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CISG CASE PRESENTATION

Russia 17 October 1995 Arbitration proceeding 123/1992 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/951017r1.html]

Primary source(s) for case presentation: Case text


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Case identification

DATE OF DECISION: 19951017 (17 October 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: 123/1992

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Germany (claimant)

BUYER'S COUNTRY: Russian Federation (respondent)

GOODS INVOLVED: Equipment (automatic diffractameter)


Case abstract

RUSSIAN FEDERATION: Arbitration at Russian Federation Chamber of Commerce and Industry [No. 123/1992 of 17 October 1995]

Case law on UNCITRAL texts (CLOUT) abstract no. 142

Reproduced with permission from UNCITRAL

A German seller (claimant) brought a claim against a Russian buyer (respondent) in connection with the [buyer's] failure to pay for equipment supplied under a contract concluded between the two parties. The buyer acknowledged that the goods had indeed been delivered under the contract but stated that its non-payment was due to the failure on the part of the bank responsible for the buyer's foreign currency transactions to give instructions for the amount payable for the goods under the contract to be transferred to the seller. The bank did not transfer the foreign currency amounts to the seller on the grounds that there were no funds available in the buyer's account in freely convertible currency to pay for the goods. Citing these facts, the buyer requested the tribunal to discharge it from liability since, in its view, the fact that it did not have available foreign currency resources should be regarded as force majeure discharging it from liability for the non-performance of its contractual obligations.

The tribunal was not in agreement with the [buyer's] view that its lack of foreign currency should be regarded as force majeure, since the contract agreed between the two parties gave an exhaustive list of force majeure circumstances discharging them from liability for non-performance of their contractual obligations. The buyer's lack of foreign currency was not included in that list of force majeure.

In addition, the tribunal stated that, under article 54 CISG, the buyer's obligation to pay the price of the goods included taking such measures and complying with such formalities as might be required to enable payment to be made. On the basis of the case materials and the clarifications offered by the buyer during the proceedings, it was established that the only action taken by the buyer was to send instructions to the bank for the amounts payable under the contract to be transferred, but that it had not taken any measures to ensure that the payment could actually be made.

The tribunal found in favor of the [seller] and ordered the buyer to make the payment for the goods supplied.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 54 ; 79(1)

Classification of issues using UNCITRAL classification code numbers:

54A [Payment of the price: obligation to pay includes enabling steps];

79B [Exemptions (impediments excusing party from damages): contract force majeure clause, interpretation of]

Descriptors: Price ; Exemptions or impediments

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Editorial remarks

"[W]here the contract provided for the list of force majeure circumstances, the ICAC did not recognize the events which were not included in the list as grounds for exemption from liability. The Tribunal seems to have taken the view that where the parties provide for a list of 'force majeure' events, such a list must be deemed as exhaustive.

"It is submitted that no such rigid rule can exist in the CISG. Indeed, it may often be the case that where the parties have defined force majeure in the contract, they have in fact intended to derogate from Article 79. However, this will not be the case in all situations. It is argued that the issue should be resolved only on the basis of the interpretation of the contract." Djakhongir Saidov, 7 Vindobona Journal of International Commercial Law and Arbitration (1/2003) 1-62 at 55-56.

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

English: Unilex database [CLOUT abstract]

French: Van den hole, [1998] Revue trimestrielle de droit (RDC/TBH) 326 [357 n.11, 361 n.56]

Italian: Diritto del Commercio Internazionale (1997) 751-752 No. 167

Polish: Hermanowski/Jastrzebski, [1997] Narodów Zjednoczonych o umowach miedznarodowej sprezedazy towarów. Konwencja wiedenska. Komentarz [CISG commentary], Warszawa:ABC 282-283

CITATIONS TO TEXT OF DECISION

Original language (Russian): Unavailable

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Honnold, Uniform Law for International Sales (1999) 352 [Art. 54 (steps to assure payment)], 486 [Art. 79]; Krüger, Financial force majeure . . . remarks on the impact of CISG Art 79 (1999) nn.65-67; Southerington, Impossibility of performance and other excuses in international trade (2001) n.142; Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) § 6-19 n.250; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at nn.437-438, 795; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 79 para. 16

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Case text (English translation)

Queen Mary Case Translation Programme

Russian Federation Arbitration proceeding 123/1992 of 17 October 1995

Translation [*] by Yelena Kalika [**]

Translation edited by Mykhaylo Danylko [***]

On 17 October 1995 the Tribunal of International Commercial Arbitration at the Chamber of Commerce and Industry of the Russian Federation composed of [...] reviewed the action brought by a German firm against a foreign trade association of Moscow for the recovery of DM [Deutsche Mark] 701,783.00.

The following persons took part in the hearing: representatives of the Claimant [hereinafter referred to as [seller]]: [...] (power of attorney of 24 July 1995); [...], an interpreter; representative of the Respondent [hereinafter referred to as [buyer/]: [...], an attorney (permanent power of attorney of 4 July 1995); other persons: [...]

FACTS

On 27 March 1992, the [seller] brought an action with the Tribunal against the [buyer] for the recovery of DM 701,783.00.

It was stated in the claim that, in accordance with contract No. [...] of 28 June 1989, the [seller] had delivered to the [buyer] certain equipment (an automatic diffractometer) for a total value of DM 701,783.00. The delivery was made by car on 27 April 1990; the bills of lading were submitted to the bank by [seller] on 9 May 1990, but nonetheless the [buyer] made no payments against [seller]'s invoice No. 7.052.90.

The [buyer] ignored [seller]'s requests that the invoice be paid.

On 12 May 1991, the [buyer] informed the [seller] that it requested the final buyer of the equipment to return the goods to the [seller]. In its telex messages of 14 November 1990 and 16 April 1991, the [buyer] informed the [seller] that, due to the difficult situation in the USSR, it did not have the funds in foreign hard currency necessary to pay the price for the equipment.

Believing that its right to receive the price for the equipment delivered was violated, the [seller] brought a claim with the Tribunal.

In its response of 12 March 1993 the [buyer] admitted the fact of [seller]'s delivery of the equipment under the contract of June 28, 1989 for a total amount of DM 701,783.00. The [buyer] also stated that upon receipt of [seller]'s invoice, it had requested the Foreign Economy Bank of the USSR ("Vneshekonombank SSSR") to transfer to [seller]'s account the amount stated in the invoice, however, the bank did not honor that request. Upon [buyer]'s request, a proposal to include the debt into the amount of a foreign debt of the USSR was filed with the Government of the USSR. On that ground, the [buyer] requested to dismiss the case due to the fact that the failure to fulfill the obligation to pay [the price] did not result due to [buyer]'s fault since the absence of funds in hard currency constituted a force majeure circumstance.

The case was arbitrated in the hearing held on 17 October 1995, at which the representative of the [seller] confirmed the claim in the amount of DM 701,783.00.

He also stated that the equipment had been delivered in full compliance with the contract of 28 June 1989, and that the [buyer] had presented the [seller] with no claims as to the quality of the goods. The [seller] argued that [buyer]'s reference to force majeure circumstances should not be taken into account and requested that [seller]'s claim be granted.

The representative of the [buyer] at the hearing repeated the arguments stated in the written reply of 12 March 1993 and confirmed the fact of delivery of the equipment under the contract of 28 June 1989.

RATIONALE

The Tribunal found that pursuant to clause 11 of contract No. [...] of 28 June 1989 all controversies and disputes, that might arise either from the contract or in connection with it, should be arbitrated by the Tribunal of Arbitration at the Chamber of Commerce and Industry of the USSR (Moscow).

Since, according to the Russian Federation Law on the Tribunal of International Commercial Arbitration of 1993 (paragraph 4 of the Appendix to the Law), the Tribunal of International Commercial Arbitration at the Chamber of Commerce and Industry of the Russian Federation had replaced the Arbitration Tribunal at the Chamber of Commerce and Industry of the USSR, the Tribunal concluded that it had competence to arbitrate the case.

After reviewing the claims on the merits, the Tribunal concluded that the [seller] had fulfilled its contractual obligations by delivering to the [buyer] in April 1990 an automatic diffractometer (Study/R system, total value of DM 701,783.00, international transport waybill of 27 April 1990).

Invoice No. 7.052.90 issued by the [seller] had not been paid by the [buyer].

The [buyer]'s reference to force majeure circumstances, and, in particular, to the lack of funds in hard currency necessary in order to pay for the goods imported, cannot be taken into consideration by the Tribunal, since clause 10 of the contract contains the exhausted list of grounds on which the fulfillment of one's obligations under the contract may be postponed. The above list does not include such circumstance as the [buyer]'s lack of hard currency funds.

Besides, Article 54 of the CISG, to which Germany and the Russian Federation are Contracting States, sets forth the buyer's obligation to pay the price of goods which includes taking such steps and complying with such formalities as may be required to enable payment to be made.

In the present case, as follows from the materials of the case and from the explanations given by the representative of the [buyer] at the hearing, the [buyer] did not take any definite steps to enable payment to be made except for sending a request to the bank to transfer the price of the goods to the [seller]'s account.

The Tribunal concludes that [seller]'s claim in the amount of DM 701,783.00 should be granted.

Pursuant to Article 5(1) of the Rules on the Arbitration Expenses and Fees the arbitration fee should be paid by the party against which the claim was granted. Thus, the arbitration fee paid by the [seller] at the filing of complaint in the amount of DM 3,532.00 should be recovered from the [buyer].

Since the rules of the distribution of the registration fees between the parties is determined in accordance with the rules set for the arbitration fees, the [buyer] also has to pay the registration fee paid by the [seller] in the amount of DM 8.38.

HOLDING

For the above reasons and pursuant to Article 34 of the Rules, the Tribunal holds that [seller] shall recover from [buyer] DM 701,783.00 as well as DM 3,532.00 paid in arbitration and registration fees in favor of [seller].

The present decision is made and signed in three originals, one of which shall be kept with the files of the Tribunal, one for the [seller], one for the [buyer].
The Chairman of the Tribunal /Signature/
Arbiters /Signature/


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Claimant of Germany is referred to as [seller]; the Respondent of Russia is referred to as [buyer]. Amounts in German currency (Deutsche Mark) are indicated as [DM].

** 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.

*** Mykhaylo Danylko is a Partner with the law firm Danylko, Kushnir, Soltys & Yakymyak, Attorneys & Counselors at Law, Kiev, Ukraine <http://www.dksylaw.com>. He holds a Masters of Laws (European Studies Program) from the Law School of International Science and Technology University, Kiev, Ukraine (July 2000); a Master of Management in Business of the Business School of International Science and Technology University (June 2002); and has received his LL.M. in International and Comparative Law at the Pace University School of Law.

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Pace Law School Institute of International Commercial Law - Last updated August 16, 2005
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