Ribotos atsakomybės bendrove „Timber Logistik“ v. UAB „Global wood trading“

At a glance

Parties

Timber Logistik (limited liability company; applicant/award creditor) v. UAB Global wood trading (Lithuania; interested party/award debtor)

Case no.

Court of Appeal of Lithuania, civil case No. e2T-58-381/2019 (court process No. 2-60-3-00046-2019-3)

Court

Lietuvos apeliacinis teismas (Court of Appeal of Lithuania), Civil Division: Artūras Driukas (presiding and rapporteur), Asta Radzevičienė, Antanas Rudzinskas

Underlying award(s)

Award of 19 April 2019 of the Arbitration Commission of OJSC Belarusian Universal Commodity Exchange, arbitration case No. 12-03-288/2019

Treaty

New York Convention 1958, Article V

Sector

Timber trade

Outcome

Award recognised and declared enforceable in Lithuania (23 September 2019).

Amount

Award: EUR 10,790.88 in total (EUR 4,762 principal debt, EUR 5,252.69 late-payment penalties, plus arbitration fee, legal and translation costs). Court costs of EUR 680 awarded to the applicant.

The dispute

On 19 September 2018 Timber Logistik and UAB Global wood trading signed contract No. 02/5263-082 for the supply of timber, following a trade on the Belarusian Universal Commodity Exchange. Global wood trading paid only part of the price. Timber Logistik sued before the Exchange's Arbitration Commission, which on 19 April 2019 awarded the unpaid principal and contractual late-payment penalties. Global wood trading did not comply with the award and did not challenge it before the Minsk City Economic Court, so Timber Logistik applied to the Lithuanian Court of Appeal for recognition and enforcement. Global wood trading argued that the penalties were excessive, that it owed only EUR 3,200, that it had not had enough time to prepare for the arbitration or find a Belarusian lawyer, and that the parties were negotiating a settlement. It asked for the case to be sent back for a new hearing on the merits.

Key holdings

1. Recognition is not a review of the merits. Article V of the New York Convention sets out a closed list of grounds for refusal. The request to send the arbitration back for a new hearing on the merits was therefore rejected. ¶ 7
2. The award debtor did not rely on any ground in Article V(1), so the court examined only the Article V(2) grounds, which it must consider of its own motion. A debt claim between private companies is arbitrable under Article 12 of the Lithuanian Law on Commercial Arbitration. ¶¶ 9–10
3. Public policy is read as international public policy and interpreted very narrowly. Excessive penalties breach it only if they amount to legalising usury. ¶¶ 12–14
4. The penalties under clause 8.3 of the contract were 0.2% per day, rising to 2% per day after 40 days, capped at the price of the unpaid goods. They were agreed between businesses, and nothing showed the contract was obtained by coercion, fraud or threats. Although high, they were capped and do not breach public policy. ¶¶ 16–20
5. A party cannot use recognition proceedings to make up for its own failure to take part in the arbitration. The debtor had been informed of the arbitration but filed no defence. Its arguments that it lacked time to prepare and owed a smaller amount were rejected. The alleged settlement talks were not proved, and a settlement may still be concluded during enforcement. ¶¶ 18–22
6. The award was recognised and declared enforceable. The applicant was awarded EUR 680 in costs: EUR 550 for legal work and EUR 130 for translations. A further 310 Belarusian rubles of translation costs was refused for lack of proof that the work related to the case. ¶¶ 23–26; operative part

Procedural history

1. 19 September 2018The parties conclude contract No. 02/5263-082 for timber. It refers disputes to the Arbitration Commission of the Belarusian Universal Commodity Exchange.
2. 19 April 2019The Arbitration Commission upholds Timber Logistik's claim in case No. 12-03-288/2019. The award takes effect on the day it is made.
3. 15 May 2019A copy of the award is served on Global wood trading. It neither complies with the award nor challenges it.
4. 13 and 17 September 2019Global wood trading files its response and a supplement. The court reinstates the missed deadline because the debtor received notice only on 19 August 2019, one day before the deadline expired.
5. 23 September 2019The Court of Appeal of Lithuania recognises the award and declares it enforceable. Its ruling can be challenged by cassation appeal to the Supreme Court within 30 days.

Tribunal, counsel and experts

Decided by

• Artūras Driukas Judge, Lietuvos apeliacinis teismas (Court of Appeal of Lithuania) (presiding judge and rapporteur)
• Asta Radzevičienė Judge, Lietuvos apeliacinis teismas (Court of Appeal of Lithuania)
• Antanas Rudzinskas Judge, Lietuvos apeliacinis teismas (Court of Appeal of Lithuania)

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Keywords

• New York Convention
• recognition and enforcement
• Article V(2)(b)
• public policy
• international public policy
• contractual penalties
• late-payment interest
• usury
• arbitrability
• Belarusian Universal Commodity Exchange
• Belarus
• Lithuania
• timber
• no review of merits
• freedom of contract
• failure to participate in arbitration

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