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CISG CASE PRESENTATION

Russia 15 May 1995 Arbitration proceeding 321/1994 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/950515r1.html]

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

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Case identification

DATE OF DECISIONS: 19950515 (15 May 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: 321/1994

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Slovak Republic [claimant]

BUYER'S COUNTRY: Russian Federation (respondent)

GOODS INVOLVED: Unavailable


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issues: Article 79 [Also cited: Articles 62 ; 78 ]

Classification of issues using UNCITRAL classification code numbers:

79B [Impediment excusing party from damages]

Descriptors: Exemptions or impediments

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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

Russian: See Rozenberg (Practika . . .), below

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. 38 [108-112]

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Russian Federation arbitration proceeding 321/1994 of 15 May 1995

Translation [*] by Marina Koukanova [**]

The case is interesting as regards the application of arts. 62, 78 and 79(5) of the United Nations Convention on Contracts for the International Sales of Goods 1980.

FACTS

A Slovak company [claimant (seller)] and a Russian company [respondent (buyer)] concluded a contract for supply of the goods to Russia, according to which another Russian company [co-respondent], the recipient of the goods, was to effect the payment for the goods. The contract stipulated that the Russian company [co-respondent], the recipient of the goods, shall be the guarantor of the payments for the goods and the respondent [buyer] shall not be liable for non-effecting the payments. In case of default of payments, the contract stipulated a penalty at an annual rate of 10 percent.

The goods supplied by the claimant [seller] were not paid for. The recipient of the goods, the Russian company [co-respondent], recognized the default of payments and suggested liquidating the debt by payment with foreign currency State-loan bonds or by a countertrade involving the goods of the Russian company. The recipient of the goods [co-respondent] affirmed that the money in foreign currency in consideration of the payment for the goods was transferred in time to the account of the Russian company [respondent (buyer)], a party to the contract concluded with the claimant [seller], but the money was blocked on the account with the Bank of the External Economic Activities on the basis of the Resolution of the Presidium of the Supreme Soviet of the Russian Federation of 13 January 1992.  

On 6 October 1994, the claimant [seller] made a claim on the two Russian companies: the respondent [buyer] [the Russian company with which the contract was concluded] and the co-respondent [the recipient of the goods].

The respondent [buyer] referred to the terms of the contract and supposed that the problem with the payment for the goods should be solved by the claimant [seller] and the co-respondent without his participation. The co-respondent alleged that, not being a party to the contract, he should not be involved in the legal proceedings and that he does not acknowledge the claims. As for the provisions of the contract concerning the responsibility for non-effecting the payments, according to the co-respondent, those provisions were included in the contract without his consent. In the course of the hearing of the case, the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Industry and Commerce (hereinafter referred to as Tribunal) found out that one of the managers of the co-respondent company was present at the signing of the contract and agreed to the wording of the contract.

In connection with the possible application of the Convention on the Settlement
by Arbitration of Civil Law Disputes Resulting from Relations of Economic
and Scientific-technical Cooperation of 26 May 1972 (hereinafter referred to as Moscow Convention 1972), the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Industry and Commerce obliged the claimant [seller] to provide proof that the Slovak Republic is a party to the Moscow Convention 1972.

RULING

The Tribunal ruled:

1. The Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Industry and Commerce has the competence to hear the present case on the basis of para. 6 of the contract concluded by the claimant [seller] and the respondent [buyer] which stipulates that all disputes or differences in connection with or arising out of this Contract shall be settled under the Rules of Conciliation and Arbitration of the Arbitration Tribunal at the International Chamber of Commerce of the State which is the place of business of the respondent [buyer] by one or more arbitrators appointed under such rules. The governing law shall be the laws of the country of the respondent [buyer].

At the time of signing of the contract, the tribunal competent to hear the present case was the Arbitration Tribunal at the International Chamber of Commerce of the Union of Soviet Socialist Republics. According to para. 4 of the Charter of the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Industry and Commerce the successor of the Arbitration Tribunal at the International Chamber of Commerce of the Union of Soviet Socialist Republics is the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Industry and Commerce.

Therefore, the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Industry and Commerce has the competence to hear the present case.

2. According to the contract signed by the claimant [seller] and respondent [buyer] in Moscow in November 1991, the claimant [seller] supplied the goods to the respondent [buyer] in January 1992. According to para. 3 of the contract, the payment for the goods shall be made for collection against the bills of loading in the Bank of the External Economic Activities of the USSR on a 120 days installment plan. The date of the beginning of the installment plan is understood as the date of Bill of Loading, but not earlier than 1 January 1992.

In accordance with the railway bills provided by the claimant [seller], the dispatch of the goods was made on 21 December 1991. The respondent [buyer] and the co-respondent do not deny the receipt of the goods and the debt to the claimant [buyer]. However, the respondent [buyer] refers to para. 3 of the contract according to which the payment shall be made by the co-respondent through the respondent [buyer]. The guarantor of the payment is the co-respondent. The respondent [buyer] is not liable for non-effecting the payment.

The co-respondent entirely denies his responsibility affirming that the provision of the contract concerning the responsibility for non-effecting of the payment is an addition to the contract made without his consent. Moreover, he insists on not being a party to the contract.

In the course of the arbitration proceedings, it became clear that this provision was included in the contract on the respondent [buyer]'s initiative and in his wording (the claimant [seller] agreed to the wording suggested by the respondent [buyer]), and the respondent [buyer]'s representative was present at the signing of the contract and signed the contract supplement No. 3 together with the respondent [buyer]. According to the interpretation of this provision of the contract given by the respondent [buyer]'s representative, the word "guarantor" in the context of the provision about the responsibility of the co-respondent for the payments for the goods means that the co-respondent shall guarantee the payment for the goods with his means through the respondent [buyer]. Therefore, the only co-respondent's responsibility is to transfer the money to the respondent [buyer]'s account in consideration of the payment for the received goods, and the respondent [buyer] shall effect the payment only after the transfer of the money by the co-respondent to the respondent [buyer]'s account.

As it was stated in the course of the arbitration proceedings, at the moment the payment for the goods was made, the remainder of the money was transferred by the co-respondent to the respondent [buyer]'s foreign currency account. However, in accordance with Resolution of the Presidium of the Supreme Soviet of the Russian Federation of 13 January 1992 2172-1 "About the Bank of the External Economic Activities of the USSR", the foreign currency accounts of enterprises, organizations and institutions were blocked with subsequent compensation of the money on the accounts with foreign currency State-loan bonds under the guarantees of the Government of the Russian Federation.

The co-respondent's money in foreign currency was on the respondent [buyer]'s account on 13 January 1992 and was therefore blocked. According to the Decree of the President of the Russian Federation of 7 December 1992 1565 "About the measures of regulation of the intern foreign currency debt of the ex -USSR", the obligations of the Bank of the External Economic Activities of the USSR to legal persons shall be performed by the emission and distribution of foreign currency State-loan bonds.

The Tribunal stated that the claimant [seller] did not express his will to adjust the relations with the recipient of the goods, the co-respondent, by countertrade of the goods or by compensation with foreign currency State-loan bonds. The claimant [seller] insists on payment of the debt. In the claimant's opinion, his debtor is the respondent [buyer] as a party to the contract as well as the co-respondent, as the co-respondent's representative signed the contract supplement, and in correspondence with the claimant [seller] the co-respondent recognized himself as a debtor before the claimant [seller] and suggested other ways of paying the debt. The claimant [seller] refers to arts. 62, 78 and 79(5) of the United Nations Convention on Contracts for the International Sales of Goods 1980.

From all the above mentioned, the Tribunal ruled that the claimant [seller] has the right to receive the payments for the goods supplied as he performed his obligations under the contract.

3. Contractual relations arose between the claimant [seller] and respondent [buyer].

In the course of the arbitration proceedings, the claimant [seller] did not provide proof of the application by the Slovak Republic of the Moscow Convention 1972. In the letter of 8 November 1995, the claimant [seller] provided the opinion of the Ministry of Foreign Affairs of the Slovak Republic on that situation. As it is stated in the opinion of the Ministry of Foreign Affairs of the Slovak Republic, according to the Constitution of the Slovak Republic and the universal legal succession of the obligations of the Czechoslovakia, the Moscow Convention should bind the Slovak Republic. However, according to international custom, the State-successor should notify the State-depositary of the international multilateral treaty about the intention to perform the obligations under the treaty. The Slovak Republic did not make such a notification. At the present time, the Slovak Republic is taking steps to denounce the Moscow Convention 1972. On the basis of the opinion of the Ministry of Foreign Affairs of the Slovak Republic, the Tribunal came to the conclusion that the Slovak Republic is not a party to the Moscow Convention 1972, and therefore, in the present case it is not possible to apply the provisions of the Moscow Convention 1972 which permit drawing into the proceedings a company that was not a party to the contract containing the arbitration clause in the capacity of a co-respondent. Thus, the Tribunal considers only a party to the contract as a proper respondent.

Therefore, para. 3 of the contract does not release the respondent [buyer] from the responsibility to pay the debt to the claimant [seller]. As the co-respondent's foreign currency funds were blocked on the respondent [buyer]'s foreign currency account, the respondent [buyer] being a party to the contract and the respondent [buyer] in the present case had to pay the debt with his own funds. The Tribunal takes into consideration that the respondent [buyer] and the co-respondent can settle the disagreement between themselves according to the laws in force.

4. As for the claimant [seller]'s demand for interest on the debt at an annual rate of 10 percent, the Tribunal found this claim justified and based on para. 9 of the contract. In the course of the arbitration proceedings, the claimant [seller] specified the date of the beginning of the period of the delay in payment and, therefore, the date from which the interest on the sum of the debt shall be reckoned. This date is understood as the date of rendering the invoice in the bank of the [respondent] buyer.

The Tribunal awarded interest at an annual rate of 10 percent starting from 8 June 1992 till the execution of the payment.


FOOTNOTES

* This is a translation of data on the award in Proceeding 321/1994, dated 15 May 1995, of the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, reported in Rozenberg ed., Arb. Praktika 1997, No. 52 [108-112]

All translations should be verified by cross-checking against the original text.

** Marina Koukanova (enter bio info.)

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Pace Law School Institute of International Commercial Law - Last updated July 22, 2003
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