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CISG CASE PRESENTATION

Russia 2 September 1997 Arbitration proceeding 255/1996 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/970902r1.html]

Primary source(s) for case presentation: Case text

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Case identification

DATE OF DECISIONS: 19970902 (2 September 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: 255/1996

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Estonia (claimant)

BUYER'S COUNTRY: Russia (respondent)

GOODS INVOLVED: Aircraft


Classification of issues present

APPLICATION OF CISG: No

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issues: Article 2

Classification of issues using UNCITRAL classification code numbers:

2E [Exclusions from the Convention: sales of aircraft]

Descriptors: Aircraft ; UNIDROIT Principles

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

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. 65 [219-223]

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. 42, 275

Russian: Boguslavskij, Mezhdunarodnoe tchastnoe provo [Private internationa law], Moskva: Jurist, 3rd ed. (1998) 214-215

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Russian Federation arbitration proceeding 255/1996 of 2 September 1997

Translation [*] by Mykhaylo Danylko [**]

1. SUMMARY OF RULING

      1.1 Since the subject of contract, concluded between the parties in February 1995 was a passenger aircraft, the Vienna Convention 1980 (CISG) is not applicable, notwithstanding that the parties are located in Contracting States to the Convention (Art. 2 CISG).

The law of the country of seller was found applicable on the basis of Art. 166 of the Fundamentals of Civil Law 1991.

      1.2 The Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Trade (hereinafter Tribunal) granted the amendment to the qualification of the claim submitted by the [Seller] in April 1997 (the initial claim was filed in June 1996). At the same time, the [Seller]'s motion, brought during the hearing on 2 September 1997 requesting to change the currency of the claim was denied by virtue of Art. 23(2) of the Russian Federation Law on the Tribunal of International Commercial Arbitration and para. 32 of the Rules of Tribunal, since the Tribunal found the delay of filing of this motion unreasonable and such that it might delay the rendering of the judgment.

      1.3 Having found by the method of interpretation of the contract (on the basis of Art. 431 of the Russian Federation Civil Code), considering the provisions of INCOTERMS 1990 and the Principles of International Commercial Contracts UNIDROIT that, when performing the contract, both parties did not observe the conditions of the contract on the delivery term, the Tribunal, on the basis of Art. 404 of the Russian Federation Civil Code, has applied the principle of "mutual responsibility".

      1.4 Since the [Seller] failed to take steps to solve the misunderstandings with a third party in accordance with the contract concluded with him, he, by this, took on himself the risk of consequences of such misunderstandings. Therefore, the Tribunal cannot grant the [Seller]'sclaim to compensate the losses, filed as a redress claim.

2. FACTS AND PLEADINGS

The action was brought by an Estonian Claimant [Seller] against a Russian Respondent [Buyer] on the basis of Art. 395 of the Russian Federation Civil Code in connection with payment of annual interest for use of money over a long period. The money was transferred as a prepayment for the used aircraft, sold by the [Seller] to the [Buyer] under the contract concluded in February 1995. The aircraft was transferred to the [Seller] by transfer certificate of 7 March 1995; however, the aircraft was confiscated in Russia because the customs authorities denied formalizing the export of the aircraft. This denial was reversed as unreasonable, but, in fact, the aircraft became available for [Seller]'s use only on 4 March 1996.

The [Buyer], objecting to the claims of the [Seller], referred to the fact that under the contract the sale was performed on the term "ex works, Moscow City", and he is not responsible for the unreasonable customs delay of clearance of the aircraft. By [Seller]'s belief, the aircraft was sold to him on the term "FCA" INCOTERMS 1990.

Later, the [Seller] amended the qualification of his claims, having qualified them as claim for recovery of losses. In his losses he included his expenses and his losses in connection with nonperformance of his obligations before the third party under the lease contract.

Having filed the initial claim in Rubles, later, the [Seller] filed a motion to recover the claimed sums in US Dollars.

3. TRIBUNAL'S REASONING

The ruling of the Tribunal contained the following main points.

      3.1 [Applicable law]

Even though the commercial companies of the parties are located in Contracting States to CISG, the Convention is not applicable to the parties' relations, since the subject of the contract is an aircraft (Art. 2 CISG).

      3.2 [Amendment to the initial claim]

The Tribunal granted the motion of the [Seller] to amend the initially filed claim to recover the annual interest for the claim to recover the losses and increase the sum of the claim, but denied [Seller]'s other motion to calculate the sum of the claim in US Dollars instead of Rubles. The Tribunal took into consideration that since filing of the claim in June 1996, the [Seller] had enough time to timely amend the claim and file such a motion. His last motion was filed on 2 September 1997, although in his calculations of 1 September 1997 the sum of his claim was in Rubles. The denial to grant this motion is explained by the fact that granting the motion may cause the further delay of rendering of the judgment (Art. 23(2) of the Russian Federation Law On the Tribunal of International Commercial Arbitration and para. 32 of the Rules of Tribunal).

      3.3 [The merits of the case]

Since there is different understanding by the [Seller] and [Buyer] of the terms of the contract regarding the delivery term and consequently about their obligations as to transfer of the goods, including customs clearance and other formalities necessary for export, the Tribunal analyzed the terms of the contract, intention and actions of the parties during performance of the contract. This analysis was made in accordance with provisions of Art. 431 of the Russian Federation Civil Code, considering the provisions of INCOTERMS 1990 and the UNIDROIT Principles of International Commercial Contracts.

The Tribunal came to the conclusion that both parties had not paid enough attention to the definition of the term of delivery that led to noncompliance with some contractual provisions. However, conforming the contractual terms with the actions of the parties gives basis to believe that the parties had in their mind the FCA Moscow City term, in fact, later changed by mutual agreement to FCA Pskov City. Therefore, interpretation of the term of the contract, intention and actions of the parties led the Tribunal to the conclusion that parties' intention included negotiation of the FCA term of delivery. Thus, the seller's obligations included not only to pay all taxes and payments, including customs payments, but also securing the customs paper work for clearance of the aircraft. This obligation was fulfilled by the [Buyer]. With this, after receiving the aircraft under the transfer certificate in Smolensk City, where the reconstruction works were done, the company, by authorization of the [Seller] sent the aircraft for customs clearance to Pskov City instead Moscow City, as was prescribed by the contract, with the aim, by allegation of this company, to save an important amount of money and time. The [Seller] did not notify the [Buyer] about the landing of the aircraft in Pskov City for customs clearance according to the Russian Customs Law.

Having found that, not only during conclusion of the contract but also during its performance, both parties did not observe the provisions of the contract, the Tribunal, on the basis of Art. 404 of the Russian Federation Civil Code, has applied the principle of "mutual responsibility".

As to the claims of the [Seller], the Tribunal came to the following conclusions.

The Tribunal granted the claim to recover the losses caused by payment of interest under the credit contract, concluded between the [Seller] and the bank, in the amount stated in this contract. The Tribunal found unreasonable part of this claim exceeding the amount of interest stated in the contract.

The Tribunal denied the claim to recover the losses caused by payment to the [Buyer] of the commission, which he also received from his consignor, under whose authority he sold the aircraft, on the following basis. Since the contract concluded between the parties does not stipulate whether the price includes the commission fees, also, considering that this commission was paid to the [Buyer] by consignor, and the [Seller] did not prove that the price of aircraft included the commission fees and he actually incurred the losses in this amount, the Tribunal does not have basis to believe that the [Seller] proved the losses in this amount and believes that there are no bases to grant the claim. Since there is no basis to recover the principal debt, there is no basis for recovery of the interest on the sum of this debt.

Having reviewed payment documents submitted by the [Seller] as evidence of expenses incurred to repair the aircraft, the Tribunal found that most of them might be a ground for recovery of the relevant sums from the [Buyer]. With this, considering that the subject of the contract is a used aircraft with a resource of 50 percent; on the other hand, the delay of delivery was a consequence of mutual fault of both parties, who did not secure the due performance of the contract, the Tribunal decided to grant this claim in the amount of half of the claimed sum.

As to the [Seller]'s claim to recover losses related to a lease contract on the aircraft concluded with a third party that was a subject of the contract from which the dispute arose, the Tribunal studied the payment documents submitted by the [Seller] as a proof of the claims and the language of the lease contract.

The Tribunal found many inexactnesses and inaccuracies in the payment documents.

As to the lease contract the Tribunal found the following. At the moment of signing of this contract the [Seller] was not a registered owner of the aircraft; had transferred the aircraft at least prior to duly formalization of his title to the aircraft, thus he acted at his own risk. As follows from clause 2.2.1 of the contract, the aircraft should be delivered to and accepted by the lessee during a 45-day term after signing the lease contract. According to clause 20 of the contract, the term of lease of the aircraft starts from the date of signing of the contract and after the confirmation of delivery of the aircraft to the airport stipulated in the contract. Since the representatives of [Seller] who transported the aircraft to Pskov City knew about the confiscation of the aircraft by the customs authorities on 30 March, i.e., 15 days after signing the contract, the [Seller] had the possibility to "inform the lessee about probable delay because of a valid cause and the schedule of delivery of the aircraft shall be considered postponed or the period equivalent to the period of delay with a valid cause, if the lessee consents" (clauses 3.3.1 and 3.3.2 of the contract). Such postponement for a valid reason according to clause 3.1 "is considered effective if the delay of lessor arose for reasons beyond the control, fault or negligence of the lessor," including actions of civil or military authorities. According to the same clause, the lessor should immediately inform the lessee about possible delay because of valid reason.

Since, as follows from the documents submitted by the [Seller], the [Seller] did not take relevant steps to solve the issues arisen under the lease contract, the Tribunal believes that the [Seller] took on himself the risk of nonperformance of the contract, for which the [Buyer] cannot be considered responsible, thus there is no basis to grant the claim to recover the losses in connection with this.

As to the claim to recover the lost profit under the lease contract, the Tribunal proceeds from the fact that since the delivery of the aircraft was not performed in the agreed term as a consequence of the mutual fault of both parties, as was said above, the claim to recover the lost profit, which [Seller] could have received from the lease contract, should be granted in only half of the asked amount.


FOOTNOTES

* This is a translation of data on Proceeding 255/1996, dated 2 September 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. 65 [219-223].

All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Estonia is referred to as [Seller] and Respondent of Russia is referred to as [Buyer].

** 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.

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