CISG CASE PRESENTATION

Russia 11 June 1997 Arbitration proceeding 255/1994 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/970611r1.html]

Case Table of Contents

• Case identification
• UNCITRAL abstract
• Classification of issues present
• Editorial remarks
• Citations to case abstracts, texts, and commentaries
• Case text (English translation)
• Guide to links contained in case presentations

Case identification

DATE OF DECISIONS: 19970611 (11 June 1997)

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: 255/1994

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russia (claimant)

BUYER'S COUNTRY: Germany (respondent)

GOODS INVOLVED: Unavailable

RUSSIAN FEDERATION: Award in Case No. 255/1994 of 11 June 1997 of the
Arbitration Tribunal of Russian Federation Chamber of Commerce and Industry

Case law on UNCITRAL texts (CLOUT) abstract no. 464

Reproduced with permission of UNCITRAL

A Russian organization, the seller, brought an action against a German firm, the buyer, claiming payment for goods supplied. The buyer disputed the claim.

The tribunal determined that the evidence supplied by the seller confirmed that the goods had been delivered. The buyer’s claim that it had paid import tax could not serve as lawful grounds for the deduction of this expenditure from the value of the goods, since the contracts were concluded on c.i.f. terms and made no provision for transferring such costs to the seller. The buyer’s claim that, owing to the lack of demand for the goods delivered, it had asked for deliveries to be discontinued did not constitute grounds for underpayment for the goods supplied. Under articles 53 and 60 CISG, the buyer’s obligations included taking delivery of the goods. Lack of demand for the goods could not, under article 79 CISG, serve as grounds for releasing it from this obligation.

On the basis of the above, the tribunal found for the seller and ordered the buyer to pay the price for the unpaid goods.

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Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issues: Articles 53 ; 60 ; 62 ; 79

Classification of issues using UNCITRAL classification code numbers:

53B [Buyer's obligation to take delivery of goods];

60A [Buyer's obligation to take delivery includes acts reasonably expected to aid seller];

62A [Seller may compel performance of buyer's obligation to pay price];

79B [Impediments excusing party from damages: change of market conditions held not such an impediment]

Descriptors: Delivery ; Price ; Specific performance ; Exemptions or impediments

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Editorial remarks

• Unavailable

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

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. 63 [212-215]

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. 158, 160, 241 ("ruled that changes in the state of the market could not serve as a ground for exemption"); Carla Spivack, 27 Pennsylvania Journal of International Economic Law (Fall 2006) n.150 [commentary on Art. 79 issues]

Case text (English translation)

Queen Mary Case Translation Programme

1. SUMMARY OF RULING

     1.1 Where there is a significant discrepancy between the arbitration clauses in the contracts in Russian and a foreign language, the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (hereinafter Tribunal) finds that it has competence to arbitrate the dispute on the grounds that the arbitration agreement may be concluded between the parties by exchanging of the statement of action and statement of defense. In the present case, the [seller] brought an action to the Tribunal and the [buyer] submitted its explanations to the merits not challenging the Tribunal's competence to arbitrate this dispute.

     1.2 Taking into consideration the subjective component of the parties, the Tribunal found that the Vienna Convention 1980 [UN Convention on Contracts for the International Sale of Goods (1980), hereinafter CISG], is applicable.

     1.3 On the basis of examination of the texts of the contracts the Tribunal has concluded that in their legal meaning they are contracts for the international sale of goods and not consignment or barter contracts as asserted the [buyer].

     1.4 When making a CIF delivery, the buyer bears the costs of the import customs duties. The actions of the buyer, who put the import customs duties on the seller, contradict the trade usage and, inter alia, Incoterms (1990).

     1.5 In order to exercise its contractual right to deduct factually paid expenses from the price for the goods, a party has to prove the expenses that had been sustained.

     1.6 In case of a contract for the international sale of goods, a change of market condition [demand for the products] cannot serve as an excuse for the [buyer] to avoid payment for the goods delivered to the [buyer].

2. FACTS AND PLEADINGS

The Tribunal has arbitrated the action brought by [seller], a Russian company against [buyer], a German company, in connection with partial payment for the goods shipped under two contracts dated November 1992. The [seller] further revoked his formal claims in connection with third contract concluded in March 1993.

     2.1 [Buyer's position]

The [buyer] submitted explanations to the merits of the action alleging that the [seller]'s claims should be denied for the reasons stated by [buyer].

     2.2 [Seller's position]

The [seller] insisted that his claims should be granted and submitted written objections to the [buyer]'s explanations; these objections were sent to the [buyer] by the Tribunal. The [buyer] has presented no explanations in response to the [seller]'s objections.

The case had been adjourned several times at [buyer]'s request. The representative of the [buyer] did not appear at the hearing of the case. The [buyer] submitted no request to adjourn the hearing due to any reasonable excuse. The [buyer] was notified of the date of the hearing in due time.

3. TRIBUNAL'S REASONING

The Tribunal's judgment granting the [seller]'s claim was based on the following grounds.

     3.1 [Tribunal's jurisdiction]

In one of the contracts, the Russian text of which was submitted by the [seller], there is an arbitration clause referring to the Arbitration Tribunal at the Chamber of Commerce and Industry of the Russian Federation which has been renamed Tribunal of International Commercial Arbitration, pursuant to the Resolution of the Supreme Council of the Russian Federation of 7 July 1993.

The arbitration clause in the text of the other contract, which was submitted by the [seller] in both Russian and German, has significant discrepancies. The Russian text provides for settlement of the disputes by the Arbitration Tribunal at the Chamber of Commerce and Industry of the Russian Federation in Moscow, while the German text provides for the Arbitration Court in the country of respondent.

Under these circumstances, the Tribunal looked at the fact that, by filing the action with the Tribunal, the [seller] recognized the competence of the Tribunal to arbitrate the dispute. The [buyer] also took steps (including the statement of defense in the letter of 28 December 1994) evidencing the recognition by [buyer] of the competence of the Tribunal. Neither then nor afterwards did the [buyer] make any objections as to the competence of the Tribunal. Besides, in [buyer]'s objections to the merits, the [buyer] agreed to consolidate the claims in connection with several contracts into one case and also to the [seller]'s capacity to bring such claims.

Pursuant to Article 7(2) of the Russian Federation Law on the Tribunal of International Commercial Arbitration, an arbitration agreement may be concluded between the parties by exchanging of the statement of action and statement of defense in which one of the parties alleges the existence of the agreement and the other party does not challenge this.

Considering the aforesaid and in accordance with Section 1(4) of the Rules of the Tribunal 1988 and the Article 16 of the Russian Federation Law on the Tribunal of International Commercial Arbitration, the Tribunal concluded that it has competence to arbitrate the dispute presented.

     3.2 [Applicable law]

Taking into account the [places of business] of the parties, the Tribunal has further concluded that the CISG is applicable to the dispute presented. Pursuant to Article 1(1)(a) CISG, the Convention applies to contracts of sale of goods between parties whose places of business are in different States when the States are Contracting States to the CISG. At the time when the contracts were concluded, both the Russian Federation and Germany had already been Contracting States to the CISG.

     3.3 [Merits of the case]

The [seller] withdrew his claims in connection with one of the contracts (of March 1993). Therefore, the Tribunal closed the proceeding of the case in that part.

As to the other two contracts, the Tribunal finds that the materials submitted by the [seller] prove the fact of the shipment of the goods as well as their cost. In [buyer]'s statement of defense of 28 December 1994, the [buyer] also admitted the fact of shipment of the goods under the abovementioned contracts.

Examining the [buyer]'s objections submitted in [buyer]'s letter of 28 December 1998, the Tribunal has reached the following conclusions.

The [buyer]'s counter arguments where summarily submitted on several occasions without relevant reference to the certain contracts; that makes it more difficult to determine their relevance to each of the contracts from which the dispute arose.

Both contracts concluded in November 1992 are contracts of bargain and sale of goods from which does not lead any consignment or barter feature.

Since the [buyer] argued that the goods were supposed to be shipped upon receipt of an order from the buyer, it has to be noted that the mentioned condition does not appear in one of the contracts. It is set forth in the other contract that every following shipment of the goods shall be delivered by the seller only upon the resale of the previous shipment of the goods by the buyer. The [seller] argued that the goods were to be delivered according to the schedule to which the [buyer] had agreed. The [buyer] did not challenge that assertion of the [seller]. The [buyer] did not assert any counterclaims in monetary form in connection with this.

The parties agreed on CIF terms of delivery, which in principle means that the seller pays the freight and that the freight is included in the price of the goods. With this, one of the contracts provides that the [buyer] shall pay the freight and that the cost of freight shall be deducted from the sum of the contract price upon presenting the freight documents. However, the [buyer] did not prove its assertion that in fact [buyer] had paid the freight under the contract setting forth the following reimbursement of these expenses by the [seller].

The [buyer]'s statement reference that it had paid the import customs duties cannot serve as a legal ground for the deduction of these expenses from the price of the goods. The contracts were concluded on the CIF terms and did not provide for the imposition of those expenses on the [seller]. According to trade practice, which was incorporated, inter alia, in Incoterms (1990), it is the buyer's duty to pay any import customs duty.

As to the [buyer]'s mention of quality defects in the goods delivered, it has to be noted that, in accordance with the parties' agreement, the price of the goods was discounted and the [seller]'s claims reflect the discount price.

The [buyer] argued that since supply had exceeded demand for this type of goods on the Western European market, [buyer] requested [seller] to stop the shipments of the goods. This cannot serve as a ground for [buyer] not to pay for the goods delivered. Taking into account the terms of the contracts and in accordance with Article 53 and Article 60 CISG, the buyer has a duty to accept the goods. In the Tribunal's opinion, no possible change of market conditions can release the buyer from this duty [to accept the goods] in accordance with Paragraph 13 of the contracts and Article 79 CISG.

The [buyer]'s references to the difficulties in receiving the certificates of the country of origin as well as receiving the export license only for part of the goods cannot be taken into consideration by the Tribunal. The [buyer] did not prove the causal connection between these circumstances and the fact of non-payment for the goods delivered. Besides this, the [buyer] did not file any financial counterclaims in relation to the above circumstances.

For the above reasons and pursuant to the terms of the contracts as well as Article 53 and Article 62 CISG, the Tribunal has reached the conclusion that the [buyer] is obligated to pay to the [seller] the sums which are the unpaid price of the goods under the two contracts.

FOOTNOTES

* This is a translation of data on Proceeding 255/1994 of 11 June 1997 of the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, reported in: Arb. Praktika 1996-1997, No. 63 [212-215]. 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.