Case No. SPC-62

On the written form of agreement, when the dispute settlement is stated to be under jurisdiction of arbitration court.

Riga, 27 November 2002

Decision

The Senate of the Supreme Court of the Republic of Latvia in the following composition – chairman of the hearing, senator R.Krauze, senators I.Septeris and M.Zagere -, with participation of a prosecutor of Prosecutor General Office of the Republic of Latvia L.Janusevska, in an open court hearing tried the case regarding the protest of the chairman of Civil Case Department of the Senate of the Supreme Court of the Republic of Latvia on decision of 27 September 2002 by Riga City Center Regional Court, by which it was ruled to issue a writ of execution in the case regarding the claim of LLC «APLAT» in Riga International Arbitration Court against LLC «Nehlsen-Rīga» on the collection of a debt.

Having heard the report by senator R. Krauze, explanations of LLC «Nehlsen-Rīga» representative M. Butans, that the protest shall be sustained, explanations of LLC «APLAT» representative M. Zeitmanis, that the protest shall be overruled and the opinion by a prosecutor of Prosecutor General Office of the Republic of Latvia L.Janusevska , that the protest shall be sustained, the Senate

established:

LLC «Felkons» as a contractor and LLC «Nehlsen-Riga-atkritumu saim­ nieciba» as a customer (hereinafter referred to as LLC «Nehlsen-Riga») on 1 November 1998. concluded agreement No. 19 on the removal of construction waste and performance of other construction related works at Stabu Street 19, Riga. Point 5.2. of the agreement provides, that disputes arising between the parties due to fulfillment of obligations under this agreement, shall be settled in compliance with the legislation existing in the Republic of Latvia.

When considering the claim submitted by LLC «Felkons» against the customer on the unpaid work in the amount of LVL 2450 and contractual penalty in the amount of LVL 1975,39, Riga City Kurzeme Regional Court by its decision of 10 April 2001 dismissed the litigation in this case, admitting that this dispute is under jurisdiction of Riga International Arbitration Court.

When considering the collateral claim, the Civil Cases Board of Riga Regional Court with its decision of 5 September 2001 left the decision of the first instance court unaltered.

In 1 October 2001 LLC «Felkons» assigned its claim rights against LLC «Nehlsen-Riga» to LLC «APLAT», which in 22 November 2001 submitted to Riga International Arbitartion Court the claim against the respondent on the collection of principal debt in the amount of LVL 2450 and contractual penalty in the amount of LVL 13 688, in total LVL 16 138 .

According to the judgment of 17 December 2001 by Riga International Arbitration Court the debt sum in the amount of LVL 2450, contractual penalty in the amount of LVL 13 688 as well as arbitration costs in the amount of LVL 520,83 were collected from LLC «Nehlsen-Riga» in favor of LLC «APLAT».

The mentioned judgment was not voluntary executed, therefore in 8 January 2002 the claimant submitted to Riga City Center Regional Court the application on the enforcement of the mentioned arbitration court judgment.

According to decision of 30 January 2002 by Riga City Center Regional Court the request of LLC «APLAT» on the issue of a writ of execution was overruled.

The Civil Cases Board of Riga Regional Court with its decision of 13 May 2002 sustained the claimant`s collateral claim and cancelled the mentioned decision.

According to decision of 27 September 2002 by Riga City Center Regional Court a writ of execution was issued for the enforcement of judgment by Riga International Arbitration Court made on 17 December 2001.

The chairman of Civil Case Department of the Senate of the Supreme Court of the Republic of Latvia submitted a protest on the decision of 27 September 2002 by Riga City Center Regional Court, asking to cancel this decision due to substantial violation of procedural rules.

The protest specifies that the only legal ground for settling a civil dispute in the arbitration court is the agreement on arbitration, the written form of which is stated in Article 492 of Civil Procedure Law. Besides, Article 534, part two, point 2 of Civil Procedure Law states that when submitting an application on the enforcement of arbitration court judgment, the document, approving a written agreement between the parties on the dispute settlement in the arbitration court, or a notarized copy of such document, shall be enclosed to the application.

The mentioned document cannot be found in the case materials; thereby Riga City Center Regional Court has acted in contradiction to Article 536, first part, points 3 and 4 of the Civil Procedure Law, when issuing a writ of execution for the enforcement of arbitration court judgment.

When assessing decision of 10 April 2001 by Riga City Kurzeme Regional Court and decision of 5 September 2001 by the Civil Cases Board of Riga Regional Court , it is noted in the protest that by this court decision the case is not tried in substance, but only some separate procedural matters are considered thus it cannot have a binding consequence. Thus Center Regional Court in its decision of 27 September 2002 has groundlessly referred to the mentioned decisions by Riga City Kurzeme Regional Court and the Civil Cases Board of Riga Regional Court, having deemed these decisions as binding in resolving the current matter.

At such conditions the court decision cannot be acknowledged lawful and legitimate.

The Senate admits that the protest shall be sustained. The decision of 27 September 2002 by Riga City Center Regional Court shall be cancelled because of substantial violation of procedural rules.

The agreement stands as a legal ground for settling a civil dispute in an arbitration court. The agreement on dispute settlement in arbitration court (agreement on arbitration court) may be concluded in a form of a separate condition in a written agreement (arbitration court clause) or in a form of a separate written agreement.

When concluding an agreement on arbitration court, the written form of the agreement (Article 492 of Civil Procedure Law) shall be complied with as an obligatory condition.

Pursuant to Article 534, part 2, point 2 of Civil Procedure Law, the party, which is asking to issue a writ of execution for enforcement of arbitration court judgment, shall enclose to the application a document, that proves a written agreement concluded between the parties on the forwarding of a dispute for settlement to an arbitration court, or a notarized copy of such document .

The materials of the case do not provide any evidence that the parties would have concluded the agreement on arbitration in compliance with requirements of part D of the Civil Procedure Law. On contrary, in 1 November 1 998 the parties concluded the agreement in which point 5.2. states that disputes shall be settled according to general procedure provided by the legislation of the Republic of Latvia. The decision of 10 April 2001 by R i ga City Kurzeme Regional Court, according to which the litigation in the claim of LLC « Fel- kons » against LLC « Nehlsen-R i ga » on fulfillment of obligations was dismissed, is based on the incorrectly submitted draft agreement of 1 November 1998, which provided the dispute settlement in arbitration court, but which the contractual parties did not sign.

Thereby, Riga City Center Regional Court has acted in contradiction to Article 536, part one, points 3 and 4 of Civil Procedure Law when issuing a writ of execution for enforcement of arbitration court judgment.

Article 16, part three of Law “On Judiciary” and Article 96, part two of Civil Procedure Law provide that the judgment, which has come into legal force, is binding to the court when considering other cases, which are relevant to this case. Such judgment has a force of law. Taking into consideration, that the case is not tried by substance in this court decision and only some separate procedural items are settled, the court decision does not have a force of law and it cannot be binding. Therefore, the Senate does not support the objections of the claimant LLC « APLAP » regarding the protest, that the court decision, by which the litigation in the case of the claim is dismissed, is binding.

Riga City Center Regional Court in its decision of 27 September 2002 has groundlessly referred to the decision of 10 April 2001 by Riga City Kurzeme Regional Court and decision of 5 September 2001 by the Civil Cases Board of Riga Regional Court, having deemed these decisions as binding in resolving the current matter.

At such conditions the court decision cannot be acknowledged lawful and legitimate.

Point 5.2. of the agreement signed and concluded between LLC « Felkons » and LLC « Nehlsen-R ī ga » provide that disputes shall be settled in accordance with the legislation existing the Republic of Latvia. Due to this reason, a writ of execution shall not be issued on then basis of the arbitration court judgment and therefore the application on enforcement of arbitration court judgment shall be overruled.

Pursuant to Article 448, point 3 of Civil Procedure Law, the Senate of the Supreme Court of the Republic of Latvia

ruled:

To cancel the decision of 27 September 2002 by Riga City Center Regional Court and to overrule the application of LLC « APLAT » on enforcement of the arbitration court judgment.

 

Chairman of hearing, senator R.Krauze

senators I.Septeris

M.Zagere

 
 
 
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