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Editorial remark
by Julian Juhasz

In this case a Czech Seller and a Russian Buyer concluded a contract for the sale and purchase of goods (unspecified Equipment). Subsequently, the Czech Seller assigned its claim under the sales contract to a Czech Bank; the Bank again assigned the claim to a Czech Insurer. When the Buyer failed to pay the purchase price, the Insurer initiated arbitration proceedings. The Arbitral Tribunal found that, in absence of a choice of law clause, the sales contract was governed by Czech law including the CISG since this was the law having the closest connection to the parties' relationship. It further held that the CISG was applicable because the contract concerned a sale of goods between parties whose place of business were in different Contracting States (Czech Republic and Russian Federation) and because the two exceptions enshrined in Art. 3(1) and Art. 3(2) CISG were not applicable: First, the Buyer had not supplied a "substantial part" of the materials necessary for the manufacture or production of the Equipment in the sense of Art. 3(1) CISG. Second, the "preponderant part" of the obligations of the Seller had not consisted in the supply of labor or other services in line with Art. 3(2) CISG. As to the assignements, the Arbitral Tribunal stated that they were not governed by the CISG, but by Czech domestic law based on the 1980 Rome Convention and the Rome I Regulation. Turning to the merits of the case, the Arbitral Tribunal held that the Buyer was in breach of Art. 53 CISG, and therefore, the Buyer was ordered to pay the outstanding purchase price. In addition, the Buyer was ordered to pay a contractual penalty. Although the CISG does not contain any provision on contractual penalties, Art. 6 CISG allows the parties to agree on a contractual penalty according to the Aribtral Tribunal. Moreover, the Tribunal dismissed the Buyer's argument that it could not make payment to the Insurer because of the so-called "passport of transaction" (required for payments made by a Russian entity to non-residents of Russia under the Russian foreign currency regulations), which was made out in the name of the Seller instead of the Insurer. It stated that there are provisions within the Russian foreign currency regulations which allow amendments of this "passport of transaction" and that the Buyer was obliged to find a way to make the payment even if that required requesting additional information from the Insurer (the Buyer knew about the assignments since it was notified about them as required by Czech domestic law). Ultimately, the Buyer was ordered to pay the outstanding purchase price, the contractual penalty and the full costs of arbitration.