Case text (English translation)
Queen Mary Case Translation Programme
Russian Federation Arbitration proceeding 38/1996
of 28 March 1997
Translation [*] by Yelena Kalika [**]
Translation edited by Mykhaylo Danylko [***]
1. SUMMARY OF RULING
1.1 Although the arbitration clause in the contract is unclear, the Tribunal of International Commercial Arbitration at the Chamber of Commerce and Industry of the Russian Federation (hereinafter Tribunal) has concluded that it has competence to arbitrate the dispute.
1.2 The Vienna Convention 1980 [UN Convention on Contracts for the International Sale of Goods (1980), hereinafter CISG] is held applicable taking into consideration that the parties to the contract are a Russian company and a German company. In accordance with Article 7(2) CISG and pursuant to Article 166 of the Fundamentals of Civil Law of [USSR] 1991, the Russian Civil Law is held to be the subsidiary statute as the law of the State of the seller.
1.3 A claim for recovery of lost profit (lucrum cessans) must be proven by the documents.
1.4 When there is no provision in the contract on an obligation to produce a particular document, in a case in which such a document is produced at the request of the other party, the requesting party must reimburse the party producing the document for the expenses incurred as a result of obtaining and sending the document.
1.5 A fine for the breach of the period of time established by law, within which the revenue received in hard currency should be deposited into the exporter's account, shall be reimbursed to the [seller] by the [buyer], when the payment of the fine resulted from the buyer's breach.
1.6 The Tribunal has granted a claim of [seller], a Russian company, that the [buyer] should pay to [seller] the annual interest, holding that the amount of this claim does not exceed the interest rates established for short-term hard currency loans in Russia.
2. FACTS AND PLEADINGS
The action was brought by the [seller], a Russian company, against the [buyer], a German company, in connection with partial payment for goods delivered under the contract concluded between the parties in February 1995. The [seller]'s claims included:
- recovery of the full payment for the goods;
- recovery of the loss of profit (lucrum cessans);
- recovery of the expenses incurred from obtaining and sending of the document requested by the [buyer];
- reimbursement of the fine paid by [seller] for the delay in depositing the revenues received in hard currency to the exporter's account in accordance with the decision of the Customs Authorities;
- recovery of additional expenses including the arbitration fee.
The [buyer] has provided no explanations as to this action.
3. TRIBUNAL'S REASONING
The decision of the Tribunal was based on the following.
3.1 [Jurisdiction competence of the Tribunal]
The Tribunal has heard the issue of its competence in relation to this dispute and found that pursuant to clause 10 of the contract concluded between the [seller] and [buyer] on 10 February 1995, the disputes arising from the contract shall be resolved by the "Arbitration Court at the Chamber of Commerce and Industry in accordance with the rules of the [said] Court, which shall be located in Moscow (Russia)." At the time the contract was concluded, there were two arbitration courts with the same name: the Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (at present, the Tribunal of International Commercial Arbitration at the Chamber of Commerce and Industry of the Russian Federation) and the Arbitration Court at the Chamber of Commerce and Industry of the city of Moscow. The language of the arbitration clause does not allow determining without doubts as to which arbitration court the parties had agreed. However, the [seller]'s submissions provide evidence that the parties chose the Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation. In particular, this is evidenced by [seller]'s filing his action with this Tribunal. The statement of action and all the materials filed with it, as well as two notices on the hearing of the case by the Tribunal, were sent to the [buyer] and received by the [buyer]. Thus, the [buyer] had the complete information on the action instituted against the [buyer] at the Tribunal and, if [buyer] had any objections, the [buyer] had many opportunities to object as to the competence of this Tribunal; however, [buyer] did not do so. For the above reasons, the Tribunal holds that it has competence to arbitrate the dispute.
3.2 [Applicable law]
The contract made by the parties does not set forth the applicable law. However, Russia and Germany are Contracting States to the CISG. Thus, the relations between the parties under this contract are governed by this Convention.
Pursuant to Article 7(2) CISG, questions not expressly settled in the Convention and which cannot be settled in conformity with its general principles shall be settled in conformity with the national law referred to by the rules of private international law. Pursuant to Article 166 of the Fundamentals of Civil Law [of USSR] 1991, which came into force in Russia on 3 August 1992, the Tribunal finds in this case that the Russian Civil Law, as the law of the State of the seller, shall be applied as subsidiary statute.
3.3 [Payment of the price for the goods]
On reviewing the evidences presented by the [seller] as to the amount of the principal debt and on hearing the [seller]'s submissions, the Tribunal, in the absence of [buyer]'s objections, concludes that the claim is reasonable and, in accordance with Article 53 CISG, the Tribunal grants the claim in full.
3.4 [Loss of profit (lucrum cessans)]
The Tribunal states that, in relation to the [seller]'s claim of loss of profit, the [seller] presented no documentary evidence of his calculations either during the first hearing or during the second hearing. During the hearing of 28 March 1997, the [seller]'s representative abandoned that claim. Consequently, this claim cannot be granted.
3.5 [Additional expenses for certificate]
In support of [seller]'s claim as to the expenses incurred for obtaining and mailing to the [buyer] the Certificate of Origin of the goods, the representative of the [seller] has presented documents which prove the payments made to the Chamber of Commerce and Industry, the Ministry of External Economic Relations and to the post authorities. The Tribunal, after examining the materials of the case and, in particular, the terms of the contract made by the parties, concludes that, in accordance with the provisions of the contract, the [seller] had no obligation to present the said certificate to the [buyer]. However, the [seller] did so at the [buyer]'s request. For the above reasons, the Tribunal of International Commercial Arbitration concludes that this claim of the [seller] shall be granted.
3.6 [Reimbursement of fine]
The [seller] has presented to the Tribunal the decision of the Customs Authority dated 3 June 1996, imposing on the [seller] a fine for violation of the established period of time for depositing the revenues received in hard currency to the exporter's account. Since the [seller] has proved that the fine resulted from the [buyer]'s breach of the terms of payment for the goods sold which were set forth in the contract, pursuant to Article 74 CISG the Tribunal finds that the [seller]'s claim as to the reimbursement of the fine by the [buyer] shall be granted in full.
3.7 [Travelling expenses relating to arbitration]
After examining the [seller]'s claim as to the reimbursement of the expenses incurred due to participation in the arbitration hearings (round trip to Moscow, hotel costs), the Tribunal finds the amount claimed by the [seller] reasonable and grants this claim.
3.8 [Interest]
The Tribunal finds it possible to grant the [seller]'s claim of 12% annual interest for the delay in payment for the goods. Since prior to institution of the action, the [seller] did not claim annual interest from the [buyer], the Tribunal has reached the conclusion that annual interest shall be paid on the principal sum of debt under the contract starting on the date of filing the action. As to the other amounts claimed for recovery from the [buyer], annual interest on them shall be awarded starting from the date of rendering of the present decision. In holding that the [buyer] shall pay 12% annual interest, the Tribunal took into account the following.
The party's obligation to pay interest in case of delay in payment of the price is directly stated in Article 78 CISG. Since the interest rate is not set forth in the Convention and since it cannot be determined in conformity with general principles pursuant to Article 7(2) CISG, the provisions of the Russian laws shall apply. Under Article 395 of the Civil Code of the Russian Federation, in case of delay of performance of money obligations, annual interest shall be recovered in the amount of the bank discount interest rate at the place of creditor's location. The [seller]'s claim of 12% annual interest does not exceed the interest rate used for short-term hard currency loans in Russia.
FOOTNOTES
* This is a translation of data on the award in Proceeding 38/1996, dated 28 March
1997, 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. 54 [189-192]. 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 Germany is
referred to as [buyer]
** 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. The
second-iteration redaction of this translation was by Dr. John Felemegas of
Australia.
*** 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.
Pace Law School
Institute of International Commercial Law - Last updated July 30, 2004
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