Russia 3 December 1998 Supreme Court [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/981203r1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: Resolution No. GKPI 98-630
CASE HISTORY: Later instances: Supreme Court of the Russian Federation 3 August 1999 [affirmed]; Cassation Board of the Russian Federation 23 September 1999 [affirmed]
SELLER'S COUNTRY: [-]
BUYER'S COUNTRY: [-]
GOODS INVOLVED: [-]
APPLICATION OF CISG: At issue was a currency control regulation involving a contract governed by the CISG
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
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CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (Russian): Unavailable
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
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Case text (English translation) [second draft]
Queen Mary Case Translation Programme
3 December 1998
Translation by Yelena Kalika [*]
[The text of this decision has not been officially published.]
[Pursuant to the Russian Central Bank Letter No. 39-T of 27 January 1999 the Deputy Prosecutor General of the Russian Federation suspended this decision by its decision No. 8-6717-98 of 13 January 1999.]
[Pursuant to the Supreme Court decision of 3 August 1999 the claim that the Instruction of 12 October 1993 should be found invalid was denied. The Cassational Board of the Supreme Court of the Russian Federation upheld the decision by its decision No. KAS 99-253 of 23 September 1999.]
The Supreme Court of the Russian Federation consisting of the Chairman Glyantsev V.V., the Secretary Yemelyanova M.A., in the presence of the Prosecutor of the General Prosecution Office of the Russian Federation Masalova L.F. has reviewed the action commenced by the public joint stock company "Fosforit". The action was commenced to find invalid the Instruction of the Russian Central Bank, the State Customs Department of the Russian Federation of 12 October 1993 "On currency controls in connection with the transfer to the Russian Federation of revenues received from the export of goods".
The Supreme Court has found the following:
The public joint stock company "Fosforit" brought a claim to the Supreme Court of the Russian Federation arguing that both Instruction No. 19 of Russian Central Bank and Instruction No. 01-20/10283 of the State Customs Department of the Russian Federation of 12 October 1993 "On currency controls in connection with the transfer to the Russian Federation of revenues received from the export of goods" were invalid.
In support of its claims, the Claimant referred to clauses 2.1, 3.2 and 6.10 of the Instruction which -- in breach of the Russian Law "On currency regulations and currency controls" -- set different principles for the accounting of the revenues received in hard currency.
Thus, Article 5 of this law sets forth that an Exporter's obligation to deposit its revenue received in hard currency to the authorized bank arises only in the case when the hard currency is in fact deposited to the Exporter's account at the conclusion of an international commercial transaction.
On the contrary, the Instruction sets forth the rule in accordance to which an exporter is obligated to deposit its hard currency revenues irrespectively to the fact whether its foreign counter-agent has transferred them or not. Such regulation contradicts the [said] Law and places a Russian exporter in a less favorable position in cases when a foreign counter-agent does not fulfill its obligations to pay for the goods delivered.
In its amended complaint, the Claimant changed its claims and requested the court to find invalid clauses 6.10, 6.11, 6.14, 6.15 of the Instruction on the grounds that they contradict Articles 48, 50, and 56 of the UN Convention on Contracts for the International Sale of Goods.
At the hearing the Claimant also pointed out that the Instruction had not been registered and published in the order set forth in the laws and, thus, should not be applied.
The representatives of the Russian Central Bank disagreed with the claims brought by the Claimant arguing that the Instruction had been drafted totally in accordance with the Russian Law "On currency regulations and currency controls" and that the contested clauses in the Instruction did not set forth any principles of currency control of the revenues received from the Exporter's international commercial transactions which would contradict the laws.
Besides, [in the Central Bank's opinion] the Instruction settles issues related to the establishing of the system of customs and banking control; it does not concern the rights and liberties of citizens and, thus, the Supreme Court of the Russian Federation has no jurisdiction over this case.
The Instruction was not registered with the Ministry of Justice of the Russian Federation since, in accordance with this Ministry's instruction of 31 May 1993, the acts of the [governmental] bodies, which are accountable either to the Supreme Council of the Russian Federation only or to the President of the Russian Federation (in particular, the Russian Central Bank), do not have to undergo the state registration.
The State Customs Department of the Russian Federation is also of the opinion that the provisions of the Instruction in controversy do not contradict the laws.
After verifying the materials of the case and on hearing the arguments of the parties as well as the report of the Prosecutor Masalova L.F., who was of the opinion that the Instruction contradicted the laws and should not be applied, the Supreme Court of the Russian Federation finds that the Instruction is invalid for the following reasons.
In accordance with clause 1 of the said Instruction, an exporter is either an enterprise (an organization or company) or a natural person, who is a Russian Federation resident, on behalf of whom a contract (agreement) to export goods was made.
Therefore, the Instruction regulates relationships in which natural persons participate; it sets forth their certain obligations and, thus, concerns their rights and interests. Therefore, pursuant to Article 116 of the Civil Procedural Code of the Russian Federation, the Supreme Court has jurisdiction over the present case as a court of the fist instance.
Besides, the Instruction is inter-departmental in character as, while it sets forth the order of currency control by such a currency control authority as the State Customs Department, it also governs enterprises and organizations, which participate in international commercial transactions, in different departments.
This fact, which is not contested by the parties, is extremely important in determining whether the Instruction is valid with regards to its compliance with the set order of registration and publication of the normative acts which concern the rights and interests of citizens and are inter-departmental in character.
However, in the present case such order was not followed.
The Russian President Ordinance of 5 December 1991 "On Ministry of Justice of the Russian Soviet Federative Socialist Republic" placed the function of state registration of normative acts, which concern the rights and interests of citizens and are inter-departmental in character, and which are issued by ministries and state departments, on the Ministry of Justice in order to observe the rights and interests of citizens.
The Regulation on the order of state registration of the departmental normative acts was affirmed by the Resolution of the Russian Federation Government No. 305 of 8 May 1992 ("On state registration of the departmental normative acts").
Clauses 2 and 3 of the said Regulation establish that the normative acts, which are issued by the ministries and departments of the Russian Federation and which either concern the rights and lawful interests of citizens or are inter-departmental in character, shall undergo the state registration irrespectively of their term (permanent or temporary) and the information they contain. Three copies of the acts -- which are supposed to undergo the state registration -- issued by ministries or departments of the Russian Federation shall be submitted with the Ministry of Justice of the Russian Federation after the Head of a ministry or a department signs them.
According to clause 7 of the said Regulation, departmental normative acts shall come into force on the day they are being assigned a state registration number.
The mandatory state registration of the legislative acts -- which concern the rights and interests of citizens and are issued by the federal executive branch of government -- by the Ministry of Justice of the Russian Federation is also set forth in the ordinances of the Russian Federation President No. 104 of 21 January 1993 "On legislative acts issued by the central state governmental authorities of the Russian Federation" and No. 763 of 23 May 1996 "On the order of publication and entering into force of the legislative acts issued by the Russian Federation President, Russian Federation Government and federal executive authorities".
During the court hearing, it was found that the Instruction had neither been submitted for registration with the Ministry of Justice of the Russian Federation nor published.
That circumstance that the Instruction was published in a number of periodicals (including "Economics and Life" newspaper and "The Law" magazine) does not mean that the order of official publishing set forth in Article 15 of the Russian Federation Constitution and laws, which were in force on the day of issuing of the Instruction, was followed. The said periodicals are not among the periodicals permitted for making an official publication.
The court finds unreasonable the arguments of the Russian Federation Central Bank that the Instruction was not supposed to be registered with the Ministry of Justice of the Russian Federation.
Indeed, the state registration of the normative acts issued by the Russian Central Bank was established by the Federal Law No. 65-FZ of 26 April 1995 "On changes and amendments to the Law of the Russian Soviet Federative Socialist Republic "On the Central Bank of the Russian Soviet Federative Socialist Republic (Bank of Russia)".
However, the Instruction of 12 October 1993 was issued not only by the Russian Federation Central Bank but also by the State Customs Department of the Russian Federation. The State Customs Department of the Russian Federation is one of the federal executive authorities (see Russian Federation President Ordinance "On the structure of the federal executive branch of government" of 10 January 1994). Therefore, the normative act issued together with a federal executive authority was supposed to undergo the mandatory state registration.
The representatives of the Russian Federation Central Bank argued at trial that the Central Bank did not have to register the Instruction on the grounds set forth in the Commentary of the Russian Federation Ministry of Justice of 31 May 1993 "On application of the Regulation on the order of state registration of the departmental normative acts affirmed in the Resolution of the Russian Federation Government No. 305 of 8 May 1992.
However, the Court finds that such arguments have no grounds.
It is pointed out in clause 2 of the said Commentary that a joint act, i.e. an act signed by two or more ministries or departments, shall be submitted for the state registration by the one which is listed as the first signatory.
The Court is of the opinion that, in accordance with the said Commentary, the Russian Federation Central Bank, as the party who was the first one to sign the Instruction, was supposed to submit the Instruction for the state registration.
The fact that prior to 26 April 1995 the Russian Federation Central Bank did not have to submit the acts, which it had issued, to the Russian Federation Ministry of Justice does not mean that [the Central Bank] was relieved from such obligation when it was a signatory of a joint act that had to undergo the state registration.
Either in clause 3 of the Regulation on the order of state registration of corporeal normative acts of 8 May 1992 or in clause 2 of the Commentary of the Ministry of Justice of 31 May 1993 there are no provisions stating that an act, in which one of the signatories is a federal executive authority, does not have to be submitted to the Ministry of Justice if the first signatory is a state department which is not obliged to submit such an act for the registration.
Both the Regulation of 8 May 1992 and the Commentary of 31 May 1993 set forth only that the state department, which signs the act first, shall submit it for the registration with the Russian federation Ministry of Justice.
For the above reasons, the Court finds the Claimant's claims to be reasonable.
As to the arguments of the representatives of the Russian Federation Central Bank that the statute of limitation has run, they are not the grounds for denial of these claims.
The relationships, which arose in connection with the issuing and publication of the Instruction, are public in character since the Instruction concerns the interests of an indefinite number of people and sets forth the rules for the participants of international commercial transactions for the whole term of [the Instruction's] being in force.
The provisions on the statute of limitation set forth in Chapter 12 of the Russian Federation Civil Code do not govern such relationships.
Pursuant to Article 197 of the Civil Procedural Code of the Russian Soviet Federative Socialist Republic, the Supreme Court of the Russian Federation holds:
The Instruction No. 19 of the Russian Central Bank and the Instruction No. 01-20/10283 of the State Customs Department of the Russian Federation of 12 October 1993 "On currency controls in connection with the transfer to the Russian Federation of revenues received from the export of goods" is invalid.
This decision of the Court cannot be appealed in cassation and can be reviewed in the order of supervision.
This decision comes into force on the day of its publication.
* Yelena Kalika, a law student at the Pace University School of Law, has studied at the Moscow State Law Academy, interned with a Moscow law firm, and is a Research Assistant at the Pace Institute of International Commercial Law.
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