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CISG CASE PRESENTATION

Russia 12 January 1998 Arbitration proceeding 152/1996 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/980112r1.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISION: 19980112 (12 January 1998)

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: 152/1996

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russian Federation (respondent)

BUYER'S COUNTRY: Germany (claimant)

GOODS INVOLVED: Goods


Case abstract

RUSSIAN FEDERATION: Award in Case No. 152/1996 of 12 January 1998 of the
Arbitration Tribunal of Russian Federation Chamber of Commerce and Industry

Case law on UNCITRAL texts (CLOUT) abstract no. 466

Reproduced with permission of UNCITRAL

Abstract prepared by Alexander Komarov, National Correspondent

Under a contract concluded by the parties in November 1994, the buyer, a Russian company, transferred to the seller, a German firm, a sum in roubles to an account specified by the seller at a Russian bank as prepayment for goods to be delivered. The seller did not deliver the goods, on the grounds that it had not received the money transferred to its account by the buyer owing to the bankruptcy of the bank which held the account and the consequent freezing of the account. In the seller’s view, these circumstances amounted to force majeure, releasing it from liability for non-performance of its obligations under the contract.

The buyer provided proof that it had prepaid the value of the goods in full, submitting a copy of the authorization for payment. The seller acknowledged the transfer of the sum and did not dispute the fact that it had not fulfilled its obligation of delivery to the buyer of the goods which had been paid for. The tribunal did not accept the buyer’s claim that the bank’s bankruptcy was an instance of force majeure releasing it from liability for non-performance of the contract, since those circumstances had no direct bearing on the non-delivery of the goods. Since the buyer had performed its obligations, as provided for under the agreement, the tribunal allowed the buyer’s claim, plus awarded interest in accordance with article 78 CISG.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 79 ; 84 [Also cited: Articles 2 ; 78 ]

Classification of issues using UNCITRAL classification code numbers:

79B [Impediment excusing party from damages];

84A [Seller bound to refund price must pay interest]

Descriptors: Exemptions or impediments ; Interest ; Restitution

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Editorial remarks

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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, Arbitrazhnaya praktika za 1998 god (Moscow, Statut), 1999, p. 18

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 55 ("insolvency of the bank to which the buyer had an obligation to transfer an advance payment not recognized by the Tribunal as 'force majeure' "); Carla Spivack, 27 Pennsylvania Journal of International Economic Law (Fall 2006) n.166 [commentary on Art. 79 issues]

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Russian Federation arbitration proceeding 152/1996 of 12 January 1998

Translation [*] by Mykhaylo Danylko [**]

1. SUMMARY OF RULING

     1.1 Considering that the parties to the dispute are a German company, the [Buyer], and a Russian company, the [Seller], The Tribunal of International Commercial Arbitration (hereinafter Tribunal)] found the Vienna Convention 1980 (CISG) applicable to the dispute; the German law was found applicable as subsidiary law.

     1.2 The Tribunal did not find as force majeure a circumstance that a bank, to which the prepayment for the goods to be shipped under the contract was wired upon [Seller]'s instructions, was adjudged bankrupt, thus the [Seller]'s account was frozen. Considering this, the Tribunal put on [Seller], who received a prepayment and did not ship the goods, an obligation to return the pre-paid sum.

     1.3 Under provisions of the contract, the [Seller] is directed to pay a penalty for the delay of delivery, and on top of that, in accordance with Art. 78 CISG, annual interest for the delay of performance of financial obligations in the amount, defined on the basis of the rate provided by the provisions of the subsidiary applied German Trade Code (Para. 352(1)).

     1.4 Considering that all payments between the parties were in Russian Rubles, even though the price for the goods in the contract was determined in German Marks, the Tribunal, when granting recovery of the debt, applied an exchange rate of German Mark to Russian Ruble on the date when [Seller] presented to [Buyer] the invoices for prepayment for the goods.

2. FACTS AND PLEADINGS

Under a contract, concluded between parties in November 1994, the Claimant [Buyer], a Russian company, wired to Respondent [Seller], a German company, on the account in Russian bank specified by [Seller], a sum in Russian Rubles as a prepayment for the goods to be delivered. The sum in Rubles in the invoice of [Seller], on which basis the prepayment had been made, was calculated in accordance with the exchange rate of Russian Ruble to German Mark that was the currency of the contract.

The [Seller] did not ship the goods referring to the fact that he did not receive money wired by [Buyer] to his account since the bank where his account was opened, was adjudged bankrupt, thus his account was frozen. [Seller] alleges that this circumstance is a force majeure, which relieved him from the responsibility for non-performance of his obligations under the contract.

The claims of [Buyer] include recovery of the prepayment sum; recovery of a penalty for delay of delivery of goods as provided for in the contract; recovery of annual interest for delay of refund of prepayment; compensation of arbitration fees.

3. TRIBUNAL'S REASONING

The ruling of the Tribunal contained the following main points.

     3.1 The competence of Tribunal to arbitrate the present dispute is directly provided for in the contract.

     3.2 Considering that both Germany and Russian Federation are Contracting States of the CISG, this Convention shall be applied to the relations of parties to the contract. With this, according to Art. 2 CISG, the issues relating to the matter of this Convention, but not governed by it, nor that may be settled on the basis of its general principles, shall be settled in accordance with the law applicable in virtue of the rules of international private law. According Art. 166 of the Fundamentals of Civil Law 1991, Section VII of which is effective in Russian Federation, "applicable to the relations of parties under the contract as a subsidiary law is a law of the country where the seller in the contract of sale is established, lives or has main place of his business", i.e. German law.

     3.3 The [Buyer] proved the fact of full, 100 percent prepayment of the price for the goods, having presented a copy of banker's order. The [Seller] admitted the fact that the pre-paid sum was wired to the account in the bank as instructed by [Seller]. Besides this, the fact of [Buyer]'s performance of financial obligation and that the whole sum was wired to the bank of [Seller], is proved by a letter from the Manager of Central Department of the [Seller]'s bank.

The [Seller] did not object to the proof that he failed to perform his obligation to deliver goods to [Buyer], already paid for by the latter. The Tribunal dismissed the reference of [Seller]'s reference to the fact of bankruptcy of his bank as a force majeure circumstance, which relieved him from the responsibility for non-performance of his obligations under the contract. This circumstance does not relate at all to the fact of non-delivery of goods; as to refund of the pre-paid sum, the [Seller] shall bear the risk of non-receipt of this sum from the bank, specified by the [Seller] himself. The [Buyer] has bona fide performed his obligations in full as it was prescribed by the contract and required by [Seller].

Thus, the Tribunal found the claim of [Buyer] to recover the sum of principal debt reasonable and directed that it shall be granted.

     3.4 It follows from the materials of case that the sum of money involved in the contract and the payment were stipulated in foreign currency - US Dollars. In anAmendment to the contract of 26 January 1995, and in Annex No. 3 to this Amendment of 1 August 1995, in connection with non-delivery of goods under which the dispute arose, the price of goods was stipulated in German Marks.

The [Seller] has sent an invoice of 1 August 1995 to the [Buyer] on the sum, specified in the said Amendment. Even though the [sum in] invoice was in Rubles, it follows from the invoice and the letter of [Seller] to [Buyer] of the same date that the sum in invoice was determined on the basis of exchange rate of Russian Ruble to German Mark increased on 3 percent of the price of the goods for the exchange of this sum in German Marks by the bank.

Therefore, the [Buyer] actually paid the price of goods to [Seller] in German Marks, thus the Tribunal found his claims to [Buyer] to recover the pre-paid sum in German Marks reasonable.

     3.5 In accordance with clause 6.1.2 of the contract of 4 November 1994 the [Buyer] is entitled to a penalty from [Seller] in the amount of 10 percent of the cost of the lot of goods that was paid by [Buyer], but shipment of which was delayed and which later has not been shipped at all.

     3.6 [Buyer]'s claim to recover annual interest [calculated] on the sum of the principal debt shall be granted in virtue of Art. 78 CISG. Since this article does not specify the amount of interest, the Tribunal determined it on the basis of para. 352(1) of the German Trade Code "in amount of 5 percent per annum". The interest in this amount shall be calculated on the sum of principal debt in German Marks for the period since 10 February 1995 to the date of refund of the said sum to [Buyer].


FOOTNOTES

* This is a translation of data on Proceeding 152/1995, dated 12 January 1998, of the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, reported in Rozenberg ed., Arb Praktika (1998) No. 2 [18-20].

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

** 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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