Joint Venture BADPRIM Ltd.
77/z Gheroghe Asachi street
Republic of Moldova
Phone: +37322 222 665
Fax: +37322 222 665
The Claimant is represented by
Mr Valeriu Cebotari
Respondent No. 1
Federal Customs Service of the Russian Federation
11/5 Novozavodskaya street
Respondent No. 2
Government of the Russian Federation
2 Krasnopresnenskaya naberezjnaya
Respondent No. 1 and Respondent No. 2 are represented by
Advokat Bo H Nilsson
Advokat Ginta Ahrel
Advokatfirman Lindahl KB
SE-101 39 Stockholm, Sweden
Phone: +46 8 527 70 800
Fax: +46 8 667 73 80
Respondent No. 1 and Respondent No. 2 are jointly referred to as "Respondents".
Article 65 of Annex D - General Conditions provides the following:
ARTICLE 65: Amicable dispute settlement
65.1 The Parties shall make every effort to settle amicably any dispute, which may arise between them. Once a dispute has arisen, the Parties shall notify each other In writing of their positions on the dispute and any solution, which they consider possible. If either Party deems it useful, the Parties shall meet and try and settle the dispute. A Party shall respond to a request for amicable settlement within 30 days of such a request. The maximum period laid down for reaching such a settlement shall be 120 days from the commencement of the procedure. Should the attempt to reach an amicable settlement fail or a Party fail to respond in time to requests for a settlement, either Party shall be free to proceed to the next stage of the dispute-settlement procedure by notifying the other.
Article 65.2 of Annex C - Special Conditions provides the following:
ARTICLE 65.2 is supplemented as follows:
65.2 If the amicable dispute-settlement procedure falls, the Parties may agree to fry conciliation through the European Commission. If no settlement is reached within 120 days of the start of the conciliation procedure, each Party shall be entitled to move on to the next state of the dispute-settlement procedure.
Article 66 of Annex D - General Conditions provides the following:
Article 66: Dispute settlement by litigation:
If no settlement is reached within 120 days of the start of the amicable disputesettlement procedure, each Party may seek:
a) Either a ruling from a national court
b) An arbitration ruling
in accordance with the Special Conditions of this Contract.
Article 66 of Annex C — Special Conditions contains in the relevant part the following provision:
Unless settled amicably, any dispute in respect of which the DAB's decision (if any) has not become final and binding shall be finally settled by international arbitration. Unless otherwise agreed by both Parties a dispute between the Contracting Authority and the Contractor shall be referred to the Court of Arbitration of the Chamber of Commerce and Industry in Stockholm.
In addition hereto, Annex B - Appendix to Tender - provides, in applicable parts, the following:
|Subclauses of General Conditions (GC) or Special Conditions (SC) of Contract|
|Arbitration rules||Cl. 66 of the SC||International Chamber of Commerce (ICC), Paris|
|Court of Arbitration||Cl. 66 of the SC||Chamber of Commerce and Industry, Stockholm, Sweden|
|Number of arbitrators||Cl. 66 of the SC||Three (3)|
|Place of arbitration||Cl. 66 of the SC||Stockholm, Sweden|
Based on the Parties’ submissions, the Tribunal thereafter conducted deliberations and entered a decision on jurisdiction on 6 July 2012. In this decision the Tribunal declared, one arbitrator dissenting, that the arbitration was to proceed under the ICC Rules, the SCC Board performing the tasks which otherwise would be incumbent on the ICC Court to perform, and that jurisdiction vested in the Tribunal in respect of both of the Respondents.
The Claimant requests that the Tribunal issue an award ordering the Respondents
(a) To pay the Claimant the amount of EUR 734,923.01, which constitutes taxes, customs duties, fees and late payment interests, according to Interim Payment Certificates approved by the Supervisor;
(b) To pay the Claimant fees for development of work drawings in the amount of EUR 317,000.00 and compensate the late payment interests in the amount of EUR 23,864.02;
(c) To pay the Claimant fees for the execution of additional works in the amount of EUR 755,700.56 and to compensate the late payment interests in the amount of EUR 109,492.88;
(d) To cover all expenses related to the arbitration proceedings, including the Claimant’s legal fees and all other expenses related to this proceeding; and
(e) To grant the Claimant such other relief as the Tribunal in its sole discretion may deem appropriate.
The final statement is purportedly approved by Mr Krivtsov, head of Kaliningrad Procurement Customs Office, as a representative of RCS. It should also be noted that the signatory’s, Mr Krivtsov, power of attorney remained valid to 31 December 2009 only. Thus, after such date he had no authority to approve such statement. The Claimant must have been aware of this limitation since it was in possession of the power of attorney in question.
According to Article 49.2. of the General Conditions:
Within 45 days of receiving the draft final statement of account and of all Information reasonably required for its verification, the Supervisor shall prepare the final statement of account, which determines:
a) the amount which, In his opinion, is finally due under the contract;
b) after establishing the amounts previously paid by the Contracting Authority and all sums to which the Contracting Authority is entitled under the Contract, the balance, If any...
Further, according to Article 49.3:
The Supervisor shall issue the Contracting Authority or its duly authorized representative, and the Contractor, with the final statement of account showing the final amount to which the Contractor is entitled under the contract. The Contracting Authority or its duly authorized representative and the Contractor shall sign the final statement of account as an acknowledgment of the full and final value of the work performed under the contract and shall promptly submit a signed copy to the Supervisor, However, the final statement of account shall not Include amount in dispute, which are subject of negotiations, conciliation, arbitration or litigation."
On the other hand, the Final Statement of Account provides, in fine, a statement concerning the status of the additional claims in the following words.
Given that the additional costs incurred by the BADPRIM Ltd. during implementation of the Contract No. 2007/126-11 from 07/18/2007 were not paid by the Contracting Authority, and given that the measures taken for the settlement of disputes arising between the parties in accordance with Article 65, 66 of the Special Conditions of the Contract did not lead to the positive results, we were forced to apply to the arbitration procedure.
For the purpose of discussing the Claimant’s requests for relief, the Tribunal will consider the Claimant's claims in the way they were presented in the Claimant’s Request for Arbitration (however, noting that the originally indicated amounts of compensation for late payments have been adjusted upwards and that an additional amount, defined here as Additional Exempt Taxes, has been introduced at a later stage.
(a) Claim for taxes, custom duties and charges, and penalties paid for the import of construction materials and equipment into the territory of the Russian Federation, as well the reimburse the taxes, customs duties and charges, and penalties for paid the temporary import equipment and construction machinery in the total amount of EUR 124,580.12 ("Taxes on Imports").
(b) Claim for VAT paid on goods, services and equipment purchased on the territory of the Russian Federation in the amount of EUR 487,730.90 ("Taxes on Local Goods");
(c) Claim for costs in the amount of EUR 22,131.53 for the storage in customs warehouses of materials, equipment and construction machinery, imported into the territory of the Russian Federation ("Warehousing Costs");
(d) Claim in the amount of EUR 6,869.35 which constitutes paid indirect taxes related to the issuance of working authorizations to citizens of the Republic of Moldova ("Work Permits");
(e) Claim for personal income taxes in the amount of EUR 6,853.97 paid on the territory of the Russian Federation ("Personal Taxes");
(f) Claim for property taxes in the amount of EUR 2,001.77 paid on the territory of the Russian Federation ("Property Taxes");
(g) Claim in the amount of EUR 317,000.00 which constitutes the costs for the elaboration of the working drawings ("Work Drawings");
(h) Claim for costs in the amount of EUR 755,700.56 for the execution of additional work ("Additional Works");
(i) Claim in the amount of EUR 84,755.37 as compensation for late payment of VAT, customs duties and other charges;
(j) Claim in the amount of EUR 23,863,02 as compensation for late payment of Work Drawings;
(k) Claim in the amount of EUR 133,356.90 as compensation for late payment for Additional Works;
(l) Claim in the amount of EUR 712,578.22 representing Additional Exempt Taxes;
(m) Reimburse the Claimant for its expenses related to the arbitration proceedings, including the Claimant’s legal fees and other expenses; and to
(n) Grant the Claimant such other relief as the Tribunal may deem appropriate in its sole discretion.
Regardless of this, there are no contradictions in the contract documents that would depart from the terms of the Contract. The matter of taxes is also addressed is the Special Conditions which state in Article 10.3 that:
(a) the Contracting Authority is responsible for ensuring exemption from taxes is obtained, and
(b) if there is any delay or impediment to the exemption from VAT and other taxes, the Contracting Authority shall pay the amount of the taxes claimed by the Contractor.
Article 35 (j) of the Russian Federal Law "On the Customs Tariffs" No 5003-1, of May 21, 1993, states that:
Goods imported on the customs territory of the Russian Federation as part of the gratuitous aid (assistance), as well as goods imported into or exported from such territory as part of technical assistance shall not be subject to customs duties.
Article 8.2, Chapter 1 of the Customs Code of the Russian Federation, No. 6I-FZ of May 28, 2003, states that:
The rules of the international treaty to which Russia is part shall prevail over the rules of the present Code If the rules of the international treaty differ from the rules of the present Code.
The Contract provides in its Article 4, last paragraph, the following:
VAT shall be paid in compliance with the binding regulations, national law and international agreements concerning the execution of the programme. VAT and other exempt taxes shall not be paid on the funds originating from EC funds.
The "Special Conditions", Article 10 "Assistance with Local Regulations" provides a supplemental provision to sub-article 10.3 of the General Conditions of the following contents:
The Contracting Authority is responsible for:
The Contracting Authority shall ensure that all necessary steps are made in order to obtain exemption from customs duties, VAT and any other exempt taxes from the relevant Russian Authorities In accordance with the procedures outlined In Annex VII [Procedures for Tax/Customs Exemptions / Refund of Goods, Works and Services Imported or Purchased In Russia by the Contractor/Subcontractor within the Mamonovo - Gzhechotki Border Crossing project] and with the relevant legislation of the Russian Federation.
In particular, the Contracting Authority is responsible for:
• Systematic updating Annex VII [Procedures for Tax/Customs Exemptions I Refund of Goods, Works and Services Imported or Purchased In Russia by the Contractor/Subcontractor within the Mamonovo - Gzhechotki Border Crossing project] in accordance with the relevant legislation of the Russian Federation;
• Applying for the certificate from the Commission of International Technical Assistance (CITA);
• Providing the Contractor with certified copies of the Certificates issued by the CITA
• Obtaining customs duty exemption;
• Paying customs depositary fees for the imported goods to be Incorporated or otherwise used in the implementation of the Works;
Ensuring that in the event the International agreement, entered into between the EU and Government of the Russian Federation and under which this project is funded, is different from the rules and norms contained in the Russian Federation Tax Code, that the rules and norms of the International agreement prevail.
In the case of any delay or fact which impedes the exemption from VAT and/or other taxes to be paid in the Russian Federation according to the legislation In force In the Russian Federation, the Contracting Authority shall pay the VAT, taxes and compensations claimed by the Contractor.
In addition to discussing the VAT and tax exemption issue at a large number of meetings, the Claimant has also raised the matter in written notifications to the Contracting Authority as well as to the Supervisor. Also the EU Delegation to Moscow has raised the issue in relation to the Contracting Authority (C-19). It appears that the Contracting Authority has made occasional attempts to regularise the situation, but appears to have finally resigned, see e.g. letters of 16 April 200912, 14 July 200913, 19 January 201014, 19 October 2010 and 12 November 2010, (C-25) explaining that the RCS saw no other way to solve the problem but by way of recourse to dispute resolution according to Articles 65 and 66 of the Special Conditions.
According to Article 50.1. of the General Conditions:
The Contracting Authority shall pay the Contractor sums due within 45 days of the date on which an admissible payment is registered, in accordance with Article 43 of these General Conditions. This period shall begin to run from the approval of these documents by the competent department referred to In Article 43 of the Special Conditions. These documents shall be approved either expressly or tacitly, in the absence of any written reaction in the 45 days following their receipt accompanied by the requisite documents.
Article 149.2 (19) of the Tax Code of the Russian Federation provides:
2. The sale (delivery, execution, rendering for personal needs) of the following shall not be subject to taxation on the territory of the Russian Federation:
19) goods (works, services), with exception of excisable goods, sold (executed, rendered) as part of the technical aid (assistance) In the Russian Federation in accordance with the Federal Law "On Gratuitous Aid/Asslstance to the Russian Federation and Amending Certain Legislative Acts of the Russian Federation on Taxes and on Introducing Privileges on Payments into State Non-budgetary Funds Relating to the Provision of Gratuitous Aid/Assistance to the Russian Federation.
Article 7 of the Tax Code of the Russian Federation provides:
If an international treaty of the Russian Federation contains provisions related to taxation that are different from the rules and norms stated in the present Code and the associated regulatory and legislative acts on taxation, then the rules and norms of the International treaty of the Russian Federation shall prevail.
Article 10.3 of the Special Conditions to the Contract provides:
In the case of any delay or fact which impedes the exemption from VAT and/or other taxes to be paid in the Russian Federation according to the legislation in force In the Russian Federation, the Contracting Authority shall pay the VAT, taxes and compensations claimed by the Contractor.
In sum, the Respondents assert that during implementation of the Contract
(i) there was an established legal framework of exemption from taxes and duties in the Russian Federation; and
(ii) that the Claimant has not been subject to any discriminatory or arbitrary actions, but was treated fairly as any other legal entity.
Specifically, the following failings of the Claimant have disqualified it from receiving compensation for alleged payments of exempt taxes.
(i) The Claimant has failed to demonstrate that it has fulfilled the requirements outlined in the General Rules and Annex VII.
(ii) The Claimant has not fulfilled its responsibility to conclude supply contracts without VAT pursuant to Article 2.2 of the General Rules.
(iii) The Claimant’s account for its efforts to obtain the exemption16 are pertinent to the VAT for Q3 - Q4 2007 and QI 2008 only.
In this regard the Respondents rely on the following:
(i) a letter from FCS dated 28 July 2008 (R-16) -in which the Claimant is urged to provide information on all subcontractors and details of the relevant contracts; and
(ii) discussions noted in the Minutes of Meeting on 28 August 2008 (C-15). The status of exemptions of taxes and duties was discussed during this meeting and under item 4 para 6 in fine it is stated that
CA [the Contracting Authority] advised CC [Contractor] to sign subcontracts with all the suppliers which were not VAT exempted. CC replied that it was practically impossible due to a big number of such suppliers.
The Claimant has failed to demonstrate that the particular goods or services were listed in the Annex to the certificate. Moreover, from the Minutes of Meeting on 5 June 2008 (C-23) as well as from RCS’s letter of 28 July 2008 (R-16) it follows that the Claimant was aware of this requirement and that, this notwithstanding, no subcontractors or suppliers were listed in the Annex.
The Respondents note that the Claimant has raised a claim for warehousing costs in its Request for Arbitration. It is noted that these costs have been repeatedly discussed at joint meetings involving, inter alii, Respondent No, 1, but no resolution has been achieved. The Respondents contest the claim in consideration of the fact that the Claimant has not demonstrated that it has incurred any such costs.
Dealing with the matter of Warehousing Costs the Tribunal notes that this item has been regularly listed in the Supervisor’s Interim Certificates of Payment (CA01 - CA06)19 without giving rise to the any objection on the part of the Respondents. However, the Claimant has not pointed to any provision of the Special or General Conditions or any principle of contract law that would entitle the Claimant to compensation for Warehousing Costs.
Additionally, the Claimant has not demonstrated costs incurred for personal income tax which is by definition levied on the income of individuals. Moreover, the Memorandum provides explicitly that
43. Contractors are responsible for compliance with state tax laws that apply to them in respect of the income received under the contract.
Act No 1 of 28 December 2009 (C-49), signed and approved by the Contracting Authority, serves as the basis for the reimbursement of the costs related to the elaboration of the working drawings. Act No 1 confirms that:
Given that the Contractor included the amount of EUR 113,000.00 in the Tender documentation for the correction of the working drawings prepared by the Contracting Authority, and that the decision to reduce the volume of works to finance the elaboration of the working drawings had not been implemented, pursuant to point 4 of the Contract, the additional works for the elaboration of the working drawings in the amount of EUR 317,000.00 shall be paid by the Contracting Authority.
There is a number of circumstances which show that there was no agreement reached between the Parties during these meetings.
(i) The Claimant sent a number of letters to the Contracting Authority after the abovementioned meetings asking to solve the issue;
(ii) In section 4 of the Draft Final Statement of Account it is stated that ("The Claimant"] developed the work drawings at its own expense in the absence of a decision regarding the financing of these drawings";
(iii) Act No.1 regarding acceptance of the elaboration of the working drawings is dated 28 December 2009, i.e. after the Provisional Acceptance Certificate signed on 10 December 2009, and wherein it is stated that all works were performed and no issues remained outstanding.
(iv) In the letter to the EC Delegation of 22 March 2010, the Claimant stated that the Supervisor had not taken any decision in the matter, nor had he considered the proposal from the Contracting Authority for reduction of the scope of works; and
(v) The dispute on elaboration of working drawings is not reflected in the Financial Audit Report, dated 24 September 2010 (C-14), The period of the audit is stated to be 29 August 2007 -10 December 2009.
The Claimant must have been aware that Mr Krivtsov lacked authority to sign such document, in particular since the Claimant
(i) was aware of that the RCS had refused to accept any payment obligations as stated in the letter dated 27 July 2009 (R-15); and
(ii) was in possession of RCS's internal order (C-62) clearly outlining the project management committee and Mr Krivtsov's limited authority.
It should be noted that Act No.l of 28 December 2009 is dated only a few days before Mr Krivtsov’s power of attorney expired. It should be noted that this Act contains a preprinted reference to year 2010 which was amended, by hand, to 2009, Also, as stated, the Act is issued after the Provisional Acceptance Certificate was prepared. Moreover, it is not mentioned in the subsequent letters from the Claimant to the Supervisor or in the Financial Audit Report prepared by Moore Stephens dated 24 September 2010. Its authenticity is open to doubt.
The matter of the work drawings was again discussed at a "High Level meeting" of 12 October 2007 (C-43), which was mainly dedicated to this question. The minutes from the meeting account for an extensive discussion of the subject and the decision to attempt a reduction of the scope of works and by such reduction release a part of the Contract sum for purposes of accommodating payment for work drawings. The following was stated:
Following much discussion it was decided that the best option would be to:
(i) Reduce the Scope of the Works by having the [Contracting Authority] decide on what item might be removed as to reduce the burden on the Contractor. But this has to be discussed In the light of the CoC. [...]
The minutes recorded as the Supervisor’s view that the requirement to undertake design was deleted from the tender, but that the fact that the negotiations had led to an adjustment in the Contract price, it would be necessary to examine the minutes and the adjustments made by the contractor to determine this responsibility.
The outstanding item of EUR 317,000 relating to work drawings was also listed in the Final Statement of Account of 28 December 2010 (C-4) forwarded under cover letter of 24 January 2011 to Respondent No. 1. In this account the item relating to work drawings was still listed. The account (last page, last paragraph) noted:
Given that additional costs Incurred by [the Claimant] during Implementation of the [Contract] were not paid by the Contracting Authority, and given that the measures taken for the settlement of disputes rising between the Parties in accordance with Article 65,66 of the Special Conditions of the Contract did not lead to [-] positive results, [the Claimant] was forced to apply to the Arbitration procedure.
However, it is clear that Respondent No. 1 finally agreed to make an additional payment of Euro 317,000 by way of the Act No. 1 issued on 29 December 2009 (C-49). This document has been signed by representatives of the "Customer", Respondent No. 1 as well as representatives of the Claimant and the design bureau apparently involved in the elaboration of work drawings. The Act attests in an unambiguous way to the fact that the Parties have entered into an agreement of the following contents:
Given that in the tender offer of the Contractor assigned the amount of € 113,000 on the adjustment of the work paper developed by the Contracting Authority, and given that no decision was made to reduce the amount of works to finance the development of work paper, pursuant to paragraph 4 of the Contract, the additional works on development of work paper in the amount of € 317,000 are subject for payment [by] the Contracting Authority.
The Respondents have invoked a letter of RCS of 16 April 2009 (R-13), informing that the Contract shall be funded by the EC and that "co-financing from the federal budget is not foreseen". It then makes reference to the dispute resolution procedure provided in Articles 65 and 66 of the Contract.
Article 4 of the Contract Agreement and Article 43.1 of the Special Conditions to the Contract serve as the basis for the reimbursement of costs for additional works:
The Contracting Authority shall pay for sums payable under the Contract in excess of the limit of the EC Contribution as defined In article 4 of the Contract Agreement.
Furthermore, the Respondents note that the Claimant has failed to refute the following requests for reduction of the amount:
(a) EUR 291,380.02 - the very purpose of Administrative Order No. 2 was to settle the additional works pertaining to vertical levelling without changes to the Contract sum. The scope of works was reduced so as to free resources for additional works. This amount is thus already paid by the Funding Agency;
(b) EUR 126,657,00 - the Claimant claims that the amount for contingencies provided for in the Contract (EUR 74,657.00) was never paid by the Funding Agency. If so, then it should be claimed from the Funding Agency and not from the Contracting Authority. As to the reduction of scope of works by not installing the warm air curtains (EUR 52,000.00), the Claimant has argued that these works were executed without payment and in spite of the reduced scope of works. No evidence is provided to substantiate this statement by the Claimant is on record, and it is denied by the Respondents.
This is a fixed price contract, implying that the Parties have agreed that the Contractor perform a specified amount of works for a (fixed) contract sum, decided in advance. From this follows with necessity that any increase in the scope of works in relation to the scope of works on which the tendered contract sum is premised entitles the Contractor to additional compensation. It is normally so that a contractor has not only a right, but also a duty to perform such additional works, A certain procedure is normally stipulated for the purpose of raising the matter of additional works with the employer and for determining their price (in the latter respect, methods are frequently agreed such as the use of unit prices and the like).
In this particular instance, i.e. a situation where "the Contractor encounters artificial obstructions or physical conditions which could not reasonably have been foreseen by an experienced Contractor", Article 19 of the General Conditions provide the requisite procedure. In such case, according to Article 19.1, the Contractor will have to notify the Supervisor, giving particulars as to the unanticipated conditions and their consequences. On receipt of such notification, the Supervisor may undertake certain steps such as asking the Contractor to provide a cost estimate and to approve such estimate (with or without modification, sub-paragraph (c)).
The Claimant has submitted five Acts (C-57) according to the following.
|Act||Date||Subject matter||Amount (EUR)|
|No. 1||15 July 2008||Additional work on installation of foundations of a volume of 293.85 m3||117,510.62|
|No. 2||22 July 2008||Additional work on installation of inspection pits in a volume of 859.4 m3||442,424.04|
|No. 4||30 March 2009||Increase of the area for parking of detained trucks||59,672.70|
|No. 5||8 April 2009||Additional pavement area at the check-point||40,397.13|
|No, 6||8 September 2009||Installation of retaining walls in a volume of 239.33 m3||95,696.07|
All of the Acts specified above have been approved by Mr V. Krivtsov along with representatives of the "Customer", the Supervisor and the design institute. The Acts include a description of the works qualified as Additional Works and include a decision by the Commission to pay compensation to the Claimant in the amounts specified above with reference to Article 43.1 of the Special Conditions. There is nothing in the work descriptions of these Acts which give reason to conclude that these are (already) covered by the work descriptions included in the Administrative Orders No. 2 and No. 4.
The Claimant’s main argument supporting the claim appears to be that
[...] the Contract is a lump sum one, and shall not be modified. The amount of EUR 1,877,428.00 shall be part of the Price of the Contract, and therefore, the total amount of the Contract shall constitute EUR 15,177,407.00 (rather than EUR 13,299,979.00).30
This statement seems to emanate from the Financial Audit Report, item (j), which in turn refers to Article 46.1 of the General Conditions. This article deals with Price revision and provides that
Unless otherwise stipulated in the Special Conditions, contracts shall be at fixed prices which shall not be revised.
Article 46.1 of the General Conditions is supplemented by Article 46.2 of the Special Conditions, providing
The Contract Price shall be deemed to have included amounts to cover the rises or falls in costs of labour, goods and other Inputs to the Works, inflation and construction cost Index in the Country and changes in currency exchange rates for the entire life of the contract. [...] and no adjustment in price will be permitted for events resulting from these effects.
The participants at the meeting also discussed two options on dealing with the shortfall of the offered price and the cunent budget of the EU Commission of EUR 13 million, the first option being that the EC Delegation would request that the RCS should fund the shortfall. If this option would prove not feasible, then
[...] the EC Delegation could explore the possibility of Increasing the budget allocated to the project or, as an alternative, deleting items from the scope of the works that would enable contract to be signed within the existing budget.
Articles 50.1 and 50.2 of the General Conditions to the Contract serve as the basis for the Claimant’s claim to receive compensation for incurred costs related to late-payment for additional works:
50.1 The Contracting Authority shall pay the Contractor sums due within 45 days of the date on which an admissible payment is registered, in accordance with Article 43 of these General Conditions. This period shall begin to run from the approval of these documents by the competent department referred to in Article 43 of the Special Conditions. These documents shall be approved either expressly or tacitly, in the absence of any written reaction In the £5 days following their receipt accompanied by the requisite documents.
50.2 Once the deadline laid down in Article 50.1 has expired, the Contractor may, within two months of late payment, claim late-payment interest;
- at the rediscount rate applied by the issuing institution of the country of the Contracting Authority where payments are in national currency:
- at the rate applied by the European Central Bank to its main refinancing transactions in Euro, as published in the Official Journal of the European Union, where payments are in Euro, on the first day of the month In which the deadline expired, plus three and a half percentage points. The late-payment Interest shall apply to the time which elapses between the date of the payment deadline (exclusive) and the date on which the Contracting Authority's account is debited (inclusive).
Articles 395(1) and 395(2) of the RF Civil Code provides:
1. Interest shall be paid for the use of someone else's funds due to their unlawful retention, evasion from their return, or late payments or due to their unfounded receipt and saving at the expense of someone else. The amount of interest payments are determined by the existing Interest rate In the Creditor’s place of residence or the Creditor's location In case of legal entitles, on the day of execution of the financial obligation or of the part thereof. If the debt is collected through the court, the Creditor's claim can be met based on the existing interest rate on the day of filing of lawsuit or the day of court decision. These norms shall be applied unless a different interest rate is established by the law or agreement.
2. If damages caused to the Creditor due the unlawful use of his funds exceed the amount of interest payments due pursuant to point 1 of this Article, then the Creditor has the right to claim compensation for damages exceeding this amount.
Article 718(1) of the RF Civil Code provides:
The beneficiary shall, in cases, amounts and order specified In the contract agreement, render assistance to the contractor during the execution of works. The contractor, in case of beneficiary's failure to fulfill this obligation, has the right to claim compensation for caused damages, including additional Idle time costs or costs caused by the modification of the contract execution period or by the increase of the agreed contract price.
As the reference to the "Contracting Authority" has been changed to relate to the "Funding Agency", it is reasonable to interpret this provision as meaning just that, i.e. that the computation of interest for delayed payments concern payments from the Funding Agency only (although the Parties may well not have considered this issue in view of the exceptional nature of a payment from the Contracting Authority).
From that date, the ECB reference rate has been quoted as follows.
8 November 2010 - 12 April 2011 : 1.25%
13 April 2011 - 12 July 2011 : 1.5%
13 July 2011 - 8 November 2011 : 1.25%
9 November 2011 - 13 December 2011 : 1%
14 December 2011 - 10 July 2012 : 0.75%
11 July 2012-7 May 2013 : 0.5%
8 May 2013 to date of the Award : 0.5%
As the Claimant has invoked Article 50.2 of the General Conditions, which provides for a default interest rate of 3.5% in excess of the ECB reference rate, this will represent the following amounts of accrued interest as per a date in proximity to the date of this Award, i.e. the date is 1 October 2013.
|As from||Up to and including||No. of days||Total Interest||Amount EUR||612 311.02||317 000.00||755 700.56|
|08 Nov 2010||12 Apr 2011||155||4.75%||12 351.07||6 394.28||15 243.41|
|13 Apr 2011||12 Jul 2011||90||5.00%||7 549.04||3 908.22||9 316.86|
|13 Jul 2011||08 Nov 2011||118||4.75%||9 402.75||4 867.90||11 604.66|
|09 Nov 2011||13 Dec 2011||34||4,50%||2 566.67||1 328.79||3 167.73|
|14 Dec 2011||10 Jul 2012||209||4.25%||14 900.97||7 714,39||18 390.44|
|11 Jul 2012||07 May 2013||300||4.00%||20 130.77||10 421.92||24 844.95|
|08 May 2013||01 Oct 2013||146||4.00%||9 796.98||5 072.00||12 091.21|
|1 052||76 698.25||39 707.51||94 659.26|
Total amount for late payment Interest EUR 211 065,01
Summing up the foregoing, the Tribunal notes that Claimant has prevailed in the following claims.
|Ref||Item||Amount in EUR|
|45. (a)||Taxes on Import||124,580.12|
|45. (b)||Taxes on Local Goods||487,730.90|
|45. (e)||Personal Taxes||6,853.97|
|45. (f)||Property Taxes||2,001.77|
|45. (g)||Work Drawings||317,000.00|
|45. (h)||Additional Works||755,700.56|
|45. (i)||Compensation for late payment of Taxes||76, 698.25|
|45. (j)||Compensation for late payment of Work Drawings||39,707.51|
|45. (k)||Compensation for late payment of Additional Works||94,659.26|
The Tribunal notes that the Claimant has initiated and pursued arbitration against two respondents, i.e. the Russian Customs Services and the Government of the Russian Federation. In its Decision on Jurisdiction of 6 July 2012, the Tribunal by majority concluded that the Contract under which the dispute has arisen was entered into by the Russian Customs Services in the name of the Russian Customs Services and on behalf of the Government of the Russian Federation. It, therefore, by necessity follows that substantive obligations can only be directed against the Government of the Russian Federation in view of the Tribunal’s finding that the Russian Customs Services has not acted on its own behalf. The Tribunal notes, however, that the Claimant has been successful on the jurisdictional issue and that the substantive issues have not been subject to separate argument by Respondent No. 1 as compared to Respondent No. 2. Therefore, irrespective of whether one were to conclude that the substantive issues have been brought against one or two of the Respondents, the cost implications have been the same; the fact that a payment obligation cannot be imposed on Respondent No. 1 will, therefore, not affect the Tribunal’s allocation of costs.
The SCC Institute has determined the arbitration costs as follows:
|Mr Christer Soderlund, Chairman|
|Mr Vladimir Khvalei, Arbitrator|
|Mr Ion Buruiana, Arbitrator|
|The SCC Institute|
|Administrative fee||EUR 23,778.00|
For these reasons, the Tribunal, by majority, renders the following
(a) THE GOVERNMENT OF THE RUSSIAN FEDERATION is ordered to pay to JV BADPRIM LTD the amount of EUR 1,828,234.09;
(b) The fees of the Tribunal and the SCC Institute are confirmed in the following amounts:
|Mr Christer Söderlund, Chairman|
|Mr Vladimir Khvalei, Arbitrator|
|Mr Ion Buruiana, Arbitrator|
|The SCC Institute|
|Administrative fee||EUR 23,778.00|
(c) THE GOVERNMENT OF THE RUSSIAN FEDERATION is ordered to pay to JV BADPRIM LTD the amount of EUR 87,021.00, constituting fees and costs and, in addition, interest according to Article 6 of the Swedish Interest Act on these amounts, from the date of this Award until payment is made.
(d) THE GOVERNMENT OF THE RUSSIAN FEDERATION is declared to be ultimately liable for the arbitration costs, determined in the total amounts of EUR 186,555.91, in the internal relationship between the Parties.
(e) Any and all other claims are dismissed.
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