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CISG CASE PRESENTATION

Russia 22 January 1998 Arbitration proceeding 102/1997 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/980122r1.html]

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

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Case identification

DATE OF DECISION: 19980122 (22 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: 102/1997

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russian Federation (claimant)

BUYER'S COUNTRY: Austria (respondent)

GOODS INVOLVED: Goods


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 53 ; 71 ; 78 ; 80

Classification of issues using UNCITRAL classification code numbers:

53A [Buyer's obligation to pay price of goods];

71A ; 71C [Grounds for suspension of performance: apparent that other party will not perform substantial part of obligations; Obligations of party suspending performance];

78A ; 78B [Obligation to pay interest; Rate of interest];

80A [Failure of performance caused by other party: party causing non-performance (loss of rights]

Descriptors: Price ; Suspension of performance ; Interest ; Failure of performance, other party

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Editorial remarks

Suspension of performance. "[T]he seller suspended its obligation to deliver the goods pursuant to Article 71 after the buyer's failure to pay for the third instalment of the goods. The buyer argued that it was entitled not to pay for the third instalment because the seller had been performing behind the schedule, had suspended deliveries and had not given any information as to when deliveries would be resumed. The Tribunal seems to have supported the seller's counter argument that the buyer did not avail itself of the right under Article 71(3). After having received the notice of suspension of deliveries, the buyer could have provided the seller with adequate assurance or performance." Djakhongir Saidov, 7 Vindobona Journal of International Commercial Law and Arbitration (1/2003) 1-62 at 40.

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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, Practika of Mejdunarodnogo Commercheskogo Arbitrajnogo Syda: Haychno-Practicheskiy Commentariy [Practice of the International Commercial Arbitration Court: Scientific - Practical Comments] Moscow (1998) No. 6 [32-35]

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.157, 173, 231, 255

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Russian Federation arbitration proceeding 102/1997 of 22 January 1998

Translation [*] by Mykhaylo Danylko [**]

1. SUMMARY OF RULING

       1.1 Non-appearance of a party, duly notified of the time and place of hearing, does not preclude the hearing of the case, unless the non-appearing party has submitted a written motion to postpone the hearing because of a valid excuse. The Respondent's request to re-confirm the date of hearing received by the Tribunal of International Commercial Arbitration (hereinafter Tribunal) on the date of the hearing cannot be a ground to postpone the hearing to a new date according to the Rules of Tribunal.

       1.2 Since the States, at territories of which the commercial companies of parties are located, are Contracting States to the CISG (Russia and Austria), this Convention is applicable. The law of Russia is applicable subsidiary as a law of country of seller.

       1.3 It does not follow from CISG that buyer has a right to avoid payment for the goods delivered to him on the ground that seller did not make the subsequent deliveries, provided for by the contract.

       1.4 The annual interest for using the money is recovered on the basis of Art. 78 CISG at the rate defined according to the provisions of Art. 395 of the Russian Federation Civil Code, the amount of which was found reasonable and fair.

       1.5 The [Buyer]'s counterclaim was left without consideration since the arbitration fees on it were not paid.

2. FACTS AND PLEADINGS

Under the contract, concluded in July 1996 between the [Seller], a Russian company (Claimant), and [Buyer], an Austrian company (Respondent), the [Seller] has shipped three lots of goods. The payment for them by letter of credit, opened by [Buyer]'s instructions, became impossible due to the serious discrepancies between the terms of the contract and the terms of the letter of credit. Later, two lots of goods were paid for by the [Buyer]. Due to the non-payment for the third lot of goods the [Seller], referring to Art. 71 CISG, suspended the performance of the contract. The [Seller]'s claims included: payment of the price for the third lot of goods; interest for using the money; recovery of legal and arbitration fees.

By [Buyer]'s belief, he was entitled to avoid payment for the third lot of goods, since [Seller]'s deliveries lagged behind the schedule, and [Seller] suspended the deliveries and did not provide information on resuming them. The [Buyer] filed a counterclaim to recover his losses in amount of the sum of the principal, [Seller]'s, claim. According to [Buyer]'s allegation, these losses incurred due to non-performance by [Seller] of his obligations and by [Seller]'s unilateral termination of the contract.

The [Seller] insisted that his claims should be granted. He provided the following arguments. By virtue of Art. 80 CISG, the [Buyer] cannot refer to the breaches committed by [Seller] in part of late delivery of documents, since such breaches arose from [Buyer]'s improper performance of his obligations under the contract (opening of the letter of credit on other terms [than that which was agreed in the contract]). Having received the notification on suspension of deliveries, the [Buyer] did not avail himself of the provisions of Art. 71(3) CISG, that provide for opportunity to resume the deliveries where [Buyer] provides adequate assurance of performance of his obligations.

3. TRIBUNAL'S REASONING

The ruling of the Tribunal contained the following main points.

       3.1 [Jurisdiction and competence of the Tribunal]

The competence of the Tribunal to arbitrate the present dispute is directly stipulated in the contract of the parties and was sustained by the parties.

      3.2 [Hearing absente reo]

The absence of [Buyer]'s representatives at the hearing does not preclude hearing of the case on the merits, since the summons informing of hearing on 22 January 1998 was received by [Buyer] on 18 November 1997, which is proved by the notification from the post office. Following from this, it should be admitted that the [Buyer] had enough time to prepare and appear before the Tribunal, as it is provided by para. 23(1) of the Rules of Tribunal.

According to para. 28(2) of the Rules of Tribunal, non-appearance of a party, duly notified of the time and place of hearing, does not preclude the hearing of the case and the rendering of judgment unless the non-appearing party submitted a written motion to postpone the hearing because of a valid excuse. Since such motion was not received by the Tribunal, the Tribunal found it possible to start proceeding of the case in absence of the [Buyer]'s representative. The Tribunal took into consideration that [Buyer] submitted to the Tribunal his explanations on the merits of the case and filed a counterclaim. As to the request of [Buyer], stated in fax of 22 January 1998, regarding the re-confirmation by the Tribunal of the date of hearing of the dispute, the Tribunal concludes that the Rules of Tribunal (a copy of which was sent to[Buyer] by the Tribunal's Secretary along with a letter of 23 April 1997 and was received by [Buyer]) do not provide for re-confirmation of the date of hearing of dispute by the Tribunal; the mentioned date is specified in summons, duly and timely served on [Buyer]; therefore, the Tribunal does not see any reasons to appoint the other date of hearing.

       3.3 [Applicable law]

Having discussed the issue of applicable law to the relations of parties, the Tribunal concluded that the parties in dispute are the companies located in Contracting States to the CISG. Thus, the dispute should be settled in accordance with provisions of this Convention (Art. 1(1)(a) CISG). According to the rules of conflict of laws, the law of country of seller, i.e., the law of Russia, should be applied subsidiary to this dispute.

       3.4 [The merits of the case]

The obligation of [Buyer] to pay the [Seller] the price for the third lot of goods delivered is grounded by the case materials. The fact of non-payment is not disputed by the parties.

Taking into attention that according to Art. 53 CISG the [Buyer] must pay for the goods delivered at the price stipulated in the contract, the Tribunal concluded that the price of the unpaid goods should be recovered from [Buyer] in favor of [Seller]. By deciding this, the Tribunal concluded that the [Buyer] was obliged to pay for the third lot of goods notwithstanding of the circumstances of the subsequent development of relations between the parties, while the Tribunal dismissed as unreasonable the arguments of [Buyer] that he had the right to avoid payment for the third lot of goods since there were no subsequent deliveries from [Seller] - such right of [Buyer], as a buyer, does not follow either from the CISG, or from the contract.

The [Seller]'s right to recover from [Buyer] the annual interest calculated on the sum of principal debt for using his money is provided for by Art. 78 CISG and Art. 395 of the Russian Federation Civil Code.

The Tribunal found reasonable and fair the average annual interest rate in amount of 10 percent per annum applied by [Seller] in his calculation of the interest. However, the period of delay, applied by [Seller] for calculation of interest from 1 August 1996 to 22 January 1998 should be corrected on the following basis. According to para. 29 of the Rules of Tribunal, one party should turn over to the other party all of the documents, that the judgment might be based on. The [Seller] amended the claim by his motion, where he changed the period of delay the interest should be calculated for, in particular, not on the date of 28 January 1997, as was stipulated in the initial claim, but additionally from 29 January 1997 to 28 January 1998. The Tribunal found impossible to discuss this additional claim in absence of [Buyer]'s representatives and concluded that the claim to recover from [Buyer] the annual interest at the rate of 10 percent per annum calculated for the period from 10 August 1996 to 28 January 1997 should be granted.

The Tribunal left the counterclaim of [Buyer] without consideration for the following reasons.

According to paras. 48 and 33 of the Rules of Tribunal, the claimant must pay arbitration fees on every claim filed with the Tribunal. A case should not be arbitrated and heard until the payment of the arbitration fees.

Since the [Buyer], despite to the proposal from the Secretariat of the Tribunal (a letter from 9 October 1997), did not pay the arbitration fees, the counterclaim filed by [Buyer] should be left without consideration.

The Tribunal, in accordance with para. 9 of the Rules of Tribunal, found the claim of [Seller] to put on [Buyer] the expenses incurred in connection with arbitration as excessive. Considering the documents submitted by [Seller] confirming the actual expenses, the Tribunal concluded that it would be reasonable and fair to decrease them and recover in the amount determined by the Tribunal.


FOOTNOTES

* This is a translation of data on Proceeding 102/1997, dated 22 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. 6 [32-35].

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