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CISG CASE PRESENTATION

Russia 22 January 1996 Arbitration proceeding 40/1995 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/960122r1.html]

Primary source(s) for case presentation: Case text

Case Table of Contents


Case identification

DATE OF DECISIONS: 19960122 (22 January 1996)

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: 40/1995

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russia (claimant)

BUYER'S COUNTRY: United Kingdom (respondent)

GOODS INVOLVED: Unavailable


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issues: Articles 53 ; 54 ; 74

Classification of issues using UNCITRAL classification code numbers:

53A [Buyer's obligation to pay price of goods];

54A [Obligation to pay includes enabling steps];

74A [Loss suffered as consequence of breach: damages calculated pursuant to liquidated damages clause]

Descriptors: Price ; Liquidated damages

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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 (Russian): Rozenberg ed., Arbitrazhnaja praktika za 1996-1997 gg. [Arbitration practice in the years 1996-1997], Moskva (Statut) 1998, No. 1 [12-15]

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 nn. 156, 160; Henschel, The Conformity of Goods in International Sales, Forlaget Thomson (2005) 116

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Case text (English translation)

Queen Mary Case Translation Programme

Russian Federation arbitration proceeding 40/1995 of 22 January 1996

Translation [*] by Mykhaylo Danylko [**]

Translation edited by Djakhongir Saidov [***]

1. SUMMARY OF RULING

     1.1 If the contract between the parties contains an agreement on the settlement of disputes arising from the contract by the Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation, then, by virtue of the Resolution of 7 July 1993 of the Russian Federation Supreme Council's [Parliament of the Russian Federation], the Tribunal of International Commercial Arbitration at the Chamber of Commerce and Industry of the Russian Federation (hereinafter Tribunal) has the competence to arbitrate such disputes.

     1.2 The Claimant must prove his right to bring the action if the name of the Claimant does not correspond to the name of the party to the arbitration agreement. Evidence of such right are, in particular, the official documents proving the succession of this right.

     1.3 Absence of parties' representatives at the hearing does not bar the dispute proceedings provided that the requirements of the Russian Federation Law on International Commercial Arbitration and the Rules of the Tribunal, enabling the parties to prepare for the proceedings and to attend the hearings, are observed.

     1.4 In defining the applicable substantive law, the Tribunal generally takes into account provisions of the Fundamentals of Civil Legislation of the USSR 1991. Since Russian law is applicable to the international contract of sale, the dispute should be settled by the provisions of the Vienna Convention 1980 [UN Vienna Convention on Contracts for the International Sale of Goods of 1980 (hereinafter CISG)], notwithstanding that the principal place of business of one of the parties to the contract is located in a State which is not a Contracting State to the CISG.

     1.5 Signature of the truck driver on the bill of lading has been recognized as proper evidence of the [seller]'s performance of his obligation to make delivery of the goods under the contract term "F.C.A. Warehouse of the seller".

     1.6 Conclusion of the contract by a party in re suam, but on account of and on commission by a third party, binds the first party to perform its obligations under the contract. Assignment of the obligations under the contract to the third party, even in the event that the contract was made on commission by and on account of the third party, does not relieve the first party to the contract of the responsibility for the third party's failure to perform or improper performance of this obligation.

     1.7 The parties' agreement in the contract as to liquidated damages which have been agreed upon and estimated in advance and which are to be paid in case of failure to perform or the improper performance of an obligation, binds the breaching party to compensate the other party for the losses in the amount agreed in the contract.

2. FACTS AND PLEADINGS

This action was brought by [seller], a Russian company against [buyer], a British company.

     2.1 [Seller's position]

The [seller]'s claims included:

     2.2 [Buyer's position]

The invoice for the goods delivered was sent not to the [buyer], but, according to the [buyer]'s instructions, to another English firm for the account of and on commission by which the [buyer], as [buyer] alleged, had purchased the goods.

The [buyer] did not present any submissions against the action and [buyer]'s representatives did not appear before the Tribunal.

3. TRIBUNAL'S REASONING

The ruling of the Tribunal contained the following main points.

     3.1 [Jurisdiction competence of the Tribunal]

The contract concluded between the parties provides for the settlement of disputes by the Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation. Since according to the Resolution of 7 July 1993 of the Russian Federation Supreme Council, the Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation was renamed the International Court of Commercial Arbitration; thus, the Tribunal has the competence to arbitrate the present dispute.

     3.2 [Claimant properly identified]

The [seller], a Russian company, the name of which is different from the name of the party to the contract, is recognized as the proper Claimant. From the documents (by-laws, changes to the by-laws, certificate issued by the Registration Chamber) presented by the [seller], it expressly follows that the [seller] is successor to the party to the contract.

     3.3 [Hearing absente reo]

According to the Rules of the Tribunal, absence of the [buyer]'s representative at the hearing does not bar proceedings of the dispute on the merits. In so ruling, the Tribunal relied on the fact that the [buyer] had been notified of the date and place of the hearing by registered letter of 10 November 1995 sent to the last known postal address of the [buyer]; this is confirmed by the Post Agency's report of 22 November 1995 contained in the case materials. In accordance with the requirements of the Rules of Tribunal, the [buyer] was notified in this manner so that [buyer] had at least 30 days to prepare for the case hearings and appear in the proceedings of the Tribunal. The [buyer] had been notified previously at the same address by the Tribunal's letters of 4 April 1995 and 30 August 1995, with enclosed claim documents regarding the action brought against the [buyer]. Besides this, as follows from the document presented by the [seller], the [seller] himself had sent to the [buyer] copies of the action documents, including enclosed documents, and these documents were served on the [buyer] on 25 February 1995.

Therefore, service of the documents on the [buyer] was in accordance with the rules provided by the Russian Federation Law on International Commercial Arbitration (Article 3(1)).

     3.4 [Applicable law]

In determination of the applicable law, the Tribunal stated that, according to the Resolution of 14 July 1992 of the Russian Federation Supreme Council, the Fundamentals of Civil Legislation of the USSR 1991 were effective in the territory of Russia at the time of the conclusion of the contract. Pursuant to Article 166(1)(2)(1) of the Fundamentals of Civil Legislation of the USSR 1991, the Russian civil law (Fundamentals of Civil Law of USSR 1991 and Civil Code of the USSR of 1964) should be applied to the contractual relations between the parties, because the Claimant, a legal entity of the Russian Federation, was the seller under the contract. In addition to this, the Russian Federation is a legal successor to the membership of the former USSR in the UN and, according to the UN Charter, the Russian Federation has acquired all the rights and obligations of the USSR under the multilateral treaties, depository of which is the UN Secretary-General. Since the USSR became a Contracting State to the CISG on 1 September 1991, the provisions of this Convention apply to contracts concluded after 1 September 1991 by parties whose places of business are located within the Russian territory. Considering that the provisions of the CISG have become part of the Russian domestic law since that date, they are to be applied to the relations between the parties to the present arbitration case by virtue of Article 1(1)(b) CISG notwithstanding that the [buyer]'s place of business is not located in a Contracting State to the CISG.

     3.5 [The merits of the case]

   3.5.1 [Recovery of the principal debt]

The case materials evidence that the [seller] has performed his contractual obligations. The goods were delivered in accordance with the contractual term "F.C.A. Warehouse of the Seller". Handing over of the goods was proved by the truck driver's signature on the bill of lading and by the [buyer]'s letter, addressed to the [seller] on 22 February 1995. This letter confirms [seller]'s assertion that the [buyer] did not pay for the goods.

Enclosed with the [buyer]'s letter of 22 February 1995 is a copy of [buyer]'s letter of 24 February 1994 to a third party [another English company], containing a request to pay the invoice enclosed with this letter directly to the [seller]; this copy confirms [seller]'s submissions as to the reasons why the invoices were sent to that third party. Under these circumstances, the Tribunal concluded that, from the very beginning, the [buyer] intended to place the obligation to pay for the goods onto the third party, on behalf and on account of which the [buyer], as follows from [buyer]'s letter of 22 February 1995, had entered into the contract with the [seller].

The Tribunal states that the main obligation of the Respondent as the [buyer] is to pay the price for the goods (Article 53 CISG). This obligation includes taking such steps and complying with such formalities as may be required under the contract or any laws to enable payment to be made (Article 54 CISG). Terms of the contract mentioned above do not contain provision that the [buyer] is entitled to transfer its obligation to pay for the goods (partially or entirely) onto a third party. At the same time, according to Article 62(1) of the Fundamentals of Civil Legislation of the USSR 1991, the obligation arisen from the contract may be transferred in part or entirely to a third party, if the third party is connected to one of the parties to the contract by relevant agreement. But even supposing that the [buyer] was bound to a third party by agreement which provided that payment of the price for the delivered goods be made by the third party directly to the [seller], then, by virtue of Article 62(3) of the Fundamentals of Civil Legislation of the USSR 1991, the liability for failure to perform or for improper performance of this obligation should be on the first party, i.e., in this case, the [buyer] to the contract from which the obligation arose. The Tribunal rules that the [seller]'s claim for recovery of the sum of the principal debt from the [buyer] is to be granted in full.

   3.5.2 [Recovery of liquidated damages]

Having addressed the [seller]'s claim for recovery from the [buyer] of damages in the amount of 10% of the price for delivered but unpaid goods, the Tribunal found that this claim was directly based on the provisions contained in the contract. According to clause 7 of the contract "If the terms of the contract as to payment agreed upon herein are not performed, then the buyer will pay the seller damages which were estimated and agreed upon in advance, in the amount of 0.1% of the whole price of the contract for each day of delay of the payment, but not exceeding 10% of the whole price of the contract". The liquidated damages reach the maximum amount on the 100th day of delay (0.1% x 100 days = 10%). The [buyer], according to clause 4 of the contract, must make the payment within 30 days from the date of delivery, i.e., in this event, not later than on 23 December 1993. Whereas on the date of hearing of this dispute the [buyer] has not paid the seller in full for the delivered goods, the delay in payment thus exceeded 100 days. On this ground, the Tribunal came to the conclusion that [seller]'s claim, based on clause 7 of the contract as to recovery of pre-estimated and agreed damages, is to be granted in full.


FOOTNOTES

* This is a translation of data on the award in Proceeding 40/1995, dated 22 January 1996, of the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, reported in: Rozenberg ed., Arb. Praktika 1996-1997, No. 1 [12-15]. All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of the Russian Federation is referred to as [seller]; Respondent of Great Britain is referred to as [buyer].

** 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.

The second-iteration redaction of this translation was by Dr. John Felemegas of Australia.

*** Djakhongir Saidov (Republic of Uzbekistan), Bachelor (University of World Economy and Diplomacy, Uzbekistan), LL.M. (University of East Anglia, UK).

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Pace Law School Institute of International Commercial Law - Last updated December 2, 2005
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