Russia 8 September 2011 Federal Arbitration Court of the Volga Area, Kazan
[Cite as: http://cisgw3.law.pace.edu/cases/110908r1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: A55-4678/2010
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Germany
BUYER'S COUNTRY: Russia
GOODS INVOLVED: Equipment
RUSSIAN FEDERATION: Federal Arbitration Court of the Volga Area, Kazan
[No. A63-4588/2010] 8 September 2011
Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/145],
CLOUT abstract no. 1366
Reproduced with permission of UNCITRAL
A Russian company (the buyer) lodged a claim against a German company (the seller) for the recovery of money paid under the contract. Under the terms of the contract, the seller supplied the buyer with equipment, payment for which the buyer was to make in instalments. The buyer paid the seller only in part. As a consequence, the seller did not supply the goods and sent a letter to the buyer informing it that, in the event of non-payment by the deadline, the contract would be considered terminated and the money paid could not be refunded. The buyer, for its part, agreed in writing to the termination of the contract and called on the seller to refund the advance payment. The seller's refusal to refund the advance served as grounds for the buyer to lodge a claim.
Following the provisions of the German Civil Law, the court of first instance allowed the claim, having reached the conclusion that the sum paid pursuant to the contract, subsequently terminated by agreement, should be returned to the claimant, inasmuch as it constituted unjust enrichment. The court of second instance upheld the judgment.
In an appeal to the court of third instance, i.e. the Federal Arbitration Court of the Volga Area, the seller asked the court to set aside the ruling on the grounds of the incorrect application of the substantive law by the courts. The seller stated that it was lawfully holding funds to cover its losses and that, in considering the case, the court should have applied the provisions of the Convention.
The Federal Arbitration Court dismissed the complaint, on the following grounds. The contract provided, among other things, that international trade law should apply. Because it was impossible to determine what constituted international trade law, the court of first instance had concluded that the parties disagreed as to the applicable law. On the basis of the conflict-of-laws rules of the Russian Federation, the court had come to the conclusion that consideration of the dispute should be governed by the German Civil Law, as the seller was a German company.
Since the contract had been cancelled and its purpose -- i.e. the supply of equipment -- was not fulfilled, the Federal Arbitration Court also stated that the amount rightfully identified by the court of first instance as unjust enrichment of the respondent was to be returned to the claimant pursuant to paragraph 812 of the German Civil Code.
Further, the respondent's argument that the courts had not applied the provisions of the CISG to the disputed relationship should be dismissed, as the courts issuing the contested rulings had noted that there were no provisions in the Convention stating that it was impossible to return money paid as a deposit or an advance under the contract, in the event of its termination.
Pursuant to article 81(1) CISG, termination of the contract releases both parties from their obligations under it, subject to any damages that might be due. And pursuant to article 81(2) CISG, a party who has performed the contract either wholly or in part could claim restitution from the other party of whatever the first party has supplied or paid under the contract. Thus, the claimant had the right to demand restitution of all that had been supplied or paid under the contract and the respondent did not lose the right to claim damages. Regarding the respondent's untenable reference to the legality of withholding payment on account of losses incurred by it, the respondent had not appealed with a counterclaim to recover losses related to non-performance of the contract.Go to Case Table of Contents
APPLICATION OF CISG: [-]
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
CITATIONS TO OTHER ABSTRACTS OF DECISION
CITATIONS TO TEXT OF DECISION
Original language (Russian): online database of court judgements <http://kad.arbitr.ru>
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents