Case text (English translation)
Queen Mary Case Translation Programme
Russian Federation arbitration proceeding 220/1996 of 11 April 1997
Translation [*] by Gilyana Bovaeva [**]
Translation edited by Mykhaylo Danylko [***]
1. SUMMARY OF RULING
1.l Despite the fact that the commercial company of the [seller] was located in the United Kingdom, a State, which is not Contracting State to the Vienna Convention 1980 [UN Convention on Contracts for the International Sale of Goods (1980), hereinafter CISG], election by parties to the contract of Russian law as applicable leads to the applications of this Convention (Article 1(1)(b) CISG), because Russia is a Contracting State to the CISG.
1.2 The contract provides for shipment of the goods on "CPT - port of designation in Russia" term with reference to Incoterms (1990) and does not specify that the shipment should be made directly from a Russian manufacturing plant, thus shipment of goods made from Finland was not in violation of the contractual provisions.
1.3 Having concluded the contract on "CPT - port of designation in Russia" term in accordance with Incoterms 1990 and not agreed otherwise, the buyer by this has agreed to bear expenses in connection with customs clearance and payment of duties, taxes and other state fees due when the goods are imported into the [buyer]'s country.
1.4 In the event of judicial recovery of the unpaid debt on the grounds of Article 395 of the Russian Federation Civil Code, only the court has discretion to decide whether to apply the rate [of interest] effective at the time the action was brought or the rate at the time the judgment was rendered.
2. FACTS AND PLEADINGS
This action was brought by the [seller], a British company, against the [buyer], a Russian company in connection with partial payment for the goods delivered under the contract concluded between the parties in November 1995.
2.1 [Seller's claims]
The [seller]'s claims included:
- recovery of the debt;
- recovery of annual interest for using [his] money;
- recovery of legal fees;
- recovery of arbitration fees.
2.2 [Buyer's response]
[Buyer] denied the [seller]'s claims, reasoning that the unpaid sum for the goods was spent for customs duties and fees for customs clearance of goods. The contract was for goods manufactured in the territory of Russia. Thus, neither the customs duties nor the fees for customs clearance of the goods should be imposed. Shipment of the goods from Finland by the [seller] (i.e., making a re-export operation) has led to these additional expenses.
2.3 [Seller's reply]
The [seller] did not agree with the [buyer]'s position. During the hearings of the Tribunal [the seller], has asked to re-calculate the annual interest at the rate effective on the date of hearing of the dispute instead of the rate effective on the date of institution of the action.
2.4 [Agreement on applicable law]
The parties' representatives have agreed at the Tribunal hearings that the rules of Russian law would be applicable to the merits of the dispute.
3. TRIBUNAL'S REASONING
The ruling of Tribunal granting the claim contained the following main points.
3.1 [Jurisdiction of the Tribunal]
Although the language of arbitration clause of the contract contains some inexactness, there is no doubt that the parties clearly meant this Tribunal. This is confirmed by the fact of participation of both parties in the arbitration proceeding and by the absence of objections against the Tribunal's jurisdiction.
3.2 [Applicable law]
Considering that the representatives of parties came to the agreement on application of the rules of Russian law to this dispute, the Tribunal mentioned that the CISG is a component part of the law of Russia, which by virtue of Article 1(1)(b) is applicable to this dispute notwithstanding the fact that the commercial company of the [seller] is located in a State, which is not a Contracting State to the CISG.
3.3 [Place of making the shipment]
Under the contract, the shipment of goods should be made on the term "CPT - port of designation in Russia" (Incoterms (1990)), i.e., on the term that is applicable in the course of international trade. Whereas the contract does not provide for shipment directly from the manufacturing plant of the goods, and the parties referred in the contract to the terms of delivery usually employed in the international trade practice, therefore it should be concluded that while concluding the contract the parties meant that the shipment by the [seller] could be made not only from the Russian manufacturing plant, but also from any other place, including the territory of another country.
3.4 [Undisputed facts]
There is no dispute between the parties concerning the facts as to delivery of the goods, their quantity, and also the sum not paid by the [buyer].
Under Incoterms 1990, the "CPT" term means that the expenses in connection with customs formalities, payment of all duties, taxes and other state fees due when importing goods into the customs territory of the country of buyer should be paid by the buyer and are not included in the price of the goods. The proof that the parties meant the same interpretation of Incoterms (1990) as to allocation of expenses for delivery on "CPT" term is the language of the clause 3 of the contract according to which the price is based on "CPT" terms and included the cost of package, containers, rating and delivery.
Therefore, the [seller] has shipped the goods and turned over all documents related to them as was required by the provisions of the contract and thereby has performed his obligations under Article 30 CISG.
Whereas the seller has shipped the goods, the buyer, by virtue of Article 53 CISG must pay the price for the goods and take delivery of them as required by the contract.
Taking into attention the aforesaid, the Tribunal found reasonable and such that the [seller]'s claims as to recovery should be granted by requiring payment from the [buyer] of the sum of principal debt under the contract.
3.5 [Interest rate]
The Tribunal decided to grant the [seller]'s claims as to recovery from the [buyer] of the annual interest for using [seller]'s money calculated over the sums of delayed payments according to the calculation presented in the statement of action for the whole period of delay until the date of institution of the action.
The reasonableness of this calculation of annual interest is proved by the article in the official reporter on the average banking rate for given loans on the day of institution of the action of one of the leading UK banks that serves the [seller].
The Tribunal did not grant the [seller]'s motion to employ the interest rate on the day of rendering of the judgment rather than on the day of institution of the action. By so deciding, [the Tribunal] took into attention that the question as to which rate should be employed in case of judicial recovering of the debt on the grounds of Article 395 of the Russian Federation Civil Code is left for the court's discretion.
FOOTNOTES
* This is a translation of data on Proceeding 220/1996 of 11 April 1997 of the Tribunal of
International Commercial Arbitration at the Russian Federation Chamber of Commerce and
Industry, reported in: Arb. Praktika 1996-1997, No. 55 [193-195]. For purposes of this
translation, Claimant of Great Britain is referred to as [seller]; Respondent of the Russian
Federation is referred to as [buyer].
** Gilyana Bovaeva, a scholar from the Russian Federation, Kalmyk Republic, earned her LL.M.
degree in Environmental Law from the Pace University School of Law, 2002. 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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