Case text (English translation)
Queen Mary Case Translation Programme
Russian Federation arbitration proceeding 342/1998 of 17 May 1999
Translation [*] by Gilyana Bovaeva [**]
Translation edited by Mykhaylo Danylko [***]
1. SUMMARY OF RULING
1.1 Under the FCA [free carrier] term of delivery stipulated in the contract, the risk of loss of or damages to the goods passes from seller to buyer from the moment of delivery of the goods to the carrier at the stipulated place of shipment. According to the Vienna Convention 1980 [UN Convention on Contracts for the International Sale of Goods (1980), hereinafter CISG] (Article 66), loss of or damage to the goods after the risk has passed to the buyer does not discharge her from her obligation to pay the price of the goods, unless the loss or damage is due to an act or omission of the seller. Such acts or omissions of the seller not having been proved, the buyer is obliged to make a payment for the goods in the amount provided in the contract.
1.2 The [seller] has not presented relevant evidence of the rate of annual interest, hence [he] has not availed himself of the opportunity to recover compensation provided by law for use of his money due to the delay in payment. The [seller]'s calculation of the annual interest in relation to the claim in foreign currency, on the basis of the loan rate established by the Russian Central Bank for loans in Russian Rubles, is found unreasonable.
2. FACTS AND PLEADINGS
2.1 The action was brought by [seller], a Russian company, against [buyer], a British company, in connection with partial payment for the goods delivered under the international sales contract concluded between the parties on 16 December 1997.
2.2 [Seller's claims]
The [seller]'s claims included:
- recovery of the sum of debt plus annual interest on the basis of Article 395 of the Russian Federation Civil Code; and
- recovery of arbitration fees.
2.3 [Buyer's position]
[Buyer] objected to granting the [seller]'s action, referring to the non-conformity of the packaging and also to illegal shipment of the goods abroad from the port where the goods were brought by the [seller] without acknowledgment of the [buyer]. [Buyer], also pointed to the [seller]'s unreasonable employment of the loan rate established by the Russian Central Bank for the loans in Russian Rubles, in her calculation of the claims, considering that payments under the contract are to be made in U.S. Dollars. During the hearings at the Tribunal of International Commercial Arbitration [the Russian Federation Chamber of Commerce and Industry (hereinafter Tribunal)], the [buyer] abandoned this claim, asking instead that the Tribunal grant recovery of the annual interest at the rate of 0.1% for each day of delay beginning from the due date of payment.
3. TRIBUNAL'S REASONING
The ruling of the Tribunal contained the following main points:
3.1 [Jurisdiction competence of Tribunal]
Competence of the Tribunal to arbitrate this dispute follows directly from the arbitration clause of the contract.
3.2 [Applicable law]
After hearing on the issue of applicable law, the Tribunal stated that parties agreed in clause 13.1 of the contract that Russian civil law would be applicable to settlement of the dispute.
Whereas by virtue of Article 15 of the Russian Federation Constitution and Article 7 of the Russian Federation Civil Code, international treaties to which the Russian Federation is a Contracting State are part of its legal system and their provisions prevail over the rules of domestic laws; thus, the CISG should be applied to the parties' relations here. Such a rationale also follows from Article 1(1)(b) CISG. As to the issues not settled by the CISG, the rules of Russian Federation Civil Code should be applied as subsidiary statute.
3.3 [Merits of the case]
3.3.1 [Obligations of the parties and passing of risk - Arts. 30, 53 and 66 CISG]
After hearing the merits of the claims, the Tribunal found that the [seller] has performed his obligations under the contract having shipped to the [buyer] the goods specified in the contract, which is proved by documents of the case.
Taking into consideration that the seller (Claimant in this case) has duly performed his obligations under the contract, having transferred to the buyer (Respondent in this case) the goods and documents relating to them, which accords with the seller's obligations under Article 30 CISG, therefore, the buyer, first of all, should have performed the obligations imposed on her by Article 53 CISG - to pay the price for and take delivery of the goods. However, the mentioned obligations were performed by the [buyer] only in part - the goods were taken, but were not paid for in full - which evidences the buyer's breach of her obligation.
The objections of the [buyer] cannot be admitted as reasonable.
As it follows from the clause 6.1 of the contract, the term of delivery was "FCA [free carrier] - place of shipping". According to this term, the risk of loss of or damage to the goods passes from the [seller] to the [buyer] from the moment when [seller] has delivered the goods to the carrier at the stipulated place of shipment. Thus, the buyer bore the risk at the moment when the goods were at the port. No connection was found between the seller and the transferring of the goods abroad and there is no disagreement between the parties as to the quality and quantity of the goods delivered. By virtue of Article 66 CISG, loss of or damage to the goods after the risk has passed to the buyer does not discharge her from her obligation to pay the price of the goods, unless the loss or damage is due to an act or omission of the seller.
[Buyer]'s assertion of non-conforming packaging (sacks instead of boxes) of the part of the goods delivered, contradicts agreement of the parties reflected in Annex 3 of 28 January 1998, clause 4 of which specifies the requirements for packaging allowing shipment of the goods in paper sacks. The country of destination was Japan, i.e. the goods were intended for export.
Based on the aforesaid, the Tribunal ruled to grant [seller]'s claim to recover the debt, which is the difference between the price of goods delivered and the payment made by [buyer].
The Tribunal left unconsidered the [seller]'s claim concerning recovery of the sum claimed by him for the delay in payment on the basis of Article 395 of the Russian Federation Civil Code, because the [seller] has not presented proof of the bank interest rates for the loans in foreign currency effective at the place of location of the creditor. However, the claimed sum was calculated on the basis of the bank rate for loans in Russian Rubles, which should not be employed to obligations in the foreign currency. [Seller]'s motion during the hearing for recovery from the [buyer] of annual interest [at the rate] of 0.1% for each day of delay was also not proved by any evidence or explanations.
4. ARBITRATION FEES
[Buyer]'s expenses as to arbitration fees should be reimbursed proportionally to the granted amount of her claims.
FOOTNOTES
* This is a translation of data on the award in Proceeding 342/1998 of 17 May 1999 of the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, reported in: Rozenberg ed., Arb. Praktika 1999-2000, No. 18 [96-98]. 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]; Respondent of Great Britain is referred to as [buyer].
** Gilyana Bovaeva, a scholar from the Russian Federation, Kalmyk Republic, earned her LL.M. degree in Environmental Law from the Pace University School of Law, 2002. The second-iteration redaction of this translation was by Dr. John Felemegas of Australia.
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