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CISG CASE PRESENTATION

China 12 October 2001 CIETAC Arbitration proceeding (Boots and clothes case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/011012c1.html]

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

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Case identification

DATE OF DECISION: 20011012 (12 October 2001)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2001/03

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: People's Republic of China (claimant)

BUYER'S COUNTRY: Poland (respondent)

GOODS INVOLVED: Boots and clothes


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 53 ; 78

Classification of issues using UNCITRAL classification code numbers:

53A [Buyer's obligations: obligation to pay price of goods];

78A [Interest on delay in receiving price or any other sum in arrears]

Descriptors: Price ; Interest

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): Unavailable

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

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

Boots and clothes case (12 October 2001)

Translation [*] by Meihua Xu [**]

Edited by Zheng Xie [***]

-   Particulars of the proceeding
-   Facts
-   [Seller]'s claim
-   Opinion of the Arbitration Tribunal
-   Award

PARTICULARS OF THE PROCEEDING

The China International Economic and Trade Arbitration Commission Shenzhen Commission (hereafter, the "Shenzhen Commission") accepted the case (case number: SHEN G2001049) according to:

   -    The arbitration clause in four sales contracts signed by Claimant [Seller], China __ Import and Export Company, and Respondent [Buyer], Poland __ Trade Company; and
 
   -  The written arbitration application submitted by [Seller].

The Arbitration Rules of the Arbitration Commission (hereafter, the "Arbitration Rules"), which became effective on 1 October 2000, apply to this case.

On 6 June 2001, the Shenzhen Commission sent the arbitration notice, the [Seller]'s arbitration application and the evidence, the Arbitration Rules, and the arbitrators' name list to the [Buyer].

The [Seller] appointed Mr. Yuan as its arbitrator. The Chairman of the Arbitration Commission appointed Ms. Wang as the [Buyer]'s arbitrator because the [Buyer] failed to appoint or ask the Chairman of the Arbitration Commission to appoint an arbitrator within the stipulated time, and appointed Ms. Xia as the Presiding Arbitrator because the two parties failed to jointly appoint or ask the Chairman of the Arbitration Commission to appoint the Presiding Arbitrator. The aforesaid three arbitrators formed the Arbitration Tribunal on 10 July 2001 to hear this case. The Secretariat of the Shenzhen Commission scheduled a court session on 21 August 2001 and sent the Arbitration Tribunal formation notice and court session notice to the parties.

A court session was held on 21 August 2001. The [Seller] attended, but the [Buyer] was absent. According to the Arbitration Rules, the Arbitration Tribunal made the award on this case by default. The agent of the [Seller] attended the court session. He made a statement on the facts and legal issues of this case and answered the Arbitration Tribunal's questions. After the court session, the Secretariat of the Arbitration Commission sent the supplementary material provided by the [Seller] to the [Buyer], but the [Buyer] provided no response.

Pursuant to Article 87 of the Arbitration Rules, the Secretariat of the Shenzhen Commission has sent all of the legal documents, notices, and material to the parties.

The Arbitration Tribunal handed down its award on 12 October 2001. The following are the facts, the Tribunal's opinion and award.

FACTS

The following are the four contracts signed by the [Buyer] and the [Seller].

      (1) On 11 August 1998, the [Buyer] and the [Seller] signed Sales Contract 98GPE-1-319 with the following terms:

      -    Goods: Boots for children;
      -    Price: The total price is US $212,660.00, CIF Hamburg;
      -    Shipment: By 10 September 1998 in installments;
      -    Payment: T/T within 30 days of B/L

      (2) On 20 January 1999, the [Buyer] and the [Seller] signed Sales Contract 99GPE-1-407 with the following terms:

      -    Goods: Lady's briefs;
      -    Price: The total price is US $73,700.00, CIF Hamburg;
      -    Shipment: By 13 March 1999 in installments;
      -    Payment: T/T within 30 days of B/L

      (3) On 20 January 1999, the [Buyer] and the [Seller] signed Sales Contract 99GPE-1-408 with the following terms:

      -    Goods: Men's briefs;
      -    Price: The total price is US $144,900.00, CIF Hamburg;
      -    Shipment: By 5 May 1999 in installments;
      -    Payment: T/T within 30 days of B/L

      (4) On 12 February 1999, the [Buyer] and the [Seller] signed Sales Contract 99GPE-1-303 with the following terms:

      -    Goods: Sport coats;
      -    Price: The total price is US $89,376.00, Hamburg;
      -    Shipment: By 20 February 1999 in installments;
      -    Payment: T/T within 30 days of B/L

The following terms were stipulated in the four contracts:

"1. Objection and compensation: If the [Buyer] objects to the quality of the goods, it shall raise the objection within 45 days after the goods arrive at the destination port by providing an inspection certificate issued by a notarized organization agreed by the [Seller]; the [Seller] is not liable for compensation for which the shipping company or the insurance company shall be liable or for damages caused by nature.

"2. Arbitration: Any dispute arising from the performance of the contract shall be settled by negotiation; if the negotiation fails, the dispute shall be submitted to the Arbitration Commission for arbitration ; the award handed down by the Arbitration Commission is final and has binding effect on both parties."

[SELLER]'S CLAIM

During the performance of the aforesaid contracts, a dispute arose between the parties. On 1 June 2001, the [Seller] filed the arbitration application with the Shenzhen Commission, asking the Shenzhen Commission to rule that:

  1. The [Buyer] shall make the payment in arrears of US $330,500 and interest of renminbi [RMB] 462,740 (until 31 May 2001);

  2. The [Buyer] shall pay to the [Seller] RMB 360,178, which was the loss of export tax return for 1998 and 1999, and interest of RMB 50,486, totaling RMB 410,603 (until 31 May 2001);

  3. The [Buyer] shall bear the arbitration fee and the [Seller]'s attorneys' fee

[Seller]'s position

The following are the facts and reasons stated by the [Seller]

Based on the four contracts signed by the [Buyer] and the [Seller], the [Buyer] was to purchase sport coats and underwear, etc. from the [Seller] for a total price of US $407,719.20. The [Seller] delivered the goods in accordance with the contracts and completed the procedures for export customs' application and delivery of the goods. However, the [Buyer] breached the contracts by failing to make payment within the stipulated time. To the present, the [Buyer] still has not paid US $330,500 in arrears. The [Seller] has repeatedly sent letters urging the [Buyer] to make payment, and asked the Commercial Office of the Chinese Embassy in Poland and the [Seller]'s attorney to send letters to the [Buyer] as well, requesting the [Buyer] to perform its contract obligation to pay the amount in arrears; however, the [Buyer] ignored those letters.

The [Seller] made the following supplementary statement regarding the US $330,500:

The payment term agreed by the two parties is payment after delivery. The [Buyer] should have made payment within 30 days of the day of the B/L. By the end of 1999, the [Buyer] still owed the [Seller] US $330,500. On 25 November 1999, the [Buyer] made the last payment of US $40,000, and refused to make the additional payment which it should have made. [Buyer] instead raised quality problems or delay in delivery issues, and threatened the [Seller] to lower the price for the goods.

The [Buyer] neither raised its objection within the stipulated time, nor provided legally effective evidence to support its objections. Under this circumstance, the [Seller] tried to persuade the [Buyer], but Mr. Wu of the [Buyer] refused to make payment. In order to receive payment as soon as possible, the [Seller] had to divide the process of recovering the payment of US $330,500 into two stages. The first stage was to recover US $250,000 and the second was to recover US $80,000.

During the negotiation of the first stage, at the end of December 1999 -- when Mr. Wu of the [Buyer] went back to China to order goods -- in order to recover most of the price as soon as possible, the [Seller] had to agree to deduct US $60,000 under the condition that the [Buyer] would pay US $188,870 by 15 February 2000. This agreement was orally reached by Wu, __ and Zhang, Xiaowei at Jinjiang, Fujian on 20 December 1999; Wu, __ made the same promise to Yan, __, the Vice President of the [Seller], via a telephone conversation. However, after going back to Poland, Wu, __ failed to perform in accordance with the agreement, and had made no payment until February 2000, but asked the [Seller] to send a fax to re-confirm the amount.

On 22 February 2000, as requested by the [Buyer], the [Seller] confirmed the oral agreement by a written document. However, after that, the [Buyer] did not make any payment or response, with the result that the negotiation was unable to be continued. Because the [Buyer] failed to keep its promise, the settlement agreement was invalid, and the [Seller] is entitled to the full payment of US $330,500.

The [Seller] made the following statement on the calculation of the interest on the payment in arrears and the loss of tax refund.

(1) Calculation of interest

  1. According to the average interest on RMB during the period that the interest had been incurred (the average of different interest rates);

  2. Calculated by different time periods according to the order of occurrence of the payment in arrears;

  3. Method for changing US $ into RMB: based on the exchange rate after tax refund, i.e., 7.60:1:00, multiplied by the tax refund rate for different commodities; for example, tax refund rate for shoes in 1998 was 11%, so it was 7.60 1.11 = RMB 8,436; the rate for clothes in 1999 was 13%, so it was 7.60 1.13 = RMB 8,588.

(2) Calculation on loss of tax refund

  1. The period (before June 1999) to apply for export tax refund had expired when the [Buyer] made payment for goods exported in September 1998, so the [Seller] suffered losses because it was unable to apply for export tax refunds for the four contracts;

  2. If the export tax refund had been granted, the [Seller] would have been able to either decrease the demand for liquidated cash or increase the cash liquidation to keep the business running, so the [Seller] is entitled to interest on the export tax refund;

  3. In 1999, export tax refund applications were processed fast; normally the refund was granted within the month of the application;

  4. If the [Buyer] had made payment in accordance with the contracts, the entire export tax would have been been refunded within the period from November 1998 to August 1999; in the arbitration application, the [Seller] calculated the interest on the export tax refund for approximately two years.

The [Buyer] submitted no defense.

II. OPINION OF THE ARBITRATION TRIBUNAL

1. Applicable law

This case involves contracts for international sales of goods. The [Seller]'s place of business is in China and the [Buyer]'s is in Poland. Both China and Poland are Contracting States of the CISG; therefore, the CISG shall be applied.

2. Contract performance

The [Seller] alleged that it has delivered goods with the total value of US $407,719.20. After checking the export invoices provided by the [Seller], the Arbitration Tribunal notes that the [Seller] has made the following deliveries:

Contract Number   Invoice Issuing Date   Amount (US $)
98GPE1319 18 August 1998 32,076
98GPE1319 30 August 1998 40,230
98GPE1319 2 September 1998 32,076
98GPE1319 2 September 1998 34,643.70
98GPE1319 8 September 1998 40,230
99GPE1303 12 February 1999 89,376
99GPE1407 5 April 1999 75,837.50
99GPE1408 9 April 1999 63,250
Total:                US $407,719.20

The [Seller] also provided related B/L and export goods customs application forms as evidence.

The [Buyer] submitted no defense.

Based on the existing evidence, the Arbitration Tribunal deems that the goods delivered by the [Seller] under the four contracts were worth US $407,719.20.

The [Seller] alleged that the [Buyer] still owes the [Seller] US $330,500; the [Buyer] makes no defense to this. The Arbitration Tribunal notes that the [Seller] sent a fax to the [Buyer] on 22 February 2000, stating:

"Mr. Wu: as you requested, we confirm the amount of the price for the goods as follows: Based on the following amount, after US $60,000 which we have agreed were deducted, you should pay us US $188,870.00. You have promised to make a payment by 15 February this year (payment of US $100,000.00 by 20 January, and payment of the remaining amount by 15 February). It is February now; please make payment arrangements as soon as possible ..."

The Arbitration Tribunal notes that the parties had agreed to deduct US $60,000. However, the [Seller] alleged that because the [Buyer] made promises but failed to perform, the [Seller] is entitled to the full payment. The Arbitration Tribunal notes that the two parties have negotiated and reached an agreement on the payment in arrears and that, the agreement was reached with conditions and was a compromise for payment. It became invalid due to the [Buyer]'s non-performance; therefore, the [Seller] is entitled to full amount of the remaining payment.

As to the difference between the payment in arrears stated in the aforesaid letter (60,000.00 + 188,870.00 = US $248,870) and that in the [Seller]'s arbitration claim (US $330,500), the [Seller] provided explanations in the material submitted to the Arbitration Tribunal (see the supplementary explanations provided by the [Seller] on this US $330,500 in the facts part), to which the [Buyer] made no defense. However, the Arbitration Tribunal notes that in the aforesaid letter, the [Seller] has checked the material regarding the deliveries and the settlement of accounts in 1998 and 1999, confirming that:

   -    In 1998 and 1999, the [Seller] has delivered goods for a total amount of US $899,870.16 (including the four contracts in this case, totaling US $407,719.20);
 
   -    US $360,000.00 has been paid in 1998; and
 
   -  US $291,000.00 has been paid in 1999.

The Arbitration Tribunal notes that there is a difference of US $248,870.16 between the value of the goods delivered and the amount in the settlement of accounts. Based on this, the Arbitration Tribunal deems that the amount which the [Buyer] has not paid is US $248,870.16.

Based on the facts in this case, the [Seller] failed to prove that the extra amount, i.e., US $330,500 minus US $248,870.16, is also the amount which the [Buyer] owes to the [Seller] under the four contracts in this case. The Arbitration Tribunal, therefore, holds that the amount in arrears which should be paid by the [Buyer] is US $248,870.16.

(3) [Seller]'s claims

Based on the aforesaid analysis, the [Buyer] failed to make payment for the goods under the contracts in this case, which has constituted a breach, so the [Buyer] should pay US $248,870.16 in arrears.

The [Buyer] shall pay the interest on the delayed payment. The [Seller] has proposed a method of calculating the interest to which the [Buyer] did not raise objection, and the Arbitration Tribunal supports the [Seller]'s calculation method.

According to the Arbitration Tribunal's aforesaid analysis, the [Buyer] shall pay US $248,870.16 for the price of the goods under the four contracts, among which US $228,463.50 is for contracts No. 99GPE-1-303, 99GPE-1-407, and 99GPE-1-408, and US $20,406.66 is for contract No. 98GPE-1-319, so the [Buyer] shall pay interest of RMB 329,004.70, which is calculated as follows:

1. Interest from October 1998 to 31 May 2001 totals RMB 33,432.50: 20,406.66 8.436 = RMB 172,150.58.

Interest from October 1998 to August 1999: RMB 172,150.58 0.726% 11 = RMB 13,747.95.

Interest from September 1999 to 31 May 2001: RMB 172,150.58 0.5445% 21 = RMB 19,684.56.

2. Interest from April 1999 to 31 May 2001 totals RMB 295,572.20: 228,463.50 8.588 = RMB 1,962,044.50.

Interest from April 1999 to August: RMB 1,962,044.50 0.726% 5 = RMB 71,222.22.

Interest from September 1999 to 31 May 2001: RMB 1,962,044.50 0.5445% 21 = RMB 224,349.98.

Regarding the [Seller]'s claim for export tax refund, the [Seller] alleged that in 1998, the export tax refund rate for shoes was 11% and for clothes 13%, based on which the [Seller] claims that it has suffered loss of tax refund, totaling RMB 360,178.00, for the four contracts in this case due to the [Buyer]'s fault. The [Buyer] raised no objection. According to the aforesaid analysis, the Arbitration Tribunal holds that the [Buyer] shall compensate the [Seller] for the loss of tax refund. As to the interest on the tax refund, the [Seller] alleged that in 1999, the tax refund was processed fast, and basically it was refunded within the month of application, to which the [Buyer] raised no objection. Therefore, the Arbitration Tribunal sustains the [Seller]'s claim for the aforesaid interest on the tax refund, i.e., RMB 50,425.

(4) Attorneys' fee and arbitration fee

The [Buyer] shall pay the [Seller]'s attorneys' fee for this case of RMB 226,600.00.

The [Buyer] shall bear the entire arbitration fee.

THE AWARD

The Arbitration Tribunal rules that:

      (1) [Buyer] shall pay the price in arrears for the goods under the four contracts of US $248,870.16 and the interest on it of RMB 329,004.70 (calculated to 31 May 2001);

      (2) [Buyer] shall bear the [Seller]'s loss of tax refund for 1998 and 1999, which is RMB 360,178 and the interest on it of RMB 50,486, totaling RMB 410,603;

      (3) [Buyer] shall bear the [Seller]'s attorneys' fee of RMB 226,600.00;

      (4) [Buyer] shall bear the entire arbitration fee.

[Buyer] shall pay the aforesaid items (1) to (4) within 30 days of this award.

This is the final award.

PRESIDING ARBITRATOR
ARBITRATOR

12 October 2001 in Shenzhen


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of the People's Republic of China is referred to as [Seller] and Respondent of Australia is referred to as [Buyer]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB].

** Meihua Xu, LL.M. University of Pittsburgh School of Law on an Alcoa Scholarship. She received her Bachelor of Law degree, with the receipt of a Scholarship granted by the Ministry of Education, Japan, from Waseda University, Tokyo, Japan. Her focus is on International Business Law and International Business related case study.

*** Zheng Xie, LL.M. Washington University in St. Louis, LL.M., BA in Economics, University of International Business and Economics, Beijing.

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