Source: http://cisgw3.law.pace.edu/cases/981230r1.html
Timestamp: 2017-04-27 10:56:28
Document Index: 86090073

Matched Legal Cases: ['Art. 8', 'Art. 15', 'Art. 28', 'Art. 15', 'Art. 1', 'Art. 7', 'Art. 8', 'Art. 3', 'Art. 3', 'Art. 44', 'Art. 6', 'Art. 2757', 'Art. 15', 'Art. 78', 'Art.\n42', 'Art. 78', 'Art.196', 'Art. 42', 'Art. 200', 'Art. 196', 'Art. 199', 'Art. 205', 'Art. 8', 'Art. 67', 'Art. 66']

Russia 30 December 1998 Arbitration proceeding 62/1998 [translation available]
Russia 30 December 1998 Arbitration proceeding 62/1998 [translation available] [Cite as: http://cisgw3.law.pace.edu/cases/981230r1.html] Primary source(s) of information for case presentation: Case text
DATE OF DECISION: 19981230 (30 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: 62/1998
APPLICABLE CISG PROVISIONS AND ISSUES Key CISG provisions at issue: Articles 4 ; 8 ; 66 [Also cited: Articles 7(2) ; 67 ] Classification of issues using UNCITRAL classification code
66B [Loss or damage after risk passed]
Descriptors: Intent ; Incoterms ; Statute of limitations ; Passage of risk Go to Case Table of Contents Editorial remarks
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. 70 [250-256]
CITATIONS TO COMMENTS ON DECISION English: Djakhongir Saidov, 7 Vindobona Journal of International Commercial Law and Arbitration (1/2003) 1-62 at pp. 13, 39
Russian Federation arbitration proceeding 62/1998 of 30 December 1998
1.1 Although the arbitration clause is insufficiently clear, the Tribunal of International Commercial
Arbitration at the Russian Federation Chamber of Commerce and Industry [hereinafter Tribunal] has come to the conclusion that the parties intended to resolve their disputes
in this arbitral tribunal and, accordingly, the Tribunal's competence includes settlement of the given
1.2 In order to resolve the dispute, [buyer] offered and [seller] accepted the application of Russian
substantive law and the Vienna Convention 1980 [hereinafter CISG], which by virtue of the Russian
Federation Constitution is a component of [the Russian] legal system. 1.3 The [United Nations] Convention on the Limitation Period in the International Sale of Goods
(New York, 1974) [hereinafter Limitations Convention 1974] is inapplicable to the settlement of the
given dispute, as neither India nor Russia are Contracting States to it. Accordingly, it cannot be
applied either as an international treaty between these States, or as an international treaty of Russia,
of whose legal system [the Limitations Convention] would be a component.
1.4 Generally, the three-year period of limitation provided in Russian civil law, rather than the
four-year period of limitation stipulated by the [Limitations] Convention 1974, is applicable to
disputes arising from contracts for international sale of goods.
1.5 Defining the initial moment of the limitation period, it is necessary to ascertain the exact date
of occurrence of the right to bring an action, with allowance for the date when the claimant has
learned or should have learned of the violation of her right.
1.6 The party must prove those circumstances to which it refers as the basis of its claims. 1.7 While the contract did not contain any instructions as to the basic terms of delivery of goods
by [seller] to [buyer], the Tribunal defined [the terms of delivery] by comparative analysis of the terms
of contract and the conduct of the parties during performance of the contract pursuant to Art. 8 CISG
and taking into account different approaches acknowledged in the practice of international trade (in
particular, Incoterms 1990). 1.8 By not taking advantage of the right to bring claims against the carrier and insurer, a buyer
who has not proved that the loss of goods was caused by seller's acts or omissions does not acquire
the right to bring a claim against seller. 2. FACTS AND PLEADINGS The action was brought by an Indian company [buyer] against a Russian company [seller] in
connection with non-receipt of two consignments of goods that were to be delivered under the
contract concluded between the parties in July 1994.
Payments between the parties were made by a letter of credit. Indicated consignments were paid by
letters of credit on the basis of bills of lading presented by [seller] to an Indian bank. In [buyer]'s
opinion, these documents were forged by [seller] which led to the inclusion of overestimated price
for the goods in the [payment] account.
[Buyer] presented proof of non-receipt of appropriate consignments from the territory of Russia.
[Buyer] offered in writing to apply Russian civil law to resolve the given dispute. [Seller] agreed to
the proposal. [Seller] challenged the Tribunal's competence to arbitrate the given dispute by referring to the
vagueness of the arbitration clause in the contract. [Buyer] objected to this argument by declaring that
such contracts between Russian and Indian companies in practice have never stipulated any arbitration
other than the Tribunal. [Buyer] referred to the Agreement between the Chambers of Commerce of
Russia and India, which recommended the arbitration of disputable commercial questions in Russia
only by this arbitral tribunal. During consideration of the merits of the dispute, [seller] referred to the expiration of the limitation
period established by Russian civil law. [Buyer] challenged this statement of defense, arguing that the
four-year limitation period established by the [Limitations] Convention 1974, incorporated in the legal
system of Russia by virtue of Art. 15(4) of the Russian Federation Constitution, should be applied
to resolve the dispute. The parties repeatedly interpreted terms of the contract and rights and obligations following from
[these terms]. [Buyer] referring to the loss of bills of lading, on the basis of which the payment was
made by the bank, did not present [these documents] to the Tribunal. The bank confirmation that
these documents were turned over to the representatives of [buyer] was presented to the Tribunal.
[Seller] challenged the grounds of [buyer]'s claims.
Though the arbitration clause contained in the contract concluded between the parties on 18 July
1994 is insufficiently clear, the Tribunal came to the conclusion that the parties intended the
resolution of disputes by this Tribunal.
Being guided by Arts. 7 and 16 of the Russian Federation Law On International Commercial
Arbitration and � 1 of the Rules of Tribunal, the Tribunal recognized its competence to arbitrate the
given dispute. 3.2 [Applicable law]
There were no provisions about applicable law in the contract. In the hearing session of the Tribunal
held on 3 December 1998, the representatives of [seller] expressed their consent to [buyer]'s offer,
annexed to the statement of action, about application of substantive rules of Russian law to resolve
the dispute, directed to the Tribunal on 29 May 1998. The parties confirmed that they reached an
agreement on application of Russian substantive law to resolve the dispute, which was reflected in
the record of the hearing session of the Tribunal.
Taking into account the indicated agreement of the parties and referring to Art. 28(1) of the Russian
Federation Law On International Commercial Arbitration and � 13(1) of the Rules of Tribunal, the
Tribunal recognized Russian civil law as applicable to resolve this dispute. As the Russian Federation,
since 1 September 1991, is a Contracting State to the CISG, the Tribunal recognized that relations
between the parties were regulated by the rules of CISG which had priority over the rules of Russian
domestic civil law by virtue of Art. 15(4) of the Russian Federation Constitution. Attention was paid
to the provision of Art. 1(1)(b) CISG, which makes the CISG applicable to contracts between parties
whose commercial companies are in different States, when one or both of the parties are not
Contracting States to the CISG but the rules of private international law lead to the application of the
law of a Contracting State. On the basis of Art. 7(2) CISG, relations between the parties are subject to subsidiary application of
Russian civil law on questions that are not expressly settled by the CISG and which cannot be
resolved according to the general principles of the CISG on which the CISG is based.
The Tribunal based its ruling on the directives of the appropriate decrees of the Supreme Council of
Russian Federation (of 14 July 1992 and 3 March 1993) and the Introductory Law to the First Part
of the Russian Federation Civil Code in order to define rules of Russian civil law which would be
supplementary applicable to resolve the dispute, taking into account that at the time of the conclusion
of the contract the Fundamentals of Civil Law 1991 were in force, but at the moment of arising of
the questions at issue the First Part of the Russian Federation Civil Code was in force. 3.3 [Limitation period]
Considering [seller]'s statement about expiration of the limitation period in relation to both claims
brought by [buyer], the Tribunal proceeded from the following: The [Limitations] Convention 1974, providing a four-year limitation period for claims arising out of
contracts for international sale of goods (Art. 8), is inapplicable to resolve the given dispute. Neither
Russia nor India are signatory parties to the [Limitations] Convention 1974, therefore it cannot be
applied either as an international agreement between these States (Art. 3(1)) or as the law of a
Contracting State referred to by virtue of the rules of private international law (Art. 3(1)(a) of the
[Limitations] Convention 1974 as amended by the Protocol of 11 April 1980 on amendment of the
[Limitations] Convention 1974). The text of the [Limitations] Convention adopted in 1974 was signed on behalf of the government
of USSR on 14 June 1974. However, it is necessary to ratify or join the Convention in order for it
to enter into force for each State (Art. 44 of the [Limitations] Convention 1974 and Protocol 1980),
in witness whereof relevant ratification instruments should be deposited with the Secretary-General
of the UN. Neither the USSR nor Russia ratified the [Limitations] Convention 1974 or the Amending
Protocol 1980. Thus, the Russian Federation has not expressed its consent to be bound by this
international treaty, which is a condition to recognize it as included in the legal system of Russian
Federation (Art. 6 of Federal Law On International Treaties of the Russian Federation in the Code
of Laws of Russian Federation 1995, No. 29, Art. 2757). Accordingly, the Tribunal cannot accept
[buyer]'s reference to Art. 15(4) of the Russian Federation Constitution. 3.3.1 [Seller]'s argument that [buyer]'s claims are extinguished by the one-year period of
limitation which was a general period of limitation at the time of the conclusion of the contract and
when the [buyer]'s right to claim arose, is unreasonable. For the following reasons: Firstly, the one-year general limitation period in the Civil Code of RSFSR of 1964 (Art. 78) was
established concerning only claims of State organizations, collective farms and other cooperatives and
public organizations. However, the general limitation period to bring a claim to protect violated rights
of persons is established as three years. This limitation period regulated relations with foreign
Secondly, since 3 August 1992, the Fundamentals of Civil Legislation (1991) were in force in the
territory of Russia pursuant to decrees of the Supreme Council of Russian Federation of 14 July 1992
and 3 March 1993. Article 42 of the Fundamentals of 1991 established a uniform general three-year
limitation period for the protection of violated rights. The rules of the Civil Code of RSFSR, non-conforming to those of Fundamentals of 1991, lost their force at the date indicated above. Paragraph
4 of the decree of the Supreme Council of Russian Federation of 3 March 1993, indicated that,
uniform for all citizens and legal entities, the general three-year limitation period established by Art.
42 of the Fundamentals of 1991 was applicable to the claims of legal entities if the one-year limitation
period stipulated by Art. 78 of Civil Code of RSFSR had not expired on 3 August 1992.
A general three-year limitation period is established in the Civil Code of Russian Federation as well
(Art.196). 3.3.2 According to Art. 42(3) of Fundamentals 1991, the period of limitation begins from the date
of occurrence of the right to claim. The right to claim arises at the time when a person has learned
or should have learned of the violation of his right. A similar rule is contained in Art. 200(1) of the
3.3.3 According to Article 5 of the Introductory Law to the First Part of the Russian Federation
Civil Code, the Civil Code is applicable to those rights and duties arising out of civil law relations
which will arise after its entry into force. Therefore, in order to establish applicable rules of Russian
law, it is necessary to fix the exact time at which the [buyer]'s right arose to bring a claim concerning
Documents issued by Vneshekonombank ("External Economic Bank") and presented by [buyer] at
the Tribunal evidence that the [buyer] was notified by Vneshekonombank about conditional payment
of the appropriate sums from the letter of credit opened on behalf of the [buyer] in the Reserve bank
of India in January - February 1995. Thus, [buyer] had learned that the payment was made to the
[seller] and accordingly acquired the right to bring a claim at the time when the First Part of the
Russian Federation Civil Code was in force. Taking into account this circumstance, the Tribunal
recognized the rules of the First Part of the Russian Federation Civil Code as applicable to the
disputable relations between the parties. 3.4 [Limitation period of buyer's claim regarding first consignment]
[Buyer] has learned of the conditional bank payment for the first consignment on 13 January 1995,
and therefore a claim concerning this request presented on 20 February 1998 is brought after the
expiration of the statutory three-year limitation period (Art. 196 of the Russian Federation Civil
Code). On the basis of Art. 199(2) of the Russian Federation Civil Code, [buyer] is denied satisfaction
of this claim. The Tribunal stresses that by virtue of Art. 205 of the Russian Federation Civil Code,
even in the presence of valid reasons for the [buyer] to miss the limitation period, this claim as a claim
of a legal entity could not be satisfied.
3.5 [Limitation period of buyer's claim regarding second consignment]
[Buyer]'s claim concerning the second consignment is brought within the statutory period of
limitation. [Buyer] could not learn of the conditional bank payment to the [seller] for the cost of this
consignment prior to 24 February 1995, since in its notice to the [buyer] Vneshekonombank marked
just this date. 4. CONCLUSIONS
The Tribunal has come to the conclusion that [buyer] has not proved the reasonableness of its claims
against the [seller] and should be denied satisfaction of the claims in essence for the following
reasons: 4.1 [Evidentiary issues]
According to the Rules of the Tribunal (� 34), parties should prove those circumstances to which they
refer as the basis of their claims. [Buyer] did not present to the Tribunal any proofs that the [seller] did not ship the goods concerning
which [buyer] brought a claim. Moreover, the Tribunal was deprived of the possibility to examine the
correctness of the transportation and other documents (including those confirming insurance of the
goods) transmitted by [seller] to [buyer] through the bank, because the [buyer] did not present these
documents, though there was a letter in the case materials from Vneshekonombank to [buyer]
confirming that these documents were given to an employee of the [buyer]. At the same time, [seller]
presented evidences to the Tribunal that he transferred a complete set of documents stipulated by the
letter of credit to the Reserve bank of India.
4.2 [Contractual terms of delivery]
The contract does not contain direct instructions as to the basic terms of delivery of goods by [seller]
to [buyer]. The Tribunal, in determining the intent of the parties, analyzed comparatively the terms of the
contract and the conduct of the parties during its performance pursuant to Art. 8 CISG. As a result,
the Tribunal concluded that the sale of goods was carried out pursuant to basic conditions of CIF or
CIP, terms widely used in international trade. Firstly, the seller paid for the transportation of the
goods to destination indicated by the buyer, and a contract of transportation of the goods was
concluded between the seller and the carrier. Secondly, the seller was obliged to insure the goods.
Thirdly, the date of the bill of lading, i.e., date of acceptance of the goods by carrier for delivery to
the buyer, was recognized as a date of performance of the obligation. Fourthly, the [seller]'s
obligation to deliver goods to buyer, concerning amount and quality of the goods, was considered
carried out in accordance with the documents given in the place of origin.
According to approaches generally accepted in practice of international trade (see, in particular,
Incoterms 1990), terms CIF or CIP stipulate that, when according to the terms and conditions of
contract the goods are subject to carriage, the risk of damage or loss of goods passes from seller to
buyer from the moment of delivery of goods by seller to the carrier for transmission to the buyer.
According to Art. 67 CISG, it is the obligation of the seller to clearly identify the goods for the
purposes of a given contract, in particular by means of shipping documents. As it was indicated
above, this requirement was met by the seller.
4.3 [Passing of risk]
According to Art. 66 CISG, loss of or damage to goods after the risk has passed to the buyer does
not discharge [buyer] from the obligation to pay the price, unless the loss or damage is due to an act
or omission of the seller. As stated above, [buyer] did not present evidences that actions or omissions of the seller caused loss
of goods. [Buyer] also did not prove that the goods were returned by carrier to the seller or were re-dispatched to other persons on the instructions of the seller.
4.4 [Buyer's alternate course of action]
[Buyer], in the absence of consignment of the goods, had the right to bring a claim not against the
seller but against the carrier while [buyer] possessed first copies of bills of lading. On the basis of insurance policies, [buyer] had the right to bring a claim against the insurance
company for loss of goods in transportation. However representatives of the [buyer] did not mention
that they presented any demands to the carrier and/or to the insurer and that these demands were
denied satisfaction by reason of responsibility of seller.
* This is a translation of data on the award in Proceeding 62/1998, dated 30 December 1998, of the
and Industry, reported in: Rozenberg ed. Arb. Praktika 1998, No. 70 [250-256]. All translations should be verified by cross-checking against the original text. For purposes of this
translation, Claimant of India is referred to as [buyer]; Respondent of the Russian Federation is
referred to as [seller]. ** Antonida S. Alibekova, teacher of Law at Mari State University (Russia), studied at the School of Law of Mari State University, School of Law of Manchester Metropolitan University (Great Britain), Legal Studies Department of the Central European University (Budapest, Hungary), School of Law of Wayne State University (Detroit, Michigan, the USA). Winner of Russia's National Round of Telders Moot Court Competition (member of the winning team) (2000), Russia's National Round of Jessup Moot Court Competition (2002). Finalist of the International W.C. Vis Moot Court Competition, Vienna, Austria (2002), semi-finalist of the Central and Eastern European Moot Court Competition, Ljubljana, Slovenia (2002). Participant in International Telders Moot Court Competition, Hague, Netherlands (2000), International F. Jessup Moot Court Competition, Washington, USA (2002). The second-iteration redaction of this translation was by Dr. John