2/12/2023. Arbitral award

Case Summary

1. H-T.Kft. and Respondent concluded Contract no. 23/2019 (hereafter: Sales Contract) in B., Hungary, on June 25, 2019, for the delivery of 160 pedigree Simmenthal pregnant heifers. The Sales Contract was subsequently amended three times.
2. Claimant is a credit insurer, which provided, under insurance policy nr K400726, insurance coverage for H-T.Kft. The insurance policy entered into force on December 1, 2015, and was extended to the Sales Contract on November 26, 2019.
3. H-T. performed the contract, but Respondent failed to pay the full purchase price. The total purchase price in the Sales Contract was EUR …, from which Respondent paid EUR …, but failed to pay the rest of the outstanding purchase price, that is, EUR 354,770.01.
4. On June 27, 2019, H-T., Claimant and the Bank concluded a tripartite agreement for factoring. On December 19, 2019, H-T. forfeited (sold) all the claims arising out of the Sales Contract to Bank by means of contract no. FM01719000.
5. In 2021, Respondent and Bank exchanged letters. In its letters of June 4, 2021, June 29, 2021 and September 20, 2021 respondent acknowledged the debts and requested the rescheduling of the payment. Bank rejected the rescheduling request.
6. On October 28, 2021, Bank and Claimant concluded an assignment contract under which Bank assigned all the claims arising out of the Sales Contract to Claimant. On December 5, 2019, H-T. notified Respondent about the forfeiting and assignment of the claims, which Respondent duly acknowledged on December 20, 2019.

Procedural History

7. Claimant submitted its statement of claim on February 22, 2023 (hereafter: Statement of Claim) to the Arbitration Court. As relief, Claimant requested that the Arbitral Tribunal establish its jurisdiction, declare that Respondent breached its obligations set forth in Article 1.1 of the Sales Contract and order Respondent to pay EUR 354,770.01 as purchase price and interests (8% as default interest on EUR 37,390.00 from April 4, 2021 to July 27, 2022, 8,5% from July 27, 2022 to September 13, 2022 and 9,25% from September 14, 2022 until final payment and 8% as default interest on EUR 317,379.79 from April 4, 2021 to July 27, 2022, 8,5% from July 27, 2022 to September 13, 2022 and 9,25% from September 14, 2022 until final payment).
8. None of the parties objected to the formation of the arbitral tribunal or raised any objection concerning any of the arbitrator.
9. On June 30, 2023, the Arbitral Tribunal adopted Procedural Order 1 and called Claimant to submit, within 30 days after receipt, the company registry extract of Respondent or other official deed confirming the address of Respondent.
10. On July 19, 2023, Claimant forwarded to the Arbitral Tribunal two submissions it received from Respondent (submission no. 20 of 15 March 2023, including its attachments, letter no. 83 of 29 June 2021 and letter no. 120 of 20 September 2021, and submission no. 55 of 20 July 2023).
11. Given that the above submissions of Respondent were in Russian language and, according to clause 9.1 of the Sales Contract, the language of the arbitral procedure is English, on July 31, 2023, the Arbitral Tribunal adopted Procedural Order 2 and called Respondent to submit, within 30 days after receipt, an English translation of its submission no. 20 of 15 March 2023, including its attachments (letter no. 83 of 29 June 2021 and letter no. 120 of 20 September 2021) and its submission no. 55 of 20 July 2023.
12. On July 31, 2023, the Arbitral Tribunal adopted Procedural Order 3 and granted the Claimant additional 30 days to submit the company registry extract of Respondent or other official deed confirming the address of Respondent.
13. On August 21, 2023, Respondent submitted the English translation of its submission no. 20 of 15 March 2023, including its attachments (letter no. 83 of 29 June 2021 and letter no. 120 of 20 September 2021) and its submission no. 55 of 20 July 2023. In these submissions Respondent explicitly acknowledged the debt but referred to its payment difficulties and requested Claimant to provide a grace period for the payment of the outstanding part of the purchase price.
14. On September 4, 2023, the Arbitral Tribunal adopted Procedural Order 4. It encouraged Parties to engage in settlement negotiations and called them to inform the Arbitral Tribunal about the outcome of the settlement negotiations within 30 days after receipt. The Arbitral Tribunal called Parties to indicate within 30 days after receipt if they request the Arbitral Tribunal to hold a hearing and to indicate within 30 days after receipt if they object that the hearing take place by means of telecommunication and, if they do so, to specify the reasons of this objection. The Arbitral Tribunal informed Parties that if no settlement is communicated to the Arbitral Tribunal within 30 days after receipt and none of them requests the Arbitral Tribunal within 30 days after receipt to hold a hearing, the Arbitral Tribunal would decide based on the parties’ written submissions and the documents in the file.
15. On September 6, 2023, Claimant submitted, with translation, the official deed issued by the Tax Committee under the Government of the Republic of Tajikistan Department of State Registration of Legal Entities and Individual Entrepreneurs in the Dushanbe City confirming the address of Respondent.
16. On September 6, 2023, Respondent informed the Arbitral Tribunal that settlement negotiations were in progress between Parties and requested the Arbitral Tribunal not to hold a hearing after receipt of the submission.
17. On November 2, 2023, Claimant informed the Arbitral Tribunals that Parties failed to reach a settlement (the settlement negotiations were unsuccessful) and requested the Arbitral Tribunal to adopt an arbitral award. The Claimant also confirmed that it does not request the Arbitral Tribunal to hold a hearing.
18. On November 21, 2023, Respondent sent a letter requesting the Arbitral Tribunal to send them an invitation addressed to D.M to participate in the hearing.
19. On November 22, 2023, the Arbitral Tribunal adopted Procedural Order 5. It declared the taking of evidence completed and closed the arbitral proceedings, in accordance with Section 41(1) of the Rules of Proceedings, and informed the parties that, in accordance with Section 43(3) of the Rules of Proceedings, it would present the award to the Arbitration Court within 45 (forty-five) days, so that the latter delivers it to the Parties. The Arbitral Tribunal noted that, in Procedural Order 4, in accordance with Sections 36(4)(c) and 37(1) of the Rules of Proceedings, it called the Parties to engage in settlement negotiations and to inform the Arbitral Tribunal about the outcome of such negotiations, and to indicate if they request to hold a hearing, respectively, within 30 days after receipt. Procedural Order 4 provided that “If no settlement is communicated to the Arbitral Tribunal within 30 days after receipt and none of Parties requests a hearing within 30 days from receipt, the Arbitral Tribunal shall decide based on the file.” In Procedural Order 5, the Arbitral Tribunal also pointed out that Respondent, in its letters dated 11.09.2023 and 22.09.2023, definitely requested the Arbitral Tribunal not to set and hold, respectively, any hearing in this arbitration case, and Claimant informed the Arbitral Tribunal in e-mail, on November 2, 2023, that the settlement negotiations became unsuccessful, and requested that no hearing be held. In response to Respondent’s letter dated November 21, 2023, the Arbitral Tribunal noted that this was sent well after the expiry of the deadline granted by Procedural Order 4.
20. Given that the Arbitral Tribunal deemed it unnecessary and none of Parties requested that within the applicable deadline, it decided not to hold a hearing, in accordance with Section 37 of the Rules of Proceedings of the Arbitration Court.

Jurisdiction of the Arbitral Tribunal and Applicable Law

21. The Arbitral Tribunal found that it had jurisdiction based on clause 9.1 of Sales Contract (Contract no. 23/2019 concluded in B. on 25 June 2019 and reproduced in Annex C/3 of the Statement of Claim).
22. The Arbitral Tribunal notes that none of Parties objected to the jurisdiction of the Arbitral Tribunal.
23. Pursuant to Article 3 of Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I), OJ L 177, 4.7.2008, pp. 6-16, “[a] contract shall be governed by the law chosen by the parties. The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case.”
24. Pursuant to Clause 9.1 of Sales Contract, the Contract is governed by Hungarian law.

Substantive claim

25. Respondent clearly and explicitly acknowledged the debt in relation to Claimant and did not object to the claim submitted in the Statement of Claim. In the letters exchanged with Bank of June 4, 2021, June 29, 2021 and September 20, 2021, Respondent acknowledged the debts. Furthermore, Respondent acknowledged the debts also in its submission no. 20 of 15 March 2023, which included letter no. 83 of 29 June 2021 and letter no. 120 of 20 September 2021 as attachments, and its submission no. 55 of 20 July 2023.
26. The Arbitral Tribunal notes that, according to the rule of procedure, the party does not have to prove the facts that are not disputed or acknowledged by the opposing party. Furthermore, according to Section 6:26 of the Hungarian Civil Code (Act V of 2013 on the Civil Code, in Hungarian: 2013. évi V. törvény a Polgári Törvénykönyvről, hereafter: Hungarian Civil Code), if the obligor acknowledges the debt, the obligee is no longer required to prove the debt, but it is for the obligor to prove that the debt does not exist or exists in a reduced amount.
27. Pursuant to Section 6:215 of the Hungarian Civil Code, Respondent was obliged to pay the outstanding part of the purchase price to H-T., in exchange for the goods delivered.
28. Claimant acquired the claim by a line of lawful assignments, in accordance with Section 6:193 of the Hungarian Civil Code. H-T. assigned the claim to Bank and Bank assigned the claim to Claimant. With this, Claimant stepped into the shoes of H-T. in respect to the Sales Contract and the claims arising out of it.
29. The Arbitral Tribunal set no time limit for the execution of the award, which implies that the award shall be executed immediately. Pursuant to Section 44(4) of the Rules of Proceedings of the Arbitration Court, [i]f no time limit is indicated in the award for the execution, it shall be executed immediately.”

Service of Documents

30. The Arbitral Tribunal took extra care to ensure proper service of documents, including the Statement of Claim. The official address of Respondent was confirmed by Claimant by means of an official document and this address was referred to in Respondent’s submissions. The Secretariat of the Court of Arbitration served all the documents via registered mail sent to this address. The documents were also sent by email (to d…o@mail.ru). The responses and submissions of Respondent make it clear that it was given proper notice of the appointment of the arbitrators and of the arbitration proceedings, received all the documents of the procedure in good order, including the Statement of Claim and Claimant’s submissions, and was able to present its case.

Interests

31. Respondent is obliged to pay interests for the late payment of the debt. The Arbitral Tribunal awarded interests in accordance with the provisions of Hungarian law and point VII.3. of the Statement of Claim. Respondent is obliged to pay 8% as default interest on EUR 37,390.00 from April 4, 2021 to July 27, 2022, 8,5% from July 27, 2022 to September 13, 2022 and 9,25% from September 14, 2022 until final payment, as well as 8% as default interest on EUR 317,379.79 from April 4, 2021 to July 27, 2022, 8,5% from July 27, 2022 to September 13, 2022 and 9,25% from September 14, 2022 until final payment.

Legal Costs

32. The Arbitral Tribunal awarded attorney’s fees to Claimant in value of EUR … in accordance with Section 11 of the Rule of Proceedings and VII.3. of the Statement of Claim. The Arbitral Tribunal found the attorney’s fees reasonable and proportionate to the value of the claim. The Arbitral Tribunal notes that Respondent did not object to the amount of the attorney’s fees.
33. The Arbitral Tribunal determined the arbitration fee, including the registration fee, , which shall be borne by Respondent. Claimant advanced the full amount of the arbitration fee. Pursuant to Section 11 of the Rule of Proceedings, the arbitration fee has to be borne by the unsuccessful party, hence, the Arbitral Tribunal ordered Respondent to reimburse Claimant for these costs and to pay to Claimant.

Vb/23012