MARITIME ARBITRATION COMMISSION
of the Chamber of Commerce and Industry of the Russian Federation
AWARD
for the case № 14/2001 for the claim of company «Marine Trade
International Corp.», Wilmington, USA, against Central Department of
Material Resources and Foreign Economic Relations of Defense Ministry
of the Russian Federation, Moscow, on recovery of 278.542.00 $.
Case № 14/2001
MARITIME ARBITRATION COMMISSION
of the Chamber of Commerce and Industry of the Russian Federation
Moscow
AWARD
for the claim of company «Marine Trade International Corp.»,
Wilmington, USA, against Central Department of Material Resources
and Foreign Economic Relations of Defense Ministry of the Russian
Federation on recovery of 278.542.00 $.
Maritime Arbitration Commission consisting of:
arbitration chairman _________________, arbitrators M.Y. Sokolov and
A.A. Makovskaya and speaker B.S. Heyfets considered during open
sessions on 09.10.2001 and 10.12.2001 the case for the claim of
company «Marine Trade International Corp.», Wilmington, USA against
Central Department of Material Resources and Foreign Economic
Relations of the Russian Federation, Moscow, Russian Federation, on
recovery of 278.542.00 $
and heard claims of
representatives of the plaintiff G.M. Savelieva and A.N. Gaposhin
representative of the defendant I.S. Zhudro
Subject of the case:
On July 5, 2001 special board of lawyers «Inyurkolleguiya» acting on
behalf of company «Marine Trade International Corp.» submitted the
claim documents on recovery of 278.542.00 $ from Central Department
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of Material Resources and Foreign Economic Relations of Defense
Ministry of the Russian Federation (hereinafter referred to as «CDMR
and FER») to Maritime Arbitration Commission of the Chamber of
Commerce and Industry of the Russian Federation (hereinafter referred to
as «MAC»).
The plaintiff substantiated competence of MAC with availability of
arbitration clause in the contract № 148/8/1101800 for sale as scrap of
the vessel of June 3, 1998 (hereinafter referred to as «the contract of June
3, 1998») which regulates relations of the parties. In accordance with
clause 22.2 of the contract later supplemented with agreements of the
parties of September 24, 1998 (supplements 1 and 2) all disputes between
vendor - CDMR and FER and purchaser - company «Marine Trade
International Corp.», which the contract’s parties fail to settle in a
friendly way, are subject to consideration at MAC in accordance with
Rules of proceedings in this arbitration court.
The plaintiff determined the claim amount by means of addition of the
penalty for the defendant’s breach of the contract’s liabilities for delivery
of hull of heavy aircraft carrier «Kiev» (hereinafter referred to as
«HCC») to company «Marine Trade International Corp.» in the sum of
218.061.00 $, losses incurred by the company as a result of CDMR and
FER breach of the contract’s liabilities in the sum of 30.000.00 $ and
calculated interest for use of the plaintiff’s monetary means by the
defendant in the sum of 20.481.00 $.
Statement of the claim also contains a request to attribute expenses for
proceedings at MAC in the sum of 5% of satisfied amount of the claim
and arbitration fee to account of the defendant.
The plaintiff’s demands are substantiated by provisions of the contract of
June 3, 1998, actual refusal of the defendant to perform its liabilities
envisaged in the contract which are contained in a letter of CDMR and
FER of October 6, 1999, losses incurred by company «Marine Trade
International Corp.» in connection with performance of the contract and
delayed transfer of advance payment in the amount of 100.000.00 $.
While determining the claim amount the plaintiff proceeds from
provisions contained in box 29 of the contract of June 3, 1998 which
stipulate that the vendor of the hull of HCC «Kiev» must pay 10% of this
hull’s cost. Losses incurred by company «Marine Trade International
Corp.» are equal to the cost of works paid by the purchaser for
preparation of vessel for its towing to the port of destination (its
conversion) and it is corroborated by the plaintiff’s documents (warrant
and receipt) which certify payment of 30.000.00 $ to persons who
performed works for conversion of HCC «Kiev». The plaintiff
substantiates lawfulness of calculating interest for the advance amount
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which was at the defendant’s disposal transferred to the latter by the
plaintiff on November 19, 1998 in accordance with provisions of the
contract of June 3, 1998, amount of interest and repayment of this
advance amount to company «Marine Trade International Corp.» only on
August 30, 2000 by calculation and certificate with information on the
middle rate of short-term credits in the Russian Federation which are
provided by credit institutions in US dollars in accordance with
advertisement in the bulletin of Bank of Russia of March 29, 2001.
The defendant chose an arbitrator and claimed that MAC does not have
competence to consider this case. This position is reflected in the
defendant’s declarations of August 28, 2001 and November 8, 2001
addressed to MAC and the plaintiff and in statements of CDMR and FER
representative at sessions of MAC on October 9, 2001 and December 10,
2001.
The defendant claims that MAC does not have competence to consider
this case because arbitration clause of the contract of June 3, 1998 to
which the plaintiff refers substantiating lawfulness of bringing claim to
MAC in fact does not stipulate exclusive jurisdiction of MAC since this
clause envisages that MAC have competence to consider disputes with
the exception of those subject to jurisdiction of the general courts.
According to the defendant, arbitration clause in the contract of June 3,
1998 envisages that MAC has competence to settle disputes arising from
maritime part of the relations of this contract’s parties, for example,
towing of hull of HCC «Kiev», but not from transfer of property right for
the aforesaid object. Furthermore, Budget Code of the Russian
Federation which regulates the parties’ relations envisages settlement by
a general and not an arbitration court.
Referring to article 118 of the Constitution of the Russian Federation
which stipulates that in the Russian Federation only a court may be body
of justice, the defendant refuses to recognize competence of an
arbitration court and, therefore, MAC does not have competence for
consideration of this case since it is a an arbitration court.
During sessions of MAC on October 9, 2001 and December 10, 2001
while discussing whether MAC has competence to consider this case, or
not, and, if not, should not proceedings for this case be ceased, the
plaintiff pointed to groundlessness of the claims of CDMR and FER.
Firstly, the parties of the contract of June 3, 1998, in accordance with
provisions of article 28, clause 2, of Russian Federation’s Law «On
privatization of the state property and bases of privatization of municipal
property in the Russian Federation», had a right to include in this
contract agreed clause (arbitration clause) about jurisdiction of MAC in
relation to disputes arising during performance of this contract. Secondly,
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such arbitration clause does not contradict Provision about MAC
(Supplement II to the Russian Federation’s Law «On international
commercial arbitration»). Thirdly, the dispute about the concrete matter
submitted for consideration to MAC is, for its legal nature, a dispute
about alienation of property and not about preparation for privatization,
order of its carrying out or making of privatization transactions in
relation to which Law on privatization establishes special order of
disputes’ consideration. And, at last, fourthly, in accordance with
provision of article 11, clause 1, of Civil Code of the Russian Federation
dispute settlement at an arbitration court (and MAC is an arbitration
court) is considered the same judicial way of rights’ protection as dispute
settlement at a general court.
Position of CDMR and FER in relation of alleged non-competence of
MAC to consider and settle the dispute according to the claim of
company «Marine Trade International Corp.» on recovery of 278.542.00
$ from CDMR and FER contradicts an opinion of First Deputy Defense
Minister of the Russian Federation in relation to this case (letter of July
31, 2000) which confirms the plaintiff’s right to apply to MAC for
settlement of this dispute.
As for subject of the dispute, the defendant which insists on cessation of
proceedings for this case at MAC because this constantly acting
arbitration court does not have appropriate competence still emphasized
that the claim of company «Marine Trade International Corp.» against
CDMR and FER on recovery of 278.542.00 can not be satisfied on the
grounds that the contract of June 3, 1998 was canceled because of
unilateral statement of deliverer-defendant for this case. Reason for such
cancellation of the contract in accordance with its part II, clause 20 is
failure of purchaser to perform its liabilities for transfer of advance
payment (clause 5.1 of the contract of June 3, 1998), acceptance of the
vessel for its preparation for one-time towing (clause 9.1 of the contract
of June 3, 1998) and opening of a L/C for settlement of accounts with the
vendor (clause 6.1 of the contract of June 3, 1998) and non-performance
of other actions envisaged in the contract.
According to explanation of the defendant’s representative, HCC «Kiev»
was sold to another organization (approximately in 1999) since CDMR
and FER considered the contract of June 3, 1998 as canceled. Amount of
100.000.00 $ transferred by the purchaser to the vendor on November 19,
1998 and returned by the latter on August 30, 2000 was not, in its nature,
an advance payment since in accordance with clause 15 of Supplement 2
to the contract of June 3, 1998 stipulation of advance payment in the
contract was canceled. Payment of 100.000.00 $ may be qualified only as
confirmation of serious intention of company «Marine Trade
5
International Corp.» to perform its liabilities according to the contract of
June 3, 1998.
In accordance with data submitted by the plaintiff’s representatives
during MAC’s session on December 10, 2001 the plaintiff completely
performed its liabilities of a purchaser envisaged in the contract of June
3, 1998: it transferred amount of 100.000.00 which it considered at that
time as an advance payment, send a L/C for making payment for the
purchase according to agreement with the vendor, received the vessel for
conversion from the defendant, carried out conversion of the vessel and
received certificate for one-time towing, presented necessary data on
arrival of a tow-boat and coordinated plan of towing with Maritime
Administration. At the same time, the defendant’s actions which more
than once insisted on modification of provisions of the contract of June
3, 1998 including its conditions of delivery basis, payments, cost and
terms of delivery and also a breach of some contractual liabilities of a
vendor, for example, failure to notify the purchaser on readiness of the
vessel for delivery (clause 11.1 of the contract of June 3, 1998) are
regarded as a breach of the contract’s provisions by the vendor.
In accordance with part 1, paragraph 20, of Rules of proceedings at MAC
the term for sending of motivated decision to the parties was prolonged
by chairman of Commission till February 25, 2002.
The decision’s motives
After consideration of the case’s materials and hearing of the parties’
representatives Maritime Arbitration Commission found that:
1. Members of MAC who considered this case were chosen in
accordance with Rules of proceedings at this constantly acting arbitration
court. The parties did not challenge to arbitrators.
2. Both parties agreed that the plaintiff’s claim arose from the contract of
purchase as scrap of the vessel - the contract of June 3, 1998.
3. In accordance with clause 22.1 of this contract the parties’ relations are
subject to the Russian Federation’s legislation.
4. As for competence of MAC to consider this case, arbitrators thought it
inexpedient to comply with the defendant’s request to consider this
matter preliminarily, and decided to consider it simultaneously with the
subject of the dispute.
5. Clause 22.2 of part 2 of the contract of June 3, 1998 (taking into
account provisions of Supplements 1 and 2) establishes that «all disputes
and disagreements except for those belonging to jurisdiction of general
courts are subject to settlement in Maritime Arbitration Commission... in
Moscow». This provision of the contract corresponds to provision of
6
article 1, clause 4, of the Russian Federation Law «On International
Commercial Arbitration» of July 7, 1993 № 5338-1 which establishes
that disputes which in accordance with the Law can be considered only in
the state courts - general and arbitration courts - cannot, on agreement of
parties, be submitted to international commercial arbitration courts.
The defendant does not dispute validity of this arbitration clause
contained in part 2, clause 22.2, of the contract of June 3, 1998 but it
believes that this dispute is not subject to consideration at MAC in
pursuance of Federal Law «On privatization of state property and bases
of privatization of municipal property in the Russian Federation» of July
21, 1997 № 123-Ф3 and Budget Code of the Russian Federation. Since
the dispute arises from the contract of June 3, 1998 and is related with its
performance this dispute is subject to consideration at an arbitration court
in accordance with Federal Law «On privatization of state property and
bases of privatization of municipal property in the Russian Federation»
of July 21, 1997 № 123-Ф3 and Budget Code of the Russian Federation.
The dispute between the parties arises from the contract for purchase of
released military property which was concluded by the parties in the
framework of privatization of this property which belonged to the state.
Article 217 of Civil Code of the Russian Federation envisages that
«while carrying out privatization of state and municipal property
provisions of this Code are used which regulate purchasing and cessation
of property right unless the laws on privatization envisage otherwise».
Federal Law «On privatization of state property and bases of
privatization of municipal property in the Russian Federation» of July 21,
1997 № 123-Ф3 establishes that «if privatization of state or municipal
property was carried out with violation of provisions of this Federal Law,
other federal laws and other regulatory legal deeds of the Russian
Federation, laws and other regulatory legal deeds of the Russian
Federation’s subjects, Government of the Russian Federation, authorities
of the Russian Federation’s subjects, local authorities, property
management bodies, purchasers and vendors, Offices of Public
Prosecutors have a right to initiate proceedings for cancel of transactions
of privatization of state or municipal property, taking measures of
responsibility, recognition of these transactions invalid, application of
consequences of invalidity of worthless transaction, elimination of
violations of the Russian Federation’s legislation on privatization and
punishment of guilty persons» (clause 1, article 29).
In relation to disputes about recognition of transactions of privatization
of state and municipal property invalid which, as indicated in clause 1 of
article 29, are subject to consideration in judicial order, clause 4 of the
same article directly envisages that «they are considered at a court,
7
arbitration court in the order and terms established by judicial legislation
of the Russian Federation».
The parties do not dispute validity of the contract concluded by them on
June 3, 1998. Maritime Arbitration Commission does not find reasons
which would permit to consider this contract as worthless. So, article 29,
clause 4, of Federal Law «On privatization of state property and bases of
privatization of municipal property in the Russian Federation»
establishing that disputes of recognition of invalidity of privatization
transactions are subject to consideration in general and arbitration courts
does not give reasons to believe that MAC does not have competence to
consider this dispute.
Furthermore, since article 29, clause 4, directly establishes that disputes
of certain category are subject to consideration in general and arbitration
courts MAC can not agree with the defendant’s opinion that expression
«disputes are subject to consideration in judicial order» contained in
article 29, clause 1, means that such disputes are subject to consideration
in state courts.
In accordance with article 11, clause 1, of Civil Code of the Russian
Federation legal protection of violated or disputed civil rights is a
protection «which is implemented in accordance with jurisdiction
established by judicial legislation - court or arbitration court».
Constitution of the Russian Federation and Federal Law «On judicial
system of the Russian Federation» determine system of the state courts of
the Russian Federation not excluding possibility of foundation of
Arbitration courts in the Russian Federation. Article 23 of Arbitration
Judicial Code of the Russian Federation and article 27 of Civil Judicial
Code directly assume possibility of transfer of disputes under jurisdiction
of general courts to arbitration courts. Other provisions of Arbitration
Judicial Code and Civil Judicial Code exclude possibility of
consideration by corresponding courts of claims which are subject to
consideration at or considered by arbitration courts. These legislative acts
and Federal Law «On executive proceedings» provides for compulsory
execution of arbitration courts’ decisions.
Order of foundation and activities of Maritime Arbitration Commission
as an arbitration court is determined by the Russian Federation’s Law
«On international commercial arbitration» of July 7, 1993 № 5338-1 and
Provision on Maritime Arbitration Commission of the Chamber of
Commerce and Industry of the Russian Federation (Supplement II to this
Law).
Therefore, indication contained in article 29, clause 1, of Federal Law
«On privatization of state property and bases of privatization of
municipal property in the Russian Federation» that disputes which are
8
listed there are subject to consideration in «judicial order» can not be
deemed as subjecting these disputes exclusively to general courts’
jurisdiction. Stipulation that disputes «about cancel of transactions of
privatization of state or municipal property, taking measures or
responsibility, recognition of these transactions invalid, application of
consequences of invalidity of worthless transaction, elimination of
violations of the Russian Federation’s legislation and punishment of
guilty persons» are subject to consideration in «judicial order» means
that they can not be settled in administrative order (see article 11, clause
2, of Civil Code of the Russian Federation) and does not allow such
transactions’ parties to settle these disputes in non-judicial order both on
the base of agreement and in unilateral way.
Decision of Plenum of Supreme Arbitration Court of the Russian
Federation of December 2, 1993 № 32 «On some matters of settlement of
disputes related to application of legislation for privatization of state and
municipal enterprises», to which the defendant refers, in contradiction to
its opinion, does not envisage, that all disputes arising from privatization
transactions are subject to consideration exclusively in general courts. As
indicated in the decision, jurisdiction of aforesaid courts covers «disputes
arising in connection with decisions of committees for property
management taken within their competence in pursuance of State
privatization program and other civil and legal disputes arising while
preparing to implementation of privatization» (clause 1). This dispute
does not belong to this category of disputes. Furthermore, aforesaid
decision clarifies provisions of the Russian Federation’s Law «On
privatization of state and municipal enterprises in the Russian
Federation» which was already invalid on June 3, 1998 when the parties
concluded the contract № 148/8/11018001 for sale as scrap of the vessel.
6. Provisions of article 29, clause 1, of Federal Law «On privatization of
state property and bases of privatization of municipal property in the
Russian Federation» does not exclude that, in accordance with other
legislative acts of the Russian Federation, some of disputes listed there
are not subject to consideration in arbitration courts. Nevertheless, as for
this dispute, whose subject is the claim of the plaintiff for losses’
recovery caused by the defendant’s improper performance of its
liabilities for the contract of June 3, 1998, the current Russian legislation
does not prohibit bringing such disputes to arbitration courts.
Article 239 of Budget Code of the Russian Federation to which the
defendant refers does not establishes such prohibition either. Firstly,
provisions of this article declare immunity of budgets as a legal regime
which envisages that recovery of budget means may be carried out only
on the base of legal deed for certain kinds of claims. Therefore, this
9
article regulates only order of legal deeds’ performance and does not
establishes exclusive jurisdiction of the state courts in relation to such
kinds of disputes. Secondly, article 239 of Budget Code does not contain
provisions which indicate that legal deeds there mean only those deeds
made by general courts. Furthermore, taking into account order of
execution of MAC’s decisions established by the Russian Federation’s
Law «On international commercial arbitration» (articles 35 and 36), it
should be recognized that these decisions are executed in pursuance of a
state court’s deed. Thirdly, provisions of article 239 of Budget Code of
the Russian Federation are not applied if legal deeds are executed on
account of budget means.
For aforesaid reasons Maritime Arbitration Commission in accordance
with article, 16, clause 3, of the Russian Federation’s Law «On
international commercial arbitration» recognized itself as competent to
consider this case.
7. The plaintiff’s claim concerns indemnity of losses incurred due to the
defendant’s improper performance of its liabilities for the contract of
June 3, 1998 and recovery of penalty envisaged in this contract. In
accordance with provisions of part 2, clause 10, of the contract the
defendant undertook to deliver the vessel to the plaintiff, to settlement
Vidyaevo, during the period from October 15 till October 31, 1998. The
defendant confirms in the supplement to the claim statement of
November 8, 2001 № 148/jur/3721 submitted to MAC that the vessel
was not delivered to the purchaser - company «Marine Trade
International Corp. which is a plaintiff for this claim.
In its letter of October 6, 1999 Central Department of Material Resources
and Foreign Economic Relations of Defense Ministry of the Russian
Federation asked the plaintiff to consider the contract as canceled. In
accordance with clause 20 of the contract «if Purchaser fails to perform
the contract’s conditions Vendor has a right to cancel the contract».
In the supplement of November 8, 2001 № 148/jur/3721 submitted to
MAC the defendant claims that the plaintiff did not perform the
following its principal liabilities for this contract:
- it did not transfer advance payment envisaged in the contract (clause
5.1 of the contract);
- it did not accept the vessel for preparation for one-time towing (clause
9.1 of the contract);
- it did not open L/C for settling of accounts with the vendor according to
the contract (clause 6.1 of the contract).
Maritime Arbitration Commission can not agree that the plaintiff took
actions which might give the defendant (the vendor) reasons to cancel the
contract of June 3, 1998 in unilateral extrajudicial order.
10
Part 2, clause 5, of the contract of June 3, 1998 (taking into account
supplements 1 and 2) does not envisage any obligation of the plaintiff-
purchaser to transfer to the defendant any advance payments. The
plaintiff was only obliged to compensate all the vendor’s expenses
connected with execution and prolongation of bank guarantee and other
expenses which may arise in connection with bank guarantee (clause
5.3). With all that, the plaintiff was obliged to compensate all these
expenses «during 3 (three) bank days from the date of drawing up
accounts for compensation of expenses» (clause 5.4). However, the
defendant did not submit any documents which would confirm that it
incurred any expenses mentioned in clause 5.4 of the contract and drew
up any accounts to the plaintiff for payment which would not be paid in
due terms mentioned in clause 5.4 of the contract. With all that, on
November 19, 1998 the plaintiff voluntarily, on the base of verbal
agreement with the defendant, transferred to the defendant 100.000.00 $
as an advance payment.
Submitted by the plaintiff protocol of acceptance of HCC «Kiev» for
preparation for towing to Alang (India) of November 17, 1998 signed by
the purchaser’s representative and the vendor’s representative refutes the
defendant’s claim that the plaintiff did not accept the vessel for
preparation for towing. Submitted by the plaintiff certificate №
98.0281.150 for one-time towing of HCC «Kiev» from port of Murmansk
to India given by Russian Maritime Register of Navigation on November
27, 1998 confirms that the vessel was ready for such towing.
In accordance with part 2, clause 6.1, of the contract of June 3, 1998 the
purchaser must open irrevocable documentary L/C in the form which
satisfies the vendor. The plaintiff sent by fax notification of November 5,
1998 about necessity of modification of conditions of the contract of
June 3, 1998 in connection with replacement of the bank and a form of
L/C for approval. The defendant, on the contrary, did not submit any
documents which would confirm that it had taken any actions necessary
for agreement of conditions of L/C. Furthermore, propositions sent by the
defendant on modification of conditions of the contract of June 3, 1998
in what concerns price and delivery terms of the vessel (fax message of
January 10, 1999 № 148/8/7-1, fax message of April 26, 1999) show that
the defendant did not think it possible and necessary to agree L/C
conditions since they are determined, first of all, by the contract’s
conditions of the vessel’s price.
All aforesaid circumstances allow MAC to draw conclusion that the
defendant did not have any lawful reasons for unilateral cancellation of
the contract of June 3, 1998 and so MAC can not consider this contract
as canceled by the defendant.
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8. Since the contract of June 3, 1998 concluded between the plaintiff and
the defendant can not be considered as canceled and since the defendant
does not disputes the fact of its non-performance of envisaged in the
contract obligation to transfer HCC «Kiev» to the plaintiff, the latter, in
accordance with provisions of article 463, clause 2, and article 398,
clause 2, of Civil Code of the Russian Federation has a right to demand
from the defendant compensation of losses incurred as a result.
Direct expenses incurred by the plaintiff made up 30.000.00 $. This
amount was paid by the plaintiff to limited company «Soudoremontnik
Severa» for preparation of HCC «Kiev» for towing. The expenses are
confirmed by documents submitted by the plaintiff.
During MAC’s session on December 10, 2001 the plaintiff also claimed
that did not received profits which it had intended to receive while
concluding the contract in the amount of, approximately, 200.000.00 -
250.000.00 $. Taking into account that the contract of June 3, 1998
envisaged the vendor’s right to re-sell HCC «Kiev» as scrap to a third
party (part 2, clause 18.1) and that the defendant by fax message of
January 11, 1999 offered to the plaintiff to modify the contract’s
conditions so that the vessel’s price would increase by 227.063.00 $
compared with the price mentioned in the contract of June 3, 1998,
Maritime Arbitration Commission thinks that the plaintiff had real
possibility to re-sell the vessel for more high price than that mentioned in
the contract of June 3, 1998 and gain profit. Nevertheless, the plaintiff
did not demand recovery of this not received profit.
9. In accordance with article 330, clause 1, of Civil Code has a right to
demand from the defendant payment of penalty for non-performance of
envisaged in the contract obligation to transfer the vessel. Penalty
amount is determined in part 1, box 21, of the contract as 10% of the
contractual cost which makes up 228.000.00 $. The defendant does not
dispute the penalty amount.
Since penalty envisaged in the contract of June 3, 1998 does not have
penal nature, i.e. losses incurred by the plaintiff as a result of the
defendant’s non-performance of its obligation are subject to complete
recovery besides the penalty amount (part 2, article 394, clause 1 of Civil
Code of the Russian Federation), in accordance with part 1, article 394,
clause 1 of Civil Code the plaintiff’s losses can be compensated only in
the part not covered by penalty. In this case the plaintiff’s losses are less
than the penalty amount, so the plaintiff has a right to demand from the
defendant only payment of the penalty amount.
In accordance with article 330, clause 1 of Civil Code «in case of
demand for penalty payment creditor is not obliged to prove that he
incurred losses». With all that, part 1, article 333 of Civil Code of the
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Russian Federation establishes that «if a penalty subject to payment is
evidently disproportionate in relation to consequences of obligation’s
non-performance a court has a right to reduce penalty amount». The
defendant’s non-performance of its obligations for the contract of June 3,
1998 entailed not only direct losses but also other negative consequences
for the plaintiff, in particular, deprived it of possibility to gain profit from
this transaction which, as is mentioned above, it had all reasons to count
upon. Maritime Arbitration Commission, however, in accordance with
part 1, article 333 of Civil Code of the Russian Federation thinks it
necessary to reduce the penalty amount subject to recovery by 20%
which, as a result, will make up 182.448.00 $.
10. The plaintiff also demands from the defendant, in accordance with
provisions of article 395 of Civil Code of the Russian Federation,
payment of interest for use of 100.000.00 $ which were transferred to the
defendant on November 19, 1998 and returned by it on August 30, 2000.
Article 395, clause 1, of Civil Code of the Russian Federation envisages
that «for use of money that belongs to other person owing to its illegal
retention and evasion of its redemption or other delay in its repayment or
groundless reception or keeping on account of other person an interest
for an amount of this money is subject to payment». Since in this case
evasion of redemption and illegal retention by the defendant of the
plaintiff’s money took place interest for its use must be calculated from
October 6, 1999, i.e. from the date when the defendant notified the
plaintiff on cancellation of the contract of June 3, 1998 and, therefore,
the defendant must have returned to the plaintiff money received from it
without delay and long before August 30, 2000.
In accordance with article 395, clause 1, of Civil Code of the Russian
Federation unless other interest rate is established by Law or a contract
«interest rate is determined by a bank rate for a date of performance of
liabilities or part thereof which exists at a place of creditor’s residence
and if creditor is a legal person - at a place of its location». So MAC can
not agree with submitted by the plaintiff interest calculation made on the
base of the bank rate which exists in the Russian Federation, i.e. at the
place of location of the debtor and not creditor. Since the plaintiff did not
submit information on the bank rate which exists at the place of its
location Maritime Arbitration Commission thinks it possible to apply
bank rate ЛИБОР. «Bank rate ЛИБОР is a bank rate granted by first-
class banks at London inter-bank financial market. This rate is a base for
international settlements since it objectively shows current state of the
market of short-term credit resources» (letter of Central Bank of the
Russian Federation of October 25, 1996 № 12-2-0-4/4391.
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LIBOR bank rate for the August 30, 2000, when the defendant performed
its liabilities and returned to the plaintiff 100.000.00 $ was 6,831% for 6-
month credits. Interest amount for this rate subject to payment by the
defendant to the plaintiff on the amount of 100.000.00 $ for the period
from October 6, 1999 to August 30, 2000 makes up 6.157.26 $.
11. The plaintiff also asks, in accordance with paragraph 24, clause 3, of
Rules of proceedings at MAC, to recover from the defendant expenses
for this case’s proceedings in the amount of 5% of satisfied part of the
claim. Since the defendant did not dispute the amount of this demand the
arbitrators think that this demand is subject to satisfaction.
On the base of aforesaid Maritime Arbitration Commission
ADJUDGED:
1. To oblige Central Department of Material Resources and Foreign
Economic Relations of Defense Ministry of the Russian Federation,
Moscow, the Russian Federation, to pay to company «Marine Trade
International Corp.», Wilmington, USA, for partial satisfaction of the
claim 188.606.06 $, for recovery of expenses for this case’s proceedings
9.430.30 $ and for expenses for arbitration fee 3.722.12.
The rest part of the claim remains without satisfaction.
2. Arbitration fee for this case is 2% of the claim amount and makes up
5.570.84 $. It must be paid by the parties in proportion to satisfied and
refused part of the claim, namely: the plaintiff must pay 1.798.72 $ and
the defendant - 3.772.12 $.
Advance payment of the plaintiff made while submitting statement of the
claim is transferred to Maritime Arbitration Commission.
This award is drawn up and signed in three copies from which one is
designed for keeping at Maritime Arbitration Commission, one - for the
plaintiff and one - for the defendant.
Arbitrators: M.Y. Sokolov (signature) A.A. Makovskaya (signature)
Seal: Maritime Arbitration Commission of the Chamber of Commerce
and Industry of the Russian Federation