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CISG CASE PRESENTATION

China September 2006 CIETAC Arbitration proceeding (Spare parts case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/060900c4.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20060900 (September 2006)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2006/14

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: United States (claimant)

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

GOODS INVOLVED: Spare parts


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 30 ; 31(a) ; 34

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 and Trade Arbitration Commission
CIETAC (PRC) Arbitration Award

Spare parts case (September 2006)

Translation [*] by Wenwen LIANG [**]

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

The China International Economic and Trade Arbitration Commission (originally known as the "Foreign Trade Arbitration Commission under the China Council for the Promotion of International Trade", later known as the "Foreign Economic and Trade Arbitration Commission under the China Council for the Promotion of International Trade", and now known as the "China International Economic and Trade Arbitration Commission", hereinafter referred to as "CIETAC") accepted the case (Case no. M2006____) according to:

   -    The arbitration clause in Contract No. 2005041 5RP concluded by the Claimant of the United States (hereinafter the "[Seller]") and Respondent of the People's Republic of China (hereinafter the "[Buyer]"); and
 
   -    The Application for Arbitration submitted by the [Seller] on 27 February 2006.

The Arbitration Rules of CIETAC (hereinafter the "Arbitration Rules") which took effect as of 1 May 2005 apply to this case. Chapter 4 "Summary Procedure" of the Arbitration Rules applies as the disputed amount does not exceed renminbi [RMB] 500,000.

On 15 May 2006, the Secretariat of CIETAC (hereinafter the "Secretariat") forwarded 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 [Buyer] by express mail.

The [Buyer] submitted an "Application to Defer the Defense" on 1 June 2006. On 2 June 2006, the Secretariat forwarded this Application to the [Seller] and notified both parties that the [Buyer] would be allowed to submit a defense and/or counterclaim before 20 June 2006.

As the parties failed to appoint or authorize the Chairmen of CIETAC to appoint a sole arbitrator within the time limit, Mr. ___ was appointed as the sole arbitrator by the Chairmen of CIETAC in accordance with the Arbitration Rules. The arbitrator established the Arbitration Tribunal on 7 June 2006. On the same day, the Secretariat forwarded the Notice of the Establishment of the Arbitration Tribunal to both parties by express mail.

After examining the written material available and consulting with the Secretariat, the Arbitration Tribunal decided to hear the case in Beijing on 14 July 2006. The Secretariat sent the Notice of Hearing to the [Seller] and the [Buyer] by express mail on 8 June 2006.

On 13 June 2006, the [Buyer] submitted an Application requesting the [Seller] to produce the evidence in Chinese. The Arbitration Tribunal, via the Secretariat, forwarded the Application to the [Seller] and notified the parties that the [Seller] should produce the Chinese version of the evidence within five days after receipt of the notice.

The [Seller] submitted the Chinese translation of the evidence on 26 June 2006. On the same day, the [Buyer] submitted another Application to Deferr the Defense and the Hearing. The Arbitration Tribunal, via the Secretariat, forwarded the above documents to both parties and notified them that the [Buyer] should submit its defense by 5 July 2006 and that the hearing would commence as scheduled.

On 3 July 2006, the [Buyer] once again submitted an Application to Defer the Defense and the Hearing. In order to guarantee the parties' procedural rights, the Arbitration Tribunal, via the Secretariat, forwarded the Application to the [Seller] and notified both parties that the [Buyer] should submit its defense by 11 July 2006.

On 13 July 2006, the [Buyer] submitted a Defense challenging the standing and jurisdiction of the Tribunal, and submitted a Letter regarding Address Change, notifying of the change of the address of the [Buyer] to "_______" as shown on the cover of this arbitration award.

On 14 July 2006, the Arbitration Tribunal held the hearing as scheduled according to Article 6(4) of the Arbitration Rules that "the arbitration shall proceed notwithstanding an objection to the arbitration agreement and/or jurisdiction over the arbitration case." The representative of the [Seller] was present. The [Buyer] was absent without valid excuse. The Arbitration Tribunal proceeded with the hearing without the presence of the [Buyer] according to Article 34 of the Arbitration Rules. The [Seller] presented its claims, facts and grounds, and original evidence, explained the claims and evidence, and answered inquiries of the Arbitration Tribunal.

The Arbitration Tribunal, via the Secretariat, notified the parties on the same day that the hearing was held and that the parties could submit any supplementary opinions and/or evidence with regard to the issue of standing, jurisdiction and merits of the case before 21 July 2006.

After the hearing, the [Seller] submitted a Counsel's Opinion and additional evidence and the [Buyer] submitted its Defense (II). The above documents were exchanged between the parties through the Secretariat.

CIETAC issued Ruling No. 007144ZGMZJZ (2006) on 1 August 2006 regarding the standing and jurisdiction issues. The Ruling rejects the challenge of the [Buyer], recognizes that the [Seller] has standing in this case, and holds that CIETAC is competent to hear this case and that the arbitration shall continue. The Secretariat mailed to both parties the above Ruling on the same day, and notified the parties that any supplementary opinion and/or evidence must be submitted by 11 August 2006 and that the Arbitration Tribunal shall make the award based on the documents available as soon as possible.

The [Seller] submitted a Supplementary Counsel's Opinion on 11 August 2006 which was forwarded to the [Buyer] by the Secretariat. The [Buyer] did not submit any supplementary material within the prescribed period.

All documents have been served on the parties. The case is now closed. The Arbitration Tribunal makes the award based on the written documents and facts identified during the hearing.

The facts, opinion of the Arbitration Tribunal and arbitral award are as follows:

FACTS

The [Seller] and the [Buyer] concluded Sales Contract No. 20050415RP on 15 April 2005 (hereinafter referred to as the "Contract").

   -    Article 1 of the Contract stipulates that the "goods and specifications" are RP1400 SPARE PARTS, and the subject amount of the contract is US $14,315;
 
   -    Article 5 stipulates the time of shipment as "45 days after receipt of Buyer's shipping information";
 
   -    Article 6 stipulates that the transit port is any US airport;
 
   -    Article 7 stipulates that the destination port is the Shanghai airport;
 
   -    Article 8 stipulates the insurance as the Seller's responsibility;
 
   -    Article 9 stipulates that the payment should be "100% of the total amount payable by T/T after installation";
 
   -    Article 10 stipulates "documents: three original copies of invoices, three original copies of carrier's certificate, the original copy of the insurance policy ..., the Airway Bills specifying freight prepaid with the Buyer listed as consignee";
 
   -    Article 11 stipulates that "the Seller shall be responsible for all tax, customs and fees in relation to the export of goods and all the risk in relation to the goods prior to the delivery to and the control of the air carrier at the port of departure. The Seller shall be responsible for transporting the goods from the transit port to the port of destination during the transit period. The Seller shall be responsible for the freight and insurance cost in relation to the export of goods."

POSITION OF THE PARTIES

[Seller]'s claim

The [Seller] alleges that it has performed its contractual obligations after the conclusion of the Contract while the [Buyer], after taking delivery of goods as agreed, did not make payment accordingly. The [Seller] thus applies for an order requiring the [Buyer] to pay the aforesaid money. The [Seller] also produced a digital copy of the Airway Bill, the invoice and the carrier's certificate as evidence.

The [Seller] seeks the following relief:

   1)   The [Buyer] should pay the outstanding payment of the goods of US $14,315 (RMB 115,522.05 at the exchange rate of 1:8.07);
 
   2)   The [Buyer] should bear the arbitration fee;
 
   3)   The [Buyer] should bear the attorneys' fees and notary fee of the [Seller] totaling RMB 3,210.44.

[Buyer]'s defense

The [Buyer] alleges that:

      According to the Contract, the manner of payment is "100% of the total amount paid by T/T after installation", i.e., payment of the full amount through electronic transfer after installation. The [Seller] did not make delivery of the goods as agreed. Thus the [Buyer] is under no obligation to make payment to the [Seller].

[Seller]'s supplementary opinion

The [Seller] submitted the following supplementary opinion after the hearing:

      The defense of the [Buyer] is not sound. The fact that the[Seller] has delivered the goods as agreed is supported by the evidence. The goods under the Contract are spare parts, which do not need to be installed. As a result, it is not reasonable to stipulate that the payment should be made "after installation". The Contract was drafted by the [Buyer] which should be responsible for the error rather than postponing the payment on the basis of the error.

The [Seller] submitted copies of receipt of the import duty and receipt of import VAT after the hearing as additional evidence.

[Buyer]'s supplemental opinion

The [Buyer] submitted the following supplemental opinion after the hearing:

      The [Seller] cannot prove that the [Buyer] drafted the Contract, neither can the [Seller] prove that the [Buyer] has received the goods. The [Seller]'s argument regarding the installation is not sound. The spare parts were to be installed immediately according to the Contract rather than to be put in storage and not in use, and the payment should be made after installation.

OPINION OF THE ARBITRATION TRIBUNAL

A. Applicable law

The parties did not stipulate the applicable law in the Contract. The Arbitration Tribunal holds that the United Nations Convention on Contracts for the International Sale of Goods (hereinafter the "CISG") applies as the places of business of the parties are in Contracting States to the Convention and the parties did not exclude the application of the Convention. Under the principle of the closest connection, matters not covered by the Convention are governed by the law of People's Republic of China, as China was agreed as the place of arbitration in the Contract.

B. Validity of the Contract

The [Seller] submitted a copy of the Contract and applied for arbitration based on its validity and legal effect. The [Buyer] did not question the authenticity or validity of the Contract except whether the [Seller] was the seller in the Contract with standing.

CIETAC made Ruling No. 007144ZGMZJZ (2006) regarding the standing and jurisdiction on 1 August 2006. The Ruling rejects the objection of the [Buyer] as to the standing of the [Seller] and recognizes the standing of the [Seller]. The Arbitration Tribunal agrees with the ruling of CIETAC that the [Seller] is the person named in the Contract despite the minor difference between the name and address of the Seller in the Contract and those of the [Seller] as the Claimant. The difference is attributed to commercial customs and printing and is not substantial.

Therefore, the Arbitration Tribunal holds that the Contract is valid and legally binding as the expression of the parties' intents without invalidating circumstances under the applicable law.

C. Whether the [Seller] has performed its contractual obligations

The [Seller] submitted a digital copy of the Airway Bill, the invoice, the carrier's certificate, receipts of import duty and receipts of import VAT to prove that the [Seller] has performed its contractual obligations and thus requested the [Buyer] to make payment.

The [Buyer] alleges that the evidence submitted by the [Seller] is not sufficient to prove that the [Buyer] has received the goods because none of the [Seller]'s evidence, except the orginal Contract, is signed by the counterparty. The materials the [Seller] submitted are of weak evidential value and subject to doubt as to their authenticity.

The Arbitration Tribunal identifies that: the Airway Bill is a "DIGITAL COPY FOR FAX OR E-MAIL" without the seal of the carrier, rather than the original or a copy of the original; the invoice and the carrier's certificate are unilateral documents of the [Seller]; the receipts of import duty and the receipts of import VAT carry the [Buyer] as the taxable person rather than the [Seller] and the [Seller] did not disclose the source of the receipts.

The Arbitration Tribunal holds that the [Seller] was obligated to:

   -    Deliver the goods to the carrier at any US airport for carriage to the Shanghai airport for delivery to the [Buyer] within 45 days after receiving the shipping notice from the [Buyer], in accordance with Article 5 to Article 11 of the Contract, Article 30, Article 31(a) and Article 34 of the CISG, Article 135 and Article 136 of the Law of Contract of the PRC (hereinafter referred as to the "Law of Contract"); and
 
   -    Transfer to the [Buyer] all documents in relation to the goods including the Airway Bill and the title of the goods pursuant to Article 10 of the Contract. The [Seller] was to deliver the goods to the [Buyer] and to pass the title of the goods pursuant to Article 133 of the Law of Contract, as the way to transfer the title was not stipulated in the Contract.

Without the seal of the carrier, the digital copy of the Airway Bill submitted by the [Seller] is not an official document issued by the carrier and thus is not an airway bill. The consignee (the [Buyer]) listed on the digital copy of the Airway Bill has challenged the authenticity of it. The [Seller] has no other evidence to prove its objectivity, legality and relevance. Therefore, the Arbitration Tribunal holds that the digital copy of the Airway Bill is not competent to prove that the [Seller] has delivered the goods under the Contract to the [Buyer].

As to the invoice and the carrier's certificate produced unilaterally by the [Seller], the [Buyer] and consignee in the invoice and in the carrier's certificate has challenged their authenticity and the [Seller] has no other evidence to prove their objectivity, legality and relevance. Therefore, the Arbitration Tribunal holds that the invoice and the carrier's certificate are not competent to prove that the [Seller] has delivered the goods] under the Contract to the [Buyer].

The [Seller] did not establish that the copies of the receipts of import duty and receipts of import VAT were lawful. The taxable person listed on the copies (the [Buyer]) has challenged the authenticity and relevance of the copies, and the [Seller] has no other evidence to prove their objectivity, legality and relevance. Therefore, the Arbitration Tribunal holds that the copies of receipts of import duty and receipts of import VAT are not competent to prove that the [Seller] has delivered to the [Buyer] the goods under the Contract.

The [Seller] did not submit other evidence to prove that the [Seller] had delivered to the [Buyer] the documents in relation to the goods pursuant to Article 10 of the Contract or other evidence to prove that the [Seller] had delivered the goods to the [Buyer].

In conclusion, as the evidence submitted by the [Seller] is not competent to prove its allegation that it "has performed the contractual obligations, the Arbitration Tribunal holds that the [Seller] has not proved that the [Seller] has performed its obligations under the Contract and the law."

Pursuant to Article 36 of the Arbitration Rules and Article 43 of the Law of Arbitration of the PRC, the Arbitration Tribunal rejects the claims of the [Seller] that the [Seller] has performed its contractual obligations and that the [Buyer] should pay the payment for goods of US $14,315.

D. Arbitration fees and attorney and notary fees of the [Seller]

Having rejected the claim of the [Seller] that the [Buyer] make payment for the goods, the Arbitration Tribunal rejects the claim of the [Seller] that the [Buyer] bear the arbitration fee, the attorneys' fees, and notary fees of the [Seller].

AWARD

The Arbitration Tribunal renders the following award:

    1)   All claims of the [Seller] are rejected.
 
    2)   The [Seller] shall bear all of the arbitration fee of US $2,469. which is offset by the deposit of US $2,469 made by the [Seller].

This award is final and takes effect from the date it is made.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of the United States is referred to as [Seller]; Respondent of People's Republic of China 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].

** Wenwen LIANG, Ph.D. candidate, University of Manchester, UK; LL.M., Wuhan University, China.

*** 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 Shephard Mullin China Law Update. Jingyuan Sun is an Associate with the New York office of the firm.

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Pace Law School Institute of International Commercial Law - Last updated October 30, 2009
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