Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography

CISG CASE PRESENTATION

China 29 September 2004 CIETAC Arbitration proceeding (India rapeseed meal case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/040929c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20040929 (29 September 2004)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2004/05

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Unavailable (respondent)

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

GOODS INVOLVED: India rapeseed meal


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 74 ; 76 ; 77 ; 78 [Also relevant: Articles 47 ; 49 ]

Classification of issues using UNCITRAL classification code numbers:

74A ; 74A1 ; 74B [General rules for measuring damages: loss suffered as consequence of breach; Includes loss of profit; Outer limits of damages: foreseeability of loss];

76B [Avoidance: damages based on current price];

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

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

Descriptors: Damages ; Profits, loss of ; Foreseeability of damages ; Mitigation of loss ; Interest

Go to Case Table of Contents

Editorial remarks

Go to Case Table of Contents

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

Go to Case Table of Contents
Case text (English translation)

Queen Mary Case Translation Programme

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

India rapeseed meal case (29 September 2004)

Translation [*] by Meihua Xu [**]

Edited by William Zheng [***]

-   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 no. G...) according to:

   -    The arbitration clause in Sales Confirmation No. 3105 (hereafter, the "Contract") signed by Claimant [Buyer], China Shenzhen __ Company, and Respondent [Seller], __ S.A., on 30 July 2002; and
 
   -    The written arbitration application submitted by [Buyer] on 3 September 2003.

This case is qualified to use the Arbitration Rules of the Arbitration Commission (hereafter, the "Arbitration Rules") which became effective on 1 October 2000.

On 29 October 2003, the Secretariat of the Arbitration Commission sent to the two parties the arbitration notice, the Arbitration Rules, the arbitrators name list, and forwarded the [Buyer]'s arbitration material to the [Seller].

On 8 December 2003, the Arbitration Commission issued (2003) Mao Zhong Zi No. __ Arbitration Tribunal formation notice, stating that Qiu, __, the arbitrator appointed by the [Buyer], Jia, __, the arbitrator appointed by the Chairman of the Arbitration Commission on behalf of the [Seller], and Wang, __, the Presiding Arbitrator appointed by the Chairman of the Arbitration Commission, formed the Arbitration Tribunal to hear this case.

Later, the Arbitration Commission noted that on 20 November 2003, the [Seller] had appointed Xing, __ as its arbitrator. Therefore, on 17 December 2003, the Arbitration Commission made (2003) Mao Zhong Zi No. __ Decision, informing that the Arbitration Tribunal of this case was formed by Wang, __, the Presiding Arbitrator appointed by the Chairman of the Arbitration Commission, Qiu, __, the arbitrator appointed by the [Buyer], and Xing, __, the arbitrator appointed by the [Seller].

The Arbitration Tribunal examined the written materials provided by the parties and held two court sessions in Beijing on 16 February 2004, and 28 June 2004, respectively. The [Seller] and the [Buyer] sent their arbitration agents to the court sessions. They made statements and arguments on the facts and legal issues, answered the Arbitration Tribunal's questions, and cross-examined the evidence submitted by the opposite party. After the court session, the parties submitted supplementary written opinions.

Due to the complexity of this case, the Arbitration Tribunal was unable to make a decision within the period stipulated in the Arbitration Rules (by 8 September 2004), therefore, the Arbitration Tribunal asked the Secretariat of the Arbitration Commission to postpone the deadline for making decision on this case for one month. After a discussion based on the stipulations in the Arbitration Rules, the Secretariat of the Arbitration Commission deemed that it was necessary and with sufficient reasons for the Arbitration Tribunal to request the postponement, therefore, the deadline for making decision on this case was postponed for one month, until 8 October 2004.

This case has been concluded and the Arbitration Tribunal handed down this award within the time stipulated by the Arbitration Rules based on the existing written material and the facts ascertained at the court sessions.

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

I. FACTS

On 28 July 2002, Shenzhen ___ Trade Company (hereafter, "S Company") asked the [Buyer] to import India rapeseed meal from the [Seller], and on 30 July 2002, the [Buyer] and the [Seller] signed the Contract with the following terms:

   -    Goods: India rapeseed meal (hereafter, the "Goods");
   -    Quality: Oil protein ≥38%; water ≥12%; sand/silica fume ≥2.5%; fiber ≥12%;
   -    Quantity: 12,000 tons, 10% plus or minus is allowed;
   -    Shipping period: 5 August 2002 to 5 September 2002;
   -    Price: US $111/tons, CNF FO Zhanjiang, Huangpu, Shekou. The [Buyer] shall choose a port in South China when issuing the L/C;
   -    Payment: The [Buyer] shall issue an irrevocable spot L/C with the [Seller] as the beneficiary by 7 August 2002.

On 5 August 2002, as stipulated in the Contract, the [Buyer] issued a L/C numbered LC45A0164402 with the [Seller] as the beneficiary.

During the performance of the Contract, the two parties had a dispute. After failing to settle the dispute by negotiation, the [Buyer] filed this arbitration application.

POSITION OF THE PARTIES

[Buyer]'s position

The [Buyer] alleges that:

After the conclusion of the Contract, the [Seller] failed to deliver the Goods to the [Buyer] as required by the Contract. On 13 September 2002, the [Buyer] faxed to the [Seller], stating that the [Buyer] had given an additional seven days of grace period to the [Seller], which would not exceed eight days and that if the [Seller] failed to load the Goods within the eight days of grace period, it would be considered that the [Seller] violated the Contract, which would entitle the [Buyer] to avoid the Contract and claim compensation from the [Seller].

On 16 September 2002, the [Buyer] faxed to the [Seller], alleging that since the [Seller] failed to load the Goods within the eight-day grace period, the [Buyer] would avoid the Contract and ask the [Seller] to bear the entire losses incurred by the [Seller]'s contract violation. On the same day, the [Seller] faxed to the [Buyer], stating that the shipping was delayed because the [Seller] was unable to arrange a ship suitable to ship the Goods in this case and asking to negotiate the contract performance of this case with the [Buyer] in Shanghai on 20 September. On 17 September 2002, the [Buyer] faxed to the [Seller] to avoid the Contract.

Prior to this, on 27 August 2002, S Company and Guangzhou __ Feed Company (hereafter, "G Company") had signed Contract No. YB2002-07-01 with the following terms:

   -    Goods: S Company was to provide 3,700 tons of Goods to G Company;
   -    Quality: Oil protein ≥38%; water ≥12%; sand/silica fume ≥2.5%; fiber ≥12%;
   -    Shipping period: By 5 August 2002; the estimate arrival time is in the middle of October;
   -    Payment method and deadline: G Company shall send renminbi [RMB] 430,000 of deposit to the bank account designated by S Company within three days after the conclusion of the contract; and the remaining part shall be paid upon taking delivery of the Goods;
   -    Remarks: If G Company fails to make payment and take delivery of the Goods within three months after the Goods pass the customs entry, S Company has the right to make disposal of the Goods and confiscate the deposit; if, however, S Company fails to perform the contract within the stipulated time, it shall return double the amount of the deposit to G Company.

On the same day, 27 August 2002, S Company signed another contract, Contract No. YB2002-07-03, with Shenzhen __ Feed Company (hereafter, "F Company") with the following terms:

   -    Goods: S Company was to provide 7,800 tons of the Goods to F Company;
   -    Quality: Oil protein ≥38%; water ≥12%; sand/silica fume ≥2.5%; fiber ≥12%;
   -    Shipping period: By 5 September 2002; the estimated arrival time is at the end of September;
   -    Payment method and deadline: F Company shall send 10% of the total price of the Goods, i.e., renminbi [RMB] 900,000, as a deposit to the bank account designated by S Company within three workdays after the conclusion of the contract; and the remaining part shall be paid upon taking delivery of the Goods;
   -    Remarks: If F Company fails to make payment and take delivery of the Goods within three months after the Goods pass the customs entry, S Company has the right to make disposal of the Goods and confiscate deposit; if, however, S Company fails to perform the contract within the stipulated time, it shall return double the amount of deposit to F Company.

After the conclusions of the aforesaid two contracts, S Company received the deposit of [RMB] 900,000 paid by F Company on 27 August 2002 and received the deposit of [RMB] 430,000 on 30 August 2002.

Because the [Seller] failed to perform the contract in this case, on 30 September 2002, S Company notified G Company and F Company, respectively, that the [Seller] had not delivered the goods yet, and that S Company was unable to perform the contracts entered into with G Company and F Company. Later, based on the aforesaid two contracts, S Company returned double the amount of the deposits to G Company and F Company, respectively.

On 6 March 2003, the [Buyer] asked its attorney to notify the [Seller] that the [Seller] must take its responsibility to compensate the [Buyer] by 25 March 2003, including the contract violation fee that the [Buyer] paid to its clients, i.e., RMB 1,330,000.00 and the interest on it due to the [Seller]'s failure to deliver the Goods on time and the [Buyer]'s loss of profit of RMB 2,285,360.00 and the interest on it and that if the [Seller] fails to do so by 25 March 2003, the [Buyer] would file an arbitration claim based on law and ask the [Seller] to bear the entire contract violation liability, including but not limited to contract violation fee, loss of profit, and the entire attorneys' fee, traveling fee, and arbitration fee incurred by the arbitration process.

After receiving the aforesaid letter from the [Buyer]'s attorney, the [Seller] raised no objection to the facts and assertions stated in the letter, and the [Seller] had expressed that it would bear US $8/ton as a contract violation fee; however, the two parties failed to reach a reconciliation settlement due to their different opinions.

The [Buyer] also alleges that:

The two parties failed to stipulate the applicable law in the Contract. Since the [Buyer] and the [Seller] are in Contracting States of the CISG, the CISG should be applied, and Chinese law should be applied when there is no stipulation in the CISG.

After the conclusion of the Contract, the [Buyer] issued the L/C within the time stipulated in the Contract, and has fulfilled its contract obligation. However, the [Seller] failed to load the Goods within the eight-day grace period. Based on article 49 of the CISG, the [Seller] has fundamentally breached the Contract and the [Buyer] is entitled to avoid the Contract.

Based on article 74 of the CISG, damages for breach of contract by the [Seller] include loss of profit suffered by S Company and the [Buyer] due to the [Seller]'s non-performance of the Contract. The damages of the [Buyer] are the following:

1. The [Seller] should bear the contract violation fees of a total of RMB 1,330,000, which S Company has paid to G Company and F Company due to the [Seller]'s contract violation, and the interest on delayed payment of RMB 167,580.

      (1) Loss of contract violation fee: contract violation fee that S Company paid to G Company + the contract violation fee that S Company paid to F Company, i.e., 430,000 + 900,000 = 1,330,000;

      (2) The [Seller] should bear the loss of interest on the aforesaid amount calculated from 17 September 2002, when the [Buyer] sent the contract avoidance notice, to the day of the actual payment of the [Seller], temporarily calculated to 17 May 2004:

Calculation formula: contract violation fee of 1,330,000 × annual interest rate of 7.56% × 20/12 = RMB 167,580

2. Based on the Contract, the [Seller] should have delivered 12,000 tons of Goods to the [Buyer], of which, S Company resold 11,500 tons. However, due to the [Seller]'s contract violation, S Company was unable to deliver the 11,500 tons of goods to G Company (3,700 tons) and F Company (7,800 tons), causing loss of profit. Pursuant to article 74 of the CISG, the [Seller] should bear the loss of profit of S Company, i.e., RMB 2,744,345 and the interest on delayed payment of RMB 345,787.47 incurred by S Company.

      (1) Loss of profit:

            a) Loss of profit on 3,700 tons of goods: 3,700 tons of goods under the contract between S Company and G Company × unit price of the goods (resale price) - 3,700 tons of goods under the Contract between the [Buyer] and the [Seller] × unit price of the Contract:

3,700 × 1,160/ton - (US $111/ton × 3,700 × 8.27 [exchange rate]) = RMB 895,511

            b) Loss of profit on 7,800 tons of goods: 7,800 tons of goods under the contract between S Company and F Company × unit price of the goods (resale price) - 7,800 tons of goods under the Contract between the [Buyer] and the [Seller] × unit price of the Contract:

3,700 × 1,155/ton - (US $111/ton × 7,800 × 8.27 [exchange rate]) = RMB 1,848,834

            c) Total loss of profit: RMB 895,511 + RMB 1,848,834 = RMB 2,744,345.

      (2) The [Seller] should bear the interest on the aforesaid amount calculated from 17 September, when the [Buyer] sent the contract avoidance notice to the [Seller], to the day of the [Seller]'s actual payment. Since it is unknown when the [Seller] would make payment, the interest is temporarily calculated to 17 May 2004.

Calculation formula: loss of profit 2,744,345 × annual interest rate 7.56% × 20/12 = 345,787.47

3. The [Seller] should bear the loss of price difference for 500 tons of goods

      (1) The current price for the goods was CNF US $132 when S Company avoided its contract with [Buyer]. Article 76 of the CISG states that:

"If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale under article 75, recover the difference between the price fixed by the contract and the current price at the time of avoidance ..."

      (2) The quantity of the Contract between the [Buyer] and the [Seller] is 12,000 tons, and S Company resold 11,500 tons of goods with 500 tons unsold. Therefore, the [Seller] should bear the loss of price difference of RMB 86,835 and the loss of interest on delayed payment of RMB 10,941.21.

            a) Calculation formula on loss of price difference: 500 tons × (market price of US $132/ton - Contract price of US $111/ton) = US $10,500.00, i.e., RMB 86,835.00, based on an exchange rate of 8.27;

            b) Interest: The [Seller] should bear the interest on the aforesaid amount calculated from 17 September 2002, when the [Buyer] sent the Contract avoidance notice to the [Seller], to the day of the [Seller]'s actual payment. Since it is unknown when the [Seller] would make payment, the date is calculated to 17 May 2004 temporarily. Calculation formula: loss of price difference of 86,835 × annual interest rate 7.56% × 20/12 = 10,941.21

4. The [Seller] should bear the entire expenses incurred by the [Buyer], including but not limited to attorneys' fee and traveling fee.

Since the [Seller] severely violated the Contract by failing to deliver the Goods to the [Buyer], with the result, the [Buyer] suffered huge economic losses, therefore, the [Buyer] filed the following arbitration claims:

      (1) The [Seller] should bear the contract violation fee of RMB 1,330,000 and the interest on this delayed payment of RMB 167,580, which the [Buyer] (or S Company) paid to its clients;

      (2) The [Seller] should bear the loss of profit of RMB 2,744,345 for 11,500 tons of goods and the interest on it of RMB 345,787.47 incurred by the [Buyer] (or S Company);

      (3) The [Seller] should bear the loss of price difference for 500 tons of goods of RMB 86,835 and the interest on it of RMB 10,941.21;

      (4) The [Seller] should bear the actual expenses incurred by the [Buyer], including but not limited to the attorneys' fee and traveling fee. This is temporarily calculated to RMB 300,000;

      (5) The [Seller] should bear the entire arbitration fee;

      (6) The [Seller] should bear such other liabilities as the Arbitration Tribunal deems appropriate.

[Buyer]'s supplementary modification of its claims

After the first court session, the [Buyer] submitted supplementary opinions in which the [Buyer] modified its claims as the following and made explanations:

      (1) The Arbitration Tribunal should consider the [Buyer]'s loss of business reputation due to the [Seller]'s contract violation when making its decision;

      (2) The [Seller] should bear the contract violation fee of RMB 1,330,000, i.e., the doubled deposit which S Company paid to G Company and F Company and the interest on this delayed payment of RMB 167,580;

      (3) The loss of profit/price difference suffered by the [Buyer] under the Contract in this case calculated by two different methods:

            a) If calculating loss of profit (11,500 tons) and loss of price difference (500 tons) based on the resale price that S Company resold the goods to its clients, the [Seller] should bear RMB 2,036,762.00;

            b) If calculating based on the difference between market price and the Contract price, then the [Seller] should bear a total of RMB 2,346,629.04.

      (4) The [Seller] should bear the [Buyer]'s actual expenses for processing this case, including but not limited to the attorneys' fee and traveling fee, temporarily calculated to be RMB 300,000.00;

      (5) The [Seller] should bear the entire arbitration fee, totaling RMB 177,717.00;

      (6) The [Seller] should bear such other liabilities as the Arbitration Tribunal deems appropriate.

Regarding the aforesaid item (3), the [Buyer] makes the following explanations:

      (1) Calculating loss of profit (11,500 tons) and loss of price difference (500 tons) based on the price at which S Company resold the goods to its clients:

The formula for loss of profit suffered by S Company by reselling part of the goods is loss of profit = price difference between resale price and the Contract price - import tax - port expenses:

   -    The price difference between resale price and Contract price: The price under the Contract between the [Buyer] and the [Seller] was US $111/ton, CNF FO Zhanjiang, Huangpu, Shekou; the price under the contract between S Company and G Company was RMB 1,160/ton; the price under the contract between S Company and F Company was RMB 1,155/ton.
 
   -    Import tax: Based on preferential State policy: import tax, i.e., ad valorem tay for rapeseed meal is 5%; import agricultural goods are exempted from paying added value tax.
 
   -    Port expenses: Based on Loading-unloading, bottling-bagging and storage service agreement for international trading goods at port between S Company and Shenzhen Chiwan __ Port Company signed on 14 March 2003: "handling fee for import rapeseed meal is RMB 43/ton"

The following are the losses of profit based on the aforesaid formula:

            a) Loss of price difference on 3,700 tons of goods: 3,700 tons of goods under the contract between S Company and G Company × unit price of the goods (resale price) - 3,700 tons of goods under the Contract between the [Buyer] and the [Seller] × unit price of the Contract:

3,700 × 1,160/ton - (US $111/ton × 3,700 × 8.27 [exchange rate]) = RMB 895,511

            b) Loss of price difference on 7,800 tons of goods: 7,800 tons of goods under the contract between S Company and F Company × unit price of the goods (resale price) - 7,800 tons of goods under the Contract between the [Buyer] and the [Seller] × unit price of the Contract:

3,700 × 1,155/ton - (US $111/ton × 7,800 × 8.27 [exchange rate]) = RMB 1,848,834

            c) Total loss of price difference is: RMB 895,511 + RMB 1,848,834 = RMB 2,744,345.

      Total loss of profit is: Price difference - Import tax - Port expenses: RMB 2,744,345.00 - (3,700 tons + 7,800 tons) × US $111 × 8.27 exchange rate -5% - (3,700 tons + 7,800 tons) x RMB 43/ton = RMB 1,772,012.25.

Calculation formula on market price difference of unsold 500 ton goods under the Contract 15: 500 ton = (market price US $132 ton - Contract price US $111/ton x 8.27 [exchange rate] = RMB 86,835.00.

Market price: On 17 September 2002, when S Company declared the avoidance of the Contract, the price for India rapeseed meal was CNF US $132.00/ton.

      (2) The [Buyer] was insisting on its claim on S Company's loss of profit and loss of price difference based on market price. After doing related investigation and under the condition not to damage the [Buyer]'s interest, the [Buyer] suggests a calculation on damages based on the Contract price and the price when the Contract was avoided in accordance with article 76 of the CISG, which states that:

"If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale under article 75, recover the difference between the price fixed by the contract and the current price at the time of avoidance as well as any further damages recoverable under article 74."

      India rapeseed meal price at international market on approximately 17 September 2002:

   -    On 4 September 2002, the price offered by __ International Company was US $131/MT, CFR FO 1SB/1SP Taiwan/S China/Korea (Inchon), which indicates that the price for India rapeseed meal in south China was US $131;
 
   -    On 4 September 2002, __ International - Asia Private Company's Shanghai Branch (hereafter, "A Company")'s price offer for India rapeseed meal was US $133/mt C&FFO1 safe berth/port South China, which means that the price for India rapeseed meal in South China was US $133/ton. A Company affixed its seal on the price offer sent to the [Buyer] on 4 September 2002, which confirmed its authenticity;
 
   -    On 17 September 2002, A Company offered a price of US $132/ton, C&FFO port South China. Thus, the [Buyer] alleges that the market price for the goods in this case at the time of the avoidance of the Contract was US $132/ton, C&FFO port of South China.

India rapeseed meal is not sold internationally, therefore, there is no international market price; A Company's international trade volume of agriculture products, especially India rapeseed meal is on top level (to which the [Seller] raises no objection), therefore, its price offer could represent the current price. In addition, A Company's price offer was very close to the price for Chinese domestic rapeseed meal, therefore, the [Buyer] deems that A Company's price should be considered as the market price.

If the loss of price difference is calculated based on the market price and Contract price, then the [Buyer]'s loss of price difference would be (market price - Contract price) × quantity of the goods, which is:

(US $132/ton - US $111/ton) × 8.27 (exchange rate) × 12,000 tons = RMB 2,084,040.00

After the second court session, the [Buyer] modified its arbitration claim to:

1. The Arbitration Tribunal should consider the damage on the [Buyer]'s business reputation caused by the [Seller]'s contract violation;

2. The [Seller] should bear the contract violation fee, i.e., the loss of deposit of a total of RMB 1,330,000.00 that S Company paid to its clients, G Company and F Company, and should pay the interest on the delayed payment of RMB 201,096.00 (temporarily calculated to 17 September 2004), totaling RMB 1,531,096.00;

3. The [Seller] should bear the [Buyer]'s loss of profit and/or price difference under this Contract, i.e.:

      (1) If calculated based on the resale price at which S Company sold the goods to its clients (11,500 tons) and price difference (500 tons), the [Seller] should bear RMB 1,808,847.25 and the interest on the delayed payment of RMB 273,497.70 (temporarily calculated to 17 September 2004), totaling RMB 2,082,344.95.

or

      (2) If calculated based on the difference between market price and the Contract price, the [Seller] should pay RMB 2,084,040.00 and the interest on the delayed payment of RMB 315,106.85 to the [Buyer], totaling RMB 2,399,146.85;

4. The [Seller] should bear the entire expenses incurred by the [Buyer] to process this case, including but not limited to attorneys' fee and traveling fee, which is temporarily calculated as RMB 300,000.00;

5. The [Seller] should bear the entire arbitration fee of RMB 177,717.00;

6. The [Seller] should bear such other responsibilities as the Arbitration Tribunal considers appropriate.

Above totals (except for item 1 and item 6)

      (1) If calculating loss of profit and loss of price difference based on resale price, it is RMB 4,091,157.95, which is US $494,698.66 based on the exchange rate of 8.27;

or

      (2) If calculating based on the difference between market price and Contract price, it is RMB 4,407,959.85, which is US $533,006.03 based on the exchange rate of 8.27.

[Seller]'s defense

Regarding the [Buyer]'s arbitration claim, the [Seller] makes corresponding defense. Later, the two parties submitted written statements and corresponding evidence to state and make argument on the following key issues.

Key issues

1. Issues confirmed by the two parties

In the written statement submitted by the two parties, both parties agree that the CISG shall be applied, and the two parties have no objection to the fact that the [Seller] failed to deliver the goods;

2. Issues in dispute between the parties

      (1) Loss of contract violation fee

      [Seller]'s position

      The [Seller] alleges that the contract violation fee resulted from the domestic contracts the [Buyer] entered into with its clients, therefore, even if the loss exists, the [Seller] shall not be liable. Based on the evidence submitted by the [Buyer], the contract violation fee was under [Buyer]'s domestic resale contracts, but not the Contract in this case. The resale contracts were signed after the Contract, and nobody has informed the [Seller] of the conclusion of the resale contracts or the terms in the resale contracts. The [Buyer] is unable to prove that the [Seller] was aware of or should have been aware of its resale performance. Even if the fact alleged by the [Buyer] that the [Seller] had known the conclusion of the resale contracts, the resale contracts were signed after the conclusion of the Contract in this case, therefore, the [Seller] should not be held liable.

As to whether the contract violation fee clause can be established or whether it is reasonable, this was judged by the [Buyer] and its domestic clients. The [Seller] did not participate and has made no promise, therefore, it should not bear any responsibility.

The loss of the contract violation fees could have been avoided, however, the [Buyer] failed to mitigate the loss under the circumstance that it had time and place to purchase substitute goods. Under this situation, even if the loss of contract violation fee related to the [Seller], based on the principle that one party shall be liable for the enlarged losses due to its own fault, the [Buyer] should bear those losses. Pursuant to the aforesaid reasons, the [Seller] should not bear the interest on the contract violation fee.

      [Buyer]'s counter argument

      It is the [Seller]'s position that the contract violation fee resulted from the [Buyer]'s domestic contracts, for which the [Seller] has no obligation to make compensation. The [Buyer], however, argues that:

   -    First, the [Buyer]'s domestic contracts were based on the Contract between the [Buyer] and the [Seller], which have causal relationship;
 
   -    Second, the [Seller] could have reasonably foreseen the resale performance of the [Buyer];
 
   -    Third, the [Seller] alleges that the [Buyer] could have avoided the loss of deposit. However, there is no evidence showing that the [Buyer] had time and place to purchase the substitute goods. Therefore, the [Seller] should bear the contract violation fee which the [Buyer] ought to compensate to its client.

      (2) Calculation of [Buyer]'s loss of profit

      Concerning the situation that the [Buyer] calculates loss of profit (11,500 tons) and loss of price difference (500 tons) based on the resale price at which S Company sold to its clients.

      [Seller]'s position

      The [Seller] is of the opinion that:

            a) Loss of profit for 11,500 tons: The [Buyer] insists that its profit should be the difference between its purchase price (Contract price between the [Buyer] and the [Seller]) and the resale price to its client made by its alleged agent (the actual buyer) (contract prices in the contracts between S Company and G Company and F Company). Regarding this, the [Seller] provides the following opinions:

The [Seller] has read the entire provisions in the CISG, but failed to find that the "calculation method" of "profit" mentioned in article 74 of the CISG could be explained as the difference between the purchase price and resale price, or that the aforesaid similar conclusion could be reached. Article 74 of the CISG explicitly excludes and denies the profit calculation method of the [Buyer]. The latter part of this article states that:

"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 then knew or ought to have known, as a possible consequence of the breach of contract."

Based on the aforesaid article, damages for breach of contract by one party should be the loss which the party in breach foresaw or ought to have foreseen with the following preconditions:

   -    It should be foreseen at the time of the conclusion of the contract; and
 
   -    It should be foreseen in the light of the facts and matters of which he then knew or ought to have known.

On the contrary, if the loss was incurred due to a performance after the conclusion of the Contract, or due to a fact that the breaching party neither knew nor ought not to have known, which was beyond the foreseeability of the party in breach, then the breaching party shall not be liable for the exceeded loss.

In the instant case, when the [Buyer] and the [Seller] signed their Contract on 30 July 2002, the [Buyer]'s loss that could be foreseen by the [Seller] was the difference between the Contract price and market price, which means if the [Seller] fails to deliver the goods, and if the [Buyer] mitigates the loss to realize the purpose of the Contract, the [Buyer] only can purchase substitute goods from markets near Chinese ports, then the [Buyer]'s loss should be the difference between the price for substitute goods and the Contract price and any reasonable extra expenses incurred by the purchase of substitute goods.

The losses indicated in the [Buyer]'s calculation were based on resale performance that occurred after the conclusion of the Contract between the [Buyer] and the [Seller] (which were the resale contracts signed between the [Buyer] and its domestic clients on 27 August 2002), and the [Buyer] failed to inform the [Seller] of the conclusion of the resale contracts or the terms in that contract. Based on article 74 of the CISG, the loss was calculated based on the facts occurred after the conclusion of the Contract. Those facts were unknown to the [Seller] and were beyond the foreseeability of the [Seller], therefore, [Buyer]'s position cannot be supported by law.

            b) Loss of price difference for 500 tons of goods: For the 500 tons of goods not included in domestic resale contracts, the [Seller] agrees to calculate loss of profit based on the difference between Contract price and market price. However, the [Seller] argues that:

For losses incurred by the same goods under the same contract, the same calculation method should be applied. However, in the instant case, the [Buyer] first calculated losses based on different domestic contract prices, and then applied different calculation methods by dividing the same goods in the same contract, i.e., calculating loss of profit for 11,500 tons of goods based on its domestic contract price, and calculating the remaining 500 tons of goods based on another method. The [Buyer]'s calculation has no legal basis and is irrational.

In addition, the current price indicated in the [Buyer]'s claim was only an inquiry or price quotes offered by related business organizations, and the [Buyer] failed to prove that the aforesaid business organizations had been legally qualified and had the authority to determine the current price. Thus, the current price provided by the [Buyer] based on such organizations lacks legality and reliability, and could not be the basis to determine the current price.

      [Buyer]'s counter argument

      Regarding the [Seller]'s aforesaid statement, the [Buyer] counter argues that the [Seller] should compensate S Company the loss of profit and loss of market price difference.

Article 74 of the CISG states that:

"Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit as 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 contract in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."

It follows from the understanding of this provision:

i. Responsibility for the scope of the damages

The CISG clearly provides for damages for breach of contract equal to the loss suffered by the party, including loss of profit. From a legal point of view, this provision is designed to put the party suffering damages in the same economic position that it should have been in if the contract had been performed. The CISG especially emphasizes that it should include loss of profits because if the contract had been performed completely, the party suffering damages would have been able to receive these profits.

Article 113 of the Contract Law of the PRC states that:

"Where a party failed to perform or rendered non-conforming performance, thereby causing loss to the other party, the amount of damages payable shall be equivalent to the other party's loss resulting from the breach, including any benefit that may be accrued from performance of the contract, provided that the amount shall not exceed the likely loss resulting from the breach which was foreseen or should have been foreseen by the breaching party at the time of conclusion of the contract."

The [Buyer] alleges that it cannot be established that the [Seller] has a sound objection to the damages calculation method of the [Buyer].

   -    First, the [Buyer] claims loss of price difference between the Contract price and resale price for 11,500 tons of goods it resold to its clients, deducting related import expenses;
 
   -    Second, since it was not easy to determine loss of profit on 500 tons of goods which were not resold, the [Buyer] claims damages based on the difference between the Contract price and the current price. The legal basis for this claim was article 76 of the CISG, which stipulates that:

"If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale under article 75, recover the difference between the price fixed by the contract and the current price at the time of avoidance as well as any further damages recoverable under article 74."

Therefore, this claim of the [Buyer] has legal basis and is reasonable, which indicates that the [Buyer] claims compensation based on the facts.

ii. The different standards applied by the parties to determining the current price

      The [Buyer]'s calculation of loss of price difference is based on the Contract price and the market price, whereas the [Seller] deems that the reasonable damages of the [Buyer] should be the difference between the Contract price and the current price. After the first court session, the [Buyer] also added claims based on the aforesaid calculation method. However, the two parties have different standards on how to determine the current price.

      [Buyer]'s standard

      The [Buyer] alleges that the market price for India rapeseed meal on 17 September 2002 should be the basis to determine the current price, providing the following evidence:

   -    On 4 September 2002, Hengyao International Company's price quote for India rapeseed meal was US $131/MT - CFR FO 1SB/1SP Taiwan/S China/Korea (Inchon), which means that the price for the goods in South China was US $131/ton;
 
   -    On 4 September 2002, A Company's price offer for India rapeseed meal was US $133/mt C & F FO 1 safe berth/port South China, which indicates that the price for the goods in South China was US $133/ton;
 
   -    On 4 September 2002, A Company affixed its seal on the price offer it issued to the [Buyer], proving its authenticity;
 
   -    On 17 September 2002, A Company offered US $132/ton C & F FO port South China to the [Buyer]. Therefore, the [Buyer] deems that the current price for India rapeseed meal at the time of the avoidance of the Contract was US $132/ton C & F FO port South China.

      [Seller]'s standard

      The [Seller] however, alleges that in the instant case, even though the [Buyer] provided Hong Kong __ International Company's and International Private Company's price offers, however, those offers (CNF FO US $132/mt) are not convincing:

   -    First, the aforesaid business organizations were middlemen outside of India, therefore, their price offers contained related procedure fees and resale profits, which results in their price offers being neither accurate nor convincing;
 
   -    Second, the aforesaid offers did not mention the quality of the goods; therefore, it was unknown whether their offers were for the goods with the same quality as that for the goods under the Contract;
 
   -    Third, the aforesaid three price offers had no signatures, which had no power of evidence.

Compared with the [Buyer]'s so-called price offer, the [Report on Price of India Rapeseed Meal] (hereafter, the "Report") issued by Guangdong Province Price Bureau Certification Center provided by the [Seller] reflects the following facts:

      (1) From 15 September 2002 to 30 September 2002, the supply of India rapeseed meal was bigger than the market demand, and the middle price for India rapeseed meal CNF FO (Huangpu, Zhanjiang, Shekou) was US $110/mt;

      (2) The Report was issued by Guangdong Province Price Bureau Certification Center, which was authorized to certify the price; therefore, it is objective and authoritative;

      (3) The quality of the goods indicated in the Report was in conformity with the quality of the goods in the Contract; therefore, it is more accurate and equal to deem that the price for India rapeseed meal indicated in the Report is the current price.

Based on the price in the Report, the CNF FO price for India rapeseed meal was US $110/mt.

However, the [Buyer] does not accept the Report issued by Guangdong Province Price Bureau Certification Center.

[Seller]'s response to the [Buyer]'s evidence

Regarding the evidence submitted by the [Buyer] to prove the current price, the [Seller] gives the following opinions:

The [Buyer] provided a price quote on the Gumeng website and rapeseed meal and cotton prices in Chinese feed market. The Chinese domestic rapeseed meal price provided by the [Buyer] indicates that:

   -    On 17 September 2002, domestic rapeseed meal price at Guangzhou station was RMB 1,100/ton;
 
   -    On 19 September 2002, domestic rapeseed meal price at Guangzhou airport was RMB 1,100/ton;
 
   -    On 29 September 2002, domestic rapeseed meal price at Guangzhou Province, Guangzhou port was RMB 1,070/ton;

The aforesaid prices provided by the [Buyer] were the same as known by the [Seller], therefore, the then current price for rapeseed meal was RMB 1,070 ~ 1,100/ton.

      (3) Mitigation of damages

      [Seller]'s position

      The [Seller] points out that Article 77 of the CISG states that:

"A party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss should have been mitigated."

This article applies when a party violates the contract, and the contract performing party fails to mitigate the loss, enlarging the damages. Under this circumstance, the contract performing party is not entitled compensation for that enlarged damages.

In the instant case, after the [Buyer] avoided the Contract on 17 September 2002, it should have been able to urge S Company to purchase substitute goods from the international or domestic market to deliver goods to G Company and F Company, and at that time, it surely would have been able to purchase the goods with the same or better quality. However, under the circumstances that the [Buyer] had time and conditions to take reasonable measures to mitigate losses, the [Buyer] failed to do so, but was leaving the aforesaid two resale contracts to be unperformed; therefore, the enlarged damages should be borne by the [Buyer] itself.

      [Buyer]'s counter argument

      The [Buyer] however, counter argues that:

   -    First, the obligation to mitigate the loss mentioned in article 77 of the CISG is not an absolute obligation; it means that "a party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit".
 
   -    Second, this indicates that such measures should be taken when the circumstances allow. In the instant case, it was not practical for the [Buyer] to purchase substitute goods; therefore, the obligation to mitigate the loss is not applicable to the [Buyer] in this case.

      (4) Interest on the delayed payment

      [Buyer]'s position

      Article 78 of the CISG states that:

"If a party fails to pay the price or any other sum that is in arrears, the other party is entitles to interest on it, without prejudice to any claim for damages recoverable under article 74."

Based on the CISG, the seller bore the responsibility to compensate the buyer when the buyer avoided the contract due to the seller's breach of contract. However, until now, the [Seller] has not made any compensation, which has constituted the so-called "any other sum that is in arrear" as stated in article 78 of the CISG. Therefore, the [Buyer] is entitled interest on the delayed payment calculated from the day of the avoidance of the Contract to the day of actual payment according to the stipulations of the CISG.

      [Seller]'s position

      The [Seller] insisted that the [Buyer]'s claim for interest is not supported and, in its final representation statement, the [Seller] emphasized that "the [Buyer]'s interest calculation on the deposits was erroneous." The [Buyer] claims that the interest should be calculated from 17 September 2002. However, based on the evidence provided by the [Buyer] itself, S Company paid twice the amount of the deposit to G Company on 28 November 2002, and paid F Company's consignee, Dalian __ Trading Market __ Food and Oil Company, twice the amount of deposit on 11 February 2004. Therefore, even though the losses of deposits as alleged by the [Buyer] were established, its calculation was wrong.

      (5) Other related expenses

      The [Buyer] claims that the [Seller] should pay its attorneys' fee, traveling fee, and arbitration fee incurred by processing this case.

Regarding the [Buyer]'s aforesaid damages, the [Seller], however, argues that based on article 59 of the Arbitration Rules, the [Seller] should only compensate part of the reasonable expenses incurred by the [Buyer] for processing this case, which shall not exceed 10% of the award. Therefore, the [Buyer] should calculate this part of the damages based on the aforesaid stipulation.

II. OPINION OF THE ARBITRATION TRIBUNAL

1. The applicable law

The Arbitration Tribunal notes that the [Buyer] and the [Seller] agree to apply the CISG in this case, and to apply Chinese law when there is no stipulation in the CISG. Therefore, the Arbitration Tribunal deems that the two parties' opinions on applicable law shall be respected.

2. The facts in this case and responsibility determination

After investigation, it was found that the two parties have no dispute on the following facts:

      (1) On 30 July 2002, the [Buyer] and the [Seller] signed Sales Confirmation No. 3105, which was the Contract in this case with the following terms:

   -    Goods: India rapeseed meal (hereafter, the "Goods");
   -    Quantity: 12,000 tons, 10% plus or minus is allowed;
   -    Shipping period: 5 August 2002 to 5 September 2002;
   -    Price: US $111/tons, CNF FO Zhanjiang, Huangpu, Shekou. The [Buyer] shall choose a port in South China when issuing the L/C;
   -    Payment: The [Buyer] shall issue an irrevocable spot L/C with the [Seller] as the beneficiary by 7 August 2002.

      (2) On 5 August 2002, the [Buyer] issued L/C No. LC45A0164402 with the [Seller] as beneficiary in accordance with the Contract, and fulfilled its obligation as required by the Contract;

      (3) The [Seller] failed to deliver the goods as stipulated in the Contract;

      (4) The two parties have no dispute on the fact that the Contract was avoided on 17 September 2002.

The aforesaid facts have been confirmed by the evidence material submitted by the two parties, and are supported by the Contract, the L/C, and the corresponding faxes between the parties.

Based on the aforesaid facts, the Arbitration Tribunal deems that the Contract in this case reflects the true minds of the two parties, which is in accordance with the stipulations in the CISG and has binding effect on the parties. The [Buyer] has performed its contract obligation; however, the [Seller] failed to deliver the goods. Therefore, the [Seller] shall be liable for contract violation.

Pursuant to the court sessions and the material submitted by the two parties, the Arbitration Tribunal notes that key issue that the two parties have there dispute on was how should the [Seller] take responsibility for failing to deliver the goods, which focuses on the following two aspects:

      (1) Whether the [Seller] shall be liable for the losses on the domestic resale contracts?

      (2) How to determine the current price and how much was it when the Contract was avoided?

As to the losses resulting from domestic resale contracts, the Arbitration Tribunal notes that on 28 July 2002, two days prior to the conclusion of the Contract in this case, the [Buyer] and S Company signed an [India rapeseed meal import agreement], by which the [Buyer] accepted S Company's entrustment to import India rapeseed meal on its behalf. The quality, quantity, and price for the goods and shipping time were basically the same as those in the Contract. On 27 August 2002, as a reseller, S Company signed Contracts YB2002-07-01 and YB2002-7-03 with G Company and F Company, respectively, in which deposit amounts were stipulated.

The [Buyer] argues that due to the [Seller]'s failure to deliver the goods:

   -   S Company was unable to perform the aforesaid YB2002-07-01 and YB2002-7-03 contracts (hereafter, the "resale contracts") with G Company and F Company.
 
   -   Therefore, the [Seller] should be liable for the contract violations fees (double the amount of the deposits) S Company paid to G Company and F Company, the difference between the Contract price and the resale price (i.e., loss of profit), and loss of market price difference for 500 tons of goods.

The [Seller] counter argues that:

The [Seller] should not be liable for contract violation fee and loss of profit based on resale contracts alleged by the [Buyer] because the resale contracts were signed after the conclusion of the Contract in this case, and the [Seller] was unaware of the conclusion and the terms in the resale contract. Meanwhile, the [Seller] asserts that the [Buyer]'s compensation amount should be the difference between the contract price and the current price when the Contract was avoided on 17 September 2002.

The Arbitration Tribunal notes that article 74 of the CISG states that:

"Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit as 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 contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."

The Arbitration Tribunal ascertained that:

   -    S Company was the seller of the two resale contracts, but not the [Buyer] in this case;
 
   -    The Contract in this case was signed on 30 July 2002, and the two resale contract were signed on 27 August 2002;
 
   -    The Arbitration Tribunal fails to find sufficient evidence showing that the [Seller] foresaw or ought to have foreseen the contract violation fee (double the amount of the deposit) or the difference between the contract price and the resale price alleged by the [Buyer] in the light of the facts and matters of which [Seller] then knew or ought to have known, as a possible consequence of the breach of contract.

Thus, the Arbitration Tribunal cannot accept the [Buyer]'s claim to have the [Seller] bear the contract violation fee (double the amount of the deposit) and the difference between the contract price and the resale price.

The Arbitration Tribunal notes that after the avoidance of the Contract, the [Buyer] did not purchase substitute goods. Article 76(1) of the CISG states that:

"If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale under article 75, recover the difference between the price fixed by the contract and the current price at the time of avoidance as well as any further damages recoverable under article 74. ..."

The Arbitration Tribunal deems that based on the CISG and the [Seller]'s contract violation by failing to deliver the goods, it is reasonable for the [Seller] to pay the difference between the Contract price and the current price at the time of the avoidance of the Contract.

The Arbitration Tribunal notes that India rapeseed meal is not popular goods purchased internationally, and has no international price quote -- on this the two parties have no dispute. Therefore, the reasonable price at the time of the avoidance of the Contract shall be the basis for calculating the price difference loss in this case.

The two parties submitted evidence to show the price of India rapeseed meal at the time of the avoidance of the Contract.

The [Buyer] alleges that the price for the goods at the time of the avoidance of the Contract should be US $132/ton C & F FO port of South China, and submitted a price quote issued by Hong Kong __ International Company on 4 September 2002, showing that the price of the goods in South China was US $131/ton (US $131/MT-CFR FO 1SB/1SP Taiwan/S. China/Korea (Inchon), and the price offered by __ A Company to the [Buyer] on 4 September 2002 in South China was US $133/ton, and on 17 September 2002 was US $132/ton C & FFO port of South China. The [Buyer] also provided website address of the China Feed Trade Market (<http://market.feedtrade.com.cn>).

The prices monitored by the China Feed Trade Market on 17 September reflected different prices at different locations.

   -    In Guangdong, the price for the goods was RMB 1,100/ton; based on the information on Guangzhou port one-week trade summary issued on 23 September 2002 found on China agriculture website, the price for the goods was RMB 1,100/ton.
 
   -    The prices at Dalang, and Nanzhan stations were RMB 1,090 ~ 1,120/ton.

The [Buyer] asserts that its price was reasonable by providing the above evidence.

The Arbitration Tribunal notes that the [Seller] alleges that the price provided by the [Buyer] was not authoritative, which cannot be the basis for the calculation of damages and deems that the middle price was US $110/ton C & F FO (at Huangpu, Zhanjiang, and Shekou).

The [Seller] also provided the Report and supplementary statement issued by Guangdong Province Price Certification Bureau, with the conclusion that:

"Based on the overall market review, from August 2002, the prices for Chinese domestic rapeseed meal and India rapeseed meal were dropping ... from 15 September 2002 to 30 September 2002, the supply of rapeseed meal was bigger than the market demand, and the middle price for India rapeseed meal was US $110/ton CNF FO."

The [Seller] also provided an inspection report issued by the Food and Oil Quality Inspection Center of Nanjing University of Finance and Economics, that was instructed by the [Seller] to make comparison on the quality between domestic rapeseed meal and India rapeseed meal, with the conclusion that the overall quality of domestic rapeseed meal was better than India rapeseed meal, therefore, the [Buyer] was able to purchase domestic rapeseed meal to substitute for the goods sold under resale contracts. Meanwhile, the [Seller] provided prices offered by India suppliers, Kandla Export Corporation and Space Agencies, respectively, on 19 September 2002, indicating that the C & FFO South China port price for India rapeseed meal was US $110 ~ 111/ton.

The Arbitration Tribunal also notes that the two parties’ allegations on price have a big difference, and the prices offered by the suppliers of the two parties have big gaps. As to the Report, the Arbitration Tribunal holds that since the disclosure of the information on India rapeseed meal was not sufficient to lead to the conclusion in the Report, it is not acceptable.

For the [Seller]’s allegation that the [Buyer] could have been able to purchase domestic goods to substitute the goods in resale contracts, since the goods purchased by the [Buyer] in this case was clearly indicated as “India rapeseed meal”, therefore, the [Seller]’s allegation of purchasing substitute goods is not in accordance with the Contract and lacks of sufficient reasons. Therefore, the Arbitration Tribunal cannot support this allegation of the [Seller] either. However, the Arbitration Tribunal notes that the [Seller] accepts the price indicated on Gumeng website and China feed trade market website (<http://market.feedtrade.com.cn>), and alleges that the then current price was RMB 1,070 ~ 1,100/ton, stating that "when importing goods to sell in the domestic market, the [Buyer] needs to pay customs tax and related expenses on import", in other words, for CNF price, expenses relating to import need to be deducted from the aforesaid price.

The Arbitration Tribunal notes that the [Buyer] has submitted evidence showing the import customs tax was 5%, with the loading-unloading, bottling-bagging and storage service agreement for international trading goods at port signed between S Company and Shenzhen __ Grain Port Company on 14 March 2003, which proves the handling fee was RMB 43/ton. The [Seller] did not object to this. Based on the facts in this case and the fact that the [Seller]'s non-delivery of the goods caused the dispute in this case, the Arbitration Tribunal deems that it is reasonable to determine that US $122/ton should be the price for India rapeseed meal at the time of the avoidance of the Contract.

3. [Buyer]'s arbitration claims

      (1) The [Buyer] asks the Arbitration Tribunal to make a judgment on the [Buyer]'s loss of business reputation due to the [Seller]'s breach of Contract, however, the Arbitration Tribunal does not accept this claim of the [Buyer] due to lack of evidence;

      (2) Based on aforesaid Opinion 2, the facts in this case and responsibility determination, the Arbitration Tribunal does not support the [Buyer]'s claim to have the [Seller] bear the contract violation fees, i.e., twice of the amount of deposit, totaling RMB 1,330,000.00 and related interest on delay payment that S Company paid to G Company and F Company;

      (3) Based on aforesaid Opinion 2, the facts in this case and responsibility determination, the [Seller] shall compensate the following items to the [Buyer]:

            a) Loss of market price difference of RMB 1,091,640 [i.e., (US $122/ton - US $111/ton) × 8.27 (exchange rate) × 12,000 tons = RMB 1,091,640];

            b) Loss of interest: The Arbitration Tribunal holds that the [Seller] shall pay the interest on the aforesaid RMB 1,091,640 calculated from 17 September 2002 to the day of actual payment. However, the interest rate alleged by the [Buyer], 7.56%, is too high, and the Arbitration Tribunal holds that 6% annual interest rate is reasonable.

      (4) The [Buyer] asks the [Seller] to pay its attorneys' fee, traveling fee and other actual expenses, totaling RMB 300,000, for which the [Buyer] submitted its arbitration representation agreement and receipt as proof, showing that the [Buyer] has paid RMB 200,000 for attorneys' fee. The Arbitration Tribunal holds that based on the facts in this case, it is reasonable to have the [Seller] bear RMB 120,000 as the [Buyer]'s attorneys' fee.

      (5) As to the actual expenses of US $4,000 (RMB 33,080.00, which have been paid by the [Buyer]) in advance to appoint Mr. Qiu as its arbitrator, the [Buyer] shall bear it on its own;

      (6) Based on the extent to which the [Buyer]'s claims are supported and the fact that the [Seller] caused the dispute in this case, the Arbitration Tribunal deems that the [Buyer] shall bear 30% of the arbitration fee and the [Seller] shall bear 70%;

      (7) The [Buyer] also asks the Arbitration Tribunal to direct the [Seller] to make other compensation which it considers to be proper. However, since this claim is not specific and lacks reasons, it is not acceptable by the Arbitration Tribunal.

III. THE AWARD

Based on the above, the Arbitration Tribunal rules that:

1. [Seller] shall pay the [Buyer]'s loss of price difference of RMB 1,091,640 and the interest on it calculated from 17 September 2002 to the day of actual payment at an annual interest rate of 6%;

2. [Seller] shall pay the [Buyer]'s attorneys' fee of RMB 120,000;

3. [Buyer]'s other claims are dismissed;

4. The arbitration fee in this case is RMB 144,637, of which the [Buyer] shall bear 30%, i.e., RMB 43,391.10, and the [Seller] shall bear 70%, i.e., RMB 101,245.90; the [Buyer] has paid the arbitration fee to the Arbitration Commission in advance; therefore, the [Seller] shall pay RMB 101,245.90 to the [Buyer];

[Seller] shall make the aforesaid payment to the [Buyer] within 30 days of this award.

This is the final award.

29 September 2004 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 [Buyer] and Respondent is referred to as [Seller]. 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.

*** William Zheng is a graduate of the Pace University School of Law. He is Special Counsel with the Shanghai office of Sheppard Mullin Richter & Hampton, LLP.

Go to Case Table of Contents
Pace Law School Institute of International Commercial Law - Last updated December 20, 2007
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography