Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography
Search the entire CISG Database (case data + other data)

CISG CASE PRESENTATION

Russia 25 April 1995 Arbitration proceeding 142/1994 (Trucks case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/950425r2.html]

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

Case Table of Contents


Case identification

DATE OF DECISIONS: 19950425 (25 April 1995)

JURISDICTION: Arbitration; Russian Federation

TRIBUNAL: Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 142/1994

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Czechoslovakia (claimant)

BUYER'S COUNTRY: Russia (respondent)

GOODS INVOLVED: Trucks


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issues: Articles 74 ; 75 ; 85 ; 86 ; 87 ; 88(1) [Also cited: Article 6 ]

Classification of issues using UNCITRAL classification code numbers:

74A [Damages (loss suffered as consequence of breach): costs relating to storage of goods and service of goods during storage];

75A1 [Damages established by substitute transaction: substitute transaction after avoidance (resale by aggrieved seller)];

85B11 [Seller's duty to preserve goods: reasonable steps to preserve goods, deposit in warehouse];

87A [Preservation of goods by deposit in warehouse];

88A [Party obliged to preserve goods may sell them]

Descriptors: Damages ; Cover transactions ; Storage of goods ; Resale of goods

Go to Case Table of Contents

Editorial remarks

Go to Case Table of Contents

Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

English: Unilex database [cited as 25 September 1995] <http://www.unilex.info/case.cfm?pid=1&do=case&id=251&step=Abstract>

Italian: [1998] Diritto del Commercio Internazionale 1089 No. 192

CITATIONS TO TEXT OF DECISION

Original language (Russian): Rozenberg, Practika of Mejdunarodnogo Commercheskogo Arbitrajnogo Syda: Haychno-Practicheskiy Commentariy [Practice of the International Commercial Arbitration Court: Scientific - Practical Comments] Moscow (1997) No. 31 [83-87]

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Djakhongir Saidov, 7 Vindobona Journal of International Commercial Law and Arbitration (1/2003) 1-62 at n.188 (claim for compensation granted for "expenses incurred on servicing of the gods for the needs of a new buyer after the goods had not been accepted by the original buyer"), n.260 ("the ICAC seems to have treated the provision of Article 85 as a right of the seller ... the court stated that 'the seller was entitled to take such steps as were reasonable in the circumstances to preserve the goods'."); [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 85 para. 16 Art. 88 para. 9

Go to Case Table of Contents

Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Russian Federation arbitration proceeding 142/1994 of 25 April 1995

Translation [*] by Yelena Kalika [**]

1. SUMMARY OF RULING

     1.1 The reference to the Economic Cooperation Council General Rules of Delivery 1968-1988, which was made in the contract entered into by the Soviet and Czech companies in March 1991, meant that the provisions of the said Rules were incorporated in the said contract.

     1.2 The reference to the Economic Cooperation Council General Rules of Delivery 1968-1988 made in the contract leads to the recognition of the fact that the parties agreed to apply the substantive law of the Seller's State to the issues not settled either in the contract or in the General Rules of Delivery (See sec. 122 of the General Rules of Delivery).

     1.3 Pursuant to Article 1(1)(a) CISG, the parties' agreement as to the applicable law does not exclude the application of the CISG since the commercial enterprises of the parties are located in different States and since these States are the CISG signatories.

     1.4 The contract made on a condition precedent is found enforceable since the Soviet [Buyer] agreed to delivery of part of the goods under the contract, but later requested the Czech [Seller] to consider the contract avoided.

     1.5 Since the [Buyer] refused to accept the goods, then pursuant to Articles 85 and 87 CISG, the actions of the [Seller], who deposited the goods in a warehouse at the expense of the [Buyer], are found reasonable.

     1.6 Pursuant to Article 88 CISG, the actions of the [Seller], who took reasonable measures to sell the goods to third parties, are found reasonable.

     1.7 The provision of Article 79 of the Economic Cooperation Council General Rules of Delivery 1968-1988, according to which lost profit can be recovered only when the contract or a bilateral treaty so states, does not apply to [Seller]'s claim to recover from the [Buyer] the difference between the price at which the goods were sold to third parties, and the price, at which the manufacturer sold the goods to the [Seller]. Such claim is the positive loss of the [Seller] and not lost profit.

     1.8 The expenses incurred in connection with eliminating defects in the goods, which arose during the time of storage, shall be attributed to [Buyer]'s account.

     1.9 [Seller]'s claims to recover interest that he paid to the bank in connection with the loan taken due to [Buyer]'s failure to pay for the goods, are denied since, in accordance with Article 119(3) of the Economic Cooperation Council General Rules of Delivery 1968-1988, damages in connection with the delay in payment cannot be recovered in excess of 6% annual interest. [Seller]'s claim to recover 6% annual interest pursuant to Article 119(1) of the Economic Cooperation Council General Rules of Delivery 1968-1988 is sustained.

2. FACTS AND PLEADINGS

The contract to make delivery of goods in 1991, which was entered into by the [Seller] (the Czech company) and the [Buyer] (the Soviet company) in March 1991, contained a provision stating that it would become binding upon [Buyer]'s confirmation that he had received hard currency to purchase the goods mentioned in the contract. In October 1991, the parties signed an amendment to the contract in which they settled the transportation issues. Considering the signing of such amendment a confirmation that the contract had become binding, in November 1991 the [Seller] told the manufacturer to ship the goods to his warehouse.

On 3 December 1991, the [Seller] received a telex from the [Buyer] [in which the [Buyer] asked] to stop delivery until a further notice from him. On 28 February 1992, the [Buyer] requested to consider the contract avoided. The [Seller] disagreed.

[Seller]'s claims included:

-   The difference between the price of goods under the contract and the price charged by the manufacturer,
- Interest paid to the bank,
- The cost of storage of the goods in the warehouse,
- Expenses in connection with eliminating the defects arisen at the time of storage.

The [Buyer] denied the claims since, in his opinion, the contract had not become binding and, thus, [Seller]'s claims to recover damages suffered were unreasonable.

Later, the [Seller] reduced the amount of the claims by means of a different determination of one of the positions. [Seller] claimed to recover the difference between the price at which he bought the goods from the manufacturer and the price at which he sold the goods to third parties.

3. TRIBUNAL'S REASONING

The Tribunal's award was based on the following grounds.

     3.1 The contract made by the parties in March 1991 contains a reference to the Economic Cooperation Council General Rules of Delivery 1968-1988 which were supposed to govern any issues not settled in the contract.

The contract did not contain an arbitration clause. Therefore, Article 104 of the Economic Cooperation Council General Rules of Delivery 1968-1988 -- according to which disputes arising out of any contract shall be arbitrated by a relevant tribunal in [Buyer]'s state -- applies to any disputes arising out of the contract.

Since the [Buyer] is located in the Russian Federation and since, pursuant to the Russian Federation Law "On International Commercial Arbitration", the Tribunal is the relevant tribunal set up to arbitrate disputes arising out of international commercial transactions when a commercial enterprise of at least one of the parties is located abroad, the Tribunal finds that it has competence to arbitrate the present dispute.

     3.2 Considering the issue of the applicable law, the Tribunal took into consideration that at the time when the contract became binding both Russia and Czechoslovakia were CISG Contracting States. Pursuant to Article 6 CISG, the parties may exclude the application of this Convention or derogate from its provisions.

Following their rights, the parties to the dispute agreed in their contract to apply the Economic Cooperation Council General Rules of Delivery 1968-1988. Thus, they incorporated the provisions of the said act into their contract. Besides, Article 122 of the Economic Cooperation Council General Rules of Delivery 1968-1988 states that the relationships of the parties in connection with questions not settled either in the contract or in the General Rules of Delivery are governed by the substantive law of Seller's state. In the present case it is Czechoslovakia law.

After evaluating the parties' agreement as to the applicable law, the Tribunal came to the conclusion that such agreement did not exclude the application of the CISG. Therefore, the CISG should apply pursuant to Article 1(1)(a) CISG since the commercial enterprises of the parties to the contract were located in different States and since such States were CISG Contracting States.

     3.3 After considering the merits of the claims and after reviewing the materials of the case, the Tribunal came to the conclusion that, since by the amendment to the contract signed by the parties on 18 October 1991 the [Buyer] agreed to [Seller]'s shipping the goods, the contract became binding on the day when the amendment was signed, i.e., on 18 October 1991.

Besides, since in the telex of 29 April 1992 the [Buyer] requested the [Seller] to consider the above-mentioned contract avoided, it confirms Tribunal's conclusion that the [Buyer] considered the contract binding.

Pursuant to the terms of the contract, the term of delivery was defined as "the year 1991". Thus, the [Seller] had reasons to ship [the goods] in November 1991 and his actions should be considered reasonable. The [Buyer] sent a telex requesting [Seller] to stop delivery only on 3 December 1991, when the goods had been already shipped.

Since the [Buyer] refused to accept the goods, pursuant to Articles 85 and 87 CISG, the [Seller] had a right to take measures which were reasonable under the circumstances to preserve the goods and to deposit them in the warehouse at [Buyer]'s expense. Pursuant to Article 88 CISG, a party who is bound to preserve the goods in accordance with article 85 or 86 may sell them by any appropriate means. Thus, the actions of the [Seller] in connection with the sale of the goods to third parties at the prices generally charged at the time of sale were reasonable.

     3.4 The Tribunal disagreed with [Buyer]'s arguments that the difference in prices is lost profit and, thus, cannot be recovered pursuant to Article 79 of the Economic Cooperation Council General Rules of Delivery 1968-1988, since the difference between the price at which the [Seller] purchased the goods from the manufacturer and the price at which the goods were sold to third parties after [Buyer]'s refusal to accept them, is the positive damage of the [Seller], and not lost profit.

For the above stated reasons, the Tribunal came to the conclusion that [Seller]'s claim to recover from the [Buyer] the difference in prices should be sustained.

Expenses in connection with the storage of the goods in the warehouse should also be recovered since they are reasonable and proved by documentary evidence (Article 87 CISG).

The Tribunal also found reasonable the claims to attribute to [Buyer]'s account expenses in connection with eliminating the defects in the goods, which arose at the time of storage, since without eliminating such defects the [Seller] would have not been able to sell the goods.

     3.5 Pursuant to Article 119 of the Economic Cooperation Council General Rules of Delivery 1968-1988, 6% annual interest shall be calculated on the sum of the delayed payment. In Tribunal's opinion, the delay in payment took place on 7 June 1994, i.e., after the expiration of the 60 days period set for the answering from the date of filing a claim by the [Seller] (7 March 1994) plus 30 days for delivery by mail (Article 102 of the Economic Cooperation Council General Rules of Delivery 1968-1988).

Therefore, 6% annual interest should be added to the sum of the debt from 7 June 1994 to the date of the factual payment.

The claim to recover from the [Buyer] the amount of interest paid by the [Seller] to the Czechoslovakia trade bank should be denied since the claim to recover 6% annual interest was sustained and since, pursuant to Article 119(3) of the Economic Cooperation Council General Rules of Delivery 1968-1988, damages suffered in connection with the delay in payment cannot be recovered in excess of 6% annual interest set in the same Article of the General Rules of Delivery.

     3.6 At [Seller]'s request, a Czech translator was invited to the two proceedings. Pursuant to Article 9 of Tribunal's Rules, the party seeking translator's services should pay the services of the translator. Therefore, the Tribunal attributes expenses in connection with the services of the translator to [Seller]'s account.


FOOTNOTES

* This is a translation of data on Proceeding 142/1994, dated 25 April 1995, of the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, reported in Rozenberg ed., Arb. Praktika (1997) [83-87]

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

** Yelena Kalika, a law student at the Pace University School of Law, has studied at the Moscow State Law Academy, interned with a Moscow law firm, and is a Research Assistant at the Pace Institute of International Commercial Law.

Go to Case Table of Contents
Pace Law School Institute of International Commercial Law - Last updated May 19, 2009
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography