577

полису объект страхования страхуется на определенный период времени (на определенный рейс);

•генеральный страховой полис (floating policy) – представляет собой договор длительного характера между страховщиком и страхователем; в нем указываются срок его действия, объем и пределы ответственности страховщика, сроки платежа страховой премии;

•смешанный страховой полис, по которому объект страхуется как на определенный рейс, так и на определенный срок.

Страховой сертификат – документ, выдаваемый страховым обществом страхователю, удостоверяющий, что страхование было произведено, и что был выдан полис. Такой сертификат на конкретный груз используется в основном в том случае, если товары застрахованы в соответствии с условиями генерального или невалютированного полиса (open policy); по требованию страхователя он может обмениваться на страховой полис, поскольку во многих странах законодательство признает в качестве документа страхования только страховой полис.

Ковернот (cover note) – документ, выдаваемый страховщиком (страховым маклером, агентом) для извещения страхователя о том, что его инструкции по страхованию выполнены, или в удостоверение совершенного агентом страхования в пользу страхователя действия.

Unit 9

CLAIMS ANS SANCTIONS. ARBITRATION

DISCUSSION

How much do you know about claims and arbitration in international trade? Discuss the following points with your partner.

•Reasons for discrepancies between sellers and buyers in international trade transactions.

•Ways to solve problems between the parties to the contract of sale.

•Arbitration procedures in Russia.

READING

ARBITRATION PRACTICES AND REASONS FOR CLAIMS

Key concepts and terms

1.Learn the following Latin words and expressions.

1)Errare humanum est. – To err is human.

2)Lex fori – the law of the forum or court (закон места рассмотрения дела)

3)Lex mercatoria – the law or custom of merchants (международное право)

4)Civility – the state of society in which the relations and duties of a citizen are recognised and obeyed; a state of civilization

5)Umpire – a third person, who is to decide a controversy submitted to arbitrators in case of their disagreement

2.Match up the words on the left with the definitions on the right.

Text 9.2. Read the text and discuss how the contractual parties may solve disputes.

Infringement of Liabilities

Sellers’ and Buyers’ Obligations

Any sales contract defines rights and liabilities of the parties involved. The seller’s liabilities are to deliver the goods on time and in perfect condition and to ensure that the title to the goods is transferred to the buyer – in other words, the seller has to make sure that the buyer becomes the owner of the goods. The latter is normally done by passing a special document, the document of title, to the buyer.

The buyers’ liabilities are to accept delivery of the goods (this prevents them from changing their mind after the goods have been sent) and to pay for the goods within the time agreed.

If one party doesn’t fulfil its liabilities, the contract is broken (this is called a breach of contract). In this case the other party (the injured party – plaintiff, claimant) can claim compensation. It is more often the case that it is the buyer who makes a claim on the seller.

If the seller causes a breach of contract, or if something else is wrong with the execution of the order, the buyer can make a complaint. Below are some of the things a buyer can complain about.

•The goods are of inferior quality.

•The goods are damaged.

•The goods were lost in transit.

•The price is incorrect.

•There was a delay in delivery.

•The goods were short-shipped (the weight was too low or the quantity too small).

•The wrong goods were delivered.

•The goods do not match the sample.

Steps for Buyers and Sellers to Adjust Claims

If the complaint is justified, the sellers have to make an adjustment, i.e. they have to offer the buyer some form of compensation. There are four possibilities.

•The sellers invite the buyers to RETURN the goods at the sellers’ expense.

•The sellers REPLACE the faulty goods at their own expense.

•In some cases, the goods can be REPAIRED by the sellers or at the sellers’ expense.

•The buyers keep the goods, but the sellers offer them a price REDUCTION.

If the sellers are late in delivering the goods, the buyers can send one or more reminders and tell the sellers that they will withdraw from the contract if the goods are not delivered by a certain date, the final deadline. It can be that the buyers reserved the right to cancel the order if delivery was late. In this case, they can cancel their order without sending any reminders.

It can happen that the buyers suffer a loss if the goods are delivered late — they may lose business, for example. In this case, they can claim damages from the sellers; that means they can start legal proceedings for compensation. However, if the delay is caused by factors beyond the sellers’ control, for example floods, earthquakes, war, etc., the seller is not liable for any of the buyers’ losses.

If the buyers fail to fulfil their obligation of paying on time, it is customary to send three reminders. This is a usual claim procedure. (See page 154.)

The buyer must write a statement of claim and mail it to the seller together with the supporting documents. Bill of Lading, Airway and Railway Bill, Survey Report, Quality Certificate may serve as documentary evidence. If necessary, drawings, photos, samples are enclosed as proofs of claims. The date of a complaint is the date on which it is mailed. Claims can be lodged during a certain period of time, which is usually fixed in the contract.

During the claim period the sellers are to enquire into the case and communicate their reply. They either meet the claim or decline it. The sellers decline liabilities if the B/L is clean, that is the shipping company hasn’t made any remarks about the quantity or condition of the cargo shipped. The sellers have also a full right to decline a claim if the goods are disorderly stored, mishandled or misused by the buyers. If a claim has a legitimate ground behind it, the parties try to settle it amicably.

153

Grounds for Claims

It often happens that one of the parties to the contract considers that the other party has infringed the terms of the contract. In such cases the party dissatisfied may think it necessary to send the other party a letter of complaint which often contains a claim, i.e. a demand for something to which the sender of the letter, in their opinion, has the right as, for instance, a claim for damages, etc. Complaints and claims may arise in connection with inferior quality of the goods, late delivery or non-delivery of the goods, transportation and insurance, storage of the goods and in many other cases.

The sellers, for example, may hold the buyers responsible for omitting to give transport instructions in time, and the buyers may make a claim on (against) the sellers for damage to the goods caused by insufficient packing.

What is the sanction against the seller if they fail to deliver the goods by the date due? The seller is penalised. The rate of penalty is fixed in the Penalty Clause or in the Clause of Agreed and Liquidated Damages. If the delay is longer than two months, the buyer has the option of cancelling the contract altogether but the seller is to compensate for the loss incurred.

What may be the grounds for complaint coming from the seller and what are the ways of settlement? The sellers in their turn are entitled to make a claim on their counterpart if the buyers fail to meet the contractual obligations. The sellers may inflict penalties on the buyers if there is a default in payment. In an f.o.b. transaction the sellers are entitled to compensation for extra storage expenses if the buyers’ vessel bound to pick up the goods fails to call at the port in time.

154

In a c.i.f. transaction the sellers may claim the demurrage if their own vessel stays idle at the port awaiting unloading. The demurrage claims may emerge from the buyers as well if the contract is signed on f.o.b. terms of delivery. If it is a c.i.f. contract, the buyers are liable to extra storage expenses when through the sellers fault they cannot clear the goods from the customs within the allowable period. Financially, legitimate claims are in large part settled by debit or credit notes.

Concept check

1.Discuss the application of a national legislation versus the international one. What are their advantages and disadvantages?

2.What is the international law governed by?

3.How do arbitration legislations vary from country to country? What is the situation like in the Russian Federation?

4.Summarise the main buyers’ and sellers’ obligations under the contract of sale in the table

below.

5.What are possible reasons for the buyer to make a complaint on the seller?

6.When is the seller not responsible for non-execution of the liabilities?

7.What alternatives does a seller have to settle the legitimate complaint?

8.What is the claim procedure?

9.Describe the steps taken by the seller in case the buyers do not pay timely.

10.Read each statement and decide if it is true or false. Discuss them with your partner:

1)In a sales contract it is better to use a national legislation rather than the international one.

2)International civil codes are undisputedly applied in most countries.

3)It is a must to envisage Arbitration and Legislation clauses in the contract.

4)It is more often the case that it is the seller who makes a claim on the buyer.

5)The buyer can cancel the order without sending any reminders if it is stipulated in the contract.

6)It is crucial for the Bill of Lading to be clean.

7)The rate of penalty for late delivery is agreed upon after signing the contract.

8)A claim can be submitted without any time limits.

11.Discuss the importance of the Arbitration clause for the contractual parties.

LANGUAGE STUDY

1. Study the list of words and word combinations, and match them with their Russian

4.Complete the following sentences with the correct form of the words given above in 1–3.

1)The recommendations of this commission are not a must to implement, they are of consultative or … character.

2)The problem of tax exemption is to be urgently … .

3)Untimely delivery may cause the buyer to … from the contract.

4)… definitions are not allowed in any contract of sale, since only precise statements may help avoid or settle disputes.

5)A contract should stipulate a certain time period to … a claim on the partner.

6)A dissatisfied party to the contract is … to apply to arbitration in case an amicable settlement is not arrived at.

7)He habitually … the law by carrying a pistol.

8)The buyers decided to … penalty at the rate of 0.1 % of the value per each day overdue.

9)The matter, with the exception of recourse to a …, is to be submitted to arbitration.

10)The buyer should carefully follow the instruction not to … or … the equipment.

11)The buyer has the right not to send any … altogether and annul the order in the case of late delivery.

12)All disputes and differences first of all should be settled …, i.e. by way of negotiations.

13)The goods lay about in … array.

14)If a vessel stays …, demurrage is to be paid.

15)In the case of untimely payment, the buyers have to pay … .

16)If either party chooses to start legal … in the court, they must submit all relevant documents.

5.Make up your own sentences to illustrate the words in 3 in the context of making claims and sanctions.

6.Look back at 1 in the Language Study section and explain the notions of agreed and liquidated damages, credit notes and debit notes in English.

READING

LOCATION AND PROCEDURE OF ARBITRATION

Key concepts and terms

Match up the words on the left with the definitions on the right.

Text 9.3. Read the text and discuss with your partner where arbitration can take place, i.e. which countries can be seats for arbitration.

The Seat for Arbitration

Very often the parties agree upon an amicable settlement of the claim in question. If, however, an amicable settlement is not arrived at, the dispute is settled either by a court of law or, which is more often the case, by arbitration. Contracts usually stipulate that in the case of arbitration each party

157

4)On filing the Points of Claim with the Foreign Trade Arbitration Commission, the claimant shall make payment in advance on account of the fee to cover the expenses of the arbitration proceedings to the amount of 1 per cent of the sum in dispute.

Such payment shall be credited to the current account of the Russian Chamber of Commerce in the Bank for Foreign Trade of Russia in Moscow or paid in cash direct to the Russian Chamber of Commerce. The receipt for such payment shall be filed with the Foreign Trade Arbitration Commission together with the Points of Claim.

5)The Points of Claim and all accompanying documents shall be filed with the Foreign Trade Arbitration Commission with copies for each respondent.

6)On receipt of the Points of Claim, the Foreign Trade Arbitration Commission shall forthwith inform the respondent that the Points of Claim have been filed, and forward to him copies of the Points of Claim and of all accompanying documents.

Within fifteen days after receipt of such notice, the respondent shall inform the Foreign Trade Arbitration Commission which of the members of the Commission he chooses as his Arbitrator or that he leaves the choice of Arbitrator to the discretion of the President of the Foreign Trade Arbitration Commission. If the parties have agreed upon other time limits, the latter must be observed.

7)Where the respondent fails to choose an Arbitrator within the time specified in section 6 above, the President of the Foreign Trade Arbitration Commission shall appoint an Arbitrator from among the members of the Commission.

8)The Arbitrators who have been either chosen or appointed shall be informed thereof by the Foreign Trade Arbitration Commission without delay and invited to choose an Umpire from among the members of the Commission within fifteen days following the receipt of such a notice.

9)Where the Arbitrators fail to agree on an Umpire within the time specified in section 8 above, the Umpire shall be appointed by the President of the Foreign Trade Arbitration Commission from among the members of the Commission.

10)By mutual consent of the parties, the settlement of the case may, in exceptional cases, be entrusted to a sole Arbitrator.

A sole Arbitrator is either chosen directly by the parties from among the members of the Foreign Trade Arbitration Commission, or, at the request of the parties, appointed by the President of the Foreign Trade Arbitration Commission from among the members of the Commission.

11)Where an Arbitrator is unable to take part in the hearing of a case, the Foreign Trade Arbitration Commission shall notify the party concerned thereof and request that another Arbitrator be chosen from among the members of the Foreign Trade Arbitration Commission within fifteen days.

If the party fails to choose an Arbitrator within this time, the Arbitrator shall be appointed by the President of the Foreign Trade Arbitration Commission from among the members of the Commission.

12)Where an Umpire is unable to take part in the hearing of a case, the Foreign Trade Arbitration Commission shall notify the Arbitrators thereof and suggest that another Umpire be chosen within fifteen days, the provisions of paragraph 9 of these Rules being applicable.

13)Upon the request of the claimant, the President of the Foreign Trade Arbitration Commission may deal with the security for the claim.

The amount and the form of the security shall be determined by the President of the Foreign Trade Arbitration Commission.

14)The day for the hearing of the case shall be fixed by the President of the Foreign Trade Arbitration Commission by agreement with the Umpire or with the sole Arbitrator.

R e m e m b e r !

Arbitration is crucial for any commercial contract and it depends very much on the legislation agreed upon. Arbitration may be effected under international or national law and its award is usually final and binding upon both parties. The law and arbitration to be applied are to be stipulated directly in the text of the contract. It is recommended to state the exact address of the court for arbitration. It is essential to know that international law is not obligate for some countries, but the application of the international law is more honest. Anyway, the parties making a contract are to very clearly define the legislation and arbitration because the legislation and consequences of its application are very different for different countries. For example, in the USA a sheriff cares for fetching money from the party which has broken the contract. And the Russian common arbitration practice is to use the national language for arbitration as well as in documents. Do be aware of the legislation of your partner’s country for arbitration!

159