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CISG CASE PRESENTATION

Russia 11 March 1998 Arbitration proceeding 487/1996 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/980311r1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 19980311 (11 March 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: 487/1996

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russian Federation (claimant)

BUYER'S COUNTRY: Turkey (respondent)

GOODS INVOLVED: Goods


Case abstract

"[T]he seller claimed payment of the unpaid part of the contract price. The buyer argued that it was entitled not to pay the full price because the seller had failed to deliver all of the goods under the contract. The unpaid part of the price corresponded to the quantity of undelivered goods. The Tribunal held that the buyer lost the right to rely on the alleged short delivery because it failed to comply with the contractual requirement as to commencing the claim within the time fixed. At the same time, the Tribunal added that even if it were assumed that the seller had not, in fact, delivered the entire quantity of the goods, the seller could not have been held liable. The materials of the case contained no evidence that the loss of the part of the goods was due to an act or omission of the seller as required by Article 66 CISG." Djakhongir Saidov, 7 Vindobona Journal of International Commercial Law and Arbitration (1/2003) 1-62 at p. 39.

Buyer was also required to pay interest on the unpaid price; "the rate of interest was determined pursuant to applicable national law". Id at p. 53.

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Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 66 ; 78 [Also cited: Article 7(2) ]

Classification of issues using UNCITRAL classification code numbers:

66B12 [Loss or damage after risk passed: buyer not relieved of obligation to pay unless damage due to seller's act or omission];

78B [Rate of interest]

Descriptors: Passage of risk ; Interest

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER 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. 20 [79-81]

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

Russian Federation arbitral proceeding 487/1996 of 11 March 1998

Translation [*] by Serge Lapine [**]

Translation edited by Mykhaylo Danylko [***]

1. SUMMARY OF RULING

     1.1 Because of the presence in the contract between a Russian company and a Turkish company of a clause on application of the law of the seller, the Tribunal of International Commercial Arbitration (hereinafter the Tribunal) considered the Russian law and the Convention on Contracts for the International Sale of Goods 1980 (hereinafter Vienna Convention 1980) applicable to the relations between the parties as part of the Russian Federation's legal system.

     1.2 Incomplete payment of the price for the goods by the buyer due to shortage of goods at the place of destination was not found reasonable taking into account the fact that the buyer did not fulfil his contract obligations on the time period for filing claims and on the documentation of such claims. The Tribunal took into consideration the fact that, according to the contract, failure to file timely claims deprives the buyer of the right to institute claims.

     1.3 In case of delivery on the FCA term, which means that the seller fulfils his obligation to deliver when he has handed over the goods into the charge of the carrier at the named place, the buyer who has found the shortage of goods in the place of destination must prove that the loss of the goods was due to the actions or omissions of the seller.

     1.4 The seller's claim for interest on the sum remaining unpaid was granted under Article 78 of the Vienna Convention 1980 at the rate determined according to Article 395 of the Russian Federation Civil Code taking into account the report on the average rates on credits in foreign currency issued by one of the leading banks in the creditor's.

2. PLEADINGS

The claim was brought by a Russian company [seller] against a Turkish company [buyer] in connection with the incomplete payment for goods delivered in accordance with the contract concluded between the parties in April 1995. The [seller]'s claims included recovery from the [buyer] of the sum remaining unpaid with interest for using this sum of money.

The [buyer] reasoned his defense on the fact that the documents, issued by Customs at the place of destination, found a shortage of goods. The sum remaining unpaid constitutes the value of the undelivered goods.

3. THE AWARD

     3.1 The competence of the Tribunal was stipulated in the contract between the parties.

     3.2 Since the contract provided for the application of the law of the seller, the relations between the parties not covered by the contract must be regulated by Russian law and the Vienna Convention 1980 as the part of the Russian Federation's legal system because the Russian Federation is a party to the Vienna Convention and, according to Article 1(1)(b), its provisions are applicable to the above mentioned sales contract.

     3.3 Considering the merits of the case, the Tribunal found that the [buyer] did not adequately support his position before the Tribunal. In the case materials there is evidence of the actual delivery and the value of the goods delivered by the [seller] under the contract.

The [buyer] by fax of 26 March 1995 (taking into account its context and fax confirmation) confirmed the incomplete payment for the goods referring to their shortage. The [seller] brought the claim in an amount less than the sum remaining unpaid by the [buyer].

     3.4 The Tribunal found that the contract between the parties set forth a 60-day term for filing claims by the [buyer] starting from the date of delivery of the goods. Even if the letter of 26 March 1996 can be regarded as such a filing, it was sent after the date required by the contract.

Since the contract provided specifically that in case of non-observance of a 60-day term the buyer loses the right to file claims with regard to the delivered goods, the [buyer]'s reference to the shortage of goods as a ground for incomplete payment cannot be considered as reasonable.

The contract provided as well that such claims had to be supported by the papers of a neutral surveying company. The [buyer] presented Customs certificates which reflected the fact of the shortage of goods, but these certificates did not give sufficient grounds for establishing the reasons for this shortage.

Since delivery was made on FCA terms in accordance with Incoterms 1990, the [seller] is considered to have fulfilled his obligation to deliver the goods from the moment he handed over the goods into the charge of the carrier at the named place.

For the reasons given above, even if one could admit that there was a shortage, the Tribunal considered that there were no legal grounds for holding the [seller] responsible, because the case materials did not contain evidence that the loss of goods had been due to the actions or omissions of the [seller]; see Article 66 of the Vienna Convention.

In such circumstances, the Tribunal did not see any grounds for holding the [seller] responsible for the shortage of goods and ruled that the sum remaining unpaid by the [buyer] must be paid by the [buyer].

     3.5 According to Article 78 of the Vienna Convention 1980, the [seller] is entitled to interest on sums in arrears. In accordance with Article 395 of the Russian Federation Civil Code, the interest rate is determined on the basis of the place of the [seller]-creditor's banking rate on the date of the fulfilment of the pecuniary obligation; also the creditor's claim may be satisfied on the basis of the banking rate on the date of bringing of the claim or of delivering of the judgment.

The case materials contained a report issued by one of the leading Russian banks on 14 November 1996 in which the bank reports the average rates for credits in foreign currency.

Bearing in mind that the [seller] based his calculation on the minimal rate and that he had the right to claim the recovery of the interest till the moment of the actual payment of the sum in question but limited himself to the sum determined on the date preceding the date of bringing of the claim and that the calculation was supported by case materials, [seller]'s claim for the recovery of the interest must be satisfied.


FOOTNOTES

* This is a translation of data on Proceeding 487/1996, dated 11 March 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. 20 [79-81]. All translations should be verified by cross-checking against the original text. For purposes of this presentation, Claimant of the Russian Federation is referred to as [seller]; Respondent of Turkey 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.

*** 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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