Case text (English translation)
Queen Mary Case Translation Programme
Russian Federation arbitration proceeding 243/1996
of 18 February 1998
Translation [*] by Serge Lapine [**]
Translation edited by Mykhaylo Danylko [***]
1. SUMMARY OF RULING
1.1 The Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (hereinafter Tribunal) recognized its competence to arbitrate this dispute, despite the inexactness of the arbitration clause of the contract. With this was taken into consideration the fact that the action was brought to the Tribunal by the [seller] and that the [buyer] did not object to the competence of the Tribunal, instead choosing an arbitrator and making a written statement of defense to the merits of [seller]'s claims.
1.2 Bearing in mind that the parties have their commercial companies located in States (Russia and Germany) which are Contracting States to the Vienna Convention 1980 [U.N. Convention on Contracts for the International Sale of Goods (1980); hereinafter CISG], the CISG is recognized as applicable to settlement of this dispute. Russian law is recognized to be the subsidiary statute, as the law of the seller's country in accordance with Article 7(2) CISG and Article 166(1) and (2) of the Fundamentals of Civil Law of USSR 1991.
1.3 Since the contract provided for taking delivery of the goods at the seller's manufacturing plant and accordingly, such transfer act was signed by the parties, the buyer is not entitled to refer to non-conforming quality of the goods based on a document issued at the place of destination of the goods.
1.4 In the presence of the contract clause providing for taking delivery at the seller's manufacturing plant, the non-mandatory provisions of Article 38 CISG permitting deferral of the examination till the arrival of the goods at the place of destination should not be taken into account.
1.5 The certificate issued by the independent inspecting organization does not have evidentiary force, because the examination was conducted not in accordance with the standard, on the basis of which the shipment was made under the contract.
1.6 Annual interest for use of money was recovered in accordance with Article 78 CISG, calculating the rate in accordance with Article 395 of the Civil Code of the Russian Federation.
While defining the starting date for calculation of the interest, the Tribunal took into consideration the date when the [seller] actually handed over to the [buyer] invoices providing for the payment term fixed in the contract after the date of receipt of the invoice. The interest was recovered up to the date of the actual payment of the debt amount.
1.7 The [seller]'s claim concerning recovery from the [buyer] of the damages suffered due to the delay in repayment of the bank loan was not considered because it was not proved with documents.
2. SUBJECT MATTER AND PLEADINGS
The subject matter of the action brought by [seller], a Russian company, against [buyer], a German company, concerned the payment for the goods shipped under the contract concluded between the parties in March 1995.
2.1 [Seller's claim]
The [seller]'s claims included:
- recovery of the price of the goods shipped with interest charged on the sum of principal debt for use of [seller]'s money;
- recovery of damages suffered due to the delay in repayment of the bank loan;
- recovery of the arbitration fees.
2.2 [Buyer's response]
The [buyer] in her objections referred to the fact that she did not receive invoices from the [seller] and also challenged the conformity of the goods in terms of quality and quantity. In [buyer]'s opinion, she does not have debt to the [seller]. [Buyer] also objected to the [seller]'s claims concerning recovery of damages.
2.3 [Seller's further argument]
At the Tribunal's hearing, the [seller], while confirming his claims, admitted that he had no proof of sending the invoices to the [buyer], but [seller] argued that at least the [buyer] received the invoices together with the [seller]'s statement of action to which they were enclosed. Besides this, the [seller] asserted that, because it is impossible to prove with documents the amount of damages suffered by [seller] in connection with obtaining the bank loan, [seller] left this issue to the Tribunal's discretion.
3. TRIBUNAL'S REASONING
The ruling of the Tribunal included the following main points:
3.1 [Jurisdiction of the Tribunal]
According to the contract of the parties, all the disputes and disagreements, except those falling under the jurisdiction of the general jurisdiction courts, are to be resolved by the Arbitration Tribunal in Moscow, Russia. Since:
(a) the [seller] brought suit in the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry and the [buyer] did not make any objection concerning lack of the Tribunal's jurisdiction, but, on the contrary, chose an arbitrator and presented his statement of defense; and
(b) pursuant to Article 16 of the Russian Federation Law "On the Tribunal of International Commercial Arbitration",
the Tribunal, despite the inexactness in the arbitration clause of the contract, ruled that it has competence to arbitrate this dispute.
3.2 [Applicability of the CISG]
Having discussed the issue of applicable law to this dispute, the Tribunal came to the following conclusions. Under 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…" Whereas the commercial companies of the [seller] and the [buyer] are in Russia and Germany, both of which are Contracting States to the CISG, thus the provisions of this Convention are applicable to settlement of this dispute.
According to Article 7(2) CISG:
"Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law."
According to Article 166(1)(2) of the Fundamentals of Civil Law of USSR 1991, in the absence of parties' agreement on the law applicable to the sales contract, the law to be applied is the law of the State where the seller under the contract was incorporated; the matters not settled by the Convention, should be settled by the Russian civil law applied as subsidiary statute.
3.3 [Merits of seller's claim]
On the merits of the [seller]'s claim, the Tribunal found the following:
(a) Materials in the present case permit to conclude that the [seller] in fact made a shipment of the goods under the contract to the [buyer] for the total price indicated in the [seller]'s statement of action.
(b) However, the [buyer] did not present evidence of payment of any sums under this contract.
(c) The [buyer] also cannot refer to the non-conformity of the goods, because on 24 March 1995, between her and the [seller] was signed Act 1 of taking of the goods under the contract [certificate of acceptance], in which was indicated that the goods in terms of quality and quantity were transferred and accepted. It should be noted that under clause 4 of the aforesaid contract, examination of the quality and quantity of the goods is to be done with the transfer act at the seller's manufacturing plant. The data reflected in the certificate issued by the independent controlling organization upon arrival of the goods cannot be taken into account by the Tribunal, because Article 38 CISG, permitting deferral of examination of the goods, invoked by the [buyer] in her written statement of defense, has non-mandatory force and, therefore, cannot be applied if the contract contains a different provision. Besides this, the inspection certificate [issued at the place of destination of the goods] does not have evidentiary force also because examination by this controlling organization was not made in conformity with the standard, on the basis of which the shipment of the goods was made by virtue of Annex 1 to the contract.
3.4 [Interest and interest rate]
Having discussed the [seller]'s claim concerning recovery from the [buyer] of the annual interest for use of the [seller]'s money, the Tribunal held that this claim should be granted on the basis of Article 78 CISG. The interest rate should be determined in accordance with Article 395 of the Civil Code of the Russian Federation. However, since the [seller] did not present evidence that the [buyer] had received his invoices, these invoices are deemed to be received by the [buyer] on 27 January 1997 (according to the notice of the ELSI postal service on the acknowledgement of receipt), i.e., on the day of serving on the [buyer] the [seller]'s statement of action with all the attachments which it included, inter alia, the invoices mentioned above. Whereas in accordance with clause 2 of the contract the payment must be made five days after the receipt of the invoice by the buyer, thus the date from which the [buyer]'s obligation to pay the price arose, should be considered 2 February 1997. Therefore, the [buyer] should pay annual interest for use of [seller]'s money from 2 February 1997 up to the date of factual payment, according to the loan rate specified in the report of one of the leading banks at the place of whereabouts of the [seller] on the day the Tribunal's ruling is rendered.
3.5 [Buyer's payment for another contract]
The [buyer] in her written statement of defense alleges that she has performed her obligation to pay the price for the goods by a particular money wire. However, this wire was made in payment for goods under another contract that is directly indicated in the documents presented at the hearing of the Tribunal. Meanwhile, the dispute in question arose between the parties in connection with performance of the contract in regard to which the action was brought. In connection with shipment under the contract in the present dispute, the [seller] issued the invoices not paid by the [buyer]. The parties' relations under the contract to which the [buyer] refers do not fall within the subject matter of the present proceedings.
3.6 [Seller's claim for damages]
The [seller]'s claim for recovery from the [buyer] of the damages [seller] suffered due to the delay in repayment of the loan taken from the bank by [seller], cannot be considered [by the Tribunal], because the [seller] did not prove these claims with relevant documents.
FOOTNOTES
* This is a translation of data on Proceeding 243/1996, dated 18 February 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. 13 [55-58].
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].
** Serge Lapine is a 5th year student at the Law Faculty of Nizhny Novgorod and at the
same time at the Interpreters' Faculty of Nizhny Novogorod Linguistic University. 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.
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Institute of International Commercial Law - Last updated July 30, 2004
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