- Arbitral Award
- Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce
LIMITATION PERIOD (PRESCRIPTION) - MATTER NOT GOVERNED BY CISG (ART. 4 CISG) - DOMESTIC LAW APPLICABLE
DUTY TO MITIGATE LOSS - ADOPTION OF MEASURES REASONABLY NECESSARY TO LIMIT LOSS (ART. 77)
DAMAGES – LIMIT OF FORESEEABILITY OF LOSS AT THE TIME OF CONCLUSION OF CONTRACT (ART. 74)
DAMAGES - TO BE ASSESSED IN ACCORDANCE WITH ART. 76 CISG
CALCULATION OF LOSS SUFFERED - INCOTERMS TO BE TAKEN INTO ACCOUNT
An English buyer and a Russian seller concluded a contract for the sale of goods to be shipped to a certain port on c.i.f. terms. When the seller notified the buyer that it would not perform the contract due to an increase in tax rates which, in its view, amounted to force majeure, the buyer filed a motion for arbitral proceeding claiming damages.
Since the contract did not contain any choice-of-law clause, the Court decided to resort to the relevant rules on conflict of laws and to apply, accordingly, Russian law. As a result, the Court held CISG applicable to the case at hand pursuant to Art. 1(1)(b).
After recalling that limitation of actions is a matter not covered by CISG and had to be solved in accordance with the applicable domestic law, the Court rejected the seller's argument that the buyer's claim was time-barred. In the opinion of the Court, the seller's express admission of liability for non-performance and its intention to compensate the buyer for the loss suffered had prevented the limitation period from expiring.
The Court also dismissed the argument that non-performance was due to force majeure, as the seller had not given any evidence thereof.
As to the loss calculated by the buyer, the Court found it to be excessive. First of all, although the buyer had based the loss suffered on a contract concluded with a third party according to which the price of the goods to be supplied was substantially higher than that provided in the original contract, there was no evidence that the seller had, or ought to have, foreseen such a loss as a consequence of the breach of contract (Art. 74 CISG). Secondly, the Court pointed out that the buyer had not taken the necessary measures to mitigate the loss, as required by Article 77 CISG, nor had it applied the provisions of Article 76 CISG in order to calculate the damages suffered.
In the light of the above, and taking into account the Incoterms, the Court ruled that the lost profit should be fixed at the amount of 10 per cent.
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English Translation to be found at the Pace University Website,
Original in Russian:
- available at the University of Pace website, http://www.cisg.pace.law.edu/}}