Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography

CISG CASE PRESENTATION

Russia 18 December 1998 Arbitration proceeding 288/1997 [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/981218r2.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 19981218 (18 December 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: 288/1997

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Russian Federation (claimant)

BUYER'S COUNTRY: Uzbekistan (respondent)

GOODS INVOLVED: Goods


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 7 ; 8 ; 90 [Also cited: Article 100(2) ]

Classification of issues using UNCITRAL classification code numbers:

7A3 [Observance of good faith];

8A [Intent of party making statement or engaging in conduct];

90A [Relations to other conventions: conventions with provisions governing same matters]

Descriptors: Good faith ; Intent ; Other conventions

Go to Case Table of Contents


Editorial remarks

Go to Case Table of Contents


Citations to case abstracts, texts, and commentaries

CITATIONS TO 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. 67 [238-243]

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Djakhongir Saidov, 7 Vindobona Journal of International Commercial Law and Arbitration (1/2003) 1-62 at nn. 60, 66 (recognition of good faith as a general principle of the Convention)

Go to Case Table of Contents

Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Russian Federation arbitral proceeding 288/97 of 18 December 1998

Translation [*] by Serge Lapine [**]

1. SUMMARY OF THE RULING

      1.1 Since the main places of business of the parties are in Russia and Uzbekistan, the relations under the contract in dispute are governed by the provisions of international treaties to which these States are Parties. The question of applicability to the parties' relations of one treaty or another must be resolved in accordance with the appropriate treaty provisions.

      1.2 Applicable law is determined according to the rules of the CIS Agreement on the Settlement of Economic Disputes (para. "e" of Article 11) and of the CIS Agreement on the Legal Aid (Article 41) as law of the place of the conclusion of the contract; in this case that is Russian law. Although at the moment of consideration of the dispute both States participated in the Convention on Contracts for the International Sale of Goods 1980 (hereinafter Vienna Convention 1980), it could not be applied as an international treaty between Russia and Uzbekistan because at the time of conclusion of the contract it had not entered into force for Uzbekistan (para. (2) of Article 100 of the Convention). However, its provisions are considered to be applicable to the relations between the parties as the rules making it pursuant to the Constitution of the Russian Federation (part 4 of Article 15) a component part of the legal system of Russia. Accordingly, under Article 7(2) of the Vienna Convention 1980 the relations are governed by the provisions of the Civil Code of the Russian Federation as subsidiary law.

      1.3 Although the contract of international sales of goods was signed not only by the Claimant [seller] and Respondent [buyer] but also by the consignor, the analysis of the contractual provisions led to the conclusion that only the seller and the buyer are the parties to the contract.

      1.4 While establishing the meaning of the document signed by the Chief Accountants of the [seller] and the [buyer], which the parties interpreted in different ways, the International Commercial Court of Arbitration at the Chamber of Commerce and Industry of the Russian Federation (hereinafter the Tribunal) in accordance with Article 8 of the Vienna Convention 1980 took notice of a document proving the intents of the parties as well as of the general principle of good faith in international trade of this Convention (Article 7).

      1.5 In determination of the way in which the contract had to be concluded by the Buyer, the Tribunal took notice of the CIS General Terms of Deliveries which differ from the Uzbekistani legislation, bearing in mind that the Civil Code of Uzbekistan gives priority to the provisions of an international treaty over national legislation.

      1.6 The calculation of the fine for the delay in payment was made in accordance with the methodology stipulated in the contract.

2. PLEADINGS

The claim was brought by a Russian company [seller] against an Uzbekistani company [buyer] in connection with incomplete payment for goods delivered under a contract concluded between the parties on 23 January 1997. The [seller]'s claims included clearing off the debt and payment of the fine provided by the contract for delay in payment.

Referring to the Certificate of Collation signed by the Chief Accountants on 16 February 1998, the [buyer] stated in his letter of 10 July 1998 that the parties have no claims against each other. Accordingly, the [seller] has no grounds to claim the exaction of the fine.

In the supplementary brief received by the Tribunal on 14 October 1998 the [seller] did not claim for payment of the goods, because the [buyer] had cleared off his main debt, but at the same time enhanced his claim as regards the sum of the fine.

At the hearing, the [buyer] continued to affirm that the [seller] had no grounds to claim the fine. At the same time, he made several remarks on the calculation of the fine.

The [seller], justifying his position on the fine, besides the contractual provisions in dispute, referred also to the "Guarantee obligation" annexed by him to the supplementary brief. This document was signed on 16 February 1998 by the Director of the [buyer] company and contained the conditions on which the [seller] agreed to sign the Certificate of Collation, and the obligations which the [buyer] assumed in this connection.

The [buyer] declared that this "Guarantee obligation" was null and void as it was not signed by the [buyer]'s Chief Accountant, which is fixed in the "Regulation on Accounting and Book-Keeping in the Republic of Uzbekistan" 1994.

3. AWARD

The Tribunal's finding contained the following main points:

      3.1 The Tribunal's competence to hear the present case is expressly stipulated by the arbitration clause of the contract (point 9) and is undisputed by the parties.

      3.2 The contract does not include any provision on applicable law. But Russia and Uzbekistan where the parties have their main places of business are Parties to several international treaties which are applicable to the relations between the parties. These treaties include: the CIS General Terms of Deliveries, the CIS Agreement on the Settlement of Economic Disputes, the CIS Agreement on the Legal Aid 1993. Although at the time of consideration of the dispute Russia and Uzbekistan are Parties to the Vienna Convention 1980, the Convention is inapplicable to the relations of the parties as an international treaty between Russia and Uzbekistan as it entered into force for Uzbekistan only on 1 December 1997, that is, after the conclusion of the contract between the parties (para. (2) of Article 100).

In determination of national applicable civil law, the Tribunal referred to the above mentioned CIS Agreement on the Settlement of Economic Disputes (para. "e" of Article 11) and CIS Agreement on the Legal Aid (Article 41), which provide that the rights and obligations of the parties to the contract are determined under the legislation of the place of its conclusion, if the parties did not agree to the contrary. According to the Constitution of the Russian Federation (part 4 of Article 15), international treaties are a component part of its legal system. Bearing in mind that Russia has been a Party to the Vienna Convention 1980 since 1 September 1991, its provisions govern the parties' relations under the present contract, and the provisions of the Civil Code of the Russian Federation apply to them as subsidiary law (under Article 7(2) of the Vienna Convention 1980) on matters not settled in the Convention and which cannot be settled in conformity with the general principles on which the Convention is based.

      3.3 Although the sales contract is signed not only by the Claimant [seller] and the Respondent [buyer], but also by the consignor, only the [seller] and the [buyer] are the parties to the contract out of which their rights and obligations arose. The consignor's functions are limited in the contract to very specific technical obligations (issuing of certificate of quality - point 2 of the contract, sending the notice of dispatch - point 3 of the contract). At the same time, it is specially stipulated (point 10.8 of the contract) that the financial relations between the seller and the consignor are governed by a separate agreement.

      3.4 Since the main sum of the debt at the time of collation of payments was cleared off by the [buyer], which is confirmed by the Certificate of 16 February 1998 signed by the Chief Accountants of the [seller] and the [buyer], the case in regard to the main sum of the debt is to be closed.

      3.5 The Tribunal cannot consider to be justified the [buyer]'s arguments that the signature of the Certificate of Collation of 16 February 1998 made pointless the [seller]'s claims to pay the fine for the [buyer]'s delay in payment for the goods delivered to him.

As it follows from the Certificate of 16 February 1998, the Chief Accountants made collation of payments only in regard to the main sum of the debt.

On the date of the signature of the Certificate of Collation, the Director General of the [buyer] company issued the above mentioned "Guarantee obligation" on recovery to the [seller] of the arbitration duty and on payment to the customs authorities of the fine for the delay of payments by means of increase of the prices under another contract.

In this "Guarantee obligation" of the Director of the [buyer] company, it was clearly indicated that only on these conditions the [seller] agreed to sign the Certificate of Collation without claiming the fine for delay of payments, the arbitration duty and the recovery of sanctions imposed by the customs authorities. Furthermore, it was particularly convened that complete or partial refusal to receive the goods under the said other contract gives to the [seller] the right to claim under the contract in dispute the damages and the fine for the delay of payments through the Tribunal.

The [seller] asserts and the [buyer] does not deny that the [buyer] did not fulfil the guarantee obligation till the moment of the present hearing.

The [buyer]'s representatives assert that the guarantee obligation given by the Director of their company is to be considered null and void because it was not signed by the Chief Accountant of the company. They invoke the Regulation on Accounting and Book-Keeping in the Republic of Uzbekistan. In consideration of this statement the Tribunal took the following position.

Indeed, the Regulation on Accounting and Book-Keeping in the Republic of Uzbekistan (para. 24) adopted by the Decree of the Cabinet of Ministers of 26 March 1994 No. 164 provides that financial obligations of a company as well as its contracts have to be signed by Director together with Chief Accountant and, in the absence of the signature of Chief Accountant, they are deemed null and void. At the same time, it should be noted that the Civil Code of the Uzbek SSR 1963 which was in force at the moment of conclusion of the contract (part 2 of Article 622 in the version of the Ukase of the Presidium of the Supreme Soviet of the Uzbek SSR of 28 February 1983 - Gazette of the Supreme Soviet of the Uzbek SSR, 1983, No. 7, Article 114) provided that if an international treaty of the Uzbek SSR establishes rules different from those fixed in civil legislation of the Uzbek SSR, the rules of the international treaty apply. The analogous norm is included in the Civil Code of Uzbekistan (Article 7) which came into force on 1 March 1997 according to the Decree of Oliy Madgelis of the Republic of Uzbekistan of 29 August 1996. The CIS General Terms of Deliveries (para. 18) provide that contracts are to be signed by Director of a company or by persons authorized by him and validated with a stamp. The contract concluded by the parties on 23 January 1997 as well as the "Guarantee obligation" of 16 February 1998 were made in full conformity with the requirements of The CIS General Terms of Deliveries which is an international treaty of Uzbekistan.

In the present case the document entitled "Guarantee obligation" and signed by the Director of the [buyer] company is taken into account by the Tribunal not as the [buyer]'s financial obligation, but as evidence of the facts invoked by the [seller]. The Tribunal refers to the Vienna Convention 1980 (Article 8), under which statements made by and any other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what the intent was. The general principle of good faith in international trade on which the Vienna Convention 1980 is based (Article 7) was also taken into account.

Bearing in mind the aforesaid and taking into account the fact that four months passed since the signature on 16 February 1998 of the Certificate of Collation and of the Guarantee obligation, the Tribunal indicates the following: 1) while signing the Certificate of Collation both the parties thought that this signature does not lead to automatic annulment of the [seller]'s other claims against the [buyer]; 2) the supposed remedy of their settlement appeared to be unrealized for reasons not beyond the [buyer]'s control; 3) as long as these claims were not settled, they can be considered within the framework of the present arbitral proceedings.

      3.6 The [seller]'s claim to direct the [buyer] to pay him the fine is based on the contractual provisions (last paragraph of point 4 of the contract). It is supported by the materials of the file. The [buyer] does not deny the fact of the delay in payment for the goods delivered under the contract (this fact follows from the Certificate of Collation of 16 February 1998). However, the parties have different approaches to the way of calculation of the fine.

The issue of payment of the fine to the [seller] is considered by the Tribunal within the claims reflected in the [seller]'s original brief for which the arbitration duties were paid. The additional claims indicated in the supplementary brief of 5 October 1998 are not considered by the Tribunal as, for their consideration, the arbitration duty was not paid.

In calculation of the sum of the fine, the Tribunal took the following approach:

  1. Under the contract (point 4) the payments must have been made within 30 banking days, not calendar days, from the date of delivery of each lot of the goods. Accordingly, the delay began after expiration of 38, not 30 calendar days, as it is pointed out in the [seller]'s calculation (moreover, with the exclusion of holidays);

  2. The contract (last paragraph of point 4) provides that the Buyer is to pay the fine for each day of delay, not for each banking day of delay in payment. Accordingly, the days after the beginning of delay when banks do not work must not be excluded from the calculation of the fine;

  3. The ending date of the computation of the fine is 18 August 1997 as is fixed in the [seller]'s brief of 9 September 1997;

  4. Computation of the fine at each point of the [seller]'s calculation is to be made bearing in mind the actual date of arrival of the goods communicated by the [buyer]'s representatives at the hearing of the Tribunal and not the abstract date deduced by the [seller] in his calculation.

Taking the above approach, the Tribunal ruled that the fine must be computed: at the first point of the [seller]'s calculation - for 86 days, at the second point - for 81 days, at the third - for 128 days, at the fourth - for 115 days, at the fifth - for 103 days, at the sixth - for 94 days, at the seventh - for 78 days, at the eighth - for 90 days, at the ninth - for 76 days.

The Tribunal imposes on the [buyer] the obligation to pay to the [seller] the sum of the fine determined in the way described above.

      3.7 The [seller]'s claim to impose on the [buyer] the obligation to redeem the sum of the fine exacted by the customs authorities for violation, through the [buyer]'s fault, of the customs rules in accordance with para. 18 of the Tribunal's Regulation and of para. 3 of the Arbitration Costs and Expenses Rules which are annexed to the Tribunal's Regulation is left without consideration due to the fact that no arbitration duty was paid from this sum.

      3.8 According to para. 6 of the Arbitration Costs and Expenses Rules, if the claim is partly satisfied, the arbitration cost is imposed on the [buyer] in proportion with the sum of the satisfied claims, and on the [seller] - in proportion with the sum of the claims which were not satisfied.

Taking into account the fact that on the date of bringing the suit, the main [buyer]'s debt constituted according to the Certificate of Collation of 16 February 1998 signed by the parties' Chief Accountants the sum cited by the [buyer], the [buyer] is to pay the arbitration cost to the [seller] in proportion with this sum. The [buyer] must also pay the proportionate amount of arbitration cost from the sum of the fine exacted for delay in payment.


FOOTNOTES

* This is a translation of data on Proceeding 288/1997, dated 18 December 1998, of the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry reported in Rozenberg ed., Praktika No. 67 [238-243]. 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 the Uzbekistan 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.

Go to Case Table of Contents
Pace Law School Institute of International Commercial Law - Last updated July 30, 2004
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography