Russia 6 April 1998 Arbitration proceeding 236/1997 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/980406r1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 236/1997
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Russian Federation (claimant)
BUYER'S COUNTRY: Korea (respondent)
GOODS INVOLVED: Ship
APPLICATION OF CISG: No
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
2E [Exclusions from the Convention (types of transactions): ships, vessels, hovercraft, aircraft]
2E [Exclusions from the Convention (types of transactions): ships, vessels, hovercraft, aircraft]
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"A Russian company sought payment of the part of the price unpaid by a Korean firm for the sea vessel delivered by the former under the contract. ... [T]he seller claimed that the vessel was to be used as iron-scrap, of which the buyer had been informed. Relying upon Article 2(e) CISG, the Tribunal ruled that the CISG was inapplicable to the dispute."
Commenting on this case and Russian Federation Maritime Commission Arbitration proceeding 1/1998 of 18 December 1998, Saidov states: "It is submitted that the approach taken in these cases should not be followed. The contracts in question were not contracts for sale of a vessel. They were, in essence, contracts for sale of iron-scrap. It is argued that the purpose of the transaction cannot be irrelevant for interpretation of Article 2(e) CISG. The fact that, in these cases, a vessel was not intended to be used as a means of transport should have indicated that a vessel did not fall within Article 2(e)." Djakhongir Saidov, 7 Vindobona Journal of International Commercial Law and Arbitration (1/2003) 1-62 at 9-10 (citations omitted).Go to Case Table of Contents
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
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. 25 [92-93]
Translation (English): Text presented below
Translation (Portuguese): CISG Brazil database <http://www.cisg-brasil.net/downloads/casos/russian_ship_arbitration.pdf>
CITATIONS TO COMMENTS ON DECISION
English:  Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 2 para. 32Go to Case Table of Contents
Queen Mary Case Translation Programme
Translation [*] by Ksenia Lapteva [**]
Translation edited by Mykhaylo Danylko [***]
1. SUMMARY OF RULING
1.1 Since the subject of the contract of sale was a ship [seacraft], the UN Convention on Contracts for the International Sales of Goods (Vienna, 1980) [hereinafter CISG], is not applicable to the contractual relationship between the parties.
1.2 Because the document for the acceptance of a ship was signed by both parties, the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry [hereinafter, the Tribunal] did not take into consideration the Respondent [buyer]'s statements regarding the completeness of the ship.
1.3 An agreement between the parties on payment of the debt by Respondent to Claimant [seller]'s agent does not deprive Claimant of his right to bring a claim, since the payment was not made by Respondent, and the agent is not a party to the contract which was concluded between Claimant and Respondent.
2. FACTS AND PLEADINGS
The claim was brought by a Russian organization [seller] against a Korean firm [buyer], in connection with partial payment of the price for the ship, which was delivered by [seller] to [buyer] in accordance with the acceptance document for the ship [ship transfer deed], as provided for by the contract between the parties, which was signed in September 1995.
In accordance with the contract [between the parties], the payment should be made by an irrevocable letter of credit, to be opened by the buyer. The letter of credit was opened by the third party to whom [buyer] resold the ship which was the subject of the contract between [seller] and [buyer]. However, the payment due on that letter of credit was not made since the requirement for providing an acceptance document for the ship signed by the third party was not met. Later on [buyer] paid the larger part of the sum to [seller]. [Buyer] further bound himself to make the remaining part of the payment to [seller]'s agent, to which [seller] agreed. However, this obligation was not performed by [buyer].
In his response to the claim, [buyer] referred to defects of the ship (certain missing parts). [Buyer] further stated that the right to demand the remaining part of the payment belongs to [seller]'s agent and not to [seller] himself.
At the hearing of the Tribunal, [seller] objected to [buyer]'s position. In particular, [seller] stated that the ship was to be used for scrap metal, of which [buyer] was informed. [Buyer] had signed the acceptance document for the ship without any reservations.
3. TRIBUNAL'S REASONING
The ruling of the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry included the following main positions.
3.1 [Competence of the Tribunal]
The competence of the Tribunal to resolve the dispute in question was directly provided for by the arbitration clause of the contract signed by the parties.
3.2 [Applicable law]
The parties did not determine in their contract the law applicable to their relations. In such circumstances, the Tribunal, based on Art. 28 of the Law of the Russian Federation On International Commercial Arbitration,  has a right to determine the applicable law in accordance with the norms of conflict of laws, provided by the law of the Russian Federation. In accordance with the conflict of laws norm stated in Art. 166 of the Fundamentals of Civil Law of USSR 1991  [hereinafter, the Fundamentals], in the absence of agreement between the parties on applicable law, the applicable law is the law of the country where the party, who is the seller in the contract for the sale of goods, is incorporated, has his main place of business or his main domicile. In the present dispute, the seller is a Russian legal entity which was established in accordance with the laws of the Russian Federation, and whose main place of business is Russia. Therefore, the applicable law is the law of the Russian Federation.
Although the CISG, to which [seller] refers in his claim papers, is a part of the legal system of the Russian Federation, in accordance with paragraph 4 of Art. 15 of the Constitution of the Russian Federation,  the CISG cannot be applied to the present dispute, since in accordance with Art. 2(e) of the CISG it does not apply to sale of ships, vessels, hovercraft or aircraft, and the subject of the contract between the parties to this dispute is a ship.
3.3 [Merits of the case]
Considering that [buyer] did not challenge the fact of the debt in sum referred to by [seller], either in its response to the claim, which was received by the Tribunal, or in the correspondence between the parties, and [buyer] has offered to pay that debt to [seller]'s agent, the Tribunal considers that the debt of [buyer] in the amount of the said sum is proven, and accordingly it is to be recovered from [buyer].
The Tribunal cannot take into consideration [buyer]'s allegation of improper quality of the delivered ship, stated in his letter of 18 August 1997, since [buyer] had signed the acceptance document for the ship on 6 October 1995 and did not make any complaints as to conformity of the ship, and missing parts in particular. [Buyer]'s statement that [seller]'s agent, and not [seller] himself, has a right to demand for the remaining payment, does not have any legal basis, since the contract for the sale of the ship was concluded between [seller] and [buyer], and the contractual rights and duties arose between these two parties. [Seller]'s agent is not a party to the above-mentioned contract.
* This is a translation of data on Proceeding 236/1997, dated 6 April 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. 25 [92-93].
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] and Respondent of Korea is referred to as [buyer].
** Ksenia Lapteva is a graduate of the Law School of Mari State University, Russia, currently in her postgraduate studies. She took part in the Vis Arbitration Moot in 2001 and 2002, as a member of the MarSU team. The MarSU team ranked in the top 16 teams in Vis in 2002.
*** 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.
1. Zakon RF "O mezhdunarodnom kommercheskom arbitrazhe" (7 July 1993) N. 5338-I.
2. Osnovy Grazhdanskogo Zakonodatelstva Soyuza SSR i Respublic, ot 31 maya 1991.
3. Konstitutsia Rossiiskoi Federatsii (adopted by referendum on 12 December 1993).Go to Case Table of Contents