Russian Federation
Judicial Division of the Supreme Arbitration Court of the Russian Federation, Moscow




[CLOUT Case no. 1367; abstract prepared by A. I. Muranov, National Correspondent, D. L. Davydenko and D. D. Yalaletdinova]

A Russian seller lodged a claim with the court at its place of business against a buyer from the United States of America for the recovery of arrears of payment for goods delivered, with interest. The court refused to hear the case. The court of second instance referred the case back to the same court of first instance. The court of third instance upheld the ruling of the court of second instance.

The Supreme Arbitration Court of the Russian Federation rejected the buyer's request for a review of the ruling of the courts of second and third instance, on the following grounds.

The buyer claimed that the parties had not reached an agreement on the consideration of the dispute over the place of business of the claimant; that, under the general rules of jurisdiction, the claim should be heard at the respondent's place of business; and that the courts had incorrectly applied article 57(1) CISG.

The contracts concluded between the parties contained an arbitration agreement that was unenforceable. Thus, in the absence of a valid arbitration agreement and in accordance with the general rules of jurisdiction on disputes involving foreign parties, the court of first instance had to decide whether it had jurisdiction to settle such a dispute.

According to Russian procedural legislation, Russian commercial State courts have jurisdiction to hear cases involving foreign entities if the dispute arises out of a contract the performance of which takes place or should take place in the territory of the Russian Federation.

It was therefore for the State court to determine the place of performance of a contract as a means of determining the jurisdiction of the dispute.

The CISG does not address the concept of the place of performance of the contract but only distinguishes between the regulation of the place where a seller has the obligation to deliver goods (article 31 CISG) and the place of payment of the purchase price by the buyer (article 57 CISG).

In this case, the dispute had arisen in connection with the buyer's failure to fulfil its obligations to pay for the goods delivered, so the place of performance of such obligations should play a decisive role in determining the jurisdiction of the dispute.

Under article 57 CISG, if the buyer is not bound to pay the price at any other particular place, it must perform its obligation: (a) at the seller's place of business; or, (b) if the payment is to be made against the handing over of the goods or of documents, at the place where the handing over takes place.

The buyer argued in favour of the application of article 57(1)(b) CISG, since the disputed contracts indicated that the handing over of the goods was to take place at the port of St. Petersburg, when the ocean bill of lading was presented to the buyer.

The court of third instance had correctly concluded that, in this case, the place of performance of the buyer's obligation for payment of the goods should be determined, in accordance with article 57(1)(a) CISG, as being the seller's place of business. Article 57(1)(b) CISG was not applicable because, under the contracts, the buyer was to pay for each delivery not at the place of the delivery of the goods but by bank transfer within 90 days of the date indicated in the commercial invoice.

Thus, as the seller's place of business was a Russian city, the court of first instance in that city had the jurisdiction to hear the dispute.




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