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CISG CASE PRESENTATION

China 17 February 2003 CIETAC Arbitration proceeding (Tire case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/030217c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20030217 (17 February 2003)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2003/16

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: Belgium (respondent)

GOODS INVOLVED: Tires


UNCITRAL case abstract

PEOPLE'S REPUBLIC OF CHINA: China International Economic & Trade Arbitration
Commission (CIETAC) 17 February 2003 (Tire case)

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/112],
CLOUT abstract no. 1098

Reproduced with permission of UNCITRAL

Abstract prepared by He Liu

A Chinese seller and a Belgian buyer signed a contract for the sale of tyres. After the goods arrived at the destination, the seller received only a portion of the money by the agreed date of payment. Later, the buyer submitted a schedule of payments for the money owed, but failed to comply with it. Following a request from the seller, the buyer paid for another portion of the goods, after that it stopped paying. The seller applied for arbitration, and requested the Arbitration Tribunal to order the buyer to pay the rest of the sum, with interest, and to cover the costs of arbitration and other related costs.

The parties had not chosen in the contract a law to govern disputes. Since the place of business of both parties was in States Parties to the CISG, the Tribunal decided that the Convention would be the applicable law.

The Tribunal found that the contract was valid, and the seller had delivered the goods as agreed. However, despite making part of the payment, the buyer had failed to pay the full amount according to the contract and the subsequent promise to make payment. In accordance with Articles 53 and 59 of the Convention, the Tribunal found that this behaviour constituted a breach of contract. The Tribunal went on to support the request of the seller according to Articles 62, 74 and 78 CISG.

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Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 53 ; 59 ; 74 ; 78 [Also cited: Article 62 ]

Classification of issues using UNCITRAL classification code numbers:

53A [Buyer’s obligation to pay price of goods];

59B [Payment due at time fixed or determinable by contract or Convention: no need for request by seller or other formality];

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

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

Descriptors: Price ; Damages ; Interest

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

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

Tire case (17 February 2003)

Translation [*] by Meihua Xu [**]

Edited by Zheng Xie [***]

-   Particulars of the proceeding
-   Facts
-   Position of the parties
-   Opinion of the Arbitration Tribunal
-   Award

PARTICULARS OF THE PROCEEDING

The China International Economic and Trade Arbitration Commission (hereafter, the "Arbitration Commission") accepted the case (Case Number: G ___) according to:

   -    The arbitration clause in Sales Contract No. SCTR-M177 signed by Claimant [Seller], China __ Tire & Rubber Co., Ltd., and Respondent [Buyer], International __ Trading N.V. on 11 January 2001; and
 
   -  The written arbitration application submitted by [Seller] on 25 June 2002.

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

On 10 July 2002, the Secretariat of the Arbitration Commission sent to the two parties the arbitration notice and the attached documents.

On 15 July 2002, the [Seller] appointed __ as its arbitrator. On 21 August 2002, the [Buyer] appointed __ as its arbitrator. However, the [Buyer] neither prepaid the traveling expenses for its foreign arbitrator to come to Beijing as required by the Arbitration Rules, nor did it appoint another arbitrator within the stipulated time. According to Article 26 of the Arbitration Rules, the Chairman of the Arbitration Commission appointed __ as the [Buyer]'s arbitrator, and __ as the Presiding Arbitrator in this case.

The aforesaid arbitrators formed the Arbitration Tribunal on 25 September 2002 to hear this case. On the same day, the Secretariat of the Arbitration Commission sent the Arbitration Tribunal formation notice to the parties.

After discussing with the Secretariat of the Arbitration Commission, the Arbitration Tribunal scheduled a court session on 28 November 2002, and on 15 October 2002, the Secretariat of the Arbitration Commission sent notice of the court session to the [Buyer] and the [Seller].

On 15 November 2002, the arbitration agent of the [Buyer] faxed to the Arbitration Commission the Power of Attorney signed by the [Buyer] and an objection to the jurisdiction of the Arbitration Commission.

Article 6 of the Arbitration Rules stipulates that objections to the arbitration clause/arbitration jurisdiction do not affect the arbitration process according to the arbitration procedure. Pursuant to the aforesaid stipulation, the Arbitration Tribunal held the court session, as scheduled, in Beijing on 28 November 2002.

On 28 November 2002, the day of the court session, the [Buyer] faxed to the Arbitration Commission, asking to postpone the court session and again objecting to the jurisdiction of the Arbitration Tribunal and the Arbitration Commission. Article 33 of the Arbitration Rules states:

"... Any party having justified reasons may request a postponement of the hearing, but a written request must be submitted to the Secretariat of the Arbitration Commission 12 days before the date of the hearing. The Arbitration Tribunal will then decide whether to postpone the hearing or not."

The [Buyer] failed to request a postponement of the court session within the time stipulated in the Arbitration Rules, and its request lacked a justified reason, so the Arbitration Tribunal decided to hold the court session as scheduled.

The [Seller] sent its arbitration agent to attend the court session, but the [Buyer] was absent. Pursuant to Article 42 of the Arbitration Rules, the Arbitration Tribunal heard this case by default. After the court session, the [Seller] submitted supplementary documents to the Arbitration Tribunal.

On 3 December 2002, the Arbitration Commission made the following decision on jurisdiction over this case:

1. The [Buyer] and the [Seller] have an effective arbitration agreement, so the Arbitration Commission has jurisdiction over the dispute in this case;

2. The official language for the arbitration procedure in this case is Chinese;

3. The arbitration application that has been filed is legitimate and effective, and the arbitration process will be continued.

On 3 December 2002, the Arbitration Commission sent the arbitration jurisdiction decision to the [Buyer] and the [Seller], informed the [Buyer] of the court session by default, and forwarded to the [Buyer] the supplementary evidence submitted by the [Seller] after the court session.

On 23 December 2002, through its agent, the [Buyer] submitted its opinions on this case in English to the Arbitration Commission, and submitted the Chinese version on 6 January 2003.

The agent of the [Buyer] had notified the Arbitration Commission orally that it was going to submit defense and counterclaim material later, but until the day of this award, the [Buyer] has never submitted any material. The Arbitration Tribunal deems that during the arbitration process, the [Buyer] has been given sufficient opportunity to submit a response and present its opinions. According to Article 21 of the Arbitration Rules, "The progress of arbitration proceedings shall not be affected notwithstanding the failure of the Respondent to file its defense in writing ..." The Arbitration Tribunal decided to process this case based on the submitted evidence and the allegations of the parties.

This case has been concluded, and the Arbitration Tribunal handed down this award by consent within the time stipulated in the Arbitration Rules.

The following are the facts, the Tribunal's opinion and award.

FACTS

On 11 January 2001, the [Buyer] and the [Seller] signed Contract SCTR-M177 (hereafter, the "Contract") with the following terms:

   -   Goods: 28,996 __ brand tires;
   -    Specifications: Seventeen specifications, including 155/70TR13 S1011; 155/80TR13 S1010; 165/70TR13 S1011; 175/70TR14 S1011;
   -   Total price: US $499,995.20;

Remarks:

   -    Tolerance:15% more or less loading of the weight and quantity of the goods are allowed;
   -   Resale restriction: The aforesaid tires can only be sold in Europe;
   -   Filler allowed:155/80TR13 S1010 tires can be used as filler;
   -   Manufacturing country and manufacturer: China __ Tire Company;
   -   Packaging: Not necessary;
   -   Shipping mark: N/M;
   -    Shipping period: Should load all tires at the port before 20 January 2001 and ship separately;
   -   Loading port: Lianhuashan port in China;
   - Destination port: __ Belgium;
   - Insurance: [Buyer] is responsible for insurance;
   -    Payment: Ninety days; __ Bank in Belgium (hereafter, "B Bank") shall make payment to the [Seller] as a payee;
   -    Documents: The [Seller] shall provide the following documents to the bank: three sets of sea shipment invoices and two sets of packing lists;
   -    Claims: Quality objections shall be made within the warranty period based on quality guarantee document issued by the [Seller]; quantity objections shall be made within fifteen days of the arrival of the goods to the destination port. Both the aforesaid objections shall be made by providing an inspection certificate issued and notarized by an agency agreed to by the [Seller].
   -    Force majeure: The [Seller] is not liable if it is unable to deliver the goods or unable to deliver the goods within the stipulated time due to force majeure; however, it shall immediately give notice to the [Buyer] via fax in such event. If the [Buyer] requests, the [Seller] shall fax the proof issued by CIETAC or relevant agencies, showing the existence of such an impediment. The [Buyer]'s failure to obtain an import license is not considered to be force majeure.
   -    Arbitration: Any disputes arising from the performance of the Contract shall be settled by friendly negotiation. If the negotiation fails, the dispute shall be submitted to the Arbitration Commission according to the Arbitration Rules. The award of the Arbitration Commission is final and has binding effect on the parties;

POSITION OF THE PARTIES

[Seller]'s position:

In its arbitration application, the [Seller] alleged that:

After the conclusion of the Contract, the [Seller] packed the goods and delivered them to the [Buyer] via __ Container Shipping Company in accordance with the Contract, and provided corresponding invoices. On 20 February 2001, by sending documents numbered EBC01-00012, EBC01-00013, and EBC01-00014, Belgium __ Bank Shenzhen Branch notified the [Seller] that on 4 May 2001, the [Seller] would be able to withdraw US $181,995.10, US $171,200.50, and US $146,799.60, respectively, which showed that the [Seller] was able to receive a total of US $499,995.20 on 4 May 2001. However, after 4 May 2001, the [Seller] only received one of the aforesaid three payments, i.e., US $181,995.10. [Seller] did not receive the remaining two payments on time.

On 15 May 2001, the [Buyer] provided a payment schedule to the [Seller], stating that it will make the entire payment by 15 June 2001, but it failed to do so. On 11 July 2001, the [Buyer] paid US $50,000 to the [Seller] via B Bank, and on 26 July 2001, the [Buyer] sent a letter to the [Seller], refusing to make further payment, alleging difficulties in collecting payments.

The [Seller] is of the opinion that the [Buyer] has breached the Contract by delaying making payment, which has caused damages to the [Seller]; therefore, the [Seller] claims that:

   (1)    [Buyer] should pay to the [Seller] US $268,000.10 for the price of the goods and interest on the delayed payment, i.e., US $23,018.53 (temporarily calculated from 5 May 2001 to 18 June 2002 until the day of actual payment based on a 2.1/10000 daily interest rate);
 
   (2)    [Buyer] should pay the [Seller]'s expenses incurred by the arbitration process, totaling renminbi [RMB] 240,000; and
 
   (3)    [Buyer] should bear the entire arbitration fee.

[Buyer]'s remarks

On 23 December 2002, in its comments submitted to the Arbitration Commission, the [Buyer] made a statement on the performance of the Exclusive Sales Agreement entered into by the two parties on 1 October 1998, alleging that the [Seller] has breached the aforesaid agreement, but did not make a defense to the [Seller]'s claims in this case.

OPINION OF THE ARBITRATION TRIBUNAL

1. The applicable law

The [Seller]'s place of business is in China and the [Buyer]'s is in Belgium. Both China and Belgium are Contracting States of the CISG. According to Article 1(1)(a) of the CISG, the Arbitration Tribunal deems that the CISG shall be applied to this case.

2. The arbitration scope of the Arbitration Tribunal

The Arbitration Tribunal notes that the [Buyer] mentioned repeatedly in its arbitration documents that the [Seller] breached the Exclusive Sales Agreement entered into by the [Buyer] and the [Seller] on 1 October 1998 and that it was going to file an arbitration counterclaim based on the same agreement. The Arbitration Tribunal also notes that the relevant evidence shows that the two parties neither stipulated the applicable law in the aforesaid agreement, nor reached an agreement on submitting the dispute arising from the performance of that agreement to the Arbitration Commission.

The Arbitration Commission accepted this case based on the arbitration clause in the Contract. Pursuant to the arbitration clause in the Contract, the two parties agreed that any dispute arising from or in connection with the performance of the Contract shall be submitted to the Arbitration Commission for arbitration. Therefore, the Arbitration Tribunal has jurisdiction over the case according to the scope stipulated in the Contract, i.e., any dispute arising from or in connection with the performance of the Contract.

If the [Buyer] is of the opinion that the [Seller] breached the Exclusive Sales Agreement, it could claim and execute its related rights separately according to the relevant laws.

3. Performance of the Contract and determination of liability for contract violation

Based on relevant evidence and the court session, the Arbitration Tribunal ascertained the following facts:

      (1) The Contract was entered into by and between the [Buyer] and the [Seller] after a fair negotiation; therefore, the Contract is effective and has binding effect on the parties;

      (2) On 19 January, 28 January, and 3 February 2001, respectively, the [Seller] loaded the goods of seventeen specifications, totaling 28,996 tires, entrusted __ Containers Company to ship them to the [Buyer], and issued invoices accordingly;

      (3) On 20 February 2001, B Bank sent a notice to the [Seller], agreeing that it could pay US $181,995.10 on 19 April 2001, and US $171,200.50 and US $146,799.60 on 4 May 2001, which shall be paid to the [Seller]. The aforesaid payments total US $499,995.20, i.e., the total price of the goods under the Contract;

      (4) On 14 June 2002, the [Seller] received US $181,995.10, which was one of the three payments mentioned above, without receiving the remaining two payments within the time notified by B Bank;

      (5) On 15 May 2001, the [Buyer] sent a letter to the [Seller], promising that it would pay "US $100,000 within this week, US $100,000 by the end of May, and pay the remainder by 15 June 2001."

      (6) On 11 July 2001, the [Buyer] paid US $50,000 to the [Seller] through B Bank and no payment has been made afterwards.

The aforesaid facts are evidenced by the following documents:

   -    Bills of Lading No. COSU298680020, No. COSU298680021, and No. COSU298680022 issued by __ Container Company;
 
   -    Invoices No. 0252659(1) ~ -252659(6), Invoices No. 0252651(1) ~ 0252651(7), and Invoices No. 0252652(1) ~ 0252652(7) issued by the [Seller];
 
   -    Payment notices No. EBC01-00012, EBC01-00013, EBC01-00014 and payment receipt notice No. EBC01-00012 issued by B Bank;
 
   -    The fax sent by the [Buyer] to the [Seller] on 15 May 2001;
 
   -    Debtor's notices No. EBC01-00013, EBC01-00014, and OR01-00132 issued by B Bank.

Based on above facts, the Arbitration Tribunal holds that:

The [Seller] has delivered the goods under the Contract and the [Buyer] has raised no objection to the delivery, however, the [Buyer] failed to make the entire payment based on the Contract or its promise made afterwards with US $268,000.10 in arrears.

Articles 53 and 59 of the CISG stipulate that:

"The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention," and "[t]he buyer must pay the price on the date fixed by or determinable from the contract and this Convention without the need for any request or compliance with any formality on the part of the seller."

Article 62 of the CISG states that:

"The seller may require the buyer to pay the price, take delivery or perform his other obligations, unless the seller has resorted to a remedy which is inconsistent with this requirement."

Articles 74 and 78 of the CISG stipulate that:

"Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he knew or ought to have known as a possible consequence of the breach of contract"

and :

"[I]f a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, without prejudice to any claim for damages recoverable."

Based on the aforesaid facts and stipulations, the [Buyer] failed to pay the price for the goods as required in the Contract, which has constituted a contract violation.

The [Buyer] shall pay US $268,000.10 to the [Seller].

As to the [Seller]'s claim for interest on the payment in arrears, the Arbitration Tribunal deems that it was an interest on the delayed payment. Based on the aforesaid facts, this interest should have been foreseen by the [Buyer], so the [Seller] is entitled to this interest and the [Buyer] shall pay this interest due to its delayed payment. The [Seller]'s calculation on interest based on a 2/1000 daily interest rate is reasonable.

Based on related evidence, in its payment notice issued on 19 April 2001, B Bank promised a payment date of 4 May 2001 for US $171,200.50 and US $146,799.60, so the Arbitration Tribunal deems that it has basis and is reasonable for the [Seller] to calculate the interest from 5 May 2001, and the Arbitration Tribunal sustains this claim of the [Seller]. The [Buyer] shall pay the interest on the payment in arrears, i.e., US $268,000.10, calculated from 5 May 2001 to the date of actual payment based on a 2/10000 daily interest rate.

4. [Seller]'s expenses incurred by arbitration application

      (1) Article 59 of the Arbitration Rules stipulates that the Arbitration Tribunal has the right to direct the losing party to pay a reasonable amount of the expenses incurred by the winning party for the arbitration process; however, it shall not exceed 10% of the award. Based on this, the Arbitration Tribunal sustains the [Seller]'s claim for expenses incurred for the arbitration process, but RMB 240,000 claimed by the [Seller] is too high, and the Arbitration Tribunal holds that RMB 150,000 is reasonable;

      (2) This case is caused by the [Buyer]'s breach; therefore, the arbitration fee shall be borne by the [Buyer].

THE AWARD

The Arbitration Tribunal rules that:

1. [Buyer] shall pay the price of the goods, US $268,000.10 and the interest on the delayed payment. The interest shall be calculated from 5 May 2001 to the day of actual payment at a daily interest rate of 2.1/10000 (0.21/1000);

2. [Buyer] shall pay the [Seller] the expenses incurred for processing this case of RMB 150,000;

3. The arbitration fee for this case is RMB 86,386, which shall be borne by the [Buyer] entirely. The [Seller] has paid the aforesaid amount in advance; therefore, the [Buyer] shall pay RMB 86,386 to the [Seller];

The [Buyer] shall make the aforesaid payment within thirty days of the award.

This is the final award.

17 February 2003 in Beijing


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 Belgium 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.

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

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