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CISG CASE PRESENTATION

Russia 5 October 1998 Arbitration proceeding 53/1997 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/981005r1.html]

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

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Case identification

DATE OF DECISION: 19981005 (5 October 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: 53/1997

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russian Federation (claimant)

BUYER'S COUNTRY: Mexico (respondent)

GOODS INVOLVED: Goods


Case abstract

RUSSIAN FEDERATION: Award in Case No. 53/1998 of 5 October 1998 of the
Arbitration Tribunal of Russian Federation Chamber of Commerce and Industry

Case law on UNCITRAL texts (CLOUT) abstract no. 468

Reproduced with permission of UNCITRAL

Abstract prepared by Alexander Komarov, National Correspondent

A Russian company, the seller, sued a Mexican firm, the buyer, for payment for goods supplied for sale on commission under a contract concluded by the parties in November 1990 and annexes to the contract in 1991 and 1993. Under the contract, in the event that the goods remained unsold for a period of two years, they passed into the buyer’s ownership. The contract also provided for a schedule for payment by instalments. The buyer did not perform its payment obligations.

The tribunal determined that, under the contract, the seller had transferred the goods to the buyer for sale on commission, as the documentation confirmed. Two years after the delivery date, the buyer became the owner of the goods received and was obliged to pay their value to the seller. Under articles 25 and 64 CISG, the seller was entitled to suspend performance of its obligations and/or declare the contract avoided. That being the case, the tribunal agreed with the seller that the contract of 15 November 1990 should be avoided on the grounds of the material breach by the buyer of its obligations and that the seller should be awarded the full value of the goods acquired by the buyer.

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Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 25 ; 64

Classification of issues using UNCITRAL classification code numbers:

25B [Definition of fundamental breach: substantial deprivation of expectation];

64A1 [Seller's right to avoid contract (grounds for avoidance): fundamental breach of contract]

Descriptors: Avoidance ; Fundamental breach

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Editorial remarks

"[T]he Tribunal recognized that the seller had exercised its right to avoid the contract. In its decision, the ICAC referred to both the provision of the contract which entitled the seller to avoid the contract and Article 64 CISG. Although the decision did not expressly mention which provision of Article 64 was the basis for avoidance of the contract, it seems that it was paragraph 1(a) that was relied upon. First, the buyer did not make any payments under the contract. Secondly, such a failure to pay was regarded by the Tribunal as a fundamental breach of contract. Finally, the seller did not exercise its right under Article 63 CISG." Djakhongir Saidov, 7 Vindobona Journal of International Commercial Law and Arbitration (1/2003) 1-62 at 38.

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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, Practika of Mejdunarodnogo Commercheskogo Arbitrajnogo Syda: Haychno-Practicheskiy Commentariy [Practice of the International Commercial Arbitration Court: Scientific - Practical Comments] Moscow (1998) No. 52 [173-175]

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 arbitration proceedings 53/1998 of 5 October 1998

Translation [*] by Marina Koukanova [**]

Translation edited by Mykhaylo Danylko [***]

1. SUMMARY OF RULING

     1.1 Taking into consideration that [seller] has taken necessary measures to find out the address of the [buyer], to which the summons on the date of hearing was timely sent, the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry [hereinafter Tribunal] has arbitrated the dispute absente reo pursuant to Article 3(1) of the Russian Federation Law on the Tribunal of International Commercial Arbitration.

     1.2 Whereas according to the provisions of the consignment agreement the unsold goods should be re-purchased and paid for by the consignee after expiration of the stipulated by the agreement period of consignment, thus, it is recognized that in such event the consignment agreement transforms into the contract for sale.

     1.3 The Vienna Convention 1980 [hereinafter CISG] was recognized as applicable to the dispute on non-payment for the goods because the commercial companies of the parties are located in countries that are Contracting States to the CISG (Russia and Mexico).

     1.4 The Tribunal granted the [seller]'s claim for avoidance of the contract due to the [buyer]'s commitment of a fundamental breach of contractually stipulated provisions corresponding to the provisions of the CISG (Arts. 25 and 64).

2. FACTS AND PLEADINGS

The action was brought by Claimant [seller], a Russian company, against Respondent [buyer], a Mexican company in connection with non-payment for the goods transferred for consignment under the contract concluded between the parties in November 1990 and under the amendments to the contract in 1991 and 1993.

According to the contract, if the goods are not sold during a specified two-year period, the [buyer] should purchase the goods in his ownership. The fact that the [buyer] has purchased the goods in his ownership is confirmed by the [seller]'s invoices accepted by the [buyer]. The contract stipulated the terms of installment payments for the goods. However, the [buyer] did not start to perform his payment obligations.

Initially, the [seller] brought to the Tribunal the claim for recovery from the [buyer] of the sums for which the term of payment has become effective. Later, the [seller] changed his claim and demanded to declare the contract avoided claiming recovery of the full price for the goods purchased by the [buyer] in his ownership.

The hearing of the case was postponed several times and suspended because the summons on hearings sent by the Tribunal were returned with notice of absence of the receiver at the stated address.

The measures taken by the [seller] including the enquiry addressed to the Trade Counselor of the Russian Federation in Mexico and to a well-known information company enabled the [seller] to determine the whereabouts of the [buyer].

3. TRIBUNAL'S REASONING

The ruling of the Tribunal contained the following main points.

      3.1 [Jurisdiction competence of the Tribunal]

The Tribunal has the competence to hear the present case, as, according to para. 1 of the contract amendment No. 3 signed by the parties on 16 September 1993 (the contract signed on 15 November), all the disputes arising from or related to the present contract should be addressed for arbitration to the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry.

Taking into attention the aforesaid, the Tribunal finds itself competent to arbitrate the present dispute.

      3.2 [Hearing absente reo]

Considering the issue of admissibility of hearing of the case absente reo, the Tribunal takes into consideration the fact that the [seller] took necessary measures to determine the address of the [buyer]. On 26 June 1998, the [buyer] was notified about the place and time of the hearing of the case by a summons, timely sent by registered letter to the last known postal address of the [buyer]. Thus, the Tribunal observed the procedural rules of handing over the aforesaid procedural documents to the parties, provided in Art. 3(1) of the Russian Federation Law on the Tribunal of International Commercial Arbitration and in § 12(5) of the Rules of Tribunal.

On the basis of all the above-mentioned and § 28(2) of the Rules of Tribunal, the Tribunal finds it possible to hear the present case in absence of the [buyer]'s representative basing its ruling on the materials available in the case.

      3.3 [Applicable law]

The parties did not stipulate in their contract a provision on applicable law. Taking into consideration the fact that the parties to the contract have their commercial companies in different countries - Russia and Mexico - and that both of these countries are Contracting States to the CISG, the Tribunal found that provisions of the CISG should be applied to the relations of the parties.

      3.4 [Merits of the case]

Having heard the claims of the [seller] for recovery from the [buyer] of the sum of principle debt, the Tribunal found it reasonable that such should be granted.

According to the contract concluded between the parties, the [seller] transferred the goods to the [buyer] for consignment, which is confirmed by the materials of the case (bills of lading No. 303 of 6 April 991, No. 301 of 14 February 1992, No. 302 of 7 May 1993). After the expiration of two years from the date of delivery, the [buyer] became the owner of the received goods (chapter I of the contract) and had to pay to the [seller] the price of the goods. The relations of the parties were then transformed into a contract for the sale of goods.

The [buyer] did not fulfil his obligations to pay for the goods received: for the period from 6 October 1993 (the time of the first payment); until the present moment the [buyer] did not make any payment.

According to para. 11(b) of the contract, if one of the parties that signed the contract does not fulfill obligations undertaken under the contract, the other party is entitled to suspend fulfillment of his obligations and/or avoid the contract. The respective rights of the [seller] follow from Arts. 25 and 64 CISG. Under such circumstances. the claim of the [seller] to avoid the contract of 15 November 1990 due to a fundamental breach by the [buyer] of his obligations is lawful.

The [seller] has the right to recover from the buyer the price for the goods transferred to the [buyer] and not paid for by the latter.


FOOTNOTES

* This is a translation of data on the award in Proceeding 53/1997, dated 5 October 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. 52 [173-175]. 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] and Respondent of Mexico is referred to as [buyer].

** Marina Koukanova (enter bio info.)

*** 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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Pace Law School Institute of International Commercial Law - Last updated July 30, 2004
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