Source: http://cisgw3.law.pace.edu/cases/040202r1.html
Timestamp: 2019-04-19 14:54:06+00:00

Document:
- The [Buyer], having received action-related documents and having taken a number of procedural steps, did not object to the Tribunal's jurisdiction to arbitrate the present dispute.
1.2 Taking into account that the contract did not provide for the applicable law, the Tribunal stated that the Vienna Convention 1980 [UN Convention on Contracts for the International Sale of Goods (1980), hereinafter CISG] is applicable to the relations of the parties (since their places of business are located in the States parties to the CISG). By virtue of art. 1211 of the Civil Code of the Russian Federation [hereinafter Russian Civil Code], the Tribunal applied Russian substantive law as subsidiary law since Russia is the [Seller]'s place of business.
First, in the absence of contractual provisions relating to the quality and purposes of purchased goods, by virtue of art. 35 of the CISG, goods do not conform with the contract if they are not fit for the purposes for which the goods of the same description are ordinarily used, which was not proved by the [Buyer].
Second, the [Buyer] did not produce any evidence of the non-conformity of the goods.
Third, having suggested the examination of the goods by independent inspectors in the port of destination, for which the [Seller] gave its consent, the [Buyer] did not invite the representatives of the [Seller] to such examination and did not present the documents on its results.
The action was brought by the [Seller], a Russian organization, against the [Buyer], a Uruguayan organization, in connection with an incomplete payment for the goods delivered under an international sales contract of 16 January 2003. [Seller]'s claims included recovery from the [Buyer] of the outstanding part of the payment and contractual penalty on this sum, as well as recovery of the arbitration fees and expenses it incurred in connection with the arbitral proceedings.
2.1 The [Buyer] did not submit a [statement of defense] and [Buyer]'s representatives did not appear at the arbitration hearings.
2.2 From the correspondence and the explanations of the representatives of the [Seller], it followed that the [Buyer] had sought to justify the incomplete payment for the goods, taking the position that they were not in conformity with the requirements of the contract.
In compliance with section 1(5) par. 2 of the Rules of Tribunal, which entitles the Tribunal to resolve the question of its own jurisdiction over a given case in the award on the merits of the case, the Tribunal considered it appropriate to cover this question in the present award and not in a separate ruling.
According to section 2 of Tribunal's Regulations and section 1(2) of the Rules of Tribunal, the Tribunal's jurisdiction covers disputes arising out of contracts and other civil-law relationships in international economic activities if at least one party's place of business is abroad.
Considering this, the Tribunal stated that the contract concluded between the [Seller] and the [Buyer] on 16 January 2003 is an international sales contract, and the parties to the contract are a Russian organization, the [Seller], and a Uruguayan organization, the [Buyer].
in the English version: "If the parties fail to settle amicably all disputes and differences, they should apply to the International Chamber of Commerce (ICC) Arbitration in Moscow in accordance with the rules of this Arbitration Court,"
In accordance with section 1(3) of the Rules of Tribunal, the Tribunal has the jurisdiction to arbitrate disputes provided there is a written agreement between the parties to refer an existing or potential dispute to it.
- The [Seller] brought an action, in which it provided arguments supporting the competence of the Tribunal, and presented all the subsequent documents to the Tribunal; the [Buyer] also presented documents to the Tribunal.
- The [Buyer] received the statement of action both in Russian and English as well as all the materials of the case sent by the Tribunal to [Buyer]'s address, which is confirmed by the notification of the messenger service. In the materials of the case, the [Seller] contended the existence of the arbitration agreement and competence of the Tribunal, and no objections to the competence of the Tribunal were submitted by the [Buyer] either to the Tribunal or to the [Seller]. In spite of the repeated proposals by the Tribunal (the letter from the Secretariat of the Tribunal No. 1800-56/1135 of 16 June 2003, and Tribunal's ruling of 4 November 2003), the [Buyer] did not submit a statement of defense in which [Buyer] could have stated its opinion about the competence of the Tribunal. Furthermore, [Buyer]'s representatives failed to appear at the arbitration hearings of 4 November and 18 December 2003, in which the representatives could submit their position about the competence of the Tribunal directly at the indicated hearings. Having considered such actions of the [Buyer], the Tribunal found it justified to conclude that the [Buyer] did not object to the competence of the Tribunal to arbitrate the present dispute.
- Taking into account the above, in compliance with art. 9 of the contract and section 1 of the Rules of Tribunal, and taking into consideration the provisions of art. 7 of the Russian Federal Law "On International Commercial Arbitration", the Tribunal ruled that it had the competence to arbitrate the present dispute.
Turning to the question of non-appearance of [Buyer]'s representatives at the arbitral hearing, the Tribunal stated that the summons to the hearing scheduled on 18 December 2003 was handed over to the [Buyer] on 10 November 2003, which is confirmed by the notifications of the messenger service contained in the materials of the case. In compliance with section 12(5) and section 28(2) of the Rules of Tribunal, default by a party duly notified of the date, time and place of the hearing does not preclude the Tribunal from continuing the arbitral proceedings and making an award unless the defaulting party submits a written application to postpone the proceedings due to a valid reason.
the Tribunal decided to arbitrate the case in the absence of the [Buyer].
Addressing the issue of the applicable law, the Tribunal stated that it was not determined in the contract.
In the opinion of the [Seller], which was expressed in the statement of action and later expressed by [Seller]'s representatives at the arbitration hearing, the CISG is applicable to the relations of the parties to the present dispute, whereas provisions of the Russian legislation are applicable as subsidiary law since seller's place of business is located in Russia.
In accordance with art. 1(1)(a) CISG, the CISG is applicable to contracts of sale of goods between parties whose places of business are located in different States parties to the Convention.
Since the places of business of the [Seller] and the [Buyer] are located in Russia and Uruguay correspondingly, and these States are States parties to the CISG, the provisions of the CISG are applicable to the present dispute.
In accordance with art. 7(2) CISG, all questions concerning matters governed by the CISG, which are not expressly settled in it are to be settled, in particular, in conformity with the law applicable by virtue of the rules of private international law.
Taking into account provisions of the conflict-of-law rules contained in art. 1211 of the Russian Civil Code, the Tribunal, keeping in mind the absence of the agreement of the parties on the choice of law, found it possible to apply to the contract the Russian law as subsidiary statute of the country of the [Seller] in the sales contract.
Having considered [Seller]'s claim to recover the principal debt from the [Buyer], the Tribunal established that according to the terms of the contract the [Seller] delivered to the [Buyer] the goods in the amount indicated by the [Seller] on terms FOB fishing area from the shipboard to the carrier ship provided for by the [Buyer], which fact is confirmed by the documents contained in the materials of the case: the mate's receipt of 22 January, 2003, a certificate of goods' quality examination of 22 January 2003, as well as [Buyer]'s letter of 27 February 2003. Thus, the [Seller] fully performed its obligations under the contract.
[Seller]'s invoice of 22 January 2003 was only partially paid by the [Buyer]. In spite of the repeated demands of the [Seller], the [Buyer] has not transferred the remaining funds for the delivered goods.
In its correspondence with the [Seller], the [Buyer] sought to justify the incomplete payment by alleging the non-conformity of the goods with the quality provided for in the contract and proposed to the [Seller] that [Buyer] pay for the goods at a price lower than that of the contract. Moreover, the [Buyer] proposed to pay for the goods after they are examined by an independent expert upon arrival of the carrier ship in April 2003 to the port of Iceland. The [Seller] stated that the contract does not provide for any additional examinations of the quality of the goods, and that the [Buyer] has not presented - in spite of repeated demands by the [Seller] - official documents (for instance, claims, statements, etc.) proving non-conformity of the goods delivered by the [Seller] with the quality requirements of the contract. Therefore, the [Seller] considered that the goods fulfilled all the quality requirements of the contract and demanded the recovery of the principal debt from the [Buyer] and also agreed to conduct an inspection of the goods ([Seller]s faxes of 19 February, 20 February, 24 February, 28 February, 14 March, 18 March 2003 and [Buyer]'s faxes of 19 February, 20 February, 27 February and 17 March 2003).
The Tribunal found that according to art. 4 of the contract the goods are to be of good quality in conformity with the Russian standards of the exported products.
As was explained by the representatives of the [Seller] at the hearings on 18 December 2003, the goods, apparently, were intended to be used as bait for fishing. The [Seller] contended that the goods delivered to the [Buyer] could be used without any limitations for the purposes intended by the [Buyer]. The [Buyer] failed to submit either to the [Seller] or to the Tribunal any documents proving otherwise.
The Tribunal found that the [Buyer], referring to the non-conformity of the delivered goods with the quality requirements of the contract (size of the "hinge"), did not present to the [Seller] any documents confirming the non-conformity of the quality of the goods with the requirements of the contract such as claims, statements of independent inspection organizations, etc. Neither do the materials of the case contain such documents. Moreover, the materials of the case contain certificates of cargo quality inspection made on 21 and 22 January 2003 by the captains of the carrier ship and the fishing ship confirming the conformity of the goods with the quality requirements of the contract, as well as the mate's receipt of 22 January 2003 confirming the conformity of the quantity of the goods and their description with the requirements of the contract.
The Tribunal took into account that although the contract did not provide for the examination of goods, the [Seller] agreed to participate in the examination of the goods by the independent inspectors after the arrival of the carrier ship to the port of Iceland, which was suggested by the [Buyer] in April 2003. However, the [Seller] was not invited to the examination of the goods and did not receive the documents on the examination results from the [Buyer].
The contract does not contain any reference to specific normative and technical documentation, including a specific standard. Neither does the contract provide for specific qualitative properties of the goods. Instead, the contract merely provides for general requirements of the goods and the [Seller] was not informed by the [Buyer] about the purposes of the purchase of goods. Therefore, in Tribunal's opinion, by virtue of art. 35 CISG, the goods delivered by the [Seller] to the [Buyer] are to be fit for ordinary use.
The Tribunal stated that the [Buyer] cannot refer to the low quality of the goods, since the [Buyer] has not proved the fact of the delivery of the defective goods.
Having considered the actions of the [Buyer], the Tribunal qualified them as a unilateral refusal to perform obligations to pay the price for the delivered goods required by the contract and the CISG.
Also, the Tribunal took into account that the [Buyer] did not submit a statement of defense, although it was quite feasible for the [Buyer] to do that as well as the fact that the [Buyer] contested neither the merits nor the amount of the [Seller]'s claims .
On the above grounds, the Tribunal, in accordance with clause 2.4 and 8.1 of the contract and arts. 35, 53, 61 and 62 CISG, ruled that [Seller]'s claim to recover from the [Buyer] the amount of the principal debt is well-founded and shall be granted in full.
Having considered [Seller]'s claim to recover from the [Buyer] the contractually agreed penalty, the Tribunal found that clause 8.2 of the contract provides for the penalty for violation by the [Buyer] of the payment terms in the amount of 0.05 per cent of the goods' value for each day of delay in payment.
From the statement of action and from the explanations of penalty calculation procedure presented by the [Seller] at the arbitration hearing, it follows that the [Seller] calculated the penalty in correlation with dates on which the partial payments for the goods were performed by the [Buyer] and in particular: for the period from 31 January to 14 February, 2003, for the period from 31 January to 17 March, 2003 and for the period from 31 January to 2 April, 2003. The [Seller] capitalized the penalty as of 2 April 2003.
The Tribunal considers it impossible to agree with the calculations of the [Seller] on the following grounds.
First, it follows from clause 8.1 of the contract that the goods shall be paid for by the [Buyer] within seven bank days after signing the bill of lading upon presenting the invoice. As was explained by the [Seller], a mate's receipt was composed at [Buyer]'s request instead of the bill of lading. According to clause 8.1 of the contract, seven bank days shall be counted starting from the date on which the mate's receipt was composed, that is from 22 January 2003. Hence, the seven-day term granted to the [Buyer] for the payment of goods expires on 31 January 2003 and recovery of the penalty is to be executed from 1 February and not from 31 January 2003 as the [Seller] alleges.
Second, the [Seller] incorrectly determined the periods of the delay of the payments for the goods. While calculating these periods, it is necessary to take into account that the date of the beginning of the delay period shall not be the common date, i.e., 1 February 2003, but a new date for each of those three periods, namely: 1 February 2003 for the first period, 14 February 2003 for the second period and 17 March 2003 for the third period. Otherwise, the penalty would be charged several times for the same period of delay which is not admitted by the law. Thus, the following periods of delay should be taken into consideration: first period from 1 to 13 February 2003, i.e., thirteen days; second period from 14 February to 16 March 2003, i.e., thirty-one days; third period from 17 March to 2 April 2003, i.e. seventeen days.
Taking the above into account as well as the fact that the outstanding price of the goods has not been paid by the [Buyer] to the [Seller] to the present moment, the Tribunal, based on clause 8.2 of the contract and arts. 330, 331 of the Russian Civil Code, ruled that [Seller]'s claims to recover the penalty from the [Buyer] is well-founded and is to be granted in the specified amount subject to the corrections mentioned above. In all other respects, this claim is not to be granted.
Having considered [Seller]'s claim to recover from the [Buyer] the amount of the arbitration fee paid by the [Seller], the Tribunal, in accordance with section 6(2) of the Regulations on Arbitration Expenses and Fees (Supplement to the Rules of Tribunal), granted the claim partly in proportion to the amount of the satisfied claims.
Having considered the claim of the [Seller] to recover from the [Buyer] expenses incurred by the [Seller] in connection with arbitration proceedings, the Tribunal found that the [Seller] implied transport expenses and expenses related to staying at a Moscow hotel incurred by the [Seller]'s representatives. In support of these expenses, the following documents were submitted by the [Seller] at the session of the Tribunal on the 18 December 2003: business trip certificate, bills for the hotel accommodation and air tickets.
Taking into account that the [Seller] incurred the indicated expenses in connection with participation of its representatives in the arbitration proceedings, the Tribunal, based on section 9 of the Regulations on Arbitration Expenses and Fees, ruled [Seller]'s claim to recover these expenses from the [Buyer].
* 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] and Respondent of Uruguay is referred to as [Buyer].

References: art. 1211
 art. 35
 art. 9
 art. 7
 art. 1
 art. 7
 art. 1211
 art. 4
 art. 35