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CISG CASE PRESENTATION

Russia 31 January 1996 Arbitration proceeding 228/1995 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/960131r1.html]

Primary source(s) for case presentation: Case text

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Case identification

DATE OF DECISIONS: 19960131 (31 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: 228/1995

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Yugoslavia (claimant)

BUYER'S COUNTRY: Russia (respondent)

GOODS INVOLVED: Unavailable


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issues: Article 78 [Also cited: Article 53 ]

Classification of issues using UNCITRAL classification code numbers:

78B [Rate of interest]

Descriptors: Interest

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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. 5 [26-28]

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. 157, 231

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Case text (English translation)

Queen Mary Case Translation Programme

Russian Federation arbitration proceeding 228/1995 of 31 January 1996

Translation [*] by Mykhaylo Danylko [**]

Translation edited by Yelena Kalika [****]

1. SUMMARY OF RULING

     1.1 Whereas the contract, concluded between the parties, contained the reference to the relevant provision of the General Terms of Delivery USSR - SFRY, thus the competence of the Tribunal of International Commercial Arbitration (hereinafter Tribunal) to arbitrate the dispute between the Yugoslavian company ([seller]) and Russian company ([buyer]) is determined on the basis of these provisions of the General Terms of Delivery USSR - SFRY considering the succession of the Tribunal to the Soviet Trade Arbitration Commission at the USSR Chamber of Commerce and Industry.

     1.2 Guided by the provisions of the General Terms of Delivery USSR - SFRY, to which the contract had referred, the Tribunal recognized the material law of Yugoslavia applicable as the law of the country of seller. Taking into attention that at the moment the contract was signed Yugoslavia was a party to the CISG, the Tribunal, based on the CISG Art. 1(1)(b), applied its provisions while arbitrating the dispute.

     1.3 The buyer who did not perform his obligation to open a letter of credit, cannot refer to this fact as a reason not to pay for the goods received and unpaid by him.

     1.4 When determining the amount of annual interest, calculated on the delay of payment, the Tribunal took into consideration the provisions of CISG Art. 78. Considering that this article does not contain any guidelines as to the amount and the mechanism of calculation of the annual interest, the Tribunal took into attention provisions of the Law of SRY On the Amount of Current Interest Rate.

     1.5 A claim to recover the annual interest for the period until the date when the suit had been brought was granted in the amount, capitalized by the [seller] and for which he paid the arbitration fees. The issue as to recovery of the annual interest at the higher rate was left without consideration.

2. FACTS AND PLEADINGS

     2.1 [Seller's position]

The Claimant [seller] (a Yugoslavian company) claimed recovery of payment for the goods supplied by him to the [buyer] (a Russian company) under the contract between the parties from 15 February 1991. [Seller] also requested recovery of the annual interest to be calculated on the amount of the principal debt.

     2.2 [Buyer's position]

The Respondent [buyer] referred to the fact that the [seller] made a dispatch of the goods without a letter of credit, impediment to open of which was the freeze of [buyer]'s finances in the Vneshekonombank of the USSR.

3. TRIBUNAL'S REASONING

The ruling of the Tribunal contained the following main points.

     3.1 [Jurisdiction competence of the Tribunal]

In the contract signed by the parties on 15 February 1991, it was stipulated that to solve the disputes and controversies that might arise from or in connection with the contract, the parties would refer to the provisions of Chapters XVII and XVIII General Terms of Delivery USSR - SFRY. In accordance with paragraph 83 of Chapter XVII, if the Respondent is a Soviet company, the Moscow based Soviet Trade Arbitration Commission at the USSR Chamber of Commerce and Industry has competence to arbitrate the dispute. By the Order of the Presidium of the USSR Supreme Council from 14 December 1987 the said Commission was renamed the Tribunal of Arbitration at the USSR Chamber of Commerce and Industry. Pursuant to the Russian Federation Law On the Tribunal of International Commercial Arbitration, the Tribunal became its successor. Therefore, the Tribunal possesses necessary competence to arbitrate the present dispute.

     3.2 [Applicable law]

The contract between the parties contains references to the General Terms of Delivery USSR - SFRY and also to the paras 9-12, Chapter IV, para 78, Chapter XV, and Chapters XIV, XVI, XVII, XVIII. Para 89, Chapter XVIII provides that "The material law of the seller's state shall apply to the relations of parties in connection with delivery of goods when the issues are either not regulated or only partially regulated by the present General Provisions, contract or separate agreement." Thus, the law applicable to the dispute is the material law of Yugoslavia.

Taking into attention that at the moment when the contract was signed Yugoslavia was a party to the CISG, the provisions of the Convention are also applicable to the relations of the parties arising out of the contract of 15 February 1991 (CISG Art. 1(1)(b)).

     3.3 [The merits of the case]

The documents in the case materials evidence that seller has performed his obligation to deliver the goods in the quantity and for the total price specified by the seller. The buyer does not challenge this fact. The buyer failed to fulfill his obligation to pay for the goods supplied by the seller.

In his response to the action from 16 November 1995 the [buyer], objecting to the action, referred to the fact that the goods had been shipped without opening the letter of credit by him. The Tribunal did not find this argument reasonable. Firstly, the contract itself stipulates not only the method of payment in the form of letter of credit but also the form of collection of invoices. Secondly, the contract does not provide for the possibility that buyer may refuse to pay for the goods supplied to him because he himself failed to open a letter of credit to make a payment to the seller. On the basis of CISG Art. 53 the buyer is obligated to pay the seller for the goods supplied in accordance with the conditions of the contract.

Pursuant to CISG Art. 78, if a party delayed in payment of the price for the goods, the other party is entitled to the interest from the amount in arrears. Since the CISG itself does not state the amount of interest, thus it should be determined on the basis of the relevant provisions of applicable law. The [seller], referring to the Art. 2 of the Law of SRY On the Amount of Current Interest Rate, in his claim requested to recover from the [buyer] 6 percent of the annual interest from the amount in arrears, starting calculation of the interest since 9 October 1991 to the date of actual payment. He also capitalized the sum of interest from 9 October 1991 to 20 May 1995, which together with the sum of principal debt constitutes the cost of action.

In the petition of 31 January 1996 requesting to change the cost of action, it is argued that the Law, on the basis of which the [seller] calculated 6 percent of interest, came into force only on 25 June 1993. Therefore, the [seller] is asking to calculate not 6 percent but 9.7 percent of the annual interest, i.e., the average interest rate at the place of the creditor, for the period from 9 October 1991 to 24 June 1993. To confirm this rate he presented a report issued by the relevant Yugoslavian bank. At the same time, the [seller] is asking to calculate the interest according to the abovesaid law at the rate 6 percent starting from 25 June 1993 to the date of actual payment.

The Tribunal believes that the increase of the interest rate from 6 per cent to 9.7 per cent for the period from 9 October 1991 to 24 June 1993 would lead to the increase of the cost of action, which would be uncovered by the arbitration fees. Thus, the Tribunal finds allowable to calculate interest on the amount in arrears for the period stipulated in the claim (from 9 October 1991 to 20 May 1995) at the annual rate 6 percent, which does not exceed 9.7 percent. The claim to recover the interest at the annual rate 9.7 percent, raised in the petition to change the cost of action is left without consideration by the Tribunal. At the same time, the 6 percent annual interest should be calculated on the amount in arrears starting from 21 May 1995 to the day of actual payment.


FOOTNOTES

* This is a translation of data on Proceeding 228/1995 of 31 January 1996 of the Tribunal of International Commercial Arbitration of the Russian Federation Chamber of Commerce and Industry reported in Arb. Praktika 1996-1997, No. 5 [26-28]. All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Yugoslavia is referred to as [seller]; Respondent of the Russian Federation 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.

*** 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.

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