Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography
Search the entire CISG Database (case data + other data)

CISG CASE PRESENTATION

China March 2006 CIETAC Arbitration proceeding (Australian barley case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/060300c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20060300 (March 2006)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2006/23

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: France (respondent)

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

GOODS INVOLVED: Australian barley


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 6 ; 8 [Also cited: Articles 74 ; 76 ]

Classification of issues using UNCITRAL classification code numbers:

6A [Exclusion or modification of Convention by contract];

8A ; 8B ; 8C [Interpretation of party's statements or other conduct: a pivotal issue of this case; however, art. 8 is not referred to]

Descriptors: Autonomy of parties ; Intent ; Standard terms and conditions

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 and Trade Arbitration Commission
CIETAC (PRC) Arbitration Award

Australian barley case of March 2006

Translation [*] by Jingyuan Sun [**]

Edited by Lin Wah Tong [***]

  1. Procedure
  2. Facts and Position of Parties
  3. Arbitral Tribunal's Opinion
  4. Award

I. PRODEDURE

The China International Economic and Trade Arbitration Commission ("CIETAC", hereinafter also referred to as the ["Arbitration Commission"]) accepted the case (Case No. G2005_____) according to:

-    The arbitration clauses in Contract No. FB29II01 (hereinafter referred to as the "Contract"), signed by the Claimant [Buyer], AAA Foreign Economic and Trade Ltd [of the People's Republic of China] and the Respondent [Seller], BBB [of France]; and
 
The Application for Arbitration submitted by the [Buyer] on 5 July 2005.

The Arbitration Rules of CIETAC (hereinafter, the "Arbitration Rules") which took effect on 1 May 2005 are applicable to this case.

On 18 July 2005, the Secretariat of CIETAC (the "Secretariat") forwarded by express mail the Notice of Arbitration, the Arbitration Rules and the List of Arbitrators to the parties, and the Application for Arbitration and its attachments to the [Seller].

On 9 August 2005, the [Seller] submitted a request to postpone the appointment of arbitrators and submission of defense on 9 August 2005 and, on the same day, the Secretariat forwarded the request to the [Buyer]. On 15 August 2005, the [Buyer] replied to it. On the same day, the Secretariat notified the parties, based on the specific facts of the case, that the [Seller] should appoint an arbitrator by 25 August 2005 and to submit its defense or counterclaim by 15 September 2005.

On 19 September 2005, the [Buyer] appointed Mr. __ as arbitrator. However, the [Seller] did not appoint or entrust the Chairman of the Arbitration Commission to appoint an arbitrator and the parties did not appoint a presiding arbitrator within the stipulated period. The Chairman of the Arbitration Commission therefore appointed Ms.__ as an arbitrator for the [Seller] and Mr. __ as the presiding arbitrator for the case according to the Arbitration Rules. The aforesaid three arbitrators formed the Arbitration Tribunal for the case. On the same day, the Secretariat sent the Notice of Formation of the Arbitration Tribunal to the parties by express mail.

After reviewing the materials of the case and consulting the Secretariat, the Arbitration Tribunal decided to open a court session in Beijing on 25 October 2005. On 21 September 2005, the Secretariat sent a Notice of Hearing to the [Buyer] and the [Seller] by express mail.

On 14 October, the [Buyer] submitted its Application for Arbitration and a relevant attachment in Chinese. The Secretariat forwarded these documents to the [Seller] on 17 October 2005.

On 18 October 2004, the [Seller] submitted an Application to Postpone the Hearing. On the same day, the Secretariat notified the parties that the application was granted based on sufficient grounds and that the hearing would be postponed to 25 November 2005.

On 9 November 2005, the [Buyer] submitted an Application to further Postpone the Hearing. On 14 November 2005, the Secretariat notified the parties that this application was also granted based on sufficient grounds and that the hearing would be postponed to 6 December 2006.

On 29 November 2005, the [Seller] submitted its Defense. On 1 December 2005, the [Buyer] submitted a Letter of Application for Amendment of Claims. The Secretariat forwarded the above documents to the parties. On 5 December 2005, the [Seller] submitted its reply and relevant attachments, which were forwarded to the [Buyer] by the Secretariat on the same day.

On 6 December 2005, the Arbitration Tribunal held a court session as scheduled. Representatives of both parties attended. They made oral statements on the facts and their claims, cross-examined the evidence, answered inquiries of the Arbitration Tribunal, and made final statements. The [Buyer] submitted supplementary evidence during the hearing, which was forwarded to the [Seller] and the Arbitration Tribunal by the Secretariat.

On 27 December 2005, the [Buyer] submitted a "Supplementary Opinion, which was forwarded to the [Seller] by the Secretariat on the same day.

On 7 February 2006, the Arbitration Tribunal entrusted the Secretariat to issue a CIETAC Letter No. 000___ to the parties, requiring them to provide the French text and its Chinese translation of Article 17 of INCOGRAIN CONTRACT NO. 12 - MARITIME SHIPMENT CIF (hereinafter referred to as "INCOGRAIN 12"), which was relevant to the case.

On 16 February 2006, the [Seller] submitted the French text and its Chinese translation of Article 17 of INCOGRAIN 12. On 20 February 2006, the Secretariat forwarded these documents to the [Buyer].

On 22 February 2006, the [Seller] submitted its Reply and attachment, in which the [Seller] made an application for authentication of the original copy of the Importation Agency Agreement (hereinafter, the Agreement) submitted by the [Buyer] during the hearing. On the following day, the Arbitration Tribunal forwarded the above documents to the [Buyer] requesting its opinion on the application for authentication.

On 14 March 2006, the [Buyer] submitted its "Supplementary Opinion II". It stated that the original copy of the Importation Agency Agreement was submitted to the Arbitration Tribunal for examination during the hearing. The Agreement which was then handed to the representative of the [Seller] was thoroughly examined. Neither the Arbitration Tribunal nor the representative challenged the authenticity of the Agreement during the hearing. The [Buyer] further suggested that it was not necessary to prove the relevancy between the Agreement, and the involved parties and the subordinate buyers since there had been an amendment to the [Buyer]'s claims and the Agreement should now be deemed irrelevant to the case. The Arbitration Tribunal forwarded the above document to the [Seller] on the same day and notified the parties that, in its judgment, no authentication of the agreement was necessary at this stage. Further notification would be issued if the Arbitration Tribunal considered any authentication necessary.

Upon the closing of the case, the Arbitration Tribunal handed down the arbitration award based on the written documents submitted by the parties, verified facts and consideration of the Tribunal.

The facts, the position of the parties, and the Arbitration Tribunal's opinion and award are as follows:

II. THE FACTS AND POSITION OF THE PARTIES

On 29 November 2001, the [Seller] and the [Buyer] signed a contract for the sale of barley. The Contract stipulates:

Goods. Newly harvested Australian Barley (Article 1);
Quantity. 50,000 metric tons, with the [Seller]'s option to deliver 10% more or less of the quantity contracted (Article 3);
Price. US $127 / MT Cost and Freight (Article 5); if the goods are unloaded at a second port, the price should be US $127.50 / MT;
Delivery. The goods should be delivered between 15 December 2001 and 31 December 2002.

Chronology of events

29 November 2001. The [Buyer] sent an e-mail to the [Seller], requiring a shipment of 10 kilograms of Australian barley as a sample by Wednesday.

7 January 2002. The [Seller] wrote to the [Buyer] by e-mail, stating that the unexpected late harvest of Australian barley might result in a delay in delivery.

22 January 2002. The [Seller] told the [Buyer] in an e-mail that the shipment could not be made by the end of January since the harvest of Australian barley would be delayed for three to four weeks and asked the [Buyer] to extend the validity of the L/C to 28 February 2002.

23 January 2002. The [Buyer] reminded the [Seller] in a fax that according to Contract No. FB29II01, the period of shipment is between 15 December 2001 and 31 January 2002. The [Buyer] alleged that no information regarding the shipment was given by the [Seller] when the deadline was approaching, and required the schedule of shipment by that day and the delivery of goods within the time concluded.

24 January 2002. In a similar fax to the [Seller], the [Buyer] said failure to deliver the goods on time would cause the [Buyer] to incur substantial losses, and required the [Seller] to reply by fax and send a copy of it to the actual buyer, Longyang Corporation, by that day.

30 January 2002. The [Seller] replied to the [Buyer] by fax. The content of the fax is as follows:

(1)    The [Seller] admitted that its failure to deliver the goods constituted a breach of contract. It said in the fax that: "We sincerely apologize for our failure to deliver 50,000 tons of Australian barley by January 2002 as provided in the contract. We admit that such failure constitutes a breach of contract. We would like to resolve the problem rather than restate the reasons that hindered us from delivering the goods on time (such as the delayed harvest and the Australian supplier's refusal to supply the goods)."
 
(2)    The [Seller] proposed several settlement plans including:
 
 
  1. The [Seller] paying a price difference of US $2 / ton (i.e., US $100,000 in total) as a compensation to the [Buyer];
  2. The [Seller] delivering French barley as a substitute;
  3. Postponing the shipment date, with the [Seller] delivering some French barley then;
  4. Postponing the shipment date, with the [Seller] delivering some French barley and English barley;
  5. The [Seller] delivering 15,000 tons of Australian barley under the Contract and Australian schooner grain later at a price different from the contract price.

The [Buyer]'s position

The [Buyer] stated that the above-mentioned proposals could not effectively compensate its losses. On 4 February 2002, the [Buyer] replied to the [Seller] by fax and proposed different settlement plans:

(1)    The [Seller] pays the [Buyer] US $10 / ton (i.e., US $500,000 in total) as compensation for its losses;
 
(2)  On top of that, the [Seller] delivers the goods (including 20,000 tons of Australian barley and 30,000 tons of Australian schooner grain) at the prices mentioned in its fax on 30 January.

After sending the aforesaid faxes, several rounds of negotiation took place between the parties but they did not lead to a resolution of the dispute. On 14 June 2002, the [Buyer] entrusted the Beijing Huamaoguigu Law Firm to issue an attorney's letter to the [Seller]. It stated that the limited amount the [Seller] agreed to pay as compensation reflected the insincerity of the [Seller] to compensate the actual losses of the [Buyer]; and that the [Buyer] would apply for arbitration if the [Seller] did not agree to compensate as the [Buyer] proposed.

The [Buyer] declared that, after the Contract was concluded, a contract was signed between the actual buyer, FFF Co. Ltd. (a subsidiary of EEE Co. Ltd.) and the subordinate buyer, the GGG Beer Factory on 6 December 2001 for the resale of 30,000 tons of the goods under the Contract at a price of RMB 1,400 yuan / MT. On 7 December 2001, the actual buyer FFF Co. Ltd. signed another contract with DDD Malt Factory for the resale of 10,000 tons of the goods at the same price.

The price under the [Buyer]'s Contract with the [Seller] is US $127 / MT or US $127.50 / MT if unloaded at a second port. Since the [Buyer] required the goods to be unloaded at a second port, when opening the L/C the contract price should be US $127.50 / MT under the Contract. The last day for delivery as concluded should be 31 January 2002. Based on the exchange rate for US dollars to RMB yuan on that day, which was 1:8.28, the contract price should be RMB 1,055.70 yuan / MT. Since the customs duty rate of the goods was 3%, and the [Buyer] should pay Chinese Government RMB 31.67 yuan / MT for the importation of the goods. The [Buyer] should also pay Value Added Tax (VAT) which was 13% of the price after the customs duty, i.e., RMB 141.36 yuan / MT [1,055.70 (1+3%) 13%]. The [Buyer] should pay RMB 66 yuan / MT in total for the expenses of the importation of goods, including Commodity Inspection Fee, Port Surcharge and woven bag cost. The total cost of importation should be composed of the aforesaid custom duties, VAT, Commodity Inspection Fee, Port Surcharge and woven bag cost. The actual buyer should pay 1% of the contract price to the [Buyer] as handling charge for importation, which should be RMB 10.56 yuan / MT [1,055.70 x 1%].

-    The cost of importation which is composed of customs duty, VAT, Commodity Inspection Fee, Port Surcharge, woven bag cost and handling charge should be RMB 249.59 yuan / MT [31.67 + 141.36 + 66 + 10.56].
 
-    The contract price should be the sum of Cost and Freight price, and the constant price for the domestic resale of the goods should be the contract price plus the total cost of importation. Therefore, the losses incurred by the [Buyer] should be RMB 94.71 yuan / MT [the resale price -- (the contract price + the cost of importation)].

After the conclusion of the Contract, 40,000 out of 50,000 tons of goods under the Contract were resold. Since the market price of the same type of goods in China did not have apparent fluctuation on 31 January 2002, the [Buyer] could expect to resell the other 10,000 tons of goods at the same resale price (RMB 1,400 yuan / MT) if the [Seller] had delivered the goods as provided in the Contract. Therefore, the [Buyer] should be entitled to damages based on such price difference for the 10,000 tons of goods. In this case, if the [Seller] had delivered the goods on time, the [Buyer] would have made a profit of RMB 94.71 yuan / MT (the difference between the Contract price and the resale price). The total difference of the 50,000 tons of goods should be RMB 4,735,500 yuan [94.71 50,000], i.e., US $571,920.29.

The places of business of the parties are China and France, respectively. Both countries have adopted the United Nations Convention on Contracts for the International Sale of Goods (the "CISG").

According to Article 74 of the CISG:

"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. ... "

This provision affirms that losses of a party shall be calculated according to the actual losses incurred. Accordingly, the [Buyer] suggested that losses should be compensated according to the aforesaid principle.

The relief requested by the [Buyer]

The [Buyer] requested the following relief:

1.    The [Seller] should compensate the [Buyer] for the losses of US $571,920.29 due to the price difference between the original contract price and the resale price.
 
2.  The [Seller] should compensate the [Buyer] for the losses of bank interest according to the aforesaid price difference. The bank interest should be calculated on the principal of US $571,920.29 at an annual rate of 8% from 31 January 2002 to the date the arbitration award is enforced.
 
3.  The [Seller] should compensate the [Buyer] for the attorneys' fee incurred in this case.
 
4.  The [Seller] should compensate the [Buyer] for the arbitration fee it paid.

The [Seller]'s position

The [Seller] stated in its Defense that the [Buyer]'s claims were time-barred; that the [Buyer]'s calculation of the damages was groundless; that the law applied in its case was wrong; and that all of [Buyer]'s claims should be dismissed.

The [Buyer]'s claims are time-barred

According to Article 9 of the Contract, the "GOVERNING CONTRACT" is "Latest INCOGRAIN, including Arbitration rules, not conflicting with above terms. If any arbitration, to be organized in Beijing by the China International Economic and Trade Arbitration Commission, in conformity of the rules of the INCOGRAIN 12 which both parties know and recognize that all disposition of the INCOGRAIN 12 substitute for the general buying or selling terms, as per the law dated 31 December 1992 completed by the law dated 29 January 1993". Therefore, both parties acknowledge that INCOGRAIN 12 is the governing contract of the Contract and they should conform to its provisions.

Article 17 of INCOGRAIN 12 stipulates that:

"XVII. ARBITRATION - Under Penalty of being time barred:

-    A. NOTIFICATION. 1) QUALITY AND CONDITION: Any claim for arbitration shall be notified to the other party not later than seven working days after recognition of the goods. ... 2) OTHER DISPUTES: For all other disputes not involving quality and condition, the party willing to exercise his right of arbitration shall notify his claim to the other party within the six months following the last day allowed for fulfillment of the obligations.
 
-    B. REFERAL OF DISPUTES. 1) QUALITY AND CONDITION: The claimant shall refer disputes to the Chambre Arbitrale de Paris within fourteen working days following the notification of arbitration claim and send them samples within the same time limit. 2) OTHER DISPUTES: The claimant shall refer the dispute to the Chambre Arbitrale de Paris within six months following the last day allowed for fulfillment of the obligations. Where a financial settlement is involved, there is no time limit for lodging a claim."

The object in dispute in this case is barley which is vulnerable and seasonal goods in the market. The above provision sets the applicable procedures clearly for handling any dispute incurred considering the special characteristics of the goods. Since the dispute in the case did not involve quality and conditions of the goods, "OTHER DISPUTES" stipulated in Art 17 of INCOGRAIN 12 should apply to this case. The claiming party should apply for arbitration and notify the other party of its claims within six months following the last date allowed for fulfillment of the obligations.

The [Buyer] did not act in conformity with INCOGRAIN 12. The Contract (Article 6) stipulates that the period of shipment was from 15 December 2001 to 31 January 2002. Therefore, the "last day allowed for fulfillment of obligations" in this case is 31 January 2002. According to Article 17 of INCOGRAIN 12, the [Buyer] has to meet the following requirements in order to make an effective application for arbitration: (1) notify the [Seller] of its claims by 31 July 2002; and (2) submit the dispute for arbitration before 31 July 2002. However, neither of these requirements was met.

(1)  The [Buyer] did not notify the [Seller] of any detailed claims by 31 July 2002. The notification of claims required by Article 17 A2) of INCOGRAIN should be in writing, with the scope, the amount and the method of calculation of the damages. The content of such notification should be similar to that of a request for arbitration so that the other party could be aware of the consequences if a settlement could not be reached.
 
(2)  The [Seller] did not submit the dispute to arbitration until 5 July 2004, almost three years after the time limit expired. Even if the running of the time limit stopped when the [Buyer] applied for an arbitration for the first time on 26 September 2002, the time limit would have started running again when the Commission allowed the withdrawal of the application for arbitration on 5 August 2004 and thus would have expired on 5 February 2005. [Seller]'s submission was almost five months after the time limit expired.

Therefore, the [Buyer]'s claims which were brought to arbitration on 5 July 2005 are, in any case, time=barred according to INCOGRAIN 12 and thus should be dismissed.

The [Buyer]'s calculation of the damages is groundless

The [Buyer]'s calculation of the damages is groundless and the law applied in its claims is wrong. The [Seller] believed that since the [Buyer]'s claims were time-barred, it was not necessary to calculate the damages. However, the [Seller] would prove that the [Buyer]'s calculation of the damages was groundless and the law applied was wrong. Article 15 of INCOGRAIN 12 which covers the damages should apply to this case instead of the CISG.

The [Buyer]'s calculation of the damages was groundless." According to the [Buyer]'s claims, the loss of the price should be the difference between the contract price and the resale price. The [Buyer] declared that the resale price was RMB 1400 yuan/MT and explained in its Application for Arbitration that:

"After the Contract was concluded on 29 November 2001, a contract was signed between the actual buyer, FFF Co. Ltd. (a subsidiary of EEE Co. Ltd.) and the subordinate buyer, the GGG Beer Factory on 6 December 2001 for the resale of 30,000 tons of the goods under the Contract at the price of RMB 1,400 yuan / MT. On 7 December 2001, the actual buyer FFF Co. Ltd. signed another contract with DDD Malt Factory for the resale of 10,000 tons of the goods at the same price.

The [Buyer] submitted copies of these two resale contracts as evidence. However, it is the [Seller]'s position that the [Buyer] was not involved in either of these two contracts. Apparently, when the [Buyer] and the [Seller] signed their Contract, the [Buyer] never submitted any evidence or disclosed its business relationship with EEE. Up to then, the [Seller] still did not know whether the [Seller] was acting as an agent of EEE or acting under its own name in order to resell the goods to EEE later. It was questionable whether the [Buyer] engaged in an actual contractual relationship with EEE. In any case, FFF was not a party to the Contract and was not contractually related to the [Seller]. It is groundless to calculate the [Buyer]'s losses based on the resale price for FFF. The [Seller] believed that the contract with FFF was not relevant to this case and that the [Buyer] failed to prove the actual losses suffered. Therefore, the [Buyer]'s claim for damage is groundless and should be dismissed.

All of the [Buyer]'s claims should be dismissed

In conclusion, the [Buyer]'s claims were time-barred, the law applied for the claim of compensation was wrong, and the calculation of damages was groundless. All of [Buyer]'s claims should be dismissed.

The [Buyer]'s response

The [Buyer] submitted its Supplementary Opinion after the first court session:

The applicable law in this case

According to Article 145 of the General Principles of Civil Law of the PRC and Article 126 of the Contract Law of China, if the parties to a contract involving foreign interests have not made a choice of law, the law of the country to which the contract is most closely connected shall be applied. In this case, the [Buyer]'s place of business, the place where it signed the contract and the port of destination are all in China. France is the [Seller]'s place of business and Australia is the port of dispatch. Therefore, the country that is most closely connected to the Contract is China. The laws of China should be the governing laws in this case.

The [Seller]'s breach of contract

It is undisputed that the [Seller] breached the Contract. The [Seller] admitted its breach of contract in its fax on 30 January 2002 with several settlement proposals. The [Seller] did not deny this fact throughout the proceedings.

Whether the [Buyer]'s claims were time-barred

The [Seller] alleged that INCOGRAIN 12, the standard contract terms issued by Syndicat de Paris du Commerce et des Industries des Grain (Paris Trade Association of Commerce and Grain Industries), should apply to this case, and that the [Buyer] did not bring the dispute to arbitration within the six-month time limit stipulated by Article 17 of INCOGRAIN 12.

The [Buyer]'s opinion on this issue was: According to Article 17 A2) of INCOGRAIN 12, for all other disputes not involving quality and condition, the party willing to exercise his right of arbitration shall notify his claim to the other party within the six months following the last day allowed for fulfillment of the obligations. The [Seller] alleged that the [Buyer] should have exercised its right before 31 July 2002. In fact, the [Buyer] notified the [Seller] of its willingness to exercise its right of arbitration on 4 February by requiring the [Seller] to compensate its losses at US $10 / ton (i.e., US $500,000 in total), and to deliver the goods (20,000 tons of barley and 30,000 tons of schooner grain) at the price proposed by the [Seller] in the fax on 30 January 2002.

The [Seller] alleged that: "the notification of claims required by Article 17 A2) should be in writing, with the amount, the scope and the calculation method of the damages. The content of such notification was supposed to be similar to that of the application for arbitration." In fact, INCOGRAIN is silent on such requirement; the [Seller]'s allegation was based on its own interpretation. In addition, the application for the exercise of arbitration submitted to the Arbitration Commission should include the aforesaid content in plain language.

The [Seller] also alleged that the [Buyer] did not bring the dispute to arbitration within the period stipulated by Article 17 B2) of INCOGRAIN 12. According to Article 17 B2), "where a financial settlement is involved there is no time-barring limit for lodging a claim." The [Seller]'s translation of "settlement" into "winding up an account" is not appropriate. First, "settlement" is the noun of "settle." According to the Oxford Dictionary of Modern Legal Usage, to "settle" means to "end (a legal dispute) by mutual agreement." In the context of INCOGRAIN 12, the phrase should be interpreted as "financial settlement" because a party would not commence an arbitration proceeding against the other party during the course of a settlement. On the contrary, it would not make sense if "financial settlement" was interpreted as financial accounting in that, according to the Contract, the payment should be made by L/C and the amount of payment should be known by the parties beforehand. Once the [Seller] delivered the goods, it could get the agreed amount of payment by redeeming the L/C at the bank.

According to Article 41 of the Contract Law of China,

"If a dispute over the understanding of the standard terms occurs... where there are two or more kinds of interpretations, an interpretation unfavorable to the party supplying the standard terms shall prevail. ..."

In this case, even if there are two interpretations of the term "financial settlement," for the benefit of the [Buyer], it should be interpreted as "monetary settlement." In legal context, INCOGRAIN 12 is a standard contract, Article 17 of which provides standard contract terms. The [Seller] alleged that, according to Article 9 of the Contract, the parties to the Contract should be bound by INCOGRAIN 12.

The [Buyer] submits that the law of China applies to this case, and points out that INCOGRAIN 12 is a standard contract, Article 17 of which provides standard contract terms.

According to Article 39(2) of the Contract Law of China:

"Standard terms are clauses that are prepared for general and repeated use by one party, and which are not negotiated with the other party when the contract is concluded."

In this case, the parties negotiated the standard terms on the basis of a standard contract, including Article 9 of the Contract, prepared in advance and provided by the [Seller] for repeated use, and which were not negotiated with the other party when the contract was concluded. Article 9 of the Contract is a standard term. INCOGRAIN 12, a standard contract, and its Article 17, a standard term, were referred to in Article 9 of the Contract under an advance preparation for repeated use. In the course of negotiations, the [Seller] had never provided the [Buyer] with a copy of INCOGRAIN 12 and the parties had never negotiated on Article 17 of INCOGRAIN 12.

According to Article 39(1) of the Contract Law of China:

"Where standard terms are adopted in concluding a contract, the party supplying the standard terms shall define the rights and obligations between the parties abiding by the principle of fairness, and shall inform the other party to note the exclusion or restriction of its liabilities in a reasonable way, and shall explain the standard terms upon request by the other party."

The [Seller] had never provided the [Buyer] a copy of INCOGRAIN 12 and never called the [Buyer]'s attention to Article 17 of INCOGRAIN 12 in the course of negotiating the Contract. The representative of the [Seller] did not deny this fact during the court session. The [Seller] failed to bring INCOGRAIN 12 to the [Buyer]'s attention and this standard term should be regarded as invalid according the Contract Law of China.

Article 40 of the Contract Law of China stipulates that:

"A standard term shall be invalid if it excludes the liabilities of the party supplying such term, increases the liabilities of the other party, or deprives the other party of any of its material rights."

According to Article 129 of the Contract Law of China, the time limit to bring a suit or apply for arbitration of disputes arising from a contract for the international sale of goods is four years, calculated from the date on which the party knows or ought to know the infringement on its right.

In conclusion, the [Buyer] was entitled to bring a suit or apply for arbitration within four years after the [Seller] notified the [Buyer] that it would not perform the obligation under the contract. Since the [Seller] sent the non-performance notification to the [Buyer] by fax on 31 January 2002, the [Buyer] was entitled to bring a suit or apply for arbitration any time before 31 January 2006. If Article 17 of INCOGRAIN 12 was applicable to this case and interpreted as "the [Buyer] should bring the dispute to arbitration within six months following the last day allowed for fulfillment of the obligations, the application would exclude the [Seller]'s liability and the [Buyer]'s right to bring the dispute to arbitration. Under such circumstances, Article 40 of the Contract Law of China should prevail and the requirement of the time limit stipulated by Article 17 of INCOGRAIN 12 should be invalid.

The effectiveness of CIETAC's decision of 31 March 2004 on its competency

Based on the "CIETAC No. 000___ Decision On Competence" (the "Decision") made by the Arbitration Commission on 31 March 2004, the [Seller] alleged that INCOGRAIN 12 is legally binding in this case. However, it was the [Buyer]'s position that the time limit was an issue of substantive law, not procedural law. The aforesaid issue regarding the time limit was covered in Article 129 of the Contract Law of China. There should be no doubt that an issue of substantive law should be decided by the Arbitration Tribunal but not the Arbitration Commission. Therefore, the statement that "the parties should still comply with ..." in the Decision should be interpreted as "the arbitration clause in INCOGRAIN 12 was superseded by the parties' agreement to apply for arbitration at CIETAC while other parts of Article 17 should still be binding.

The [Buyer]'s final request for relief

1.    The [Seller] should compensate the [Buyer] for the losses of US $571,920.29 due to the price difference between the market price and the original contract.
 
2.    The [Seller] should compensate the [Buyer] for the losses of bank interest according to the aforesaid price difference. The bank interest should be calculated on the principal of US $571,920.29 at an annual rate of 8% from 31 January 2002 to the date the arbitration award is enforced.
 
3.    The [Seller] should compensate the [Buyer] for the arbitration fee it paid.

Regarding Claim 1, the [Buyer] states that it waives its right to claim for the difference between the market price and contract price of the goods under the Contract (i.e., US $900,000) and only claims US $571,920.29 for damages.

[Seller]'s Supplementary Defense

In its Supplementary Defense, the [Seller] alleged that the [Buyer] made its amendment of claims because they were challenged by the [Seller] at the hearing based on the Supplementary Opinion submitted by the [Buyer].

The [Seller] stated that the [Buyer]'s amendment of claims was without justifiable reasons and that it was against the regulation of the arbitration procedures. The [Buyer] should have filed clear and definite claims on the dispute, and amendments should not be made even if the claims were challenged in the course of the proceedings. The Arbitration Tribunal should not accept such doubtful amendments by the [Buyer]. Otherwise, it would be unfair to the [Seller] and is against the principle of fairness and reasonableness of the arbitration proceeding. Apart from that, the amendments of claims by the [Buyer] would certainly delay the normal arbitral proceedings. The [Seller] suggested in its Supplementary Opinion that the [Buyer]'s statements regarding the amendments of claims should not be considered by the Arbitration Tribunal.

Regarding the governing contract and governing law

First, the [Seller] submitted that the law of China was irrelevant to the dispute in this case. The parties had agreed that disputes arising out of the Contract would be governed by the latest version of INCOGRAIN 12.

Second, the [Seller] believes that the key issue in this case is the applicability of the latest version of INCOGRAIN 12 to the dispute. If the latest version of INCOGRAIN 12 is applicable, any disputes regarding the applicable laws and regulations would be resolved. Article 9 of the Contract expressively stipulates that the latest version of INCOGRAIN 12 govern the contract and thus is binding on both parties. Any contractual disputes should be subject to its provisions. In addition, the Decision by the Arbitration Commission on 31 March 2004 confirmed the effectiveness of INCOGRAIN 12 governing the contract in this case.

Regarding the time limit

INCOGRAIN 12 was not a standard contract prepared by the [Seller]. It was made and issued by Syndicat de Paris du Commerce et des Industries des Grains (Paris Trade Association of Commerce and Grain Industries) as a widely accepted professional standard and norm of the grain industry. Its role and status is similar to that of the CISG and INCOTERMS which are highly recognized in international contracts and trade. The only difference among the three principles is the scope of applicability and popularity to the parties. The provisions of INCOGRAIN 12, including the time limit, are equally applicable to both the [Buyer] and the [Seller]. The parties chose INCOGRAIN 12 to govern their contract for their grain transaction in this case because they had been engaged in the grain business for a long time and both knew the industry standards well. This is very different from the [Buyer]'s allegation that INCOGRAIN 12 was prepared and suggested solely by the [Seller] and that the [Buyer] did not know about it at all. The [Buyer] also claimed that the parties had never negotiated on the applicability of INCOGRAIN 12.

First, the [Buyer] acknowledged at the hearing that it had been engaged in international sales of grain for many years. As an experienced business firm in the international sales of grain, the [Buyer] should have been cautious and performed the duty of care when entering into the over six-million-dollar transaction in this case. Article 9 of the Contract covered the applicability of INCOGRAIN 12 including the amendment of the arbitration organization, the applicable rules, and choosing INCOGRAIN 12 to supersede the general contract terms that were applied in the previous transactions. The [Buyer] contradicts itself by alleging that it overlooked the content of Article 9 while an amendment was made changing the arbitration organization in Article 9 to CIETAC through negotiation with the [Seller].

Second, the [Buyer] should bear the burden of proof that it did not get a copy of INCOGRAIN 12 but it failed to satisfy this burden. The [Buyer] was well aware that INCOGRAIN 12 is applicable to the Contract. The interpretation of "financial settlement" should take into account the background and context of the contract instead of focusing on a single term to produce a literal interpretation. In any event, the [Buyer]'s claims were time-barred.

The soundness of [Buyer]'s claims

The [Seller] alleges that the [Buyer]'s claims are groundless. First, [Seller] asserts that the laws applied by the [Buyer] were wrong. The [Buyer] invoked Article 76 of CISG. However, Article 15 of INCOGRAIN 12, which covers breach of contract and damages, should govern this case rather than applying the CISG. Article 76 of CISG covers calculation of damages when a contract is avoided. However, neither party had ever denied the validity of the Contract and it had never been declared avoided. Article 76 of CISG is not applicable here.

Moreover, the [Buyer] based its claim on a calculation of the difference between the market price and contract price derived from the prediction of the price of malting barley in 2004 in a report by analyst Ma Dequan and the information obtained from a seminar on brewing material. The [Buyer] used the wrong subject as a reference in the prediction of the market price. The subject matter of the Contract is newly harvested Australian barley. The reference of subject used by the [Buyer] in deciding the market price is malting barley imported to China. The [Buyer] never produced any evidence to prove that the two are comparable. It is the [Seller]'s position that Australian barley and malting barley are not equivalent goods, and that the reference materials submitted by the [buyer] were not sufficiently authoritative. The [Buyer] failed to prove the authority of the materials and the eligibility of analyst Ma Dequan to be accepted by the Arbitration Tribunal. The [Buyer] also failed to prove the truthfulness, and authority of the materials obtained in a seminar and submitted any market price of the subject in the contract.

The [Buyer]'s Supplemental Opinion II

Later, the [Buyer] presented a further submission, stating:

The [Buyer]'s amendment of claim

In the [Seller]'s Defense, the [Seller] challenged the [Buyer]'s amendment of claims. In fact, the [Buyer] submitted an alternative pleading which allowed it to claim the damages as "market price minus the contract price" or the "resale price minus the contract price." Such alternative pleading is permitted by the Arbitration Tribunal according to its practice. During the court session on 6 December 2005, the Arbitration Tribunal asked the [Buyer] to confirm its request between the two alternatives as the final claim. Therefore, the [Buyer] requested that the calculation of damages should be the difference between the then market price and the contract price in its Supplementary Opinion. The calculation of damages above and the procedure through which the [Buyer] requested the relief both conformed to the practice and rules of the Arbitration Commission.

The governing law

The [Buyer] insisted that the governing law of this case should be the law of China.

Whether INCOGRAIN 12 is a standard contract

The [Seller] argues that INCOGRAIN 12 is not a standard contract, but an international treaty similar to CISG and INCOTERMS. The [Buyer] replies to this argument as follows:

First, a standard contract is composed of fixed terms and conditions which were prepared in advance by a party for repeated use, and which are not negotiated with the other party in the course of concluding the contract. International treaties are different from standard contracts in terms of:

(1)    The content of an international treaty usually does not become the terms of a contract while a standard contract is adopted as the terms of a contract;
 
(2)  Since international treaties are widely known, the party to a contract is supposed to know the content of the treaties without notification from the other party;
 
(3)  The text of an international treaty is fair so as not to prejudice either party while, in a standard contract, one side has all the bargaining power in protecting its advantage.

Second, according to the above-mentioned differences between a standard contract and an international treaty, INCOGRAIN 12 becomes a standard contract or a part of the standard contract after it has been adopted by one party as part of the Contract, because: (1) INCOGRAIN 12 becomes a part of the Contract after it was cited by the [Seller] in the Contract; (2) INCOGRAIN 12 is not internationally widely known; (3) INCOGRAIN 12 obviously is prepared with prejudice to the advantage of the sellers in sales of grain.

Third, the [Seller] has not produced any evidence to prove its claimed that INCOGRAIN 12 is widely applied in international trade like the CISG.

The consequence of the [Buyer]'s lack of awareness of the text of INCOGRAIN 12

The [Seller] alleged that the [Buyer], as an experienced business firm in international sales of grain, should have been cautious about provisions that are disadvantageous to it when concluding the Contract. However, according to Article 39 of the Contract Law of China,

"Where standard terms are adopted in concluding a contract, the party supplying the standard terms shall define the rights and obligations between the parties abiding by the principle of fairness, and shall inform the other party to note the exclusion or restriction of its liabilities in a reasonable way, and shall explain the standard terms upon request by the other party."

Therefore, the [Seller] could not allege that it was the [Buyer]'s fault that [Buyer] did not know the provisions of INCOGRAIN 12 under circumstances in which [Seller] was legally obliged to call the [Buyer]'s attention to such provisions. In addition, the [Seller] alleged that, since the [Buyer] suggested adding an arbitration clause in Article 9 of the Contract, it should have known Article 17 of INCOGRAIN 12 which is in dispute in this case. However, Article 9 of the contract only cited INCOGRAIN 12, which was not included in Article 9 of the Contract, and the [Seller] did not provide the text of INCOGRAIN 12 to the [Buyer] when concluding the Contract. Under such circumstances, it was not reasonable for the [Buyer] to know the content of Article 17 of INCOGRAIN 12.

The interpretation of Article 17 of INCOGRAIN 12

The parties' key dispute in this case is how to interpret the term "financial settlement" in Article 17(B) of INCOGRAIN 12 which says "where a financial settlement is involved, there is no time limit for lodging a claim." The [Seller] declared that, as in the translation by Shanghai SISU Translation Service Co. it submitted to the Arbitration Tribunal, "financial settlement" should mean "offsetting an outstanding future obligation with a financial or cash transfer." Since the [Seller] submitted its Supplementary Defense two months after the [Buyer] submitted its Supplementary Opinion, the [Buyer] believes that:

First, the [Seller] might have used inappropriate methods to obtain a translation of INCOGRAIN 12 to favor its own advantage during those two months. After receiving the translation from the [Seller], the [Buyer] submitted the French version of Article 17 of INCOGRAIN 12 to China Translation and Publishing Corporation for a Chinese translation. China Translation and Publishing Corporation translated "financial settlement" as "financial/monetary settlement."

Second, the [Seller] did not allege that this translation was wrong but admitted that the parties had different understandings of the term "financial settlement." According to Article 41 of the Contract Law of China, "Where there are two or more kinds of interpretation, an interpretation unfavorable to the party supplying the standard terms shall prevail." Therefore, according to the governing law, where there are two interpretations of the term "financial settlement," it should be interpreted as "financial settlement" and thus against the [Seller] who supplied it.

Third, the [Buyer] believed that the translation by China Translation and Publishing Corporation should have the highest authority.

Lastly, since the time limit to exercise the right to arbitration in Article 17 of INCOGRAIN 12 is six months, the prescription was interrupted once the parties started negotiating about the settlement. The payment of goods was supposed to be made by letter of credit in this case. Therefore, once the [Seller] redeemed the L/C after loading the goods with the shipping document, the account would be settled. Under this method of payment, no "financial settlement" would occur between the parties.

In conclusion, the term "financial settlement" in Article 17 of INCOGRAIN 12 should be interpreted as "monetary settlement."

Whether the [Buyer] applied for arbitration within the time limit

The [Seller] admitted that the last day for performance of the Contract was 31 January 2002. Since the time limit to bring a dispute to arbitration should be four years, according to the law of China, the last day when the [Buyer] could bring the dispute to arbitration should be 31 January 2006. The [Buyer]'s application for arbitration submitted on 5 July 2005which was within the time limit.

Whether the [Buyer]'s claims are groundless

The [Seller] challenged the grounds on which the [Buyer] claimed damages. It declared that it was wrong for the [Buyer] to claim damages according to the CISG, and that Article 15(C) of INCOGRAIN 12 should govern. In fact, Article 76 of the CISG and Article 15(C) of INCOGRAIN 12 are basically the same. The [Seller] interpreted Article 76 of the CISG as only covering calculation of damages when a contract is declared avoided. In fact, such misinterpretation by the [Seller] was based on the unprofessional Chinese translation of the CISG. In order to have a correct interpretation of such provision, the original English text of Article 76 should be examined and it actually says that "If the contract is avoided ..., at the time of avoidance ..." A contract is avoided when a party to it declares it is or when a party breaches the contract. In this case, the Contract was avoided when the [Seller] expressively declared that it would not perform the obligation on 31 January 2002. Therefore, the [Buyer] should be entitled to claim damages according to Article 76 of the CISG.

The [Seller] also declared that the goods under the Contract, newly harvested Australian barley of 2001, and malting barley, whose market price was used by the [Buyer] to claim damages, were two different subjects. In regard to this declaration, the [Buyer] called the Arbitration Tribunal's attention to the following facts:

(1)    The [Buyer] provided the market price of malting barley because that which the [Seller] was obliged to deliver was malting barley. For example, in the fax the [Seller] sent to the [Buyer] on 4 February 2002, the [Seller] proposed to deliver 20,000 tons of Australian feeding barley and 30,000 tons of Australian malting barley in February with some monetary compensation. The above communication between the parties showed that the goods under the Contract should be malting barley.
 
(2)  Moreover, the expert opinion by analyst Ma Dequan clarified that the goods under the Contract should be classified as one kind of malting barley. According to the expert opinion, the barleys imported to China for producing beer can be classified into feeding barley and malting barley. Schooner grain is the major kind of malting barley that has been imported to China. The goods under the Contract were also malting barley which were better than feeding barley but lower than schooner grain in terms of the quality.
 
(3)  The [Buyer] claimed damages based on the market price of schooner grain because the average price of malting barley imported to China was equivalent to or close to the price of schooner grain since it was the majority of imported malting barley. Since the quality of goods under the Contract fell between feeding barley and Schooner grain, the [Buyer] applied a price slightly lower than the average price of imported malting barley as the market price for the goods. This method of calculation has been widely accepted in the Arbitration Commission's practice. Therefore, the [Buyer]'s claims were reasonable and avoided an excessive claim regardless of the actual losses.

The [Seller] alleged at the hearing that the [Buyer] failed to prove the proper authority and expertise of the expert opinion by analyst Ma Dequan. However, the representative of the [Seller] did not challenge the expert opinion during the hearing. The [Seller] should produce its own expert opinion to rebut analyst Ma Dequan's opinion if any doubt was raised by it.

III. THE ARBITRATION TRIBUNAL'S OPINION

1. Applicable law

The dispute in this case arose from an international sale of goods. Since the places of business of the parties are both Contracting States of the United Nations Convention on Contract for the International Sale of Goods (the "CISG"), the CISG should apply to this case. However, according to Article 6 of the CISG,

"The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions."

Therefore, in this case, the specific agreement between the parties about the applicable terms should prevail.

2. The applicability of INCOGRAIN 12

Article 9 of the Contract stipulates that:

"GOVERNING CONTRACT: Latest INCOGRAIN, including Arbitration rules, not conflicting with above terms. If any arbitration, to be organized in Beijing by the China International Economic and Trade Arbitration Commission, in conformity to the rules of the INCOGRAIN 12 on which both parties know and recognize all disposition of the INCOGRAIN 12 substitute to the general buying or selling terms, as per the law dated 31 December 1992 completed by the law dated 29 January 1993."

Accordingly, the [Seller] alleged that INCOGRAIN 12 governs the contract, is legally binding the parties and excludes the application of the CISG. The [Buyer] alleged that the law of China should be applied to the case because INCOGRAIN 12 was a standard contract and Article 17 of INCOGRAIN 12 was invalid in that the [Seller] failed to call the [Buyer]'s attention to it in the course of negotiation.

The Arbitration Tribunal noted that the parties expressively stipulated in Article 9 of the Contract that INCOGRAIN 12 governs the contract. Regarding governing contract clauses, the Arbitration Tribunal holds that although they should not apply to the dispute as a substantive law, INCOGRAIN 12 is a model contract for CIF transactions issued by SYNDICAT DE PARIS DU COMMERCE ET DES INDUSTRIES DES GRAINS PRODUITS (Paris Trade Association of Commerce and Grain Industries). INCOGRAIN 12 covers terms regarding the price, quantity and quality of goods, delivery, insurance and payment for goods. Article 17 of INCOGRAIN 12 covers issues involving arbitration and stipulates that:

"XVII. ARBITRATION -- Under penalty of being time barred:

A. NOTIFICATION. 1) QUALITY AND CONDITION: Any claim for arbitration shall be notified to the other party not later than seven working days after recognition of the goods ... 2) OTHER DISPUTES: For all other disputes not involving quality and condition, the party willing to exercise his right of arbitration shall notify his claim to the other party within the six months following the last day allowed for fulfillment of the obligation.

B. REFERRAL OF DISPUTES. 1) QUALITY AND CONDITION: The claimant shall refer the dispute to the Chambre Arbitrale de Paris within fourteen working days following the notification of arbitration claim and send them samples within the same time limit. 2) OTHER DISPUTES: The claimant shall refer the dispute to the Chambre Arbitrale de Paris within six months following the last day allowed for fulfillment of the obligations. Where a financial settlement is involved there is no time limit for lodging a claim."

The Contract was not concluded wholly based on INCOGRAIN 12:

-    Article 5 of the Contract stipulates that the price of goods is "US $127 / MT COST AND FREIGHT" but not based on CIF terms;
 
-    Some other provisions concerning quantity of goods, delivery and payment are also not identical to the corresponding provisions in INCOGRAIN 12;
 
-    The parties expressively changed the arbitration institution from Chambre Arbitrale de Paris to China International Economic and Trade Arbitration Commission in Beijing in Article 9 of the Contract. According to the context of the Contract, Article 9 of the Contract cites INCOGRAIN 12 for dispute resolution but not for substantive issues.

The [Buyer] claimed that INCOGRAIN 12 was a standard contract and should be interpreted against the [Seller] and should not be accepted because the [Buyer] was not fully aware of its contents at the time when the parties cited it and modified the terms in the Contract.

However, the Arbitration Tribunal holds that INCOGRAIN 12, cited by the parties in the Contract after negotiation, was part of the Contract and should prevail over the CISG in this case as decided in the Arbitration Tribunal's Opinion 1.

Except for the part concerning the arbitration institution, the rest of Article 17 of INCOGRAIN 12 regarding arbitration should apply to this case. The arbitration institution should be the China International Economic and Trade Commission.

3. The [Buyer]'s amendment of claims

The Arbitration Tribunal noted that the [Buyer] only requested the price difference as the loss and damages when applying for arbitration; and the [Buyer] claimed damages as the "difference between the market price and the contract price" in its final claims. The [Seller] challenged the [Buyer]'s amendment of its claims on the ground that amending the claims after the hearing was radically unfair to the [Seller] and was against the principle of fairness and reasonableness of the arbitration proceedings. Such claim would certainly delay the arbitral proceedings. The [Seller] stated that the amendments should not be accepted by the Arbitration Tribunal.

According to Article 14 of the Arbitration Rules,

"The Claimant may amend its claim and the Respondent may amend its counterclaim. However, the Arbitral Tribunal may not permit any such amendment if it considers that the amendment is too late and may delay the arbitral proceedings."

The Arbitration Tribunal requested the [Buyer] to define its final claims, afforded reasonable opportunities to the [Seller] for challenging such decision in court, and permitted the [Seller] to submit supplementary opinions after the hearing. Therefore, the Arbitration Tribunal held that its acceptance of the [Buyer]'s amendment of claims does not violate the Arbitration Rules and did not adversely affect the [Seller]'s procedural and substantive rights. The arbitration award would be based on the [Buyer]'s final amendment of claims.

4. The time limit

According to the Arbitration Tribunal's Opinion 2, the part in Article 17 of INCOGRAIN 12 covering arbitration should governing this case.

The Arbitration Tribunal noted that a dispute concerning the interpretation of the English text of INCOGRAIN 12 exists between the parties. Both of the English text submitted by the parties contained a note providing that "in the event of dispute as to interpretation of this text, the French text shall be valid," the Arbitration Tribunal requested the parties to provide the French text of Article 17 of INCOGRAIN 12 and its Chinese translation.

The [Buyer] submitted the French text and its Chinese translation as follows:

[The Chinese translation and French text are not reproduced.]

The [Seller] submitted the French text and its Chinese translation as follows:

[The Chinese translation and French text are not reproduced.]

The parties agree that the dispute in this case is a type of "other disputes" stated in Article 17(A) and (B)(2). The parties dispute over the interpretation of "financial settlement" (règlement financier) in Article 17(B)(2). They both acknowledged that the last day allowed to fulfill the obligations is 31 January 2001. The [Buyer] interpreted the term as "monetary/financial settlement", and thus alleges that there was no time limit in this case since the parties had not reached a financial settlement. It insisted that the applicable law in this case should be the law of China and thus the relevant time limit should be four years. [Buyer] alleges that the application by the [Buyer] before 31 January 2006 was within the stipulated time limit. The [Seller] interprets the term as "offsetting an outstanding future obligation with a financial or cash transfer." The [Seller]'s reasoning is that it would be unreasonable for INCOGRAIN 12 to mean "monetary settlement" as the term because, if there was no time limit whenever the parties tried to settle their dispute, the provision of a time limit would be meaningless.

The Arbitration Tribunal noted that although the parties had different interpretations of the term "financial settlement" (règlement financier), neither of the interpretations had sufficient authority in this case. The parties failed to provide an interpretation from an authoritative translation institution in the grain industry or from the SYNDICATE DE PARIS DU COMMERCE ET DES INDUSTRIES DES GRAINS PRODUITS (Paris Trade Association of Commerce and Grain Industries). Therefore, the Arbitration Tribunal could only make its decision according to the provisions of INCOGRAIN 12 and general commercial principles, while each party was holding to its own interpretation.

The Arbitration Tribunal concludes that it was reasonable and fair to require the claimant to refer disputes (other than those regarding quality and conditions) to arbitration within six months following the last day allowed for fulfillment of the obligations in Article 17 of INCOGRAIN 12. The [Buyer]'s claim that such requirement was obviously against it should not be accepted. Since the parties agreed that INCOGRAIN 12 governs the contract, both of them should be subject to the six-month time limit. Article 17(B)(2) concerns the exception to the time limit, which is the disputed "financial settlement" (règlement financier). The [Buyer] interpreted the term as "monetary settlement," while the [Seller] interpreted the term as "offsetting an outstanding future obligation with a financial or cash transfer." Since both interpretation lacked supportive evidence, the Arbitration Tribunal accepted neither of them.

In this case, they [Buyer] must produce valid evidence to support its allegation that its claims were not time-barred. According to general commercial practices, parties to a transaction usually try to negotiate and settle a dispute before applying for arbitration, and such settlements usually involve monetary compensation. Therefore, according to the submission of the [Buyer], if there was no time limit whenever the parties tried to settle their dispute, the provision regarding the time limit in Article 17 of INCOGRAIN 12, which might lead to an unconquerable difficulty in practice, would be meaningless.

Accordingly, the Arbitration Tribunal holds that, in this case, pursuant to the financial settlement, which was an exception to the six-month time limit of application for arbitration in Article 17 of INCOGRAIN 12, the deadline for the parties to refer the dispute to CIETAC should be 31 July 2002.

The Arbitration Tribunal notes that the [Buyer] submitted an Application for Arbitration regarding the dispute in this case on 26 September 2002 (case No. G20030290) and withdrew the arbitration later on 5 August 2004. Therefore, the Arbitration Tribunal holds that since the [Buyer] failed to apply for arbitration before 31 July 2002, its claims are time-barred.

5. The [Buyer]'s claims

As discussed above, the [Buyer]'s claims were time-barred. Therefore, all [Buyer]'s claims are dismissed.

6. The arbitration fee

Taking the facts in the case into account, the [Buyer] should be fully responsible for the arbitration fee of this case.

1.  The [Buyer]'s claims are dismissed.
 
2.  The [Buyer] shall bear the entire arbitration fee of RMB 138,673 yuan, which has been paid to the Commission by the [Buyer] in advance.

This is the final award. It takes effect on the day of the decision.


FOOTNOTES

* For purposes of this translation, Claimant of the People's Republic of China is referred to as [Buyer] and Respondent of France is referred to as [Seller]. Amounts in U.S. currency (dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB ... yuan].

** Jingyuan Sun is an Associate with the New York office of the law firm of Sheppard Mullin Richter & Hampton LLP. Sheppard Mullin produces the China Law Update website.

*** Lin Wah Tong , JD student, City University of Hong Kong; Bachelor of Arts in Language Studies, Associate Degree of Arts in Bilingual Communications Studies.

Go to Case Table of Contents
Pace Law School Institute of International Commercial Law - Last updated March 8, 2010
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography