Case No. SPC-28

Dispute settlement procedure and assigned claim rights

Riga, 12 May 2004

Decision

The Senate of the Supreme Court of the Republic of Latvia in the following composition – chairman of the hearing, senator I.Fridrihsons, senators O.Druks-Jaunzemis and R.Zake -, with participation of prosecutor of Prosecutor General Office Department of the Republic of Latvia M.Kucinska and attorney at law A.Duks, in an open court hearing tried the case on the protest of the Prosecutor General of the Republic of Latvia regarding the decisions by Riga Center Regional Court of 10 October 2003 and 22 December 2003 concerning application of LLC “United Graphics” on the issue of a writ of execution and application of LLC “United Graphics” and Irina Grigorovica on the issue of a new writ of execution.

Having heard the report by senator R.Zake, explanations of the A.Duks, attorney at law, and the opinion by a prosecutor M.Kucinska , who sustained the protest, the Senate of Supreme Court of the Republic of Latvia

established:

In 22 February 2002 the customer LLC “Innus” and contractor LLC “Buvniecibas grupa Pilseta” concluded the contract.

Point 9.3. of the mentioned contract includes the clause of arbitration court. In accordance with this condition, disputes between the parties shall be settled in Riga Independent Arbitration Court.

In 1 July 2003 LLC “Buvniecibas grupa Pilseta” as an assignor and LLC “United Graphics” as an assignee concluded the Assignment agreement. The assignor, pursuant to Articles 1793-1810 of Civil Law, has assigned to the assignee its claim rights arising out of the contract concluded with LLC “Innus” on 22 February 2002.

In 12 September 2003 LLC "United Graphics" submitted to Riga Independent Arbitration Court a statement of claim against LLC "Innus" claiming to acknowledge the amendments to the contract of 22 February 2002, amendments to cost estimation, delivery-acceptance act of work and the enclosed form 2, and agreement of 27 November 2002 on the termination of the contract, as null and void since their signing as well as claiming to acknowledge the delivery-acceptance act of work as effective and collection of LVL 122.175,99, turning collection against all movable property, real estates and monetary means owned by the respondent, as well as collection of arbitration costs in the amount of LVL 1895,71.

According to judgment of 29 September 2003 of Riga Independent Arbitration court the claim of LLC "United Graphics" was partly sustained.

T he amendments to the contract of 22 February 2002, amendments to cost estimation, delivery-acceptance act of work and the enclosed form 2, and agreement of 25 November 2002 on the termination of the contract and amendment to agreement of 27 November 2002 were acknowledged as null and void.

The request on the enactment of the delivery-acceptance act of work as of 4 September 2002 was overruled.

The principal sum in the amount of LVL 39. 667,60, contractual penalty in the amount of LVL 82.508,39, arbitration duty – LVL 1 306,53, fee of arbitrator - LVL 300 and mailing costs- LVL 3, in total LVL 123. 786,12 were collected from LLC "Innus" in favor of LLC "United Graphics" .

The overpaid sum in the amount of LVL 289,18 was repaid to LLC “United Graphics".

As the mentioned arbitration court judgment was not voluntary executed, LLC "United Graphics", in accordance with the procedure provided in Article 534 of Civil Procedure Law, submitted to Riga Center Regional Court the application on the issue of a writ of execution for enforcement of arbitration court judgment.

According to decision of 10 October 2003 by Riga Center Regional Court the application of LLC "United Graphics" was sustained and the execution writ for the enforcement of the judgment of 29 September 2003 by Riga Independent Arbitration Court on the collection of LVL 123 175,99 was issued.

The case was tried only in the first instance court, the decision was not appealed due to reasons not depending on the participants of the case, as Article 535 of Civil Procedure Law does not provide the rights of appeal.

Prosecutor General of the Republic of Latvia submitted the protest on the cancellation of the court decision due to violation of substantial legal rules.

The protest emphasizes that the claim rights are assigned and not the dispute settlement procedure. The arbitration clause shall be deemed as a separate agreement on the dispute settlement procedure. The clause included in the mentioned contract doe not pass over to the assignee.

Having examined the case materials and considered the arguments of the protest, the Senate acknowledges that the protest shall be sustained.

In accordance with Article 534, part two, point 2 of Civil Procedure Law, a document approving a written agreement between the parties regarding dispute settlement in the arbitration court, or a notarized copy of such document, shall be enclosed to the application on the issue of a writ of execution.

LLC "United Graphics” enclosed to the above mentioned application the Contract of 22 February 2002 concluded between LLC "Innus" and LLC "Buvniecibas grupa "Pilseta"", where the arbitration clause is included in p.9.3.

The court, when issuing a writ of execution, has not taken into account that one party of the Contract LLC "Buvniecibas grupa "Pilseta"" has assigned its claim rights against LLC "Innus" to LLC "United Graphics", but LLC “United Graphics" and LLC "Innus" have not agreed on the dispute settlement in the arbitration court.

The arbitration clause, included in p.9.3. of the contract, shall be deemed as a separate agreement on the dispute settlement procedure between LLC "Innus" and LLC "Buvniecibas grupa "Pilseta"".

In accordance with Article 1800 of Civil Law the claim assignment shall be deemed as an assignment of the claim, which is the subject of the claim, but only the claim rights are passes over to the assignee, and not those contractual relations out of which these rights arise.

Hence the reference of LLC "United Graphics" to Article 18O6 of Civil Law, which provides the rights of an assignee to take over the claim with all related and on the moment of assignment existing rights, is not essential.

The mentioned rule has provided transition of civil rights that shall be differentiated from dispute settlement procedure.

Thus the arbitration clause included in the contract does not pass over to the assignee. Hence the indication of Riga Center Regional Court in the decision on dispute settlement in arbitration court an accordance with established obligations, does not comply with provisions of Article 490, part one, of Civil Procedure Law and it is a wrong conclusion that the arbitration court had grounds to adopt decision that the dispute settlement is under jurisdiction of arbitration court as provided in Article 439 of Civil Procedure Law.

At such circumstances, the decision of 10 October 2003 by Riga Center Regional Court according to which the application of LLC "United Graphics" was sustained, cannot be acknowledged as lawful.

Taking into consideration the above mentioned, together with the decision of 10 October 2003, the decision of 22 December 2003 by Riga Center Regional Court regarding issue of a writ of execution to the legatee of LLC "United Graphics" I.Grigorovica, shall be also cancelled.

Pursuant to Article 485 of Civil Procedure Law, Senate of the Supreme Court of the Republic of Latvia,

ruled:

To suspend decisions of 10 October 2003 and 22 December 2003 by Riga Center Regional Court .

To cancel decisions of 10 October 2003 and 22 December 2003 by Riga Center Regional and to forward the case for a new trial to the same court.

 

Chairman of hearing, senator I.Fridrihsons

Senators O.Druks-Jaunzemis

R.Zake

 
 
 
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