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CISG CASE PRESENTATION

Russia 18 December 1998 Maritime Commission Arbitration proceeding 1/1998 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/981218r1.html]

Primary source(s) of information for case presentation: Alexandre Mouranov

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Case identification

DATE OF DECISION: 19981218 (18 December 1998)

JURISDICTION: Russian Federation

TRIBUNAL: Maritime Commission at the Chamber of Commerce and Industry of the Russian Federation

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 1/1998

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russia (complainant)

BUYER'S COUNTRY: Canada (respondent)

GOODS INVOLVED: Out-of-commission military submarine


UNCITRAL case abstract

RUSSIAN FEDERATION: Maritime Arbitration Commission at the Russian Federation Chamber of Commerce and Industry
Case No. 1/1998 of 18 December 1998

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/113],
CLOUT abstract no. 1115

Reproduced with permission of UNCITRAL

Abstract prepared by A. S. Komarov, National Correspondent, A. I. Muranov and N. S. Karetnaya

A Russian organization (the plaintiff) and a Canadian company (the respondent) concluded an agreement under which the plaintiff sold to the respondent marine scrap metal in the form of a decommissioned diesel submarine. The parties explicitly stated that the contract had been drawn up and would be interpreted according to the law of the Russian Federation.

The Arbitration Commission considered whether CISG, which had been incorporated into Russian law, was applicable to the contract in question. It concluded that the submarine should be considered a marine vessel, even though it had been decommissioned by the Russian Navy, since the description "decommissioned" relating to the subject of the contract could denote only the loss of the submarine's status as a naval vessel, not the loss of its status as a marine vessel. The Arbitration Commission concluded that, while the submarine was capable of remaining afloat, even if it required the assistance of external devices to do so, it should be considered a marine vessel.

In the light of the above, the Arbitration Commission decided that CISG was inapplicable by virtue of the provisions of article 2.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 2(e)

Classification of issues using UNCITRAL classification code numbers:

2E [Exclusions from Convention: ships or vessels (out-of-commission submarine held not excluded from Convention)]

Descriptors: Ships or vessels

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Editorial remarks

EDITOR: Alexandre Mouranov

As far as we know, this is the first award (and up to the moment the only award) in the practice of the Maritime Arbitration Commission at the Chamber of Commerce and Industry of the Russian Federation, in which the CISG is mentioned.

The value of this award is in the important interpretation of article 2(e) of the CISG by the arbitrators:

An inoperative sea vessel (as well as a sea vessel excluded from the official list or, accordingly, from the registry) is to be regarded, subject to certain conditions, as goods that do not fall within the scope of the CISG. The arbitrators draw the following distinction between sea vessels and other goods which were sea vessels before:

A sea vessel remains what it is as long as it has the possibility to be afloat, though with the assistance of any other exterior appliances. In any other case, it becomes goods subject to the CISG.

See also Editorial remarks by Djakhongir Saidov:

"[T]he Ministry of Defence of the Russian Federation entered into a contract for the sale of a submarine to a Canadian company. The submarine, which was excluded from the list of the Russian Navy, was to be used as scrap-iron. The buyer, however, breached the contract by opening a submarine as a public exhibit. Considering the seller's claim for an order requiring the buyer to demolish the submarine, the Maritime Arbitration Commission at the Chamber of Commerce and Industry of the Russian Federation examined the issue of the applicability of the CISG. The Commission ruled that the Convention did not apply to the dispute by virtue of Article 2(e). In the opinion of the arbitrators, the submarine had been excluded from the list of the Russian Navy because of loss by this submarine 'of its Navy vessel status and for loss of that part of its specific functional descriptions, which brought about that status'. Nevertheless, it still had general qualities (although limited) of a sea vessel. Therefore, the arbitrators ruled that 'as long as this submarine [had] the possibility to he afloat, though with assistance of other exterior appliances, it [was] to be regarded as a sea vessel'. According to this interpretation, a sea vessel within the meaning of Article 2(e) also includes 'inoperative' sea vessels even those excluded from the Navy list as well as from the registry. A possibility that a vessel can be afloat will suffice for it to fall under Article 2(e)."

Commenting on this case and Russian Federation Arbitration proceeding 236/1997 of 6 April 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. ... 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).

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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): Unavailable

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

Maritime Commission at the Chamber of Commerce and Industry of the Russian Federation
Case No. 1/1998 Award of 18 December 1998

Translation [*] by Alexandre Mouranov

Summary of the case

Claimant [seller], a directorate of the Ministry of Defense of the Russian Federation, and Respondent [buyer], a Canadian company, entered into a contract of sale of a submarine, excluded from the list of the Russian Navy. The parties subjected the contract to Russian law. After the submarine military equipment and engine had been put out of commission, the submarine was towed to Canada by sea. The buyer was under the obligation to demolish the submarine entirely by breaking it into scrap-iron. The buyer breached this obligation by making in Canada the submarine (fixed to the berth) an afloat exhibit, open for public. The buyer also ignored numerous requests of the seller to provide him with the certificate of demolition according to the contract. The seller then gave to the buyer a declaration of contract avoidance and filed his claim against the buyer with the Maritime Arbitration Commission, in accordance with the arbitration agreement in their contract. The seller demanded an injunction preventing the buyer from exploiting the submarine in any possible way except entire demolition by breaking into scrap-iron. The seller sought an order against the buyer requiring her to demolish the submarine entirely by breaking it into scrap-iron and to provide the seller with the certificate of demolition, as well as recovery of penalties, established by the contract. The Maritime Arbitration Commission, applying Russian law, decided that the contract is still binding on the parties despite seller's declaration of avoidance and then awarded that all seller's claims be satisfied. In rendering the award, the arbitrators of the Maritime Arbitration Commission examined the issue of the applicability of the CISG and came to the following conclusions:

"…the arbitrators think it necessary to indicate that the submarine sold by the claimant to the respondent is to be regarded a sea vessel notwithstanding the fact that it was excluded from the military list of the Russian Federation Navy. This exclusion, in the arbitrators' opinion, stands only for loss by this submarine of its Navy vessel status and for loss of that part of its specific functional descriptions, which brought about such status. However, this exclusion can in no way stand for deprivation of it [the submarine] of the general qualities of a sea vessel, though limited. The arbitrators believe that as long as this submarine has the possibility to be afloat, though with assistance of other exterior appliances, it is to be regarded a sea vessel.

"In view thereof, the arbitrators believe that the UN Convention on Contracts for the International Sale of Goods, which is in force for the Russian Federation, in this case is not applicable by virtue of article 2 of this Convention, and that in resolving the dispute they [arbitrators] should not rely on its provisions, in particular those on remedies and avoidance of the contract".


* All translations should be verified by cross-checking against the original text.

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Pace Law School Institute of International Commercial Law - Last updated January 25, 2012
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