- Russian Federation
- International Court of Arbitration of the Chamber of Industry and Commerce of the Russian Federation
PENALTY FOR FAILURE TO PERFORM CONTRACTUAL OBLIGATIONS - NOT DUE IF FAILURE EXCUSED BY AN EXEMPTING EVENT ACCORDING TO ART. 79 CISG
INTEREST FOR DELAYED PAYMENT (ART. 78 CISG) - DUE EVEN IF DELAY IMPUTABLE TO AN EXEMPTING EVENT - REFERENCE TO ART. 7.4.9 UNIDROIT PRINCIPLES "REFLECTING UNDERSTANDING GENERALLY ACCEPTED IN INTERNATONAL COMMERCIAL PRACTICE"
A Russian company ("the buyer") entered into a contract with a Canadian company ("the seller") for the delivery of certain goods. While the buyer duly performed its obligation to pay the whole price in advance, the seller delivered only part of the goods and some of the goods delivered were defective. When the buyer requested the return of part of the price as well as the payment of the stipulated penalty for partial delivery and interest for the delayed return of part of the price, the buyer objected that its failure to perform the contract properly was due to an exempting event according to Art. 79 CISG.
The Arbitral Tribunal, while accepting the buyer’s objection with respect to the payment of the penalty, found that payment of interest for the delayed return of part of the price was due irrespective of whether or not the delay was caused by an exempting event. The Arbitral Tribunal based its decision on “the understanding generally accepted in the international commercial practice as reflected in the UNIDROIT Principles of International Commercial Contracts […] prepared by UNIDROIT with the participation of both Russian and Canadian specialists” and referred in particular to Art. 7.4.9 and the accompanying comments of the UNIDROIT Principles which expressly state that interest is due even if the delay in payment is the consequence of force majeure.
“[…] The claims for recovery of the penalty for the partial delivery and for payment of interest for delay in repayment of money are the result of two different breaches made by the Respondent. The contract provided for the right to demand payment of the appropriate sum with regard to each of them. Though for release from payment of the penalty for the partial delivery of the goods the Respondent has to prove the circumstances exempting him from liability (in accordance with the contract and Article 79 of the Vienna Convention), the interest for delay in repayment of money is to be paid irrespectively of whether a party is exempt from liability for the non-payment. Such understanding is generally accepted in the international commercial practice, what was reflected in the UNIDROIT Principles of International Commercial Contracts both in the edition of 1994 and in the edition of 2004 (Article 7.4.9 (Interest for failure to pay money)). These Principles together with the Comments on them were worked out by the International Institute for the Unification of Private Law (UNIDROIT) with participation of both Russian and Canadian specialists. The Comment on Article 7.4.9 expressly states that even if the delay in payment is the consequence of force majeure, interest will still be due […]”.}}
Information kindly provided by Professor Alexander Komarov, President of the International Court of Arbitration of the Chamber of Industry and Commerce of the Russian Federation.}}