Russia 19 March 1996 Arbitration proceeding 88/1995 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/960319r1.html]
DATE OF DECISIONS:
CASE NUMBER/DOCKET NUMBER: 88/1995
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Russia (claimant)
BUYER'S COUNTRY: Germany (respondent)
GOODS INVOLVED: Unavailable
APPLICATION OF CISG: Yes [Article 1(1)(a)]
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issues:
Classification of issues using UNCITRAL classification code numbers:
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CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
English: Journal of International Arbitration 1 (2000) 124-125; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=434&step=Abstract>
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. 13 [49-52]
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.167Go to Case Table of Contents
Queen Mary Case Translation Programme
Translation [*] by Yelena Kalika [**]
1. SUMMARY OF RULING
1.1 Although the language of the arbitration clause in the contract was not drafted clearly, the Tribunal concluded that the parties meant to arbitrate their disputes at the Tribunal. [Such conclusion] is evidenced, in particular, both by the [Seller]'s filing the claim with the Tribunal and by the Respondent [Buyer]'s not contesting the competence of the Tribunal to arbitrate the present dispute.
1.2 The present dispute is governed by the CISG because both parties to the dispute, the Russian Federation and Germany, are CISG Contracting States (Article 1(1)(a) CISG). Pursuant to Article 166 of the USSR Principles of Civil Law 1991, issues not settled in the CISG are governed by Russian law as a subsidiary statute, as the law of the State where the seller was incorporated and has its main place of business.
1.3 The [Buyer]'s refusal [to make] a partial payment for the goods based on their low quality is found unreasonable because the quality inspection was performed in violation of the proper procedure set in the contract and because the claim as to the quality was made in violation of the term set in the contract. In accordance with the contract, it entails one's forfeiture of a right to claim.
1.4 The Instruction "On the procedure of acceptance of the quality of industrial and technical products", which was approved by the USSR State Arbitrage in 1966 and on which the [Buyer] relies, cannot be taken into consideration because it applies only to internal economic relations. In the absence of a relevant provision in the contract, [the Instruction] does not apply to the relationships of the parties in connection with international commercial transactions.
1.5 Since the [Buyer] failed to make a counterclaim in accordance with the procedure set in the Rules of the Tribunal, the [Buyer] has no right to demand [that his debt be] offset.
1.6 The contractual penalties for the delay in payment for the goods were recovered based on the sum for which the [Seller] paid arbitration fees. The rest of the claim of penalties was left without consideration.
2. FACTS AND PLEADINGS
[Seller], a Russian firm, brought a claim against Respondent [Buyer], a German firm, in connection with partial non-payment for the goods delivered under a contract made by the parties in January 1994. In accordance with the contract, the [Buyer] was to make the final payment within five days after the [Seller]'s submitting the documents stated in the contract and upon arrival of the last lot of goods at the agreed place of destination. The claims included the main debt and penalties for the failure to make a timely payment in the amount stated in the contract.
Both in his written reply and during the Tribunal's proceeding, the [Buyer] contested the [Seller]'s claims. The [Buyer] argued that the goods delivered were of low quality. According to the [Buyer], the losses he suffered due to the [Seller]'s breach exceeded the amount of the claims [brought against him]. The [Buyer] based his counterclaim both on the Regulations of deliveries of industrial and technical goods approved by Resolution No. 888 of the USSR Council of Ministers on 25 July 1988 and on the USSR Principles of Civil Law 1991. As to the procedure of acceptance, the [Buyer] stated that the acceptance was made in accordance with the provisions of the said Instruction approved by the USSR State Arbitrage. The [Buyer] sought to offset [his debt by] his counterclaim. In this connection, he argued that the [Seller]'s claim should be denied. Besides, the [Buyer] argued that there was no delay in payment at all because, in accordance with the contract, the documents, based on which the payment should be made, were to include a Certificate of Quality of the goods. According to the [Buyer], the [Seller] failed to provide the [Buyer] with [such a Certificate of Quality]. In support of his position, the [Buyer] relied on Article 410 of the Russian Federation Civil Code and Article 80 CISG.
During the Tribunal's proceeding the [Seller] insisted on his claims and objected to the [Buyer]'s arguments. Besides, the [Seller] brought an additional claim of penalties for the period from the date of the claim to the date of the proceeding.
3. TRIBUNAL’S REASONING
The Tribunal rendered an award based on the following grounds.
3.1 According to the parties' contract, all disputes and disagreements between them shall be arbitrated by the Tribunal in Moscow.
That the [Seller] brought his claim to the Tribunal and the [Buyer] did not contest the Tribunal's competence evidences that the parties indeed meant the Tribunal [when drafting the arbitration clause].
For the above stated reasons, the Tribunal finds that it has competence to arbitrate the present dispute.
3.2 The Russian Federation has been a CISG Contracting State since 1 September 1991. Germany is also a CISG Contracting State. Therefore, the parties' relationships under the contract in controversy are governed by the CISG based on Article 1(1)(a) CISG.
In accordance with Article 166 of the USSR Principles of Civil Law 1991, which have been in force in the Russian Federation since 3 August 1992, the parties' relationships not settled in the CISG shall be governed by the law of the State where the Seller was incorporated, resides or has its main place of business as a subsidiary statute. In the present case, it is the substantive law of the Russian Federation.
3.3 The materials of the case evidence and the [Buyer] does not contest the fact of delivery of goods by the [Seller] in the quantity stated in the claim.
The Tribunal finds unreasonable the [Buyer]'s arguments concerning the [Buyer]'s right to make a partial payment for the goods due to their low quality. The inspection of the quality of the goods was performed in violation of the procedure set in the contract. The [Buyer]'s argument that he inspected the quality of the goods in accordance with the Instruction "On the procedure of acceptance of the quality of industrial and technical products" approved by Resolution No. P-7 of the USSR State Arbitrage on 25 April 1966 cannot be taken into account because that Instruction applies to internal economic relations exclusively. In the absence of a relevant provision in the parties' contract stating that this Instruction applies, it cannot be applied to the parties' relationships concerning international commercial transactions. Besides, the claim as to quality was brought in violation of the period of time set in the contract. In accordance with the contract, [such violation] entails the [Buyer]'s forfeiture of a right to claim. As to damages, the [Buyer] failed to establish the fact of damages itself and to support his computation of the reduction of the price in proportion to the damages suffered.
Besides, the [Buyer] was entitled to bring a counterclaim in accordance with the procedure set in the Rules of the Tribunal. However, he failed to do so. Therefore, he cannot demand that [his debt] be offset.
For the above stated reasons and based on Article 62 CISG and on the provisions of the contract, the Tribunal finds that the [Buyer] must pay the amount of the main debt to the [Seller].
3.4 In accordance with the contract, when the [Buyer] fails to make a timely final payment for the goods delivered, he must pay penalties to the [Seller]. [The amount of penalties is set at] 0.2% of the cost of the goods shipped for each day of the delay in payment.
The Tribunal finds unreasonable the [Buyer]'s argument that the date of payment has not yet arrived and, thus, that the [Seller]'s right to recover penalties for the delay in payment has not arisen due to the [Seller] failure to present all of the documents required in the contract in order to make a final payment for the goods, namely, the [Seller]'s failure to present Certificates of Quality. The materials of the case contain receipts issued by the [Buyer]'s Representative Office in Moscow. These receipts were submitted by the [Seller] and evidence that the [Buyer] has received Certificates of Quality.
For the above stated reasons, the Tribunal finds that the [Buyer] must pay penalties in the amount stated in the claim.
3.5 The [Seller] failed to pay arbitration fees in connection with his additional claim brought during the Tribunal's proceeding. Therefore, the Tribunal leaves [this additional claim] without consideration.
* This is a translation of data on Proceeding 88/1995, dated 19 March 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. 13 [49-52].
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] and Respondent of Germany is referred to as [Buyer].
** Yelena Kalika, JD Pace University School of Law, has studied at the Moscow State Law Academy, interned with a Moscow law firm, and is an Associate at the Pace Institute of International Commercial Law.Go to Case Table of Contents