Source: http://cisgw3.law.pace.edu/cases/020322r1.html
Timestamp: 2017-04-26 00:18:22
Document Index: 573876228

Matched Legal Cases: ['Art. 15', 'Art. 7', 'Art. 90', 'Art. 166', 'Art. 166', 'Art. 165', 'Art. 395', 'Art. 74', 'Art. 395', 'Art. 166', 'Art. 165', 'Art. 7', 'Art. 16', 'Art. 15', 'Art. 7', 'Art. 90', 'Art. 166', 'Art. 165', 'Art. 166', 'Art.\n165', 'Art. 395', 'Art. 15', 'Art. 7', 'Art. 74']

[Cite as: http://cisgw3.law.pace.edu/cases/020322r1.html] Primary source(s) of information for case presentation: Case text
20020322 (22 March 2002) 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: 225/2000 CASE NAME: Unavailable CASE HISTORY: Unavailable
SELLER'S COUNTRY: Russian Federation (claimant) BUYER'S COUNTRY: Peoples� Republic of China (respondent) GOODS INVOLVED: Goods
APPLICATION OF CISG: Yes [Article 1(1)(a)] APPLICABLE CISG PROVISIONS AND ISSUES Key CISG provisions at issue: Articles 74 ; 90 [Also cited: Articles 7(2) ; 53 ; 62 ] Classification of issues using UNCITRAL classification code
Descriptors: Damages ; Foreseeability of damages ; Other conventions Go to Case Table of Contents Editorial remarks
CITATIONS TO TEXT OF DECISION Original language (Russian): Rozenberg, Praktika of Mejdunarodnogo Commercheskogo Arbitrajnogo Syda: Haychno-Practicheskiy Commentariy [Practice of the International Commercial Arbitration Court: Scientific - Practical Comments] Moscow (2001-2002) No. 46 [277-282] Translation (English): Text presented below
Translation edited by Yelena Kalika [***] 1. � SUMMARY OF RULING
1.1� Transformation of a barter contract into
an international sales contract according to the parties� agreement does not
affect the validity of an arbitration clause contained in the barter contract.
1.2 Since the parties� contract did not contain a choice of law provision, the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry [hereinafter Tribunal], ruled that pursuant to Art. 15(4) of the Russian
Federation Constitution [hereinafter RF Constitution] and Art. 7(2) of the
Russian Federation Civil Code [hereinafter Civil Code] the parties�
relations should be governed both by the Vienna Convention 1980 [hereinafter CISG] (as the parties to the contract are from Contracting States � the Peoples Republic of China and the Russian Federation) and by the General Principles of Deliveries
between the Soviet Union and the Peoples� Republic of China [hereinafter
Principles of Deliveries]. In this connection, by virtue of Art. 90 CISG, the
rules of the Principles of Deliveries prevail over the provisions of the
CISG. On the basis of Art. 166 of the Principles of Civil Law 1991, the law of the Russian Federation was applied as the
subsidiary law, as the law of the country of the seller.
The Tribunal pointed out that since Art. 166 of the Principles of Civil Law 1991 contains a special rule regarding obligations under international
sales contracts, thus the general rule of Art. 165(2) of the Principles of Civil Law 1991 � which provides for a rule of conflict of laws based on the criterion of the
place of conclusion of a contract � was not applicable.
1.3� Taking into consideration that the Principles of Deliveries contain provisions on payment of interest for delay of performance of financial obligations, these provisions -- and not Art. 395 Civil Code -- govern the relations of the parties. Accordingly, the
amount of interest to be recovered is limited to the ceiling provided for in
the Principles of Deliveries.
1.4� Calculation of interest could be made
only from the date when the delay of performance of a monetary obligation began
under the international sales contract into which the barter contract was
transformed. The interest cannot be calculated for the period of performance of
obligations under the barter contract since those obligations were not monetary by their nature.
1.5� On the basis of Art. 74 CISG, the
Tribunal allowed the [Seller] to recover from the [Buyer] losses suffered by
[Seller] due to the breach of contract by [Buyer] in connection with a penalty
imposed on the [Seller] by the Russian Federation Customs authorities for
non-receipt of hard currency proceeds within the period of time specified in the law.
brought by Claimant [Seller], a Russian company, against Respondent [Buyer], a
Chinese company, in connection with non-performance of obligations under a
contract concluded between the parties on 18 September 1998. Under this
contract, which was a barter contract, the [Seller] delivered to [Buyer] the
goods specified in the contract, but the [Buyer] did not ship the goods that
should be delivered in exchange within thirty days after delivery by [Seller]
of his lots of goods. The [Buyer] referred to difficulties that arose in
connection with obtaining a license. On 16 December 1998, the parties therefore
signed an Addendum to the contract which provided that [Buyer] would make a
monetary payment for the goods delivered to him by [Seller]. The [Buyer] only partially performed his obligation. By the decision of Russian Customs
authorities of 29 December 1999, a penalty was imposed upon [Seller] for his violation of the rules governing deposit of hard currency proceeds received for the goods exported. The proceeds were to be deposited to [Seller]'s transit account.
[Seller] included: recovery of the sum of the principal debt and interest for
delay of performance of monetary obligation based on Art. 395 Civil
Code; compensation of the sum of the penalty [Seller] paid pursuant to the decision of
the Customs authorities; and compensation of arbitration fees and expenses.
Since the contract
did not set forth the applicable law, the [Seller] grounded application of rules
of Russian law referring to both Art. 166(1)(2) of the Principles of Civil Law 1991 (as the law of
country of the seller under a contract transformed into a sales contract) and to
Art. 165(2) of the Principles of Civil Law 1991 (considering that the contract was signed in the Russian Federation, i.e., the place of [Seller]).
The [Buyer] did not
appear before the Tribunal, nor did he submit his explanations to the action.
The competence of the Tribunal to arbitrate
the present dispute follows from Clause 11 of the contract which provides that
all disputes and misunderstandings that might arise from or in connection with
the contract should be arbitrated by the Tribunal in accordance with the Rules
of Tribunal. The Tribunal ascertained that the parties had concluded an arbitration
agreement that met the requirements as to form prescribed in Art. 7(2) of the Russian
Federation Law on International Commercial Arbitration.
On the basis of Art. 16(1) of the said Law, the Tribunal
interprets the arbitration clause, which is a part of the contract, as an
agreement independent from the other terms of the contract. Therefore,
even if the contract -- which at the beginning commenced as a barter contract and was later
transformed into an international sales (delivery) contract signed by the
parties on 16 December 1999 Addendum No. 1 -- had been deemed void, the
arbitration agreement of the parties would have remained in force. Thus, the
arbitration clause is applicable to the parties� contract transformed by their
mutual agreement into a contract of another type.
Having reviewed the issue of the
possibility to arbitrate the case on the merits in the absence of
representatives of the parties, the Tribunal stated that the Respondent
[Buyer], was duly notified of the time and place of the hearing, which is
evidenced by a receipt issued by the post office. Since the [Buyer] submitted neither a
written motion to adjourn the hearings for a good cause nor objected to the claims of [Seller], the Tribunal found that according to
para. 28(2) of the Rules of Tribunal, non-appearance of the [Buyer] before the
Tribunal does not preclude arbitration of the case and rendering of the
decision. In addition, the Tribunal -- having stated that [Seller] based on para. 28(3)
of the Rules of Tribunal asked the Tribunal to try the case in the absence of his
representative -- granted this motion, finding it possible to arbitrate the
dispute on the merits in the absence of the Claimant [Seller]�s representative.
to the law applicable to the relations of parties to this dispute, the Tribunal
followed the provisions of Art. 15(4) of the RF Constitution and Art. 7 Civil
Code, according to which international treaties of the Russian Federation are a
component part of the Russian Federation legal system, and if they provide
for different rules than are provided for by civil law, then the rules of the
international treaties apply.
Tribunal ascertained that the parties failed to choose the applicable law in their
contract. Since, having signed Addendum No. 1 to their contract, the parties
transformed it into an international sales (delivery) contract, and, since as of the
date of such transformation of the contract � 16 December 1999 � the CISG had been in force both in the country of [Seller], the Russian Federation, and the
country of [Buyer], the Peoples� Republic of China, the provisions of this
Convention should be applied. According to Art. 90 CISG, it does not prevail
over any already existing international treaties or treaties that might be
concluded and which contain provisions concerning the matters governed by the
CISG. Since there is such a treaty between the Russian Federation and the
Peoples� Republic of China � the Principles of Deliveries � the Principles of
Deliveries should be applied to the contractual relations of the parties.
7(2) CISG provides, inter alia, that questions concerning matters governed by
this Convention are to be settled in conformity with the law applicable by
virtue of the rules of private international law. According to Art. 166(1)(1)
of the Principles of Civil Law 1991, Russian law should be applied to issues not governed by
the Principles of Deliveries and the CISG. The Tribunal cannot accept the
additional arguments of [Seller] that Russian law should be applied as the law of the place of conclusion of the contract by virtue of Art. 165(2) of the
Principles of Civil Law 1991. Art. 166 of the Principles of Civil Law 1991 sets forth a special rule regarding
obligations under international sales contracts such as the ones in dispute here; thus the general rule of Art.
165(2) of the Principles of Civil Law 1991 is not applicable to the present dispute.
to the merits of [Seller]�s claims, the Tribunal ascertained that the case materials evidence the sum of [Buyer]�s principal debt claimed by [Seller]. The amount of debt is not disputed by [Buyer]. In accordance with Arts. 53 and 62 CISG, this sum should be recovered from [Buyer].
to the [Seller]�s claim to recover from [Buyer] interest for use of money, the
Tribunal concluded that the calculation performed according to the provisions
of Art. 395 Civil Code could not be taken into consideration in the present case
since as it was stated above, by virtue of Art. 15(4) of the RF Constitution
and Art. 7(2)(2) Civil Code, international treaty rules prevailed over the rules of national civil law. Para. 55(1) of the Principles of Deliveries
provides for a penalty in the amount of 6 percent per annum from the delayed sum
in the event of a delay of performance of a monetary obligation. The monetary obligation arose between the parties only at the moment of signing Addendum No. 1 to the contract, i.e., on 16 December 1999. This Addendum obligated
[Buyer] to make "payment in hard currency" to the account of [Seller].
Therefore, the [Buyer]�s delay of payment of the full cost of goods delivered by [Seller] is eleven days (from 17 to 28 December
1999, when the [Buyer] made a partial payment to the account of [Seller]), and
269 days of the delay of payment of the rest of the cost of the goods (from 29
December 1999 to 25 October 2000). The Tribunal found reasonable and granted
the aggregate sum of interest calculated by [Seller] at the rate of 6 percent per
annum as provided for in the Principles of Deliveries.
by [Buyer] of his obligation under the barter contract and later under the
international sales contract led to the Russian Customs authorities to impose on
[Seller] a penalty due to non-receipt of hard currency proceeds, as provided for
by the customs law of Russia. The imposition of such penalty is evidenced by the decision of the Customs
authorities. Taking into consideration that payments between the parties were to be made in US Dollars, the [Seller] calculated the sum of the penalty in dollars at
the [banking] rate of ___ Russian Rubles per US Dollar. The [Buyer] did not
dispute the amount of this claim of the [Seller]. The [Seller] is entitled to
claim compensation of losses caused him due to actions of the other party
based on Art. 74 CISG, which states that damages for breach of contract by
one party consist of a sum equal to the loss, suffered by the other party as a
consequence of the breach of contract. The sum of the penalty imposed on
[Seller] by the Customs authorities of the Russian Federation constitutes such
a loss. On this basis, the Tribunal granted the claims of [Seller] to recover
from [Buyer] the sum paid by [Seller] as a penalty.
Pursuant to para. 6(2) of the Rules of Tribunal on Arbitration Fees and
Expenses, the arbitration fees are placed on [Buyer] pro rata to the amount of
granted claims.
* This is a translation of data on Proceeding 225/2000 of 22 March 2002
of the Tribunal of International Commercial Arbitration at the Russian
Federation Chamber of Commerce and Industry, reported in: Rozenberg ed., Arb.
Praktika (2001-2002), No. 46 [277-282]. 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 Peoples Republic of China is
*** Yelena Kalika, JD Pace University School of Law, has studied at the Moscow State Law Academy, interned with a Moscow law firm, and is an Associate at the Pace Institute of International Commercial Law. Go to Case Table of Contents Pace Law School
Institute of International Commercial Law - Last updated December 10, 2004