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China 10 August 2000 CIETAC Arbitration proceeding (Silicon metal case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/000810c1.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISION: 20000810 (10 August 2000)

JURISDICTION: Arbitration ; China

TRIBUNAL: China International Economic & Trade Arbitration Commission [CIETAC] (PRC), Shanghai Commission

JUDGE(S): Unavailable


CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: P.R. China (respondent)

BUYER'S COUNTRY: Unavailable (claimant)

GOODS INVOLVED: Silicon metal

Classification of issues present



Key CISG provisions at issue: Articles 25 ; 45 ; 49 ; 74 ; 75 ; 77

Classification of issues using UNCITRAL classification code numbers:

25B [Definition of fundamental breach: substantial deprivation of expectation, etc.];

45A [Buyer's remedies for breach by seller];

49A [Buyer's right to avoid contract (grounds for avoidance): fundamental breach of contract];

74A [General rules for measuring damages: loss suffered as consequence of breach];

75A2 [Damages established by substitute transaction (substitute transaction after avoidance): repurchase by aggrieved buyer];

77A [Obligation to take reasonable measures to mitigate damages]

Descriptors: Fundamental breach ; Avoidance ; Damages ; Profits, loss of ; Cover transactions ; Mitigation of loss

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Editorial remarks

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Citations to case abstracts, texts, and commentaries


(a) UNCITRAL abstract: Unavailable

(b) Other abstracts



Original language (Chinese): Chinalaw Retrieval System, Database of Arbitration Cases and Awards by Beijing Peking University Yinghua Technology Ltd. Co.; see also Zhongguo Guoji Jingji Maoyi Zhongcai Caijueshu Xuanbian [Selected Compilation of Awards of CIETAC] (1995-2002), Law Press, at page 486

Translation (English): Text presented below


English: Dong WU, CIETAC's Practice on the CISG, at nn.58, 146, 158, 179, 216, Nordic Journal of Commercial Law (2/2005)

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Case text (English translation)

Queen Mary Case Translation Programme

China International Economic & Trade Arbitration Commission
CIETAC (PRC), Shanghai Commission Arbitration Award

Silicon metal case (10 August 2000)

Translation [*] by YUAN Xiaotong [**]

Edited by JIANG Chi [***]

I.   Facts of the Case
II.  Arguments of the Parties
III. Opinion of the Arbitration Tribunal
      1. Applicable law
      2. The validity of the contracts
      3. The liability for non-performance
      4. Arbitration fees and attorneys' fees
IV. Award

In accordance with the arbitration clause contained in contracts (No. 99YCSX E23J and No. 99YCSX E222) between Claimant C&A Inc. [Buyer] and Respondent China XX Importation Co. [Seller] on 12 August 1999, and in accordance with Claimant's Application for Arbitration filed on 23 May 2000, China International Economic & Trade Arbitration Commission, Shanghai Commission ("CIETAC Shanghai Commission") accepted this arbitration case arising out of the disputes on the two contracts aforesaid.

The amount of the claim totals not more than Renminbi [RMB] 500,000; therefore, in accordance with the Arbitration Rules of CIETAC, Summary Procedure will be applicable to this case. The Arbitration Tribunal was formed with one sole arbitrator to hear the case.

The Arbitration Tribunal held the oral hearing on 12 July 2000. Respondent [Seller] did not attend the hearing, so the Arbitration Tribunal held the hearing by default. [Buyer]'s representative attended the hearing, addressed the facts and legal issues of this case and answered the questions raised by the Arbitration Tribunal. [Buyer] submitted its supplementary documents to the Arbitration Tribunal after the hearing. Meanwhile, [Seller] also tendered its written defense to the Arbitration Tribunal.

The facts of the case, the opinions of the Arbitration Tribunal and the award are presented as follows.

I. Facts of the Case

[Buyer] and [Seller] concluded two sales contracts of silicon metal, No. 99YCSX E23J and 99YCSSX E222, on 12 August 1999 [(the "Contracts")]. The Contracts provided:

[Buyer] would purchase 300 tons of silicon metal from [Seller], of which 200 tons were under contract 99YCSX E23J and 100 tons under contract 99YCSX E222. The unit price was US $710/mt FOB Chinese main ports. The sum of the two Contracts amounted to US $213,000. The price was to be paid by a letter of credit [L/C] at sight. The time of delivery was August and September 1999, respectively.

After the Contracts were concluded, [Buyer] opened the [L/C] but [Seller] did not deliver the goods. [Buyer] had to purchase alternative goods from another company to substitute for the goods subject to the contracts in dispute. [Buyer] thereby suffered economic loss because of the price difference. No agreement was reached by the parties through negotiations. Accordingly, [Buyer] filed the arbitration application with CIETAC Shanghai Commission with claims as follows:

  1. [Seller] should compensate [Buyer] the economic loss of US $57,000; and
  2. [Seller] should bear all the arbitration fees and [Buyer]'s attorneys' fees.

II. Arguments of the Parties

[Buyer]'s arguments. After the Contracts were formed, [Seller] declined to deliver the goods under the Contracts because the market price of silicon metal increased. In the middle of November 1999, after [Buyer] requested [Seller] several times but in vain to deliver the goods and the [L/C] in favor of [Buyer] had expired, [Buyer] purchased silicon metal of the same quality as under the Contracts from two other Chinese companies as the necessary measure to mitigate the loss. Since [Seller] had breached the Contracts, [Buyer]'s loss should be calculated as follows:

  1. [Buyer] bought 240 tons of silicon metal at the price of US $895 CFR Ukraine Odense from Qinghai XX Silicon Metal Smelting Ltd. Taking into account the saving of the freight of US $95/mt for the shipment from the Chinese port to Ukraine Odense, the actual loss should be US $21,600 ((895-95-710) 240).
  2. [Buyer] bought 60 tons of silicon metal at the price of US $800 FOB China Guangzhou from China Precision Machine Importation Company Xiamen Branch. The actual loss therefore should be US $5,400 ((800-710) 60).
  3. The loss of profit is US $30,000 (100/mt 300 mt).

    The aggregated amount of the losses totals US $57,000.

[Seller]'s arguments. [Seller] rebutted:

  1. The quantity of the goods. [Buyer] claimed that the quantity of goods was 300 tons. However, the two parties actually agreed to deliver only 180 tons. [Buyer] opened a [L/C] for the 180 tons of silicon metal, so the quantity of goods should be calculated as 180 tons.
  2. Breach of Contract. In accordance with the practice of international trade, the [L/C] was to be opened for [Seller] no later than 15 days prior to shipment. Since the deadline for shipment was 31 August 1999, [Buyer] should have issued the [L/C] before 20 August 1999. However, [Seller] did not receive the [L/C] from [Buyer] until 20 August 1999. It was [Buyer] who breached the Contracts first.
  3. The substitute goods. [Seller] alleged that the market price of silicon metal was US $710-735/mt in August 1999. [Buyer] had the obligation to mitigate the loss and should not have purchased the substitute goods at the price of US $800/mt.
  4. Loss of profit. [Buyer]'s claim for the loss of profit has no reasonable basis. Even if [Seller] should compensate [Buyer], the compensation should include only the actual loss.

    [Seller] alleged [Buyer] should bear the liability for its default during the performance rather than [Seller].

III. Opinion of the Arbitration Tribunal

     1. Applicable law

The Contracts in dispute contain no provisions on the governing law. Since both the parties' places of business are within States that are Contracting States of the United Nations Convention on Contracts for the International Sale of Goods (CISG) and neither party excluded the application of CISG in their contracts, the Arbitration Tribunal thereby decides that the CISG shall be the applicable law to this arbitration case. As for issues not provided by the CISG, since China was specified as the place of arbitration by the Contracts, in accordance with the principle of the closest relation, the Arbitration Tribunal shall observe the Chinese laws to decide on the issues not provided by the CISG.

     2. The validity of the contracts

The two Contracts subject to the arbitration were signed by the representatives of the two parties; they so manifested the "meeting of minds" of the parties. The execution of the Contracts conformed to the Law of the People's Republic of China on Economic Contracts Involving Foreign Interests; therefore the Contracts are legal, effective, and binding on both parties.

     3. The liability for non-performance

          A. Both Contracts in dispute were signed on 12 August 1999. [Buyer] opened the first [L/C] on 13 August 1999. The Contracts did not stipulate the time for opening the [L/C]. [Seller]'s assertion that [Buyer] failed to issue the [L/C] in 15 days prior to shipment and therefore constituted breach of contract was without ground.

          B. In compliance with the Contracts between the two parties, [Buyer] opened a [L/C] on 13 August 1999 for the amount of US $127,800 which was the total price for 180 tons of the goods at the unit price of US $710/mt. The evidence indicated that [Buyer] informed [Seller] in a fax that [Seller] might immediately deliver the 180 tons of goods in stock, of which first 120 tons might be delivered in two installments, 60 tons each, with a lapse of one or two weeks between the two installments. However, [Seller] did not deliver the goods. Accordingly, [Buyer] did not issue the second [L/C] after the issuance of the first [L/C] for the 180 tons of goods. The Arbitration Tribunal finds no evidence indicating that [Buyer] and [Seller], through negotiations, agreed to deliver only 180 tons of silicon metal. Changes to the quantity of goods would be a significant modification to a contract. Without sufficient evidence proving that the Contracts had been terminated or modified by the parties, the quantity of the goods to be delivered shall still be the amount stipulated in the Contracts.

          C. As contemplated by the Contracts, [Seller] was obligated to deliver the goods, hand over any documents relating thereto, and transfer the title in or to the goods, to [Buyer]. [Seller] did not deliver the goods. Consequently, this constituted a fundamental breach of the contract. According to Article 45 of CISG, the measure taken by [Buyer] to mitigate the loss had reasonable basis. According to Article 74 and Article 75, the Arbitration Tribunal referred to "Metal Bulletin" published by the World Steel and Metal News on 15 November 1999 in Britain. It was indicated that the market price of silicon metal was US $820-840/mt at the time [Buyer] purchased the substitute goods. The Arbitration Tribunal concludes that the price of US $800/mt at which [Buyer] bought the substitute goods was reasonable. [Seller] should compensate [Buyer] US $27,000 for the loss arising out of purchase of the substitute goods.

          D. Since the Arbitration Tribunal has supported [Buyer]'s claim of the loss for the substitute goods, this decision actually maintains the performance of the original contract. So the Arbitration Tribunal dismisses [Buyer]'s claim for the loss of profit.

     4. Arbitration fees and attorneys' fees

[Buyer]'s claims are mostly supported by the Arbitration Tribunal. The arbitration fees shall be divided between the two parties, 20% by [Buyer] and 80% by [Seller].

In accordance with Article 59 of the Arbitration Rules of CIETAC, the Arbitration Tribunal decides that [Seller] shall bear [Buyer]'s attorneys' fees.

IV. Award

The Arbitration Tribunal hereby decides:

  1. [Seller] shall compensate [Buyer] the economic loss of US $27,000;
  2. [Seller] shall pay to [Buyer] the attorney fees of RMB 18,832.80;
  3. All the other claims raised by [Buyer] are dismissed;
  4. The arbitration fees for this case shall be shared by [Buyer] and [Seller], at the rate of 20% and 80%, respectively.

This award is final.


* All translations should be verified by cross-checking against the original text. For purposes of this translation, Respondent of China is referred to as [Seller]; Claimant is referred to as [Buyer]. Amounts in the currency of the United States (dollars) are indicated as [US $]. Amounts in the currency of China (renminbi) are indicated as [RMB]. Weight unit appears as mt. (metric ton) or ton.

** YUAN Xiaotong, LL.M. candidate, Faculty of Law McGill University, Montreal Canada, 2001 to present; LL.B. Renmin University of China Law School, 2001.

*** JIANG Chi is an Associate with the New York office of Debevoise & Plimpton LLP.

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Pace Law School Institute of International Commercial Law - Last updated October 27, 2005
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