Russia 8 October 1996 Arbitration proceeding 407/1995 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/961008r1.html]
DATE OF DECISIONS:
CASE NUMBER/DOCKET NUMBER: 407/1995
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Germany (claimant)
BUYER'S COUNTRY: Russia (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:
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
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. 30 [110-113]
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, 167Go to Case Table of Contents
Case text (English translation) [second draft]
Queen Mary Case Translation Programme
1. SUMMARY OF RULING
1.1 Written approval (backing) by a third party of the contract, signed by both Seller and Buyer, does not mean that that third party became a party to the contract and therefore it is not bound by the arbitration clause of this contract. Accordingly, while hearing his objections to the competence of the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Trade (hereinafter Tribunal), the Tribunal decided to dismiss the motions of the Claimant and the Respondent (the parties to the contract) to bring the third party to the proceedings as one of the respondents.
1.2 Selection of the arbitrator by the third party cannot be considered as its consent to solve the dispute by the Tribunal, since it expressed objections to the Tribunal's competence.
1.3 Since at the moment of concluding of the contract (March 1994) the commercial companies of the Claimant and the Respondent were located in Contracting States to the CISG (Germany and Russia), the provisions of this Convention cover the relations of the parties to the contract.
1.4 The relations between the Respondent and the third party, who received the goods delivered by the Claimant, should be regulated under the commission contract concluded between them.
1.5 The Tribunal found possible to recognize an article on eurocredits in "Izvestia" newspaper as evidence of the rate of annual interest for using the money, recovered on the basis of Art. 78 CISG and Art. 395 of the Russian Federation Civil Code.
2. FACTS AND PLEADINGS
The action was brought by a German company (Claimant) against two Russian companies. The Claimant, in March 1994, concluded with a first Russian company a contract for deliveries of goods to the second Russian company. There was a commission contract effective between those Russian companies at that time. The amendments to the contract between First Respondent and the Claimant were backed (approved in written) by the CEO of the Second Respondent. The addendum to the contract between the First Respondent and Claimant provided for the right of the Second Respondent to pay for the received goods directly to the Claimant. Most of the payments for the goods were made by the Second Respondent. The Claimant and the Second Respondent have signed a certificate of verification of deliveries and payments under the contract. The Claimant claimed: recovery of the rest of unpaid sum for the delivered goods; recovery of the penalty provided for in the contract; recover of annual interest for using the money; compensation of the legal and arbitration fees.
The First Respondent deemed that Claimant should regulate all issues with the Second Respondent. The First Respondent, as a participant in a commission agreement with the Second Respondent, has fulfilled his obligations by concluding a contract with the Claimant.
The Second Respondent stated that he was not a party to the contract with the Claimant, nor did he sign any addendum to the contract which entitled him to make payments for the delivered goods. As to the backing of the addendums to the contract by the Second Respondent's CEO regarding the quality and quantity of the goods, those addendums do not contain an arbitration clause. Therefore, the Second Respondent asked to exempt him from the proceeding, considering that the Tribunal does not have competence to hear the claims against him.
The representatives of the Claimant and the First Respondent insisted during the trial to arbitrate the action against the Second Respondent.
3. TRIBUNAL'S REASONING
The ruling of the Tribunal contained the following main points.
3.1 [Jurisdiction and competence of the Tribunal]
According to the Art. 7 of the Russian Federation Law on the Tribunal of International Commercial Arbitration and para. 1(3) of the Rules of Tribunal, the Tribunal may hear the disputes if there is a written agreement between the parties.
Having analyzed the case materials and listened to the explanations of the parties, the Tribunal found the following.
There was a contract of 24 March 1994 concluded between the Claimant and the First Respondent. Clause 8 of the contract provided for competence of the Tribunal to solve the disputes between the parties which may arise during performance of the contract. In this connection, the Tribunal found itself competent to arbitrate the dispute between those two parties.
There were not presented any documents about the arbitration agreement between the Claimant and the Second Respondent. The circumstance that the CEO of the Second Respondent backed an addendum to the contract to which the Claimant and the First Respondent referred, cannot be considered as evidence of the arbitration agreement. Backing of the addendums to the contract was made as a part of negotiation of the quality and quantity of the goods to be delivered on the basis of the commission contract of 28 December 1993 between the Claimant and the First Respondent. This cannot be a ground for recognizing the Second Respondent as a party to the contract between the First Respondent and Claimant, nor as an evidence of his consent to participate in a dispute resolution proceeding before the Tribunal.
The selection of an arbitrator by the Second Respondent also cannot be considered as his consent to the arbitration of the dispute by the Tribunal, since in his letter of 26 January 1996 he stated objections to the resolution of dispute with his participation by the Tribunal.
Under these circumstances, the Tribunal, by virtue of Arts. 7 and 16(2) of the Russian Federation Law On the Tribunal of International Commercial Arbitration, and para. 1(3) of the Rules of Tribunal found that the dispute between the Claimant and the Second Respondent cannot be arbitrated by the Tribunal; thus the proceeding of this dispute should be terminated in accordance with paras. 1 and 45 of the Rules of Tribunal.
3.2 [Applicable law]
The parties to the contract are companies located in Contracting States to the CISG therefore the provisions of this Convention cover their relations.
3.3 [The merits of the case]
According to Art. 53 CISG, the buyer to the contract must pay in time the price for the goods. In case of non-performance by buyer of this obligation, the seller may claim from him the payment of the price for the goods in accordance with Art. 62 CISG.
Involvement of the third party to performance of the contract as a recipient of the goods, payer, etc., does not exempt the buyer from responsibility before the seller for the obligations he assumed. In this connection, the obligation to pay for the goods delivered under the contract is put upon the First Respondent.
The fact of delivery of the goods under the contract and partial payment of their price to the Seller is proved by the case materials and is not contested by the First Respondent. Nor did he contest the unpaid sum for the goods, annual interest on this sum, and the sum of the penalty. The first Respondent did not prove by documents that this sum includes the payment for the goods delivered to the Second Respondent under the contract to which the First Respondent is a party.
Under these circumstances the sum of the principal debt, as well as the penalty, should be recovered from the First Respondent.
The relations between the First Respondent and the Second Respondent, who received the goods delivered by the Claimant, should be regulated under the commission contract concluded between them.
According to Art. 78 CISG, the party who delayed the payment of the price must pay to the other party the annual interest on the delayed sum.
The Tribunal granted the Claimant's claims to recover from the First Respondent annual interest on the sum of the principal debt at the rate of 5 percent per annum for the period from 22 November 1994 to 31 December 1994, and at the rate of 5.9 percent from 1 January 1995 to the date of actual payment. The Tribunal found possible to recognize an article on eurocredits in "Izvestia" newspaper as evidence of the rate of annual interest for using the money as a rate of banking credit at the place of creditor at the time of arbitration of the dispute.
The Tribunal put on the First Respondent the obligation to compensate the Claimant for his legal fees.
* This is a translation of data on Proceeding 407/1995, dated 8 Octoberr 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. 30 [110-113]. All translations should be verified by cross-checking against the original text.
** 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.Go to Case Table of Contents