- Zaporizkyi Regional Administrative Court
SALES CONTRACT – PLURALITY OF PARTIES OF DIFFERENT NATIONALITIES (UKRAINIAN, TURKISH, IRANIAN) - DISPUTE WITH THE UKRAINIAN TAX AUTHORITY - UNIDROIT PRINCIPLES APPLIED BEFORE UKRAINIAN COURTS AS A MEANS FOR INTERPRETING APPLICABLE DOMESTIC LAW (UKRAINIAN LAW)
FORCE MAJEURE - REFERENCE TO THE UKRAINIAN LEGISLATION CONCERNING OPERATIONS IN FOREIGN CURRENCY AND TO ARTICLE 7.1.7 UNIDROIT PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS (1994 ED.)
Claimant, a Ukrainian-Turkish company, entered into a contract with an Iranian company for the sale of lead plate. As the Iranian company paid only part of the price, Claimant could not register the contract in its accounts as performed, as required by the Ukrainian legislation on payments in foreign currency.
When subsequently the Tax Authority performed an inspection of Claimant's accounts and discovered that Claimant had not properly registered the sales operation in question, it concluded that in this way Claimant had outstanding debt receivable, which violated the regulations for export operations as required from Ukrainian companies by Ukrainian legislation concerning operations in foreign currency and for that reason issued a fine.
Claimant filed a suit against Respondent, a Ukrainian District State Tax Administration Authority, requesting the annulment of the fine that Respondent had issued.
Claimant argues that it is excused from liability since Ukrainian legislation on payments in foreign currency contains a provision on force majeure, which provides that if the violation of deadlines for registering the economic operation was due to force majeure, the term is suspended for the duration of the force majeure and re-starts the day after it ends.
The Court rejected the claim. In its reasoning, by applying the provisions on force majeure in the Ukrainian legislation on operations in foreign currency, the Court referred to article 7.1.7 UNIDROIT Principles (1994 ed.), which states that non-performance by a party is excused if that party proves that the non-performance was due to an impediment beyond its control and that it could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences; and that when the impediment is only temporary, the excuse shall have effect for such period as is reasonable having regard to the effect of the impediment on performance of the contract.
In the light of the aforementioned, the Court reasoned that the United Nations resolution on the freezing of accounts and assets of companies involved in or supporting Iran's nuclear activities was adopted before Claimant and Iranian party had signed the contract, so that Claimant was aware of conditions specified in the resolution. Further, the Court found no proof that the Iranian company ever furnished support to Iran's nuclear program and therefore dismissed the argument.
Ukrainian legislation on payments in foreign currency states that force majeure has to be proven by an appropriate acknowledgment by the Ukrainian Chamber of Commerce and Industry or another authorized organization of the country where the party to the contract is situated.
Therefore, the Court concluded that Claimant did not present any valid evidence of the occurrence of a force majeure.
Original in Ukrainian available at the Unified State Register of Court Decisions: http://www.reyestr.court.gov.ua/}}