior to the session.

In line with the sole arbitrator’s instructions, the [Seller] in it submission dated 14 April 2010 (received by the Secretariat of the FTCA on 16 April 2010) amended its claim and provided missing evidence. In this submission the [Seller] requested the payment of:

-    7,663.08 EUR as the principal amount of debt,
-    2,418.91 EUR as the interest accrued over the principal amount of debt up to 12 April 2010,
-    The default interest running on the RSD counter value of the principal amount of debt starting from 13 April 2010 until the date of final payment and
-    The costs of arbitral proceedings to be awarded by the sole arbitrator, with interest running from the date of finality of the award until the final payment.

The [Buyer] failed to meet the instructions of the sole arbitrator and timely submit the evidence requested during the oral hearing that was not previously distributed. The Secretariat of the FTCA received the submission of the [Buyer] accompanied by a copy of the Power of Attorney that authorized Company M to undertake legal actions in the interest of collecting the [Seller]’s claim dated 29 May 2009, a copy of the order form no. 56/09 for the services of debt collection with the same date, confirmation receipts already submitted with the Answer to Claim and the creditor balance sheet for the period 23 July 2008 to 17 December 2008 (with hand written balance data of 7,163.17 EUR (8,163.17 EUR – 250.00 EUR 500.00 EUR – 250.00 EUR)).

IV. The Law applicable to the Proceedings and the Merits

The arbitration agreement contained within the arbitration clause in Article 13 of the Contract dated 16 June 2008, concluded between the Parties to this dispute provides as follows:

"The Contracting Parties agree that provisions of the Law on Arbitration of the Republic of Serbia as well as the Rules of the Foreign Trade Court of Arbitration attached to Serbian Chamber of Commerce are to be applicable with respect to the procedure before the FTCA, whereas the applicable laws of the Republic of Serbia are to be applied to the substance of the dispute."

This provision of the arbitration agreement, confirmed as valid by the sole arbitrator in the section I paragraphs 3-4 of this award, stipulates that the Parties have contracted for applicable law in terms of both procedure and substance of the dispute.

Accordingly, pursuant to the Article 13 paragraph 2 of the Contract concluded between the [Seller] and the [Buyer] on 16 June 2008, the provisions of the Serbian Law on Arbitration and Article 45 paragraph 2 of the FTCA Rules, the sole arbitrator has applied certain provisions of the Law on Civil Procedure of the Republic of Serbia ("Official Gazette" no 125/04).

The Contracting Parties have chosen the law of the Republic of Serbia to be applied to the merits of this dispute, as per the Article 13 paragraph 2 of the Contract. Having in mind that the dispute arises out of the contract for international sale of goods, the relevant rules of the Serbian legislation in this area are contained in the UN Convention on Contracts for International Sale of Goods concluded in Vienna in 1980 (hereinafter referred to as: Vienna Convention), that came into force on 27 April 1992 in Serbia. The Article 1(1) of this Convention states that the Convention applies to contracts of sale of goods between parties whose places of business are in different States when these States are Contracting States. Given that the Convention is applicable in Bosnia and Herzegovina since 6 March 1992 <www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html>, the conditions for its application in the context of the current dispute – as a part of applicable internal laws of the Republic of Serbia - are fulfilled. However, acknowledging the principle of the party autonomy, Article 6 of the Vienna Convention stipulates that "the parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions." If the exclusion is explicit, the contract for the international sale of goods will be governed by the internal laws of a state, applicable by virtue of the rules of conflict of laws. The question that remains is whether the application of the Vienna Convention can be excluded implicitly through the choice of certain national law as applicable law to the dispute – as is the case here.

In both doctrine and case law, it is undisputed that the choice of national law of State that is not a party to the Vienna Convention, implicitly excludes its application. The problem arises in situations when the parties opted for a national law that encompasses the Vienna Convention to be applicable. Part of comparative judicial and arbitral practice is of the opinion that the choice of a national law of a State that is a party to the Convention implicitly entails exclusion of the Vienna Convention and application of internal law instead, since if it had been otherwise, the choice of applicable law would be rendered meaningless. The majority standing however is that the choice of a national law of a State party to the Convention includes the applicability of the Vienna Convention since it regulates the international sale of goods in the State whose laws were chosen as applicable, while the internal law will be applied with respect to the issues not governed by the Vienna Convention. If the parties opted for a law of certain State to be applied, without expressly delineating that they choose internal law of the State, the Vienna Convention will be applicable (comparative jurisprudence and doctrine available on the world wide web: <www.uncitral.org/uncitral/en/case_law/digests/cisg2008.html>, <www.uncitral.org/uncitral/en/case_law.html>, http://cisgw3.law.pace.edu/cisg/biblio/ferrari13.html#ii>).

Bearing in mind what was previously stated, the sole arbitrator considers that the [Seller] and the [Buyer] have – by choosing the laws of the Republic of Serbia as applicable to their Contract dated 16 June 2008 – opted for the Vienna Convention in the first place, whereas for the issues falling outside the scope or not regulated by the Convention they opted for internal laws of the Republic of Serbia to be applied. In light of the Article 13 paragraph 2 of the Contract and its Article 10 that provides for "application of the Law on Contracts and Torts of the Republic of Serbia in relation to all the issues not expressly regulated by the Contract", the application of the Vienna Convention is not excluded. The aim of this Article was to incorporate certain provisions of the Law on Contracts and Torts into the Contract, derogating from related provisions of the Vienna Convention, in the same manner that particular provisions of the Contract establish certain rights and obligations of the parties. This possibility is confirmed by the Article 6 of the Vienna Convention.

V. Statement of Reasons concerning the Claim

The sole arbitrator has evaluated all submitted evidence, separately and in conjunction, and established the following with respect to the [Seller]’s claims:

V.1. Obligation of the [Buyer] to settle the principal debt

The [Seller] and the [Buyer] have concluded the Contract for Sale and Delivery of Good dated 16 June 2008 that called for successive sale and delivery of agricultural products and grains from the territory of the Republic of Serbia to the territory of the Republic of Bosnia & Herzegovina during 2008/2009. According to the Statement of Claim, the [Seller] has on several occasions delivered agricultural products to the Buyer] in 2008, for which partial timely payments were provided in accordance with Article 4 of the Contract. At the moment when the Statement of Claim was filed before the FTCA, the [Buyer]’s outstanding debt towards the [Seller] for the goods purchased in September 2008 comprised of the amount of 3,154.48 EUR under invoice no. 111/08 dated 15 September 2008 and 4,936.00 EUR under the invoice no. 112/08 dated 23 September 2008, even though the Article 4 paragraph 2 of the Contract stipulates that these installments have become due on 15 December 2008 and 23 December 2009 respectively. Since, pursuant to the Article 4 paragraph 3 of the Contract, the [Buyer] is obliged to settle the payment of the default interest if it pursues payment in accordance with the paragraph 2 of the same Article, the [Seller] has requested the amount of accrued interest running on the RSD counter value of the principal invoiced debt and thereby requested 9,138.34 EUR as the total amount of the principal debt.

The [Buyer] has contested the amount of 9,138.34 EUR in its Answer to Claim, submitting that accordance to its records, the amount of debt is 15,965.78 KM that is 8,187.57 EUR. The foregoing represents the amount of the principal debt, excluding the interest. The [Buyer] has also submitted that it had reached an agreement on settlement of debt in several installments after the [Seller] filed its Statement of Claim before the FTCA, providing confirmation receipts of Company M whose employee received 500.00 EUR as a partial payment on 12 August 2009. The [Seller] made no objections in that regard, confirming that the said amount was held as a deposit securing the payment of the principal debt and stating that the deposit could be regarded as a partial fulfillment. Accordingly, the [Seller] amended its claim by decreasing the amount of 9,138.34 EUR to 8,869.78 EUR. The [Seller] contested that it received two further payments in the amount of 250.00 EUR each, and confirmed its allegations by submitting a written Statement by Company M dated 17 November 2009. The Statement of the Company M referred to these two subsequent payments as the settlement of claim it had towards the [Buyer]. Given the submitted confirmation receipts, the sole arbitrator was of the opinion that these only indicate that payments were received by an employee of the Company M, not that these amounts were in any way intended for the [Seller]. Accordingly, the sole arbitrator found that the [Buyer]’s claim was not substantiated.

The [Buyer] acknowledged the debt under the Contract on the hearing that held on 7 April 2010, stating that it amounts to 8,187.57 EUR minus 500.00 EUR and due to its financial difficulties proposed to the [Seller] an amicable solution by reaching a settlement. The [Seller] refused the proposal and amended its claim as instructed by the sole arbitrator, decreasing the amount of initial debt under the invoice no. 111/08 from 15 September 2008 for the amount of 500.00 EUR.

Based on established factual background and conducted evidentiary proceedings, under the Article 59 of the Vienna Convention the sole arbitrator concluded that the [Seller]’s claim for payment of the purchase price for delivered goods is grounded. In accordance with the mentioned Article, a buyer is obliged to remit the price on the day agreed under the contract, without any additional request or other formalities on the side of a seller. Having in mind that the [Buyer] failed to meet its obligation of payment of the purchase price stipulated under the Article 4 of the Contract, it owes the [Seller] the payment of 7,663.08 EUR.

V.2. The obligation of the [Buyer] to pay the interest running on the principal debt

The [Seller] has also requested the payment of the interest running on the principal debt. In accordance with the Article 4 paragraph 2 of the Contract, the [Buyer] is obliged to pay for the goods straight upon their delivery, but not later than 90 days following that day. Pursuant to the Article 4 paragraph 3 of the Contract, the [Buyer] that is settling the payment as provided in the paragraph 2 of the same Article is obliged to pay the default interest from the moment of the maturity specified in the [Seller]’s invoice. The [Seller], pursuant to its amended claim from 16 April 2010, requested the payment of 2,418.91 EUR as the amount of interest accrued over the principal debt from the day on which it became due until 12 April 2010 and the interest running on the RSD counter value of the principal debt from 13 April 2010 until the date of final payment. The [Seller] based its request on the stated contractual provision and (in light of the Article 10 of the Contract) on the Article 277 of the Law on Contracts and Torts of the Republic of Serbia (hereinafter referred to as: LCT), whereby the provision of the Article 78 of the Vienna Convention was accordingly derogated. Pursuant to the Article 277 paragraph 1 of the LCT, the debtor that fails to settle the debt in a timely manner will be obliged to pay the default interest, as prescribed by the Law. The [Seller] has accordingly hired a court financial expert to execute appropriate calculations and establish the amount of the default interest in accordance with the Law on Default Interest of the Republic of Serbia ("Official Gazette of the SR Yugoslavia" no. 9/2001). The [Seller] has also provided the amendments to the court financial expert findings dated 12 April 2010.

The sole arbitrator did not accept the submitted calculation of the interest pursuant to the Law on Default Interest and has therefore rejected the [Seller]’s claim in that regard due to the following reasons: (1) It is undisputed that the [Buyer] is obliged, under the Contract and the LCT, to settle the payment of default interest under the rate established by Law; (2) The Law on Default Interest of the Republic of Serbia ("Official Gazette of the FR Yugoslavia" no. 9/2001) provides for the interest rate solely for monetary claims that are set in a nation currency, i.e. RSD and not for the claims stipulated in foreign currencies like EUR, as is the case here; (3) the Vienna Convention as a part of applicable Serbian law, does not provide for a solution to the problem of determination of the applicable interest rate in cases where debtors default upon their obligations; (4) the sole arbitrator has determined that the current situation is to be resolved under the Article of the Vienna Convention that provides in its paragraph 2 that "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." Resolving issues that are not explicitly regulated under the Convention by application of the general principles upon which the Convention is based is in line with the Article 7 paragraph 1, where in its interpretation, regard is to be given to its international character and to the need to promote uniformity in its application as well as to the observance of good faith in international trade. Having in mind that the aim of the Vienna Convention is to promote adoption of uniform rules that would facilitate elimination of legal obstacles in international trade as well as to promote its evolution, the cited regulation gives grounds for determining the applicable interest rate "autonomously, in accordance with the general principles upon which the Convention is based" as it was aptly stated in one arbitral award (Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirstchaft – Wien, No. SCH 4318 dated 15 June 1994).

Even though the Convention does not expressly delineate these principles, comparative doctrine and jurisprudence has extracted these principles from the purpose and analysis of particular Articles and their place in a system laid down by the Convention <http://cisgw3.law.pace.edu/cisg/biblio/koneru.html#90>. The general principle that relates to the obligation of payment of the purchase price and failure thereon, is providing full compensation to the creditor so that it can achieve the benefit it was supposed to under the contract. Pursuant to this general principle, it has to be decided which interest rate would be the most appropriate one having in mind the provision of the Article 7 paragraph 1 of the Convention. Comparative doctrine and arbitral practice support the position that the appropriate interest rate would be the one matching the costs (price) of the loan that creditor could have taken for the purposes of its business ventures had there been no failure on the side of the debtor to remit the payment of its obligation (Ibid). Arguments supporting this view state that its aims at promoting international trade in a way that uniformity and legal certainty are promoted. The applicable rate in each case would have to be determined based on the average interest rate in the State where a seller has its seat applied to short term loan in the contracted currency. This solution is inspired by similar examples in international trade contained e.g. in the UNIDROIT principles from 2004 (Article 7.4.9.) and the Principles of European Contract Law from 2009 (Article 9.508).

The sole arbitrator considers that in the interest of promotion of the international trade, the interest rate is to be decided autonomously, in accordance with the underlying principles of the Vienna Convention and the Article 7 paragraph 2. Accordingly, the [Seller] is entitled to interest at the average rate applied for short term loans of the State using the stipulated currency. Since the case at hand revolves around the payment stipulated in EUR, the sole arbitrator has decided to award the interest based on the data published by the European Central Bank <www.ecb.int/pub/pdf/stapobo/spb201004en.pdf> relying on the practice in those states of the EU that use EUR as their official currency.

In accordance with the practice of the FTCA, the interest is awarded based on a particular interest rate for the foreign currency, having in mind that the award might be a subject of recognition and enforcement proceedings abroad. After examining the information on the interest rates published by the European Central Bank, the sole arbitrator has established that the average interest rate for EUR in the period relevant for this dispute was 3,778% annually, and therefore represent the interest that the [Seller] is entitled to due to [Buyer]’s delay in payment of the purchase price.

The [Buyer] is obliged to pay the interest running on the principal amount of debt from the date on which each of the separate installments became due, at the average interest rate for EUR of 3,778% annually, that is: for the amount of 3,154.48 EUR under invoice no. 111/08 starting from 15 December 2008 when the payment obligation matured as agreed under the Contract until 12 August 2009 when the [Seller], trough Company M received the amount of 500.00 EUR which corresponds to the decrease of the principal amount from the submission dated 24 November 2009 and in accordance with the instruction from the sole arbitrator from 7 April 2010, decreased the debt under the invoice no 111/08; for the amount of the remaining debt of 2,654.48 EUR under invoice 111/08 starting from 13 August 2009 until the date of final payment: for the amount of 4,936.00 EUR under invoice 112/08 starting from 23 December 2008 when the payment obligation matured as agreed under the Contract until the date of final payment, as it is stated in the Award.

V.3. The obligation of payment of the costs of arbitral proceedings

The [Seller] has submitted the calculation of costs based on which the total amount of incurred costs was 63,545.00 RSD (7,500.00 RSD for drafting of the Statement of Claim, for submission dated 19 November 2009, 24 November 2009, 24 December 2009 and 14 April 2010 each 7,500.00 RSD and 8,500.00 RSD as costs of legal representation on a hearing held on 7 April 2010, for financial expert findings on the issues of calculations of the default interest the amount of 15,045.00 RSD, 2,000.00 RSD for travel costs as well as postal ad copying costs in the total amount of 500.00 RSD). The [Seller] specified that its costs further included 19.088,00 RSD as registration fee and costs of the arbitral proceedings in the amount of 141,970.00 RSD, comprising a total amount of 224,603.00 RSD.

Pursuant to the Article 149 paragraph 1 of the Law on Civil Procedure, "the losing party is obliged to pay for the total costs of the proceedings". The [Buyer] is, as established by the facts and examined evidence, a losing party.

Accordingly and pursuant to the Article 150 of the Serbian Law on Civil Procedure, examining all the relevant circumstances of the case, the sole arbitrator has concluded that costs of the arbitral proceedings were partially necessary. The sole arbitrator found that the court financial expert findings on issues related to calculation of the default interest were unnecessary since the claim of the [Seller] for the interest to be awarded under the Law on Default Interest of the Republic of Serbia were rejected, as it was elaborated in part V.2. of the award. Accordingly, the [Buyer] is obliged to pay the total amount of 209.558,00 RSD as the costs of the arbitral proceedings.

The total costs of the arbitral proceedings awarded in the amount of 209.558,00 RSD were converted by the sole arbitrator pursuant to the exchange rate of the National Bank of Serbia for EUR, on the day of the award (EUR=99.3791 RSD), bearing in mind that the [Seller] requested the costs in EUR. Accordingly, the total amount of 2,108.67 EUR was awarded as costs of arbitral proceedings, as it is stated in the paragraph 3.1. of the Award.

The [Seller] has additionally requested the interest running on the costs for the arbitral proceedings from the moment of the finality of the arbitral award until the date of final payment. According to the practice of the FTCA, the interest is not awarded on the costs of the proceedings so the request of the [Seller] was rejected in that regard.

VI. 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.

** Uroš Živković is an assistant-lecturer in Private International Law at the University of Belgrade Faculty of Law. Dr. 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 August 28, 2012
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