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CISG CASE PRESENTATION

China June 2006 CIETAC Arbitration proceeding (Concentrate fruit juice case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/060600c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20060600 (June 2006)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2006/07

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: France (respondent)

GOODS INVOLVED: Concentrated fruit juice


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 53 ; 62

Classification of issues using UNCITRAL classification code numbers:

Unavailable

Descriptors: Unavailable

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): Unavailable

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

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

Concentrated fruit juice case (June 2006)

Translation [*] by Zheng Xie [**]

Edited by William Zheng and Jingyuan Sun [***]

Particulars of the proceeding
Facts
Opinion of the Arbitration Tribunal
Award

PARTICULARS OF THE PROCEEDING

The China International Economic and Trade Arbitration Commission (hereafter, the "Arbitration Commission") accepted the case (Case number: G2005___) according to:

   -    The arbitration clause in Contracts No. 02KF109, 02KF128 and 01FK168 [the "Contracts") signed by Claimant ___ [of the People's Republic of China] (hereinafter referred to as "[Seller]") and Respondent ___ [of France] (hereinafter referred to as "[Buyer]") on 27 January, 26 April and 31 October 2002, respectively; and
 
   -    The written Application for Arbitration submitted by the [Seller] on 14 November 2005.

All three Contracts include arbitration clauses stating that:

"All disputes arising out of the performance or relating to this Contract, shall be settled amicably by negotiation. In case no settlement can be reached through negotiation, the case shall be submitted to the China International Economic and Trade Arbitration Commission, Beijing, China, for arbitration in accordance with its rules of Arbitration. The arbitral award is final and binding upon both parties."

The Arbitration Rules of the Arbitration Commission [hereafter, the "Arbitration Rules"], which took effect on 1 May 2005, apply to this case.

On 5 December 2005, the Secretariat of the Arbitration Commission served the [Seller] and the [Buyer], by express mail, the Arbitration Notice, the Arbitration Rules and the Arbitrators List. It also served the [Buyer] the [Seller]'s Application for Arbitration and its attachments.

The Secretariat also tried but failed to send the Notice of Arbitration to the [Buyer] via facsimile according to the fax number provided by the [Seller]. The record showed "No Signal."

The Secretariat sent the aforementioned documents to the [Buyer] at the address, i.e., "___ France," provided in the [Seller]'s Application for Arbitration. The express mail company notified the Secretariat that the mail could not be delivered because the [Buyer] had moved, but the new address was not known. As per the Secretariat's request, the documents were left at the aforementioned address.

The Secretariat notified the [Seller] of this, and the [Seller] provided another address, i.e., "2nd ___, France." The Secretariat served the [Buyer] the Notice of Arbitration and attachments at that address, but the express mail company advised the Secretariat that the [Buyer] had moved to a new address, which was unknown. As per the Secretariat's request, the documents was left at that address on 10 January 2006.

The Secretariat notified the [Seller] of the above situation. The [Seller] replied in mail that, " The [Buyer]'s address provided in the Application for Arbitration should be deemed as the correct address. If the [Buyer] does not sign and accept the mail, the [Seller] agrees that the documents should be left at that address for service process."

All documents were sent to the [Buyer] by express mail at the address provided by the [Seller]. Since the [Buyer] moved to a new address, which was unknown, the documents were left at that address. Pursuant to Article 68(2) of the Arbitration Rules, the [Buyer] was served.

The [Buyer] neither submitted a response nor evidence, nor did the [Buyer] appear at the hearing. Therefore, it is deemed that the [Buyer] gave up its right to defend in the proceedings.

The [Seller] appointed Mr. ___ as its arbitrator. Since the [Buyer] neither appointed nor authorized the Chairman of the Arbitration Commission to appoint an arbitrator within the time limit, the Chairman appointed Mr. ___ as arbitrator. Since the [Seller] and the [Buyer] neither jointly appointed nor authorized the Chairman of the Arbitration Commission to appoint the presiding arbitrator within the time limit, nor did the parties recommend one to three arbitrators as candidates for the presiding arbitrator pursuant to Article 22(3) of the Arbitration Rules, the Chairman appointed Ms. ___ as the presiding arbitrator. On 24 February 2006, these three arbitrators formed an Arbitration Tribunal to hear this case. On the same day, the Secretariat served the parties the Notice of Formation of the Arbitration Tribunal.

On 24 February 2006, after consulting the Secretariat, the Arbitration Tribunal scheduled a hearing on 23 March 2006 at 9:30 a.m. in Beijing. The Secretariat served the parties the Notice of Hearing by express mail.

On 23 March 2006, the hearing was held in Beijing as scheduled. The [Seller]'s representative was present, but the [Buyer] failed to appear without valid excuse . The Arbitration Tribunal heard the case by default pursuant to Article 34(2) of the Arbitration Rules. The [Seller]'s representative stated its claims, and presented facts and legal opinions. The Tribunal investigated the factual issues and the originals of the evidence submitted by the [Seller].

On 13 April 2006, the [Seller] submitted supplemental evidence and the Attorney's Opinion on the Disputes Regarding the Sale of Concentrated Fruit Juice in case G2005____.

On 14 April 2006, the Secretariat sent letters to the parties. The letter notified the [Buyer] of the hearing and forwarded the supplement documents the [Seller] submitted after the hearing. It also informed the [Buyer] that it must submit a request, if there is any, for another hearing to cross-examine the evidence or to object to any part of the case before 5 May 2006. The Tribunal would not accept any submission after the set date. In addition, both parties are notified by the letters that any objections to the arbitration proceedings must be raised in writing before 30 April 2006.

Neither party submitted any response to the letters.

The case is concluded. Based on the evidence verified in the hearing and the written materials, the Arbitration Tribunal renders this award by consent within the time limit pursuant to Article 42(1) of the Arbitration Rules.

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

FACTS

1. The Contracts

The [Seller] and the [Buyer] signed Contracts No. 02KF109, 02KF128 and 02KF168 (the "Contracts") for the sale of Concentrated fruit juice on 27 January, 26 April and 31 October 2002, respectively.

Contract No. 02KF109 stipulates the following terms:

   -    Goods: Concentrated pineapple juice made in China;

   -    Manufacturer: China Electronic Import and Export Yunan Hong He Ge Lin Food Ltd.;
   -    Quantity (net weight ): 800 tons (3%);
   -    Unit price: US $645/ton CNF Rotterdam;
   -    Total price: US $516,000;
   -    Time of delivery: March-July 2002;
   -    Payment: D/P 45 days:

   -    Documentation: The Seller shall provide bills of lading, originals of commercial invoices (three copies); originals of packing list (three copies); certificate of origin; quality certificate.

Contract No. 02KF128 stipulates the following terms:

   -    Goods: Concentrated pineapple juice of 2002;
   -    Quantity (net weight): 500 tons ( 5%);
   -    Unit price: US $950/ton CNF Rotterdam;
   -    Total price: US $475,000;
   -    Time of delivery: June-July 2002;
   -    Payment: The Buyer shall pay 20% of the total price, i.e., US $95,000 before 10 May 2005, and the remaining 80% shall be paid within D/P 45 days;
   -    Documentation: The Seller shall provide bills of lading, originals of commercial invoices (three copies); originals of packing list (three copies); certificate of origin; quality certificate.

Contract No. 02KF128 stipulates the following terms:

   -    Goods: Concentrated apple juice of 2002;
   -    Quantity (net weight): 200 tons ( 5%);
   -    Unit price: 500 Euro/ton FOB China (shipping before 31 December 2002), or 510 Euro/ton FOB China (shipping from January to 30 June 2003);
   -    Total price: 1,000,000 -1,100,000 Eruo [it should be 1,020,000 Euro: note by the Arbitration Tribunal];
   -    Time of delivery: No later than 30 June 2003;
   -    Payment: D/P 45 days;
   -    Documentation: The Seller shall provide bills of lading, originals of commercial invoices (three copies); originals of packing list (three copies); certificate of origin; quality certificate.

All three contracts stipulate that:

   -    With respect to quality disputes, the [Buyer] shall notice the [Seller] within twenty (20) days after the cargo arrive at the port of destination;
 
   -    With respect to quantity disputes, the [Buyer] shall notice the [Seller] within ten (10) days after the cargo arrive at the port of destination; and that
 
   -    The [Seller] shall not be liable for any other problems, for which insurance company, carriers and other transportation companies, or post office shall be liable.

2. Payment Agreement

On 4 July 2003, the [Seller] as B and the [Buyer] as A, signed a Payment Agreement to schedule payments under the Contracts. The English version of the Payment Agreement states:

"For the due payment of the goods that party B shipped to party A of apple juice concentrate and pineapple juice concentrate against different contracts, herewith party A confirm to pay party B according the following schedule:

(1) For Apple Juice Concentrate of EUR 117,040.00

   -    EUR 58,520.00 to be paid by July 15, 2003;
   -    EUR 58,520.00 to be paid by 1August 15, 2003,

(2) Pineapple Juice Concentrate of USD 170,363.00

   -    USD 85,363.00 to be paid by 31 July 2003;
   -    USD 85,000.00 to be paid by 20 August 2003.

The above payments were delayed 100% due to party A change of financial structure with a new factoring company, all the quality, storage, analysis claim of pineapple juice concentrate of EUR 116,736.25 (equal USD 136,713.00) had been deducted, there is no any more complaints or disputes for the above amount.

The settlement of any possible disputes on this payment agreement, if could not be settled by friendly way, will be as the same stipulated in the relative contracts, in Beijing, China."

The following is the corresponding Chinese translation of the Payment Agreement:

[Chinese translation not reproduced]

3. The [Seller]'s Position and Arbitration Requests

After signing the Contracts, the [Seller] duly performed its contractual duties and delivered the goods to the [Buyer], but the [Buyer] only paid part of the payments for the goods. The [Seller] negotiated with the [Buyer] several times in order to arrange the payments. On 4 July 2003, the parties signed the Payment Agreement which confirmed the outstanding balance and arranged a payment plan. The [Buyer] should have made payments pursuant to the Payment Agreement. However, it only paid US $83,500 for the concentrated pineapple juice. Therefore, the [Buyer] still owes the [Seller] 117,040 Euro for the concentrated apple juice and US $86,863.00 for the concentrated pineapple juice. After the [Seller]'s many payment demands, the [Buyer] still refused to pay the balance due. The [Seller] thus filed the arbitration application pursuant to the Payment Agreement and the Contracts.

The [Seller] requests the following relief:

   (1)  

The [Buyer] shall pay the [Seller] 117,040 Euro for concentrated apple juice and US $86,863.00 for concentrated pineapple juice; and

   (2)   The [Buyer] shall bear the arbitration fee.

4. The [Seller]'s Supplemental Opinion submitted after the court session

The [Seller] states that:

      (1) The facts are clear and the evidence is sufficient. The [Buyer] should pay the balance of the contract price pursuant to the Payment Agreement. After the Contracts were concluded, the [Seller] performed its contractual duties and delivered the goods, but the [Buyer] only paid part of the contract price and failed to pay the balance due. The [Seller] negotiated with the [Buyer] several times in order to arrange payments. On 4 July 2003, the parties signed the Payment Agreement, confirming the outstanding balance and arranging a payment plan.

      (2) The [Buyer] breached the Contracts and intentionally refused to pay its debt. Therefore, the [Buyer] should be held liable. The [Buyer] should have made payments pursuant to the Payment Agreement after signing it. However, the [Buyer] only paid a small portion of the payments of goods (US $23,465 before 5 August 2003 and US $59,985 before 23 October 2003), and failed to pay the remaining balance. The [Seller] demanded payment many times. The [Buyer] responded on 9 and 10 March 2003, respectively, but thereafter, the [Buyer] did not respond at all. In addition, the [Buyer] intentionally avoided payment of the debts and did not respond to the [Seller]'s phone calls or facsimiles. The [Seller] had to file the arbitration application and asks the Arbitration Tribunal to honor the [Seller]'s requests.

5. The [Buyer] did not submit any response or counterclaim.

THE ARBITRATION TRIBUNAL'S OPINION

Based on the documents submitted by the [Seller] and the investigation conducted in the hearing, the Arbitration Tribunal issued its opinion as follows:

1. Scope of this case

The [Seller] and the [Buyer] signed three Contracts in 2002 for sales of concentrated pineapple juice and concentrated apple juice. The Contracts contain arbitration clauses stipulating that any disputes arising out of the Contracts should be submitted for arbitration with CIETAC. On 4 July 2003, the parties executed a Payment Agreement to schedule a payment plan for the outstanding balance under the Contracts. The [Seller] submitted the disputes under the three Contracts for arbitration. The Arbitration Tribunal holds that the arbitration application is appropriate. The scope of this case includes the disputes arising under the Contracts and the Payment Agreement.

2. Applicable law

The Contracts are for international sales of goods. The Contracts do not stipulate the governing law. The [Seller]'s place of business is in China, and the [Buyer]'s place of business is in France. Since both China and France are Contracting States of the United Nations Convention on Contracts for International Sales of Goods ("CISG"), the CISG should apply to this case. According to the principle of closest connection, the law of China should apply for matters not stipulated in CISG because both the place of the [Seller] and the seat of arbitration are in China.

3. Performance of the Contracts

After investigation, the Arbitration Tribunal finds that the Contracts reflect the parties' true intent. The Contents are legitimate, the formation is appropriate, and the Contracts do not violate the CISG or the law of China. The Contracts are valid, and the parties should perform the Contracts in good faith.

Based on the [Seller]'s written opinion, the evidence submitted and the investigation in the hearing, the Arbitration Tribunal finds that the Contracts have been performed.

The evidence demonstrates that the Contracts were signed on 27 January, 26 April and 31 October 2002, respectively. Two of them are for the sale of concentrated pineapple juice, and one is for the sale of concentrated apple juice.

The [Seller] provided four commercial invoices to the [Buyer] in the amount of US $193,500.00 (300 tons of pineapple juice), US $154,316.25 (239.25 tons of pineapple juice), US $105,929.00 (111.5 tons of pineapple juice) and 117,040 Euro (209 tons of apple juice), respectively, on 8 April, 10 June, 5 August, and 12 December 2002. The [Seller] submitted the relevant documents and bills of lading to the Arbitration Tribunal, proving that it has delivered the goods under the Contracts to the [Buyer] through CCC Shipping Agency Co,. Ltd.

After receiving the goods, the [Buyer] made two payments for the concentrated pineapple juice to the [Seller] in the amount of US $66,485.00 and US $69,970.00 on June 16, 2002 and December 9, 2002, respectively.

On 4 July 2003, the parties signed the Payment Agreement confirming that the [Buyer] owed 117,040.00 Euro for the concentrated apple juice and US $170,363.00 for the concentrated pineapple juice. In the Payment Agreement, the [Buyer] admitted that the overdue balance was caused by its own reason, and clarified that 116,736.25 Euro (i.e., US $136,713), which the [Buyer] claimed for damages of quality defects, warehouse expenses and inspection expenses, had been deducted from the outstanding balance. In the Payment Agreement, the parties confirmed that they did not have any objection to the outstanding balance.

The Arbitration Tribunal holds that the Payment Agreement reflects the parties' true intent, and is sufficient evidence of the performance of the Contracts. The Payment Agreement confirmed the amount which the [Buyer] owed the [Seller] under the Contracts. The Arbitration Tribunal confirms the validity of the Payment Agreement.

After signing the Payment Agreement, the [Buyer] paid the [Seller] US $23,465.00 and US $59,985.00 on August 5 2003 and October 23, 2003, respectively.

Thereafter, the [Buyer] stopped performing the Payment Agreement. Although the [Seller] negotiated with the [Buyer], the [Buyer] failed to pay any balance due.

4. Evidence

The evidence submitted by the [Seller] included the three Contracts, one Payment Agreement, three commercial invoices, four bills of lading, four wire transfer confirmations, the [Seller]'s three demand letters, and [Buyer]'s two response letters. All evidence submitted by the [Seller] has been sent to the [Buyer] by the Secretariat. The [Buyer] did not submit any objection. Therefore, it is deemed that the [Buyer] did not object to the truthfulness, legality and relevance of the evidence to this case. In the hearing, the Arbitration Tribunal reviewed the originals of the aforementioned documents. The Arbitration Tribunal finds that the copies were consistent with the original documents.

The Arbitration Tribunal holds that the [Buyer] has been provided with sufficient time and opportunity to submit an opinion, to file a response, to submit evidence and cross-examine evidence, but the [Buyer] gave up those rights.

5. The [Buyer]'s liability for its breach

Article 53 of the CISG provides:

"The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention."

The [Seller] delivered part of the goods and issued commercial invoices accordingly. However, after receiving the goods, the [Buyer] did not pay the full payments of goods as stated in the commercial invoices. The Payment Agreement demonstrates that the parties are in a debtor-creditor relationship under the Contracts and confirmed the amount of the outstanding balance. However, the [Buyer] failed to perform according to the Payment Agreement and paid only a small portion of the total balance to the [Seller]. As a buyer engaged in international trade, the [Buyer] has breached the Contracts.

As to remedy for a buyer's breach, Article 62 of the CISG provides:

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

Therefore, the Arbitration Tribunal sustains the [Seller]'s claim that the [Buyer] shall pay the outstanding balance. Regarding the amount owed, it was verified by the Payment Agreement on 4 July 2003 that the [Buyer] owed the [Seller] 117,040 Euro and US $170,363. Thereafter, the [Buyer] paid US $23,465.00 and US $59,985.00 on 5 August 2003 and 23 October 2003, respectively. Therefore, the [Buyer] still owed the [Seller] 117,040 Euro and US $86,913.00, but the [Seller] requested payments of 117,040 Euro and US $86,863.00.

The Arbitration Tribunal also notes that in the facsimiles sent between the parties after the Payment Agreement was concluded, the [Seller] mentioned that the [Buyer] still owed 117,040 Euro and US $86,863, and also stated that the outstanding amount was 117,040 Euro and US $86,363. The [Buyer] did not deny either of the above stated amounts. The Arbitration Tribunal holds that the discrepancy might have been caused by a typo. Furthermore, the parties also mentioned that if the [Buyer] paid the outstanding balance of 117,040 Euro for the concentrated apple juice contract in two installments before 29 March 2004, the [Seller] would consider waiving the outstanding balance regarding the concentrated pineapple juice. Since the Payment Agreement was not performed, the Arbitration Tribunal does not consider this proposed waiver.

The Arbitration Tribunal holds that, based on the evidence submitted by the [Seller], the outstanding balance which the [Buyer] owes the [Seller] should be the difference between the amount confirmed in the Payment Agreement and the amount paid by the [Buyer] afterwards. The difference is 117,040 Euro and US $86,913. The amount claimed by the [Seller] was less than the amount stated above. Since the Arbitration Tribunal has no power to adjudicate rights and interests beyond the arbitration requests, the Arbitration Tribunal sustains the [Seller]'s request for payments by the [Buyer] of 117,040 Euro and US $86,863.

6. Arbitration fee

Pursuant to Article 46 of the Arbitration Rules, the Arbitration Tribunal holds that since the disputes subject to this proceeding were caused by the [Buyer], and all of the [Seller]'s requests were sustained, the [Buyer] should bear the arbitration fee.

AWARD

   1.   The [Buyer] shall pay the [Seller] the outstanding balance of 117,040 Euro and US $86,863;
 

   2.  

The arbitration fee is 66,850 RMB. The [Buyer] shall be responsible for the arbitration fee. The [Seller] has paid the arbitration fee in advance. The [Buyer] shall compensate the [Seller] for 66,850 RMB.

The above amounts of 117,040 Euro, US $86,863 and 66,850 RMB shall be paid within twenty days after this award is rendered, otherwise interest shall be paid at the annual rate of 6%.

This award is final and takes effect when entered.


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 the [Seller]; Respondent of France is referred to as [Buyer]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB].

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

*** 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 and Editor of the Sheppard Mullin China Law Update. Jingyuan Sun is an Associate with the New York office of this firm.

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