Czarnikov Group Limited v. UAB „Lietuvos cukrus“

At a glance

Parties

Czarnikov Group Limited (United Kingdom) v. UAB „Lietuvos cukrus“ (Lithuania, in restructuring)

Case no.

Civil case No. e2T-85-370/2019 (court process No. 2-60-3-00075-2019-5)

Court

Court of Appeal of Lithuania (Lietuvos apeliacinis teismas), Civil Division

Underlying award(s)

Refined Sugar Association second-tier final award of 9 May 2019, case No. 2329; earlier partial final award on jurisdiction No. 2311 of 9 August 2017

Forum and rules

Recognition and enforcement under the 1958 New York Convention and the Lithuanian Law on Commercial Arbitration

Treaty

New York Convention, Article V(1), V(2)(a), V(2)(b)

Court

Judges Artūras Driukas, Dalia Kačinskienė, Danguolė Martinavičienė (presiding and rapporteur)

Sector

Sugar trade; commodity sale

Outcome

Award recognised and declared enforceable in Lithuania (7 November 2019).

Amount

Award: EUR 539,700 damages, EUR 54,809.53 simple interest (4% a year from 7 November 2016, 914 days), 8% annual interest on EUR 594,509.53 until payment, and award costs of GBP 59,522 excl. VAT. Court costs: EUR 4,630 awarded of EUR 5,024.79 claimed; EUR 38 court fee refunded.

The dispute

Czarnikov Group Limited, a UK company, said that under contract No. 333485 of 23 July 2014 it agreed to buy 5,000 tonnes of white refined crystal sugar from UAB „Lietuvos cukrus“. Under an agreement of 14 October 2014, 2,500 tonnes were to be delivered in 2014 and the rest by the end of April 2015. The seller did not deliver 2,500 tonnes. In a Refined Sugar Association arbitration, Czarnikov obtained an award of 9 May 2019 for damages and interest, and then applied to the Court of Appeal of Lithuania for recognition and enforcement. The seller, now in restructuring, opposed through its restructuring administrator and its general director. It argued that no written arbitration agreement existed: there were only emails of 24–25 July 2014, and a contract that Czarnikov alone had signed. It also argued that the tribunal was biased and improperly composed, because Czarnikov was a member of the Association and its director had allegedly been an arbitrator. Finally, it argued that the damages were punitive and the costs excessive, contrary to Lithuanian public policy.

Key holdings

1. Jurisdiction objection rejected. The arbitral tribunal decided its own jurisdiction in its decision of 9 August 2017, and nothing showed the respondent had challenged it. The respondent's statements did not disprove the arbitration agreement found in that decision. ¶¶ 11–12
2. The claims of bias and improper composition fail. The respondent gave no concrete evidence that the tribunal was biased, and bare assertions are not enough. ¶ 13
3. The dispute is arbitrable under Article V(2)(a). Claims for damages and interest arising from a contract between private legal entities can be arbitrated. ¶ 14
4. No breach of public policy under Article V(2)(b). Public policy is read narrowly, as international public policy. The tribunal weighed both parties' proposals for the market price under section 51 of the English Sale of Goods Act and set damages at the market price on the date of breach, 7 November 2016. It awarded simple interest, not compound interest. The respondent's arguments in fact sought a review of the merits, which the court cannot carry out. ¶¶ 16–17
5. The size of the arbitration and legal costs is not a public-policy matter. Assessing those costs would mean reviewing the award de novo. ¶ 18
6. Since no ground under Article V(1) or V(2) applied, the award was recognised and declared enforceable. Czarnikov received EUR 4,630 in court costs, reduced to the maximum allowed by the Ministry of Justice Recommendations, and a refund of the EUR 38 court fee. ¶¶ 19–23; operative part

Procedural history

1. 23 July 2014Contract No. 333485 for 5,000 tonnes of white refined sugar, as alleged by the claimant.
2. 14 October 2014Agreement on the delivery schedule: 2,500 tonnes in 2014 and the rest by the end of April 2015.
3. 9 August 2017Refined Sugar Association partial final award on jurisdiction No. 2311 finds that an arbitration agreement exists.
4. 9 May 2019Refined Sugar Association second-tier final award in case No. 2329 awards damages, interest and costs to Czarnikov.
5. 7 November 2019The Court of Appeal of Lithuania recognises the award and declares it enforceable. The ruling took effect on adoption and could be appealed in cassation to the Supreme Court of Lithuania within 30 days.

Tribunal, counsel and experts

Decided by

• Danguolė Martinavičienė Judge, Court of Appeal of Lithuania (presiding judge and rapporteur)
• Artūras Driukas Judge, Court of Appeal of Lithuania
• Dalia Kačinskienė Judge, Court of Appeal of Lithuania

Run a conflict check on these names →

Keywords

• New York Convention
• recognition and enforcement
• Article V(2)(b) public policy
• Article V(2)(a) arbitrability
• Refined Sugar Association
• sugar
• written arbitration agreement
• email exchange
• competence-competence
• separability
• arbitrator bias
• punitive damages
• Sale of Goods Act 1979 section 51
• market price damages
• Lithuania
• restructuring
• no review of merits

Summary generated with AI from the published documents — refer to the award for the authoritative text.