Settling commercial disputes

A Contract defines rights and obligations of the parties involved. In case of breach of the Contract the sufferer makes a claim on the party, which fails to meet their contractual obligations. It is more often the case that it is the Buyer who makes a claim on the Seller.

Most often the Buyer makes quality and quantity claims on the Seller. The cause for complaints may be poor quality, breakage, damage, short-weight, leakage, etc.

In case of short-weight it is recompensed by a load sent separately or at the time of follow-up shipments. In case of damage or faults, the goods at the Buyer's option can be repaired all at the Seller's expense.

If the goods are missing, the Seller must necessarily locate them. Sometimes it is quite a problem as consignments may be lost when transshipped at some intermediate port or if sent to a wrong address. If the goods are not recovered, compensation must be paid by the party directly responsible for it.

The Seller in his turn is entitled to make a claim on his counterpart if the Buyer fails to meet his contractual obligations.

The Seller may inflict penalties on the Buyer if there is a default in payment.

Settling commercial disputes by arbitration is practiced if the parties cannot reach mutual understanding. In this case in accordance with the corresponding clause of the Contract the claim is submitted for arbitration, in Russia to the Arbitration Commission at the Russian Chamber of Commerce and Industry.

If the parties do not agree upon a single arbitration, each of them appoints their own. In this case the latter should elect the chairman from the same List.

The three of them form the arbitration tribunal, which considers the case and makes an award by a majority of votes. The awards of the Arbitration Commission are final and binding upon both parties and are not subject to appeal.

Arbitration expenses, which are sometimes very high, are usually borne by the loser unless otherwise agreed upon.

The arbitration clause

The Arbitration Clause is an obligatory clause of every contract in international business transactions. It includes the terms of settling commercial disputes, which may arise out of making the Contract.

The Arbitration Clause is drawn up most frequently in the following way: "Should the Sellers or the Buyers fail to settle in an amicable way any dispute or difference, which may arise out of or in connection with the present Contract the same shall be referred,to arbitration in Stockholm” . That may be the Seller or the Buyer's country; the parties may also apply to arbitration in third countries. The choice depends on the amount of the arbitration expenses. Then the clause usually stipulates that the arbitration tribunal shall consist of two arbitrators and an umpire. The party, which wishes to refer the dispute for arbitration, shall notify the other party of it by a registered letter stating the name and the seat of the appointed arbitrator who may be the citizen of any country, as well as the subject of the dispute, date and number of the Contract. The other party within 30 days of the date of the said letter shall appoint the second arbitrator who may also be the citizen of any country and shall notify the first party by a registered letter of the name and the seat of the arbitrator appointed by it.

The arbitrators shall appoint an umpire.

The arbitration award shall be adopted in accordance with the conditions of the present contract by a majority of votes within 3 months of the date of the appointment of the umpire. The award should be made out in written form, state its reasons, the distribution of arbitration costs and be signed by all the members of the arbitration tribunal.

The arbitration award shall be final and binding upon both parties and without appeal. The parties undertake to fulfill the award in time and without enforcement.