Source: http://cisgw3.law.pace.edu/cases/040923u5.html
Timestamp: 2019-04-22 11:00:30+00:00

Document:
The International Commercial Arbitral Tribunal at the Ukrainian Chamber of Commerce and Trade dealt with the action brought by the Claimant (the seller), a Ukrainian company, against the Respondent (the buyer), an Israeli company, for the recovery of US$ 44,208.65. This included US$ 43,669.95, constituting the cost of the goods, plus US$ 538.70, constituting reimbursement of the expenses incurred by the payment of a penalty for breach of currency payment receipt laws.
The seller undertook to sell and the buyer undertook to buy an assortment of foodstuffs, the price and quantity of which were specified in the contract.
The buyer accepted the delivered goods; however, the buyer only partially paid for the cost of the goods. Since the buyer had not paid off its debt voluntarily, the seller addressed the Tribunal with an action against the buyer claiming recovery of US$ 44,208.65.
Section 11.3 of the contract called for the substantive law of the seller's State, i.e. the law of Ukraine, to be applicable to the contract. In accordance with Article 1 (1)(b) CISG, the Convention was applicable to the contract since Ukraine was a Contracting State.
In this regard, Article 53 CISG required payment of the purchase price and that the buyer accepts delivery of the goods as required by the contract and the Convention. In settling the dispute, the Tribunal decided that the Israeli buyer was obliged to pay to the Ukrainian seller US$ 43,699.95 (the cost of the delivered goods) and US$ 2,620.20 (reimbursement of the expenses on payment of the arbitration fee). The Tribunal decided the buyer was not obliged to repay the seller's penalty as such recovery was not provided for in the contract and the seller could have prevented the penalty being incurred by initiating arbitral proceedings within the prescribed time.
The International Commercial Arbitral Tribunal at the Ukrainian Chamber of Commerce and Trade (hereinafter Tribunal) having considered the action brought by Claimant [Seller], an Ukrainian company, against Respondent [Buyer] an Israeli company, for the recovery of US $44,208.65, including US $43,669.95, which constitutes the cost of the goods plus US $538.70 as reimbursement of the expenses caused by the payment of the penalty for the breach of the currency payment receipt terms, has decided the following.
"All disputes arising in the result of or in connection with performance of the present Contract shall be settled by the parties by the negotiations. If the parties fail to reach an agreement the dispute shall be submitted for the adjudication to the International Commercial Arbitral Tribunal at the Ukrainian Chamber of Commerce and Trade in accordance with the Rules of Tribunal. The Tribunal's award shall be final and binding upon the parties. The Tribunal shall follow provisions of substance law of the [Seller]'s state, delivered awards included."
According to Contract #115 of 14 August 2001, the [Seller] undertook to sell and the [Buyer] undertook to buy foodstuff (hereinafter - goods) assortment, price and quantity of which are foreseen by the specification which is an integral part of the Contract.
The Contract provides that goods shall be delivered from the [Seller]'s warehouse and that deliveries are to be carried out by the [Seller] on the basis of advance orders. Goods are to be sent by the [Seller] within terms not exceeding 15 working days from receipt of the [Buyer]'s order. The delivery date shall be the date indicated in the Cargo Customs Declaration. Payment for each of the delivered consignment of delivered goods shall be in US dollars according to the invoice billed by the [Seller] within the term of 35 bank days from the date the goods are dispatched. The date of the dispatch of the goods shall be the date indicated in the Cargo Customs Declaration.
In case of the delivery of low-quality goods, the [Buyer] is obliged to send the [Seller], within 10 days from the date when a defect is discovered, a claim for replacement enclosing confirming documents attested by a neutral organization. The [Seller] is obliged to examine the claim for replacement with regard to the quality and quantity of goods and to respond to the [Buyer] without delay but not later than within 30 days from the date the claim for replacement was received.
In pursuance of contract provisions during the period from 20 August 2001 till 28 December 2002, the [Seller] has delivered to the [Buyer] goods in the sum of US $178,882.59 under EXW delivery conditions (INCOTERMS, 1990).
The [Buyer] accepted the delivered goods, however, the [Buyer] has only partially paid for the cost of the goods in the amount of US $134,989.64. The indebtedness, which includes a bank commission in the amount of US $223, was attributed by the [Buyer] to its account in the amount of US $43,669.95.
Since the [Buyer] has not paid off its debt voluntarily, the [Seller] on 22 April 2003 has addressed the Tribunal with an action against the [Buyer] claiming recovery of US $44,208.65.
By virtue of the resolution of the President of the Tribunal, dated 22 April 2003, the Tribunal has initiated proceedings in the case.
On 15 May 2003 the Tribunal sent by a registered letter with delivery notification to the [Buyer] (to the address indicated in the action claim) copies of the action materials, Rules of Tribunal, and the Tribunal Arbiters List, with a suggestion to present statement of defense within 30 days and communicate the name of the appointed arbiter. On 15 August 2003, the above-mentioned registered letter was returned to the Tribunal by the Israel Postal Service because "the addressee is not registered at the mentioned address".
In its application of 11 September 2003 the [Seller] has informed the Tribunal of the address to the Consular department of Israel in Ukraine with a request to help to receive information about the [Buyer]'s location. In view of the above, the [Seller] asked the Tribunal to prolong the terms in order to obtain more specific information on [Buyer]'s address. In its letter of 12 September 2003, the Tribunal has granted a [Seller]'s request and prolonged the term for the provision of information on [Buyer]'s location to 15 October 2003.
In its letter of 14 October 2003, the [Seller], referring to the request sent as well to the Trade and economic mission within the Embassy of Israel in Ukraine with regard to receipt of the information on [Buyer]'s location, asked the Tribunal to grant additional time for receipt of that information. In its letter of 15 October 2003, the Tribunal granted [Seller]'s request and prolonged the term for the establishment of the factual location of the [Buyer] to 28 November 2003.
In the letter of 28 November 2003, the [Seller] informed the Tribunal of the specified address of the [Buyer] (address of its registration indicated in the extract from the state company register of Israel) to which it asked to send action materials once again.
On 2 December 2003, the Tribunal has for the second time sent the [Buyer] copies of the action materials, Rules of the Tribunal and Tribunal Arbiters List by a registered letter with delivery notification. On 9 February 2004 the registered letter was returned to the Tribunal by the Israel Postal Service with a note: "the addressee has left".
The [Seller] in its letter of 11 February 2004 asked the Tribunal to send action materials to the address of the [Buyer] company's owner. On 12 February 2004, the Tribunal, for the third time, sent copies of the action materials, Rules of Tribunal and Tribunal Arbiters List to the specified address by a registered letter with delivery notification. On 17 May 2004 this registered letter was returned to the Tribunal by the Israel Postal Service because the letter was "unclaimed".
Taking into account that action materials were sent by the Tribunal to the last known location of the [Buyer] and to the address of the [Buyer]'s company owner and envelopes contain notes and postmarks of the Israel Postal Service evidencing registration of the attempts to deliver registered letters to the [Buyer], by virtue of art. 31 of the Law of Ukraine "On International Commercial Arbitration", registered letters are considered delivered to the [Buyer].
After the composition of the Tribunal for the present case was formed, proceedings on the case were appointed to 9 July 2004. Parties were informed about the above by summons.
The summons (notice of appointment) sent by a registered letter to the [Buyer] to the address presented by the [Seller] was returned to the Tribunal by the Israel Postal Service since "the addressee was not registered at that address". Earlier on 12 February 2004, action materials had been sent to the same address by registered letter with delivery notification, however, they were returned to the Tribunal by the Israel Postal Service on 17 May 2004 since the letter was "unclaimed".
Since registered mail of the Tribunal sent to the same address was returned by the Israel Postal Service due to the different reasons the Tribunal has decided to postpone adjudication of the present case.
According to art.7.5(b) of the Rules of Tribunal adjudication of the case was appointed on 23 September 2004.
The resolution on postponement of the proceedings on the case was sent to the [Buyer] at two addresses (postal receipts # 1994303 and 1994311). Registered letter # 1994311 of 16 August 2004 was returned to the Tribunal by the Israel Postal Service because of "departure".
At the hearings of the Tribunal, [Seller]'s representatives referring to the fact that the [Seller] has undertook all the reasonable actions for the specification of [Buyer]'s address in order for the Tribunal to deliver the mail, including receipt of the extract from the Israel state company register and to the fact that the Resolution on postponement of the proceedings of the case of 9 July 2004 sent to the registration address of the [Buyer] was returned because of departure of the addressee, asked the Tribunal to regard the letters as delivered to the [Buyer] and to consider the case on the basis of the available materials presented by the [Seller].
Since the abovementioned letters were sent to the last known address of the [Buyer]'s registration and the envelopes contain notes and postmarks of Israel Postal Service evidencing registration of the attempts to deliver registered mail to the [Buyer], by virtue of art. 31 of the Law of Ukraine "On International Commercial Arbitration" registered letters are considered to be delivered to the [Buyer].
1. The parties have concluded Contract # 115.
2. According to art. 11.3 of the Contract, the substantive law of the [Seller]'s State, i.e., the law of Ukraine is applicable to the Contract.
According to art. 1(1)(b) of the UN Convention on Contracts for the International Sale of Goods (Vienna, 1980), the CISG is applicable to the present relations since Ukraine is a Contracting State to the Convention.
In compliance with art. 53 of the Convention the buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention.
3. Delivery of the goods in the amount of US $178,882.59 is confirmed by the International Cargo Consignment Note, Cargo Customs Declarations, invoice bills which contain indications of the title of goods, its price, quantity, cost and notes of Ukrainian Regional Customs.
4. Payment of US $134,989.64 by the [Buyer] is confirmed by the bank documents presented by the [Seller].
5. The [Buyer] has not presented to the Tribunal any proof of payment of the debts in the amount of US $43,669.95.
According to the [Seller]'s representative, the [Buyer] explained the partial non-payment by the claims related to quality of the goods, however, the [Buyer] has not presented either to the [Seller] or to the Tribunal any documents confirming such claims in the procedure foreseen in Section 10 of the Contract and has not challenged this action.
At the same time, according to art. 209 of the Civil Code of USSR, absence of the fault shall be proved by the party which has breached the obligation. The [Buyer] has not presented to the Tribunal any evidences of absence of its fault in the non-payment of the indebtedness for the received goods.
6. Under such circumstances, [Seller]'s action claims for recovery of US $ 43, 669.95, i.e., cost of the delivered goods, are well-founded and are subject to satisfaction.
7. As to [Seller]'s action claim for recovery of US $538.70 which constitutes losses caused by the payment of a penalty for breach of the terms of the receipt of currency earnings under an external economic contract to the budget of Ukraine, this claim shall not be satisfied for the following reasons.
- Law of Ukraine "On the Procedure of Execution of Settlements in Foreign Currency" (art.1(1)) states that the maximum term for the receipt of the currency earnings under external economic contracts is 90 calendar days from the date of the customs clearance (issue of the Export Cargo Customs Declaration) of the exported goods. Recovery of a penalty in the amount of 0.3 % of the sum of the non-received currency for each undue day is foreseen for the breach of this term (art.4 (1) of the Law).
- However, the Tribunal does not find any basis for recovery of these losses from the [Buyer] since its recovery is not provided by the Contract. Moreover, the [Seller] was able to prevent these losses by lodging an action with the Tribunal in time. According to art. 4(2) of the Law of Ukraine "On the Procedure of Execution of Settlements in Foreign Currency", if the Tribunal accepts an action from the resident on recovery from a non-resident of an indebtedness caused as a result of non-compliance by the non-resident with the terms of export and import contracts, the terms established by the Law are suspended and the penalty for its breach for this period is not paid.
- According to art. 211(2) of the Civil Code of USSR, an arbitration court is entitled to reduce the amount of a respondent's liability if the creditor deliberately or due to its carelessness contributed to the increase of the amount of the losses caused by the non-fulfillment or improper fulfillment of obligations and has not taken any measures for its reduction.
[Seller]'s untimely action therefore precluded recovery of the penalty as foreseen by the abovementioned Law. Under such circumstances, there are no reasons for recovery of the losses incurred by the [Seller] in the amount of US $538.70 at the expense of the [Buyer].
8. According to Section V, para. 2 of the Regulations on Arbitration Fees and Expenses, expenses on payment of the arbitration fee are to be reimbursed at the expense of the [Buyer] in proportion to the amount of the satisfied action claims (98.78%, in this case).
- US $ 2,620.20 [reimbursement of the expenses on payment of the arbitration fee].
In total, the amount of the satisfied claims constitutes US $ 46,290.15. All other action claims are rejected.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Ukraine is referred to as [Seller] and Respondent of Israel is referred to as [Buyer].

References: art. 31
 art.7
 art. 31
 art. 11
 art. 1
 art. 53
 art. 209
 art. 4
 art. 211