Source: http://www.cisg.law.pace.edu/cisg/wais/db/cases2/040412r1.html
Timestamp: 2019-04-19 08:35:51+00:00

Document:
APPLICATION OF CISG: The contract states that "all disputes and disagreements are to be settled on the basis of actual legislation of the Russian Federation". Because the reference is to Russian legislation, as opposed to, for example, Russian law, the Tribunal construed this as an exclusion of the Convention.
1.1 Indication in the sale and purchase contract that disputes arising from it are settled on the basis of Russian legislation is considered to imply existence of the agreement on application of Russian legislation (not Russian law), which excludes application of the Vienna Convention of 1980 to the relations of the parties. The conclusion of the Tribunal, as it is stated in the judgment, is based on the literal interpretation of this agreement of the parties in compliance with art. 431 of the Russian Civil Code.
1.2 Non-fulfillment of obligations to the [Seller] by a third party entails responsibility of the [Seller] to the [Buyer] by virtue of art. 403 of Russian Civil Code. Consequently, the sum of a prepayment as well as the contract penalty is collected from the [Seller].
The claim was filed by a Kazakh company against a Russian firm in connection with non-delivery of goods for which a one hundred per cent prepayment had been executed in accordance with conditions of an international sale and purchase contract concluded by the parties on 23 April 2002. In view of non-delivery of the goods over a long-term period, the [Buyer] in compliance with contract conditions has dissolved the contract. [Buyer]'s claims included: return of the prepayment sum and payment of the contract penalty for the delivery delay.
[Seller] has not presented explanations on the claims and his representatives have not participated in the hearings of the Tribunal. In the course of pre-arbitration correspondence, the [Seller] has presented apologies to the [Buyer] for failure to deliver the goods, explaining as the reason non-fulfillment of contract obligations to the [Seller] by a third party.
Para. 6.2 of the contract provides that disputes and disagreements not settled by negotiations are to be adjudicated at International Commercial Arbitral Tribunal at Chamber of Commerce and Industry of Russian Federation (hereinafter referred to as Tribunal).
The present dispute falls within subject and object competence of the Tribunal, as foreseen in para. 1(2) of the Rules of the Tribunal.
Based on the above and following art. 16 of Law of Russian Federation "On International Commercial Arbitration" and paras 1(5) and 1(3) of the Rules of the Tribunal, the latter adjudges itself competent to consider the present dispute.
In para. 6.1 of the contract parties have stated that "all disputes and disagreements are to be settled on the basis of actual legislation of the Russian Federation". Since Russia is party to the Vienna Convention of 1980, in the present case basically the application of the provisions of this international treaty as part of Russian law system would be possible.
However neither on ground of materials of the case nor in the course of the hearings in the absence of [Seller]'s representative could the Tribunal clarify the true will of the parties who included above mentioned condition in their contract.
Under such circumstances Tribunal in accordance with art. 431 of the Russian Civil Code stated, basing itself on the literal sense of the clause used by the parties, that this clause implies existence of the agreement on application of specifically Russian legislation (not Russian law) and excludes application of the Vienna Convention by virtue of its art. 6.
Considering the absence of the [Seller] at the hearings of the Tribunal, the latter has found that claim papers and notification about hearings of the case on 10 March 2004 were sent to the [Seller] by registered letters to the [Seller]'s last known location, however, they were returned by the post service with the note: "Undeliverable". A search for [Seller]'s new address conducted by the [Buyer] by means of reasonable inquiries, in particular addressing the Ministry of Taxation Inspection Board of Russian Federation, was not successful.
Taking the above into account and following art. 3(1) of the Law of Russian Federation "On International Commercial Arbitration", the Tribunal concluded that written messages sent by the Tribunal, including notification about the hearings of the case, are deemed to have been received by the [Seller].
Since by virtue of para. 28(2) of the Rules of the Tribunal non-appearance of the party properly notified about date and place of the hearings does not impede the adjudication of the case and passing of the judgment on the case, the Tribunal considers that the case can be heard in [Seller]'s absence.
Considering the claims on the merits, the Tribunal stated that dispute between parties emerged due to the non-delivery of the goods by the [Seller], for which the [Buyer] has transferred a one hundred per cent prepayment.
The [Buyer] has sought pre-arbitration settlement of the dispute (letters of 17 September 2002 and of 10 October 2002), however it did not succeed. The [Seller] has justified non-delivery of the goods by the violation of contractual obligations to [Seller] by third parties and promised to return the money funds [Buyer] had paid (letter of 19 September 2002).
By the complaint of 23 September 2002, the [Buyer] has notified the [Seller] about dissolution of the contract on basis of paras 7.1 and 7.2 of the contract in view of the fundamental breach of contract conditions by the [Seller]. Since the complaint was delivered to the [Seller] on 10 October 2002, according to para. 7.2, the contract is considered dissolved as of that date.
Pursuant to art. 403 of the Russian Civil Code, responsibility for the actions of third parties is conferred on the debtor, in present case - [Seller]. By virtue of para. 5.4 of the contract and art. 453(5) of the Russian Civil Code [Seller] is obliged to return the sum of prepayment to the [Buyer].
[Buyer]'s claim on payment of the penalty calculated for the period from 18 August till 25 November 2002 from the cost of the non-delivered goods is based on para. 5(2) of the contract and art. 330 of the Russian Civil Code and is not contested by the [Seller]. The Tribunal considers that [Seller] has to pay to the [Buyer] penalty in the claimed amount.
According to para. 6(1) of the Regulations on Arbitration Expenses and Fees, which is Supplement to the Rules of the Tribunal, arbitration fee paid by the [Buyer] is to be reimbursed by the [Seller].
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Kazakhstan is referred to as [Buyer] and Respondent of the Russian Federation is referred to as [Seller].

References: art. 431
 art. 403
 art. 16
 art. 431
 art. 6
 art. 3
 art. 403
 art. 453
 art. 330