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CISG CASE PRESENTATION

China November 2006 CIETAC Arbitration proceeding (Nitrile exam gloves case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/061100c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20061100 (November 2006)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2006/04

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: United States (respondent)

GOODS INVOLVED: Nitrile exam gloves


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 78 [Also cited: Article 53]

Classification of issues using UNCITRAL classification code numbers:

78B [Rate of interest]

Descriptors: Interest

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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

Nitrile exam gloves case (November 2006)

Translation by [*] Dong Ping [**]

Edited by Fan Yao [***]

PARTICULARS OF THE PROCEEDING

The China International Economic and Trade Arbitration Commission (hereinafter: "Arbitration Commission") accepted the case (case no. G2006____) according to:

-    The arbitration clauses in Sales Contract No. SCO31225-430, signed on 24 November 2003, and Sales Contract No. SCO31209-433, signed on 9 December 2003 (hereinafter: "Sales Contracts"), both of which were concluded by the Claimant (hereinafter: "[Seller]") AAA (Tian Jin) Plastic Cement Limited Company [of the People's Republic of China] and the Respondent (hereinafter: "[Buyer]") BBB Supply [of the United States]; and
 
-    The written arbitration application submitted by the [Seller] on 25 May 2006.

The Arbitration Rules, which were published by the Arbitration Commission and became effective since 1 May 2006 (hereinafter: "Arbitration Rules"), apply to the arbitration proceedings in this case.

On 27 June 2006, the Secretariat of the Arbitration Commission sent both parties the Arbitration Notice, Arbitration Rules and the list of the panel of arbitrators by express mail, and sent to the [Buyer] the Arbitration Requisition and evidence materials submitted by the [Seller]. According to the "International Express Mail Service Checklist" provided by the post office, the [Buyer] signed the above documents sent by the Secretariat of the Arbitration Commission on 6 July 2006. Thereafter, all of the documents that the Secretariat of the Arbitration Commission wrote to the [Buyer] were sent by express mail.

Since the [Seller] failed to choose its arbitrator or entrust the appointment to the Chairman of the Arbitration Commission in a specified time, according to the Arbitration Rules, the Chairman of the Arbitration Commission appointed Mr. XXX as an arbitrator of this case. Since the [Buyer] similarly failed to choose its arbitrator or entrust the appointment to the Chairman of the Arbitration Commission in a specified time, according to the Arbitration Rules, the Chairman of the Arbitration Commission appointed Mr. YYY as an arbitrator of this case. Since both parties failed to jointly choose the Presiding Arbitrator or entrust the choice to the Chairman of the Arbitration Commission in a specified time according to Arbitration Rules, the Chairman of the Arbitration Commission appointed Mr. ZZZ as the Presiding Arbitrator of this case. The above three arbitrators constituted the Arbitration Tribunal on 4 August 2006, and tried this case together.

The Arbitration Tribunal decided to hold an oral hearing in Beijing through the Secretariat of the Arbitration Commission on 7 September 2006. On 4 August 2006, the Secretariat of the Arbitration Commission wrote to the two parties by express mail to notify them of the composition of the Tribunal and the commencement of oral hearings.

On 14 August 2006, the [Buyer] sent a fax document with a signature of "BBB Supply Mr. ZHOU X" and signature date of "10 August 2006", in which the [Buyer] confirmed accepting the files sent by the Arbitration Commission, and requested a postponement of twenty-five days for the reason that some partners of the company and the manager who carried out the contracts were on a business trip abroad.

In order to make an early reply to the postponement request, the Arbitration Tribunal wrote to the [Buyer] through the Secretariat of the Arbitration Commission on 25 August 2006, urging it to provide business license information and identification of its legal representative or other authorized deputation, within five workdays after receiving the notification. The [Buyer] neither submitted any documents within the time limit, nor provided any written opinions. Due to this, the Arbitration Tribunal decided to maintain the original date of hearing, and notified both parties by fax and express mail on 31 August 2006 through the Secretariat.

The Arbitration Tribunal opened an oral hearing in Beijing on 7 September 2006. The [Seller] authorized arbitration agents to participate in the oral hearing. The [Buyer] neither appeared in the session nor provided an explanation. According to Section 2 of Article 34 of the Arbitration Rules, the Arbitration Tribunal entered a default judgment. In the trial, the arbitration agents of the [Seller] exhibited the evidence, gave an oral presentation, and answered the questions of the Arbitration Tribunal.

After the trial, the [Seller] submitted additional evidence on 14 September 2006. The Secretariat of the Arbitration Commission sent the additional evidence to the [Buyer] on 30 September 2006, and notified of the trial affairs, and the right to submit written materials in quintuplicate to the Arbitration Commission before 25 October 2006, if the [Buyer] has any objection to the additional evidence. The [Buyer] failed to summit any written materials during this period.

This case is now decided. Considering the facts clarified in the trial and the existing written materials, Arbitration Tribunal gives a ruling after a collegiate evaluation.

Followings are the facts, the opinion of the Arbitration Tribunal, and the arbitration award.

FACTS

[Seller]'s position

The [Seller] alleged that:

The [Seller] and [Buyer] concluded Sales Contracts on 24 November 2003 and 9 December 2003 which provided that "the [Buyer] purchase 4,700 cases of Nitrile Exam Gloves from the [Seller], the purchase price is US $138,650, and the mode of payment is T/T Date of delivery to 60 days."

The [Seller] made the delivery according to the agreement, however, the [Buyer] did not pay the purchase price as scheduled. After the [Seller]'s repeated urging, the [Buyer] made a partial payment of US $14,980 on 9 December 2004, with US $123,670 still owed. After that, the [Buyer] refused to pay the remaining money for the reason of product quality defects. In order to solve the problem and reduce the loss, the [Seller] agreed to accept the return of the goods. However, until now, the [Buyer] has neither returned the goods nor paid the remainder of the purchase price.

To sum up, the arrears of payment of the [Buyer] has already violated the law, and caused great losses to the [Seller]. Therefore, the [Seller] submitted the following arbitration requests:

1.   The [Buyer] should immediately pay the [Seller] the unpaid purchase price of US $123,670 and the interest arising therefrom of US $14,922.80;
 
2.   The arbitration fee and attorney fee should be borne by the [Buyer].
 
On 13 September 2006, the [Seller] explained the interest request, advising that the interest should be calculated from 15 March 2004 to 16 May 2006, and the interest rate should be the RMB loan annual interest rate of 5.40%.

The [Buyer] did not file a defense to the arbitration requests, or to the facts and reasons submitted by the [Seller].

OPINION OF THE ARBITRATION TRIBUNAL

1. The applicable law

This is a contract dispute involving an international sale of goods. There was no agreement between the parties as to the applicable law. The places of business of the [Seller] and the [Buyer] are located in China and America, respectively. Both countries are Contracting States of the 1980 United Nations Convention on Contracts for the International Sale of Goods [CISG]. According to paragraph (1) of Article 1 of this Convention, the CISG applies to "contracts of sale of goods between parties whose places of business are in different States." Hence, the Arbitration Tribunal considers that the CISG shall apply to this case. For matters which are not stipulated in the CISG, according to the doctrine of the most significant relationship, as the seller in this case is a Chinese legal person with its main business place locating in China, therefore, Chinese laws shall apply.

2. Validity of the sales contracts

Sales Contract No. SCO31225-430 signed by the two parties on 30 November 2003, states that the [Buyer] purchases 2,350 cases of Nitrile Exam Gloves from the [Seller] at CIF XINGANG US $29.50/CASE, with a total contract price of US $69,325, shipping before 25 December 2003, T/T Date of delivery to 60 days.

Sales Contract No. SCO31209-433 signed by the two parties on 9 December 2003, states that the [Buyer] purchases 2,350 cases of Nitrile Exam Gloves from the [Seller] at CIF XINGANG US $29.50/CASE, with total contract price of US $69,325, shipping before 25 December 2003, T/T Date of delivery to 60 days.

The Arbitration Tribunal concludes that the above two sales contracts reflect the true intention of the parties, with legitimate forms and non-violation of compulsory provisions of laws and administrative regulations, conforming to the entering into force conditions provided by the Contract Law of the People's Republic of China; thus these two contracts are valid and legitimate.

3. The performance of the two sales contracts and the liability for breach

According to the [Seller]'s statement and evidence provided:

   -    Upon Sales Contract No. SCO31225-430 becoming effective, the [Seller] shipped the goods according to the contract on 17 December 2003 and fulfilled its contractual delivery obligation;
 
   -    After Sales Contract No. SCO31209-433 became effective, the [Seller] shipped the goods under this contract on 27 December 2003, fulfilled its contractual delivery obligation.

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 two sales contracts also stipulate that the buyer shall pay the purchase price according to "T/T Date of delivery to 60 days". Based on the above, the Arbitration Tribunal concludes that the [Buyer] violated the provisions of the CISG and the sales contracts by not paying the remainder of the purchase price after receiving the goods and shall be liable for the breach of contracts.

4. Arbitration requests of the [Seller]

      a. Request for the remainder of the purchase price

      After receiving all the goods under the two sales contracts, the [Buyer] only made a partial payment of US $14,980 on 9 December 2004. This left US $123,670 to be paid. The Arbitration Tribunal supports [Seller]'s request for payment of this sum.

      b. Request for interest

      Article 78 of the CISG states: "If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, []" According to this, the Arbitration Tribunal concludes that the [Buyer] shall pay the corresponding interest to the [Seller] for not paying the purchase price in a timely manner.

After the Tribunal's examination, all of the goods under Sales Contract No. SCO31225-430 were shipped on 17 December 2003, and all of the goods under Sales Contract No. SCO31209-433 were shipped on 27 December 2003. The [Seller] advised that it took twenty days to ship by sea from port of loading (Tian Jin Port) to port of discharge (Long Beach in the USA), the [Buyer] failed to respond, so Arbitration Tribunal decides to accept this.

Article 6 of the two sales contracts provides that the term of payment is "T/T Date of delivery to 60 days". According to this, the [Seller]'s assertion that the payment dates are 7 March 2004 and 17 March 17 2004, respectively, is well founded. The Arbitration Tribunal accepts this. Considering the accrual date of interest the [Seller] requested, the Arbitration Tribunal concludes that the accrual date of the unpaid purchase price under Sales Contract No. SCO31225-430 is 15 March 2004, while under Sales Contract No. SCO 31209-433, the date is 18 March 2004. The Arbitration Tribunal supports the [Seller]'s request to calculate interest to 16 May 2006.

It is reasonable for the [Seller] to assert an interest rate of annual rate 5.40%, the [Buyer] failed to respond; Arbitration Tribunal accepts the interest rate sought by the [Seller].

The [Seller]'s assertion that the [Buyer] made a partial payment of US $14,980 on 9 December 2004, did not specify the sales contract to which this pertained. In order to conveniently calculate interest, the Arbitration Tribunal designates it in its discretion as a payment under Sales Contract No. SCO31225-430.

In conclusion, the [Buyer] shall pay the [Seller] interest of US $15,066. The interest requested by the [Seller] is US $ 14,922.80. The Tribunal supports all of it.

The following chart illustrates the interest calculation:

Contract No. Interest-bearing
Principal (US $)
Interest-bearing
Days
Annual
Interest
Rate
Interest (US $)
Contract
SC031225-430
69,325 2004.3.15 -

2004.12.9

269 days

5.40% 2,759
54,345 2004.12.9 -

2006.5.16

523 days

5.40% 4,205
Contract
SC031209-433
69,325 2004.3.18 -

2006.5.16

790 days

5.40% 8,102
Total       15,066

      c. Requests for attorneys' fee and arbitration fee

      Since the [Seller] failed to provide the amount of attorney fee loss and related evidence, the Arbitration Tribunal decides not to support this request.

As the dispute arose from the [Buyer]'s violation, and most of the [Seller]'s arbitration requests are supported, the arbitration fee shall be borne by the [Buyer].

AWARD

The Arbitration Tribunal unanimously ruled as follows:

1.   The [Buyer] shall pay the [Seller] the purchase price of US $123.670;
 
2.   The [Buyer] shall pay the [Seller] interest charge on the overdue account of US $14,922.80 [Translator's note: According to the above chart, the buyer would be obligated to pay US $15,066 in interest. However, the seller only claimed US $14,922.80. Hence this is the amount the Tribunal awarded.];
 
3.   The arbitration fees, RMB 47,719, shall be borne by the [Buyer]. Since the above fees have already been credited against the same amount prepaid by the [Seller], the [Buyer] shall pay the [Seller] RMB 47,719;
 
4.   The other arbitration requests of the [Seller] are dismissed.
 
The [Buyer] shall complete the payment stated above within 30 days since the date of award being made.

This award is final and binding, takes legal effect upon its issuance.


FOOTNOTES

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

** Dong Ping, Bachelor's Degree in Law, Peking University School of Law 2004; Master's Degree in International Economic Law, Chinese University of Hong Kong 2009.

*** Fan Yao, graduate student studying International Economic Law at School of Law, Tsinghua University, Beijing, China, has participated in the 6th Annual Willem C. Vis (East) International Commercial Arbitration Moot.

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Pace Law School Institute of International Commercial Law - Last updated October 26, 2009
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