- Arbitral Award
- International Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation
SALES CONTRACT - BETWEEN AN UZBEK COMPANY AND A RUSSIAN COMPANY - RELYING ON ARTICLE 28(3) OF THE LAW OF THE RUSSIAN FEDERATION ON INTERNATIONAL COMMERCIAL ARBITRATION AND ON ARTICLE 26(1) OF THE ARBITRATION RULES THE SOLE ARBITRATOR DECIDED TO BASE HIS DECISION ON THE CISG, THE CIVIL CODE OF THE RUSSIAN FEDERATION AND THE UNIDROIT PRINCIPLES
ADVANCE PAYMENT OF THE PRICE - FUNDAMENTAL BREACH OF CONTRACT BY SELLER - BUYER ENTITLED TO REQUEST RETURN OF ADVANCE PAYMENT - REFERENCE TO ARTICLE 466 OF CIVIL CODE OF RUSSIAN FEDERATION AND TO ARTICLE 7.2.1 OF UNIDROIT PRINCIPLES
"A claimant, an Uzbekistani company, filed a lawsuit against a defendant, a Russian company, for collection of advance payment for goods, which were not delivered.
The court’s reasoning is explained below.
On the issue of the law applicable to the relations between the parties under the contract, the ICAC found that according to Article 28 of the Law of the Russian Federation ‘On International Commercial Arbitration’ and paragraph 1 of article 26 of the ICAC Rules, the dispute shall be resolved in accordance with such rules of law as the parties have chosen as applicable to the merits of the dispute.
Since the Russian Federation and the Republic of Uzbekistan are parties to the CISG, the ICAC considered the provisions of the CISG to be applicable to the relations between the parties.
According to paragraph 2 of Article 7 of the CISG questions concerning matters governed by this convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the applicable law. The ICAC ruled that provision of the Russian civil law, in particular, the Civil Code of the Russian Federation is to be applicable to the relations between the parties as a subsidiary statute.
Relying on paragraph 3 of Article 28 of the Law of the Russian Federation ‘On International Commercial Arbitration’ and paragraph 1 of Article 26 of the arbitration rules, the sole arbitrator considered it expedient to apply the UNIDROIT Principles when considering a dispute.
Based on the foregoing, the sole arbitrator decided to follow the CISG, the Civil Code of the Russian Federation and the UNIDROIT Principles when considering the dispute.
As follows from the materials of the case, the parties concluded the contract, according to which the defendant undertook an obligation to transfer the products into the ownership of the claimant in the agreed assortment, and the claimant undertook an obligation to pay for the products on an advance basis.
Before proceeding to the merits of the case as submitted by the claimant, the sole arbitrator found it necessary to determine the legal nature of the contract and concluded that it was a contract for the supply of goods subject to the provisions of paragraph 3 of chapter 30 of Part Two of the Civil Code of the Russian Federation; and, in the unregulated parts, general provisions applicable to contract for the sale of goods as such.
Paragraph 1 of Articles 486, 487 and 516 of the Civil Code of the Russian Federation grant the buyer with the right to pre-pay the goods in the manner as provided for in the contract.
In accordance with Article 466 of the Civil Code of the Russian Federation the buyer has the right to demand the return of the advance payment, if the seller in breach of the terms of the contract provides less quantity of goods than it was paid for. Article 7.2.1 of the UNIDROIT Principles also reflects a widely recognised rule that it is always possible to demand due amounts under a contractual obligation and, if this demand is not met, to recourse to available remedies in the court.
The sole arbitrator qualified the defendant’s actions as a material breach of the contract in the sense of Article 25 of the CISG, since the claimant was largely deprived of what he was entitled to rely on the contract, that is, he received less goods than he paid for.
Since the fact of breach of the contract by the defendant is confirmed by the case materials, the sole arbitrator concluded that the defendant’s failure to fulfill the obligation to supply the products was proved by the claimant, and recognised the claimant’s claim is reasonable and subject to satisfaction in full."
(cf. S. Petrachkov / A. Bekker in "Perspectives in Practice of the UNIDROIT Principles 2016", IBA Publication 2019, p. 265-266)