- Arbitral Award
- International Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation
SALES CONTRACT - BETWEEN RUSSIAN BUYER AND INDIAN SELLER - CONTRACT GOVERNED BY CISG - RATE OF INTEREST - ISSUE NOT ADDRESSED IN CISG - TO BE DETERMINED BY APPLICABLE DOMESTIC LAW
ACCORDING TO ART. 395 OF RUSSIAN CIVIL CODE RATE OF INTEREST TO BE DETERMINED IN ACCORDANCE WITH RATE OF BANK INTEREST EXISTING ON THE DAY OF PERFORMANCE OF MONETARY OBLIGATION AT PLACE OF LOCATION OF CREDITOR - NO RATE OF BANK INTEREST FOR INDIAN CURRENCY IN RUSSIAN FEDERATION - REFERENCE TO UNIDROIT PRINCIPLES AS REFLECTING INTERNATIONAL TRADE PRACTICES
ACCORDING TO ART. 7.4.9(2) UNIDROIT PRINCIPLES RATE OF INTEREST SHALL BE AVERAGE BANK SHORT-TERM LENDING RATE TO PRIME BORROWERS PREVAILING FOR CURRENCY OF PAYMENT AT PLACE FOR PAYMENT, OR WHERE NO SUCH RATE EXISTS AT THAT PLACE, THEN SAME RATE IN STATE OF CURRENCY OF PAYMENT - REFERENCE TO RATE INTEREST USED BY CENTRAL BANK OF INDIA
Russian Buyer (Claimant) claimed from Indian Seller (Respondent) damages for non-delivery of the goods. Among others Claimant asked for the interest on the amount of the price paid in advance in Indian currency.
The law applicable to the contract was CISG.
Since the parties disputed the applicable rate of interest and CISG did not regulate this question the Arbitration Court, noting that the issue is not addressed in CISG, referred to Article 395 of the Russian Civil Code which provides that the rate of interest is to be determined according to the rate of bank interest on the day of performance of the monetary obligation at the place where the creditor is located. However, since in the Russian Federation, i.e. the place where the creditor was located, there is no rate of bank interest for Indian currency, the Arbitration Court decided to apply the international trade practice adopted in such cases as reflected in the UNIDROIT Principles of International Commercial Contracts. And since Article 7.4.9 (paragraph 2) of the UNIDROIT Principles provides that the rate of interest shall be the average bank short–term lending rate to prime borrowers prevailing for the currency of payment at the place for payment, or where no such rate exists at that place, then the same rate in the State of the currency of payment, the Arbitration Court applied the corresponding rate of interest used by the Reserve Bank of India.