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CISG CASE PRESENTATION

China 14 February 2007 CIETAC Arbitration proceeding (Bellows forming machine case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/070214c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20070214 (14 February 2007)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2007/02

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Canada (respondent)

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

GOODS INVOLVED: Bellows forming machines for the manufacture of corrugated plastic pipes


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 35 ; 80

Classification of issues using UNCITRAL classification code numbers:

35A [Conformity of goods to contract: quality, quantity and description required by contract];

80A [Failure of performance caused by other party (party causing non-performance): loss of rights]

Descriptors: Conformity of goods ; Burden of proof ; Failure of performance, other party

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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

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Case text (English translation)

Queen Mary Case Translation Programme

China International Economic & Trade Arbitration Commission
CIETAC Arbitration Award

Bellows forming machine case (14 February 2007)

Translation [*] by Ma Weiyuan [**]

Edited by Wang Minna [***]

[...]

Arbitral proceedings
Facts of the case
Position of the parties
Ruling of the Arbitration Tribunal
Award

ARBITRAL PROCEEDINGS

The China International Economic and Trade Arbitration Commission ("CIETAC") accepted the case (Case M2005____) according to:

   -    The arbitration clause contained in Sale-Purchase Contract No. HC20030408 (the "Contract") signed between Claimant China AAA Co. Ltd [of the People's Republic of China] (hereinafter: the "[Buyer]"), and Respondent BBB Inc. [of Canada] (hereinafter: the "[Seller]") on 8 April 2003; and
 
   -    The written application submitted to CIETAC by [Buyer] on 7 June 2005.

The arbitration rules of the China International Economic and Trade Arbitration Commission (hereinafter the "CIETAC Arbitration Rules"), in effect since 1 May 2005, apply to this proceeding.

On 9 June 2005, the Secretariat of CIETAC sent the Notice of Arbitration, CIETAC Arbitration Rules and the Panel of Arbitrators to [Buyer] and [Seller] separately by EMS. The Request for Arbitration and attachment submitted by [Buyer] were also sent to [Seller].

[Buyer] appointed Mr. ___, and [Seller] appointed Mr. ___ as the arbitrator for each side. Since the parties did not appoint the presiding arbitrator jointly, or entrust the Chairman of the CIETAC to make such appointment in a specified time, pursuant to the CIETAC Arbitration Rules, the Chairman of CIETAC appointed Mr. ___ as presiding arbitrator. These three arbitrators composed the Arbitral Tribunal on 14 July 2005 to hear and decide the present case. On the same day, the Secretariat of CIETAC sent the Notice of Composition of Arbitral Tribunal to [Buyer] and [Seller] by EMS.

With the permission of the Secretariat of CIETAC, the Tribunal decided to have an oral hearing in Beijing on 30 August 2005. The Secretariat sent a Notice of Oral Hearing to both parties by EMS.

The [Seller] submitted its Statement of Defense, Letter of Authorization, Notarization and Authentication Documents and Request for Counterclaim, simultaneously prepaid fees for the arbitration for its counterclaim. The Secretariat forwarded these documents to the [Buyer].

On 30 August 2005, the Arbitral Tribunal held an oral hearing in Beijing. Representatives of [Buyer], legal representative, arbitration agents and the translator of [Seller] participated. The [Seller] submitted documents of evidence and a Request for re-evaluation before the hearing started. At the hearing, the parties made oral presentations, examined all the submitted evidence and answered questions of the Arbitral Tribunal in the investigation process. After the hearing, the parties submitted supplementary documents of evidence.

Since the parties could not reach an agreement as to the institution for re-evaluation, the Tribunal sent notices to them several times with respect to the content, scope, base and standard of the re-evaluation. Furthermore, the Tribunal held a preparatory meeting for re-evaluation on 29 August 2006, with the presiding arbitrator as the chairman. The [Seller] and [Buyer] as well as some experts attended the hearing, made arrangement for the re-evaluation and set issues regarding the quality disputes in this case.

On 12 September 2006, the [Seller] sent a written notice cancelling the process for re-evaluation, stating that since the products and machines of the [Buyer] have been evaluated several time by National Authoritative Institution, there was not much necessity to start the re-evaluation process.

Since it is the [Seller] that applied for re-evaluation and later withdrew its application, the Tribunal decided to cancel the re-evaluation process, letting the parties bear the burden of proof, respectively. The Tribunal proposed to hold a second hearing later. Neither party dissented from this decision. New supplementary evidence was later submitted.

On 21 November 2006, the Tribunal held the second hearing in Beijing. Representatives of [Buyer], legal representative, arbitration agents and the translator of [Seller] participated. The [Seller] had submitted documents of evidence and a Request for re-evaluation before the hearing started. At the hearing, the parties made oral presentations, examined all the submitted evidence and answered questions of the Arbitral Tribunal in the investigation process. After the hearing, the parties submitted written legal arguments.

Due to the complexity of facts, the delay caused by preparatory work for re-evaluation and the time incurred by the second hearing, with the application from the Tribunal, the Head of CIETAC agreed to and decided to postpone the time period for decision, to 14 February 2007.

This case has finished all of its proceedings. Based upon the written documents and the facts identified at the oral hearings, the Tribunal made this award jointly.

FACTS OF THE CASE

I. Facts of the Case

The Respondent [of Canada] (hereinafter the "[Seller]') and the Claimant [of the People's Republic of China] (hereinafter the "[Buyer]") signed Contract No. HC20030408 (hereinafter the "Contract") on 8 April 2003. The Contract provides for the purchase by [Buyer] from the [Seller] of:

Goods: Two Bellows forming machines manufactured by the [Seller], Model No. 1520-7.4MQR and Model No. 4020-7.6MQR [for the manufacture of corrugated plastic pipes].

Price: The total price of the goods is US $2,836,859.

Delivery terms: CIF Tianjin, China.

Payment terms: The [Buyer] shall prepay US $300,000 as a deposit; the [Buyer] shall issue an irrevocable letter of credit indicating [Seller] as the beneficiary for the total value of contracting goods; the [Seller] is entitled to 90% of the payment after it dispatches the goods, by negotiation to the issuing bank with complete set of shipping documents, with payment of the remaining 10% based on bilateral execution of an inspection agreement and the provision of a letter of warranty period guarantee, which will become validated after the [Buyer]'s inspection.

Claims: In case of non-conformity, the [Buyer] can return the goods, or reduce the price consistent with the extent of the defect and the damages the [Buyer] suffers.

After the Contract was concluded, a dispute arose in contract performance. Negotiation between the parties fell through and, on 7 June 2005, the [Buyer] filed the case with CIETAC pursuant to the arbitration clause contained in the Contract.

POSITION OF THE PARTIES

[Buyer]'s claim

In its application for arbitration, the [Buyer] requested that:

1.   The [Seller] pay the damages due to breach of the Contract, including:
 
- US $615,259.35 for Bellows forming machine Model No. 1520-7.4MQR;
   and
- US $757,308.00 for Bellows forming machine Model No. 4020-7.6MQR.
 
2.   The [Seller] pay other damages and costs of RMB 533,458.38.
 
3.   The [Seller] bear the attorneys' fees of RMB 102,629.00 and arbitration fees for this case.

The [Buyer] stated its case as follows:

1. After the Contract was signed, the [Buyer] paid the deposit as agreed, as well as the L/C for 100% of the contract value (L/C No. 0107LC03000033). The [Seller] dispatched the goods in two batches separately on 9 June and 27 June 2003, and after that negotiated 90% of the payment.

2. After the [Buyer] received the goods and assembled and positioned them in accordance with the Contract, the [Seller] started to adjust the machines from August 2003 to the end of 2004, accumulatively 85 working days. There were over ten sessions from time to time. However, the machines cannot satisfy the requirements stipulated in the Contract up to now. This has resulted in a huge economic loss to the [Buyer].

3. So far the main problems with the machines are:

      a) As for the Bellows forming machine No. 1520-7.4MQR (hereinafter also called "Machine 1520"), this machine often comes up with a broken safety lock, along with a broken principal rotating axis when producing bellows with internal diameter at 400mm; neither can it produce bellows with internal diameter of 500 mm; moreover, the flaring wall thickness fails to meet the Contract requirement.

      b) As for the Bellows forming machine No. 4020-7.6MQR (hereinafter also called "Machine 4020"), its flaring is out of shape and below the wall-thickness requirement; and there is a leakage of the head section.

Because of the material quality defects in the two machines provided by the [Seller], the normal manufacturing process is interrupted and the [Buyer] suffered a huge economic loss. Therefore the [Seller] should restitute the [Buyer] the pertinent loss due for the breach pursuant to the Contract and the CISG.

[Seller]'s position

[Seller] counterclaims that:

1.   The [Buyer] should instantly clear the remaining 10% payment, i.e., US $283,685.90 along with an overdue payment incurred at a rate of 3/10,000 per day from 1 October 2004 to the day of clearance.
 
2.   The [Buyer] should bear the attorneys' fees for the case and other losses of RMB 100,000.
 
3.   The [Buyer] should bear the arbitration fees for the case.

For the purpose of defense, the [Seller] restated the facts as below:

The parties signed the Contract for the sale of two Bellows forming machines. The [Seller] fulfilled its obligation in accordance with the contract terms punctually, as to install, adjust the machine and train the personnel. Nonetheless, during that period of installation and adjustment, the [Seller] found out that the [Buyer] was employing an unqualified extruding machine manufactured by Italian company CCC___ (hereinafter also referred to as "CCC Company"), which led to two big problems:

  1. The melt temperature falls out of control and also exceeds the maximum temperature required in the Contract.

  2. The extruding machine performs badly with blending of plastics. The Italian supplier of the extruding machine only modified the blending section of the screw in the 120 extruding machine by manual tools, which is extremely inaccurate and unacceptable.

The [Seller] called these problems to the attention of the [Buyer], suggesting that the [Buyer] provide a better extruding machine. The [Seller] highly recommended a type of high-quality extruding machine manufactured by a German company. Not only did the [Buyer] turn down the [Seller]'s suggestion but the [Buyer] also insisted that the [Seller] adjust the Bellows forming machine again and again on the extruding machine of poor quality produced by CCC Company. The [Seller] adjusted the Bellows forming machine as the [Buyer] requested only out of good faith; these jobs had already fallen beyond the scope of the [Seller]'s responsibility.

In order to solve the problems attributed to the unqualified CCC extruding machine, the [Seller], the [Buyer] and CCC Company held a meeting in Shanghai on 30 June 2004. The three parties came up with an agreement that CCC Company shall replace the screw of the extruding machine, and the [Seller] shall test the quality of the new extruding machine of CCC Company with independent instruments. In mid-August 2004, the [Seller] conducted a test on the new extruding machine. The result turned out to show the melt temperature still fell out of control and exceeded the requirement of the Contract. This test further proved the lack of conformity of the extruding machine.

According to the Contract, it is the Bellows forming machine not the extruding machine that the [Seller] is obliged to provide. The [Seller] had provided and installed the two Bellows forming machines consistently with the Contract. The two machines worked in good condition, and conformed to the quality, scale and operating standard set forth in the Contract. Hence, the [Seller] had fulfilled its contractual obligation.

On the contrary, the [Buyer]'s claims fall short of legal ground and thus should not be supported.

First and foremost, the [Buyer]'s allegation that the two sets of Bellows forming machine have material quality defects cannot hold water.

1. The [Seller] is an internationally well-known enterprise in the field of plastic forming, taking the lead in this field and renowned for its outstanding product quality.

2. With International ISO9000 Certificate, the [Seller] employs a rigorous system to control the output of its products in order to guarantee the quality of its products.

3. The Bellows forming machine of the [Seller] involves over 30 items of Chinese patents; in other words, the machine is novel, inventive and practically applicable in the legal sense. It technically leads the whole industry in China even all over the world, ranking No. 1 in quality, thus entirely conforming to the requirements of the Contract.

4. The goods in dispute work as part of a whole system rather than working independently; in this sense, the so-called "quality defects" by no means should be ascribed to the [Seller]'s machines.

5. The inspection report came into being out of the [Buyer]'s unilateral authorization, which lacked procedural fairness. The inspection authority should be designated by both parties' joint authorization. The selection, identification and competence of the inspection authority as well as the inspectors could never have been conducted fairly by virtue of the unilateral authorization.

6. The result of the inspection came out only in the presence of one party. In the whole process of production, due to the complicated proceedings and multiple segments involved, the unilateral authorizer may lead to the false conclusion of unqualified products, only out of negligence in specific segment no matter intentionally or inadvertently.

7. The inspection report, literally speaking, has material logic mistakes.

8. The possible contributors to the so-called "quality defects" are:

(1) The usage of the raw materials;
(2) The operating condition and quality of the complementary machinery;
(3) To what extent the operating method is scientific and proficient;
(4) To what extent the operating technique is advanced and proficient.

The [Seller]'s product is a complex of systematic engineering work, the quality of which depends on the comprehensive interaction of the factors above. The so-called "quality defects" that the [Buyer] alleged are only based on a provincial part of the factors, which turn out to be insufficient and unconvincing.

Secondly, the [Buyer]'s claims are groundless both contractually and legally.

According to the Contract, should a quality dispute arise, the parties can invoke Article 15 of the Contract, which stipulates that the [Seller] can resort to three sorts of settlements, the [Buyer] has no right to choose the settlement but must consent the [Seller]'s choice. In this regard, the extent of depreciation is up to the [Seller]; the [Buyer], in the same way, has no right to decide on the extent of depreciation but only to agree or disagree with the [Seller]'s decision. Therefore the [Buyer] is not entitled to require the [Seller] to depreciate the goods in light of an explicit contractual agreement.

Pursuant to the CISG invoked by the [Buyer] in its statement of claim, there is no definite rule concerning product quality; suffice it to state, the Convention respects freedom of contract.

Similar rules can be found in the PRC Contract law, which constitutes anything but the legal ground as indicated in the [Buyer]'s statement of claim.

In the preparatory meeting presided over by the Tribunal, both parties assented to sum up the quality dispute arising from the equipment (including the products) in the present case as having eight aspects. It is alleged that:

1.   Forming machine 1520 has a problem with a broken safety lock when manufacturing bellows with internal diameter of 400mm.
 
2.   Forming machine 1520 cannot produce bellows with internal diameter of 500mm.
 
3.   The bellows with internal diameter of 225mm, 300mm and 400mm manufactured by forming machine 1520 fail to meet the double flaring wall-thickness standard.
 
4.   The flaring aforementioned became out of shape right after the machine left the factory, which get worse after cooling down (24 hours later). The larger the scale, the worse the problem.
 
5.   Bellows with internal diameter 500mm and 600 mm produced by forming machine 4020 bear outshaped flaring.
 
6.   The bellows with internal diameter 500mm and 600mm manufactured by forming machine 4020 fail to meet the flaring wall thickness standard.
 
7.   A leakage of the head section takes place when forming machine 4020 is producing bellows with internal diameter 600mm.
 
8.   None of the scaled products produced by both machines meets the capacity requirement stipulated by the Contract.
 

The [Buyer]'s arguments and response to the [Seller]'s counterclaims are synthesized as follows:

1. Both parties' arguments and issues in the present case.

      a) The arguments of the parties:

           i) The [Seller] alleges that it is an internationally well-known enterprise with International ISO9000 Certificate and that its forming machines involve multiple Chinese patents, and are obviously of high quality.

The [Seller] submits that, according to the [Seller]'s introduction brochure, it has already produced a series of qualified and stable products, sufficient to prove that the goods in dispute are qualified.

However, the [Buyer] submits that the fact that the [Seller] is internationally well-known with an ISO9000 Certificate and multiple patents has no direct link with the present case. The key point is whether the goods provided by the [Seller] conform to the standard stipulated in the Contract, and whether [Seller] is competent to manufacture qualified products. Based on the parties' adjustment records, mails back and forth, and the [Buyer]'s trial on the machines, the quality problem of the machines are severe. The [Buyer]'s self-introduction materials in late 2003 and product technique standard documents provided in the commercial fair held at early 2004 are all derived from the technical standard provided in February 2003 by the [Seller] and came into being in 2003. The truth is, the parties kept adjusting the machine till the end of 2004. Moreover, some accessories were not delivered until August 2004, hence disrupting the [Buyer]'s normal production. The publicity on the product is a distinct concept from its real quality; in this regard, the evidence provided by the [Seller] does not demonstrate that the machines are qualified.

At the first hearing, the [Seller], despite the facts, insisted on the good quality of its products, and otherwise argued that it is not responsible for the predicament of the [Buyer] which should be attributed to other factors. Nor did [Seller] admit the legally effective inspection result. Correspondingly, the [Buyer] suggested that the Tribunal test the machine in the presence of both parties, with the inspectors and instruments selected by the [Seller]. Should the machines in dispute turn out to fulfill the Contract, the [Buyer] will bear all the consequences. This suggestion was approved. However, although the [Seller] consented to this; the [Seller] later refused to start the test.

The [Seller] even proposed that forming machine 4020 could produce bellows with a diameter of 500 which forming machine 1520 could not, which utterly goes against the Contract.

            ii) The [Seller] alleges that, in light of the minutes of 30 June and 2 July 2004, both parties had come to a memorandum of understanding as well as a relevant settlement. Therefore the Contract had already been fulfilled. Albeit the [Buyer] submits this is not true.

First of all, after the installation of the machine, the [Seller] sent personnel to adjust the two forming machines many times, with a time span of two years, cumulatively 85 working days. In the meantime, the parties met tens of times to solve the quality problem, with tens of copies minutes and memoranda alike. These documents, including the two copies of minutes the [Seller] submitted as supplemental evidence, conversely reflected the long-lasting unsolved quality problem with the machines which eventually gave rise to huge damages against the [Buyer].

Identically, the [Seller]'s assertion accordingly that there is a memorandum of understanding and the Contract has been fulfilled cannot be justified either in fact or in law.

            iii) The [Seller] casts doubt on the competence of the inspection authority, and also on the unilateral authorization of the [Buyer], hence, disapproves the inspection result, and simultaneously requests a re-evaluation with the instruments and methods provided by the [Seller].

However, the inspection authority authorized by the [Buyer] is an expert institution approved by the PRC government agency, professionally qualified and authoritative within the industry. The inspection is procedurally legitimate and methodologically scientific, with definite result. The inspection result is objective, fair and valid. The objection the [Seller] initiated against the competence of the inspection authority is therefore unreasonable. The [Buyer] opposed a re-evaluation.

However, at the beginning of 2006, the [Seller] filed a petition to the Tribunal to re-evaluate the machines in dispute, and got it approved. The Tribunal along with the [Buyer] spent nearly half a year preparing for the re-evaluation. On 29 August 2006, the Tribunal assembled the [Buyer], the [Seller] and the experts and held the preparatory meeting of re-evaluation, setting the problems remaining with the machine and the specific item of re-evaluation. Nevertheless the [Seller] outrageously withdrew its petition on 8 September.

The [Buyer] regards the [Seller]'s fickle acts as a disparagement of the Tribunal and the [Buyer]. The [Seller] therefore ought to be held completely liable for all kinds of ramifications.

      b) Issues. The two issues in the present case are:

            i) Whether there are "quality defects"; and

            ii) What restitution is due for the [Seller]'s problematic performance?

The [Buyer] submits:

The machines at issue have quality defects. According to the [Seller]'s reply on 8 September 2006 to the preparatory meeting of re-evaluation on 29 August 2006, the [Seller] decided not to re-evaluate the machine and assented to examine the disputes in eight aspects concerning the machines at issue.

The [Buyer] submits that the [Seller] was the petitioner for re-evaluation, but later withdrew its petition. Suffice it to say, [Seller] has conceded all the facts the [Buyer] submitted regarding the quality defects of the machines in dispute, not only the disputes in the eight aspects specified, which, is absolutely a principal issue.

The [Seller] asserts quality disputes No. 1, 3, 4, 5, 6, 8 pertain to the problem of product quality and capacity, taking 75% of the whole package of dispute, while disputes No. 2 and 7 pertain to the quality problem of the machines, taking 25%.

The [Buyer] cannot agree with this assertion, because:

            (1) Disputes No. 1, 2, 7, 8 are all direct quality problem of the machines, closely related to the design, processing, assembling and materials of the machines. The problems hereby indicate the severe quality problem with the machines right after leaving the factory.

            (2) Disputes No. 3, 4, 5, 6 specifically demonstrate that the products manufactured by the machine fail to meet the contractual requirement, virtually verifying the problem with the machines, such as the deficiency with its design and mould, so as to affect the product quality.

As indicated in the evidence presented by both parties, up to July 2004, all the problems with the goods in dispute filed with the Tribunal remain present.

Additionally, the [Buyer] has also provided the circumstance of other enterprises using the same type of forming machine supplied by the [Seller]. The quality problems appearing in the evidence coincided with those in the machines in this case. In other words, the quality problems the [Buyer] came across generally exist. In combination with the inspection report, it is definitely true that the [Seller]'s machines have quality defects.

The [Buyer] summarized the problems with the machines in dispute in light of the inspection report and practical operation as follows:

            (1) It is the problem with the machines themselves, such as the trembling of forming machine 1520 and broken safety lock. The [Seller] had transformed the structure and also increased the number of the safety locks, but failed to solve the problem, which reinforces the conclusion that the problem is material, directly causing the [Buyer] to be unable to maintain normal production. Another example is that forming machine 4020 cannot pass the overheating and overcooling test; the leakage taking place during production results in a waste of raw materials. These further illustrate the quality defects with the machines.

            (2) Products manufactured by the machines cannot reach the required quality standard. Forming machine 1520 cannot produce bellows with internal diameter of 500mm, proving that the capacity of the machine falls below the contractual requirement. The [Seller] should be held liable for the consequence. All of the products produced by both machines also have the problem of outshaped flaring, they fail to meet the flaring wall-thickness standard and cannot meet the capacity requirement of the Contract. The quality problems the [Buyer] filed with the Tribunal square with the eight problems agreed by both parties in the preparatory meeting on 29 August 2006.

The [Buyer] suffered considerable loss due to the problems with the goods provided by the [Seller]:

            (1) The equipment and machinery purchased by an enterprise should be advanced and mature. But according to the [Seller]'s adjustment record, it replaced some components each time adjusting the machine, attempt and failure took turns, whereas problems remain unsolved. Actually, the [Seller] was regarding the equipment purchased by the [Buyer] as "experimental products" and the [Buyer]'s workshop as an "experimental place", as a result impeding the [Buyer]'s regular production and entailing huge economic loss.

            (2) The [Buyer] is a production-orientated enterprise. It purchases machinery for the purpose of producing qualified products in order to gain profits. In this sense, it is fatal for such an enterprise to fail to manufacture qualified products, or to bear the burden of high production cost which would retard its competitiveness. Suffice it to say, the quality problem in the present case has caused huge economic loss to the [Buyer].

            (3) According to the supplemental evidence the [Buyer] provided, due to the predicament on regular production entailed by the [Seller]'s defective goods, the [Buyer] had incurred a loss of over RMB 7,000,000 to the end of June 2005, which is expected to continue before the quality problems are cleared out.

2. About the [Buyer]'s claims for restitution:

      a) Legal grounds for restitution. Pursuant to the relevant rules of the CISG, along with Article 13 of the Contract, the [Seller] guaranteed that the goods are made of upper-class materials with first-class technique, also conforming to the quality, scale and function stipulated in the Contract. In case of non-conformity, pursuant to Article 15 of the Contract, the [Buyer] is entitled to:

            (1) Return the goods. The [Seller] shall refund the purchase price to the [Buyer] and is responsible for all direct loss and all other necessary expenses.

            (2) Depreciate the goods in accordance with the extent of the defects and loss of the [Buyer].

            (3) Have the [Seller] substitute all of the goods.

The [Buyer] opted to depreciate the goods considering that if the [Seller] substitutes the goods, the [Buyer] has no means to assure the quality of the subsequent products in case of higher risk; and if the [Buyer] returns the goods, the [Buyer] needs additional capital to purchase new equipment. After two years' failure of normal production, the [Buyer] suffered a great economic loss with no extra capital to purchase new equipment. In this regard, depreciating the goods would minimize both parties' loss, thus is optimal.

      b) Measurement of the restitution amount:

            i) The [Buyer] requests the [Seller] to restitute the damages due for forming machine 1520 at US $615,259.35, with reasons as follows:

                  1) The total value of forming machine 1520 is US $1,367,243. Apart from the general accessories, the modules directly used to produce bellows are categorized as 25mm, 300mm, 400mm and 500mm (internal diameter). The total value of the modules is US $777,824, among which modules to produce bellows with internal diameter of 500mm are worth US $233,570, one-third of the total value of the modules. Since forming machine 1520 cannot produce bellows with the internal diameter of 500 mm, which presumed function is actually futile, only leaving the machine with two-thirds of the preset function. Hence to say, according to the value proportion of the machine's preset function, the valid function of the machine is only 67%. Consequently, the [Buyer] concludes that because forming machine 1520 fail to produce bellows with internal diameter of 500mm as stipulated in the Contract, it should be discounted at 33%.

                  2) Forming machine 1520 has problems such as frequent broken safety lock, broken axis when producing bellows with internal diameter of 400 mm, indicating that its capacity on this item is also not completely effective. Simultaneously taking account of the insufficient wall thickness and other quality problems arising from the products of forming machine 1520, the machine should be discounted at 12%.

Thus there is a discount at 45% in aggregate; the total value of restitution should be:

-  US $1,367,243 45% = US $615,259.35.

       ii) The [Buyer] requests the [Seller] to restitute the damages under forming machine 4020 in the amount of US $757,308. The reasons are as follows:

The quality problems with forming machine 4020 mainly lie in its failure to produce qualified products, which is material in nature.

Forming machine 4020, pursuant to the Contract, is used to produce five scales of bellows with internal diameter of 500mm, 600mm, 800mm,1000mm, 1200mm. Currently, due to fact that the flaring wall to produce bellows with internal diameter of 500-600 mm cannot reach the thickness standard, the machine cannot produce qualified products to the scale of 800mm, 100mm. 1200mm. In another word, in the current situation, the forming machine can only manufacture scales of bellows below 600 mm, with a dysfunction to produce scales between 800 mm to 1200 mm. To concede, it cannot assure the quality of the products below the scale of 600mm, which generated incredible loss to the [Buyer].

Therefore, the [Buyer] requests to discount the total value of forming machine 4020 at 50%. From the total value of the Contract, US $1,469,616, deduct the total expenses of adjustment and inspection of US $45,000. The actual price of forming machine 4020 should be US $1,424,616, i.e.:

-  US $1,424,616 50% = US $712,308.

The adjustment fees plus inspection fees are US $ 4,500.

Therefore, the restitution amount for forming machine 4020 should be US $757,308

            iii) Other damages:

                  1) The inspection fee: 10,000.00 50% = RMB 5,000.00. The [Seller] should bear the burden of half of this.

                  2) Accommodations and transportation: 114,781.50 30% = RMB 34,437.00. Due to the durable adjustment period, the [Seller] should bear 30% of this.

                  3) Materials involved in the adjustment: 2,824,979.41 40% 30% = RMB 338,997.53. The materials used for adjustment are completely fresh. The smash of unqualified bellows out of the adjustment is regarded as processing scrap, worth only 60% of the fresh materials (i.e., fresh materials get discounted at 40% turning to processing scrap). Identically due to the durable adjustment period, the [Seller] should bear 30% of this.

                  4) Materials involved in the test: RMB 49,904.08.

                  5) The electricity expense in the adjustment period: 318,925.91 30% = RMB 95,677.78. Due to the durable adjustment period, the [Seller] should bear 30% of this.

                  6) Advance money RMB 9,441.99.

                  The six items above amount to RMB 533,458.38.

                  7) Attorneys' fees RMB 102,629.00

To sum up, the total restitution against the two forming machine is US $1,372,567.35, together with compensation due for other losses of US $636,087.38.

In addition, the [Buyer] reminds the Tribunal that, according to the CISG, the [Buyer] is entitled to claim anticipatory interest. Since it is hard to count the exact amount of anticipatory interest, the [Buyer] did not raise a single claim on this item of loss, but requests the Tribunal to take it into account together with the discount of the machines.

3. About the counterclaim of the [Seller]. The [Buyer] issued an irrecoverable L/C worth 100% of the total Contract value, with the [Seller] as the beneficiary. The remaining 10% of the payment is available to the [Seller] only via the inspection agreement indicating qualified goods approved by the [Buyer]. Since the goods are problematic, the inspection agreement has not been signed so far. The [Seller] should assume the liability. The [Buyer] requests the Tribunal to overrule the [Seller]'s counterclaim.

The [Seller]'s defense and counterclaim are as follows:

      Both parties confirmed by signature the issues in the present case in the presence of the Tribunal:

      -    One is whether the Bellows forming machines stipulated in the Contract are qualified.
      -    The second issue is whether the machines can produce qualified products (i.e., qualified High Density Polytene Double-Sylphon Bellows).

      -    The third is, whether the eight problems raised by the [Buyer] actually exist, what are their causes, and whether these problems have been solved.

Presided by the Tribunal, both parties set common sense standards for the settlement of these three issues:

The quality standard of the Bellows forming machines should be in accordance with the Contract and its appendices;

The products manufactured by the machines, i.e., High Density Polytene Double-Sylphon Bellows, should be in accordance with PRC national standards; and

The eight problems should also be resolved in a manner that is consistent with the Contract and national standards.

Concerning the legal causation, to define the quality of the goods in dispute jointly based on the end products and the machine itself, is compatible with the specific situation in the present case. Furthermore, to regard the Contract along with its appendices as the foundation of the quality evaluation embodies the appropriate party autonomy toward each side's rights and obligations. Employing national standards is intended to pay respect to the legal sovereignty of the State in which the arbitration venue is located. Therefore, it is justifiable for both parties to agree on these issues and standards set by the Tribunal.

The [Seller]'s response to the issues and standards

In light of the issues and standards mentioned above, the [Seller] submits its legal opinion as follows:

1. The [Buyer]'s claims and reasons are not justified.

      a) As to the forming machines themselves, the record of adjustment period and the unilateral authorized inspection report without parameters stipulated in the Contract cannot prove there are quality defects in the forming machines.

            i) The record of adjustment provided by the [Buyer], as the name suggests, is the record formed in the period of adjustment; simultaneously, it is not a single record of the forming machine, but of the whole production line. However, the adjustment was conducted on condition of severe problems with the extruding machine. Hence, the record of adjustment should not been deemed as valid evidence.

First of all, even the best machine may have a running-in period, which well explains that the problems showing up in the adjustment period are out of the range of quality problems.

Second, bellows are manufactured in a production line, including plenty of machinery, while the [Buyer]'s machine is only that which produced the end product. Hence, the results may not necessarily match the causes one by one: from the perspective of legal causation, the [Buyer] committed logical error demonstrating the quality of end products by the record of production line adjustment.

What is more, the [Buyer]'s record was made in a situation of severe problems with the extruding machine. From the documents and pictures the [Buyer] presented to the Tribunal, it is obvious that there are severe problems with the extruding machine. The [Buyer]'s agent conceded that the [Buyer] once repaired the extruding machine and replaced the screw, after which the problem in the adjustment period never showed up again.

Last but not least, since the [Buyer] had replaced the screw of the extruding machine, the problems in the adjustment period disappeared and thereafter the [Buyer] was able to manufacture and had manufactured a large number of qualified products.

            ii) The unilateral inspection report which is outside the parameters stipulated in the Contract cannot prove a quality problem with the forming machines.

The Contract along with its appendices specifically embodies both parties' rights and obligations. Unilateral inspection without certain parameters stipulated in the Contract cannot bind the other party. The [Buyer]'s conclusion that the machines have quality problem derived from an inspection report is materially against the Contract, thus cannot stand.

The Notes in Appendix 7 of the Contract state first and foremost that: "the melting temperature of the materials cannot exceed 215C, melting pressure should be 330bar." According to the inspection result on Page 1-7 of the attached sheets to the inspection report SJW20050016 provided by the [Buyer], Tables 1, 2 and 3 show that the melting temperatures of the extruding machine are, respectively, 2bar, 19bar, 98bar and 145bar, far from the contractual requirement. This result indicates that:

      -    Under these circumstance, which deviate from the Contract, the inspection result has nothing to do with the [Seller];
 
      -    Under this kind of pressure, it is difficult to send the melting plastic into the head section. Inadequate melting pressure reflects the quality of the extruding machine, which got verified when the [Buyer] replaced and repaired the screw of the extruding machine.

Identically as for the result on Page 1-6 of the inspection report SJW20050017: In Tables 1, 2 and 3, the melting pressure of the extruding machine is, respectively, 35bar, 35bar, 140bar, 141bar, distant from the first requirement of Notes in Appendix 7 that melting temperature of the materials cannot exceed 215C, melting pressure should be 330bar, which, once again, belies the [Buyer]'s conclusion based on the deviant inspection report.

            iii) It is only a presumption that, should the inspection report refer to a violation of the Contract, the conclusion is anything but to confirm the existence of quality problems with the forming machine (the only so-called "problem" lies in the "overheating and overcooling" in the connecting point of the head section).

                  (1) Inspection report SJW20050016:

                  This report indicates that there are material quality problems with the extruding machine. The output and melting pressure is inconsistent with the Contract to a great degree. In contrast, the forming machine only has a minor problem as not installing the touch-proof screen which has no effect on the production.

Inspection Result 1: The maximum output of the extruding machine. From the comparison between the testing result and the contract standard, the maximum output of the extruding machine is far below the contractual requirement, which would get even lower plus the head section. This only can prove that the extruding machine has quality problems, failing to meet the capacity standard; this is not a problem with the forming machine.

Inspection Result 2: The first scale and the second (the third, forth and fifth are qualified): Since the surface of the plastic pipes does not pertain to ground finish, it is rough to some extent. There is no rule for allowance either in the scale the [Buyer] marked or in the Contract, so the degree of roughness falls within the range of arbitrary allowance, which absolutely conforms to the national standard.

Inspection Result 3: Overheating and overcooling. The Contract is silent on the connecting section. But it is common sense that high-pressure equipment like this should bear similar temperature with its domestic part in the connecting point with other equipment. In the real practice, the [Buyer] never came across accidents in this sense. In any event, lack of a touch-proof screening device in the connecting point and warning sign has no causal link with the operation and production of the machine itself.

Other Inspection Results: As for other results stated in attached sheets page 1-7: in Tables 1, 2 and 3, the melting pressures of the extruding machine are, respectively, 2bar, 19bar, 98bar and 145bar, inconsistent with the requirement. It is the problems with the extruding machine, with reasons and conclusion as above.

                  (2) Inspection report SJW20050017:

                  This report indicates:

Inspection Result No. 1: The maximum output of the extruding machine. From the comparison between the testing result and the Contract requirement, the maximum output of the extruding machine is far below the Contract requirement, which would get even lower plus the head section. This only can prove that the extruding machine has quality problems, failing to meet the capacity standard; this is not a problem with the forming machine.

Inspection Result No. 2: This result says the machine cannot normally produce bellows with internal diameter of 500mm, not that it cannot produce this kind of bellows at all. The problem also emerged from the extruding machine. The [Buyer] herein changed the subject subtly.

Other Inspection Results: As to other inspection results in the attached sheets page 1-6: In Tables 1, 2 and 3, the melting pressures of extruding machine are, respectively, 35bar, 35bar, 140bar, 141bar, not conforming to the Contract, still with the problem in the extruding machine. The reasons and conclusion are as aforementioned.

      b) As for the double-wall bellows manufactured by the forming machine: the [Buyer] intentionally concealed the fact that it can manufacture large quantities of qualified products without authoritative inspection report.

            i) As mentioned above, the products manufactured during the adjustment period are not equal to the end products. "The adjustment record" is a record of a running-in period; and also it is not the single record of the forming machine, but of the whole production line; simultaneously, the record was made of the bad condition of the extruding machine; thus this cannot be used to prove quality problems with the forming machine.

            ii) As for the complaint of specific customers, without clear legal causation, it cannot lead to the conclusion of unqualified products.

First, the complaint of a specific customer is only an individual opinion. The so-called product quality problem may have turned up in the multiple segments like transportation, installation, etc. The installation and operation is also a factor influencing the quality. It is illogical simply to attribute the problem to the quality of the forming machine.

Second, according to the [Buyer]'s website, the customers of the [Buyer] had reached thirty-seven by May 2005, not only including the worldwide attractive construction of the "Olympic Shooting Palaestra", but also the office buildings of PLA, regarded as extremely important military facilities. Nonetheless, no complaint comes from these important customers, only praise. What is more, the [Buyer] was approved and recommended by "the office of the leaders group for Olympic economic activities of Beijing industry, Chinese Architecture Association", which are all authoritative institutions.

            iii) What is more important, the [Seller]'s evidence includes the inspection report by state-level authoritative institutions, specifically twelve copies of the scientific report, done by sampling test of the [Buyer]'s products 6,000 m. This test is conducted for all types of the [Buyer]'s products one-after-one in light of the six indexes fixed by the State. The ultimate result is that the machines have met the national standard.

      c) As to the eight problems with the machinery raised by the [Buyer], the [Seller] responds as follows:

Problem 1: [Buyer]'s allegation that the forming machine 1520 always comes up with broken safety lock when producing bellows with internal diameter of 400mm, thus cannot manufacture normally.

First of all, this is a unilateral record which did not show the frequency of the problem.

Second, the evidence on this problem is still the record of the adjustment period. And the safety lock is exactly the so-called "safety fuse" in order to protect the machine from burning down. The problem does not exist any more after replacement of the screw.

Problem 2: [Buyer] allegation that "forming machine 1520 cannot produce bellows with the internal diameter of 500mm.

According to Inspection Result 2 of the [Buyer]'s inspection report, it says the machine cannot normally produce bellows with internal diameter of 500mm, not that it cannot produce this kind of bellows at all. The problem also emerged from the extruding machine. The [Buyer] herein changed the subject subtly.

In addition, the record of adjustment cannot support the [Buyer]'s assertion; conversely, much of the [Seller]'s evidence can prove that not only can the forming machine 1520 work normally, but it also manufactures qualified products.

Problem 3: [Buyer]'s allegation that "the double flaring wall-thickness of forming machine 1520 cannot reach the standard when producing bellows with internal diameter of 225mm, 300mm and 400mm."

Problem 6: [Buyer]'s allegation that "the flaring wall thickness of forming machine 4020 cannot meet the standard when producing bellows with internal diameter of 500mm and 600mm (same kind of problem with Problem 3)."

The [Buyer] erred to say the flaring wall thick did not meet the standard. Because the state-level authoritative institution authorized by the [Buyer] itself conducted sample inspection on the [Buyer]'s products of 6,000m, involving twelve items in total and covering all types of products. At last all the products passed the examination. The [Buyer] excessively beautified its flaring technique in its patent documents. But even ordinary technical personnel can materialize the technique following the description. Even if the flaring is not thick enough, it can still be closely connected so as to meet the technical standard according to the description. The evidence the [Seller] turned in that originated from the [Buyer]'s evidence of "the Inspection Report of State Chemical Building Materials Testing Center" and the foregoing patent part can demonstrate the [Buyer]'s self-contraction with its previous description.

Besides, as mentioned above, the record of adjustment provided by the [Buyer] was made on the awful condition of the extruding machine; the [Seller] and Sinopec Qilu Company both confirmed the severe problem with the extruding machine. Because of the high temperature of the materials coming out of the extruding machine, as well as the heterogeneous blend of materials, the end products came up with problem in some aspects. Notwithstanding, the problem is foregone after the repair and replacement work.

Problem 4: [Buyer]'s allegation that " the flaring aforementioned became out of shape right after the machine left the factory, which go worse after cooling down (24 hours later). The larger the scale, the worse the problem "

Problem 5: [Buyer]'s allegation that "the flaring of forming machine 4020 goes out of shape when producing bellows with the internal diameter of 500mm and 600mm.(identical problem)"

First of all, the relevant proof does not show up in the [Buyer]'s record of adjustment, which, also was made on the bad condition of extruding machine. The truth is, the extruding machine have a severe quality problem, as confirmed by CCC Company or the staff of Sinopec Qilu.

The machines can now manufacture qualified products, which is verified by the inspection report form of the State Chemical Building Materials Testing Center provided by the [Buyer]: The target bellows went through authoritative tests complying with State GB/T19472.1-2004 "Polyethylene structure wall pipeline system for underground usage Part 1: Polyethylene double wall corrugated pipes." The result showed that the machine conforms to the standard.

According to the inspection report: the sample base quota is 500, twelve items in total. The base number in aggregate is 6,000 meters, produced by [Buyer]. The bellows of 6,000m piled up like a hill, the outshaped flaring can even be perceived by sight. It is unusual that the inspection did not find the problem.

Problem 7: [Buyer]'s allegation that "there is a leakage in the head section of forming machine 4020 when it produces bellows with internal diameter of 600 mm."

Again from the inspection report of the State Chemical Building Materials Testing Center provided by the [Buyer]: the [Buyer] submitted DN/ID600, DN/ID800 and DN/ID1000 to the testing center. The larger the diameter of the bellows, the stricter the production technique is required to be. The leakage of the head section is impossible to exist in the situation of so large volume of production. Assume it has showed up in the adjustment; please refer to the [Seller]'s opinion on the adjustment period as above, no repeat made here.

Problem 8: [Buyer]'s allegation that "none of the scaled products produced by both machines meets the capacity requirement stipulated by the Contract."

Merely tracing back to the inspection report of the [Buyer], the extruding machine falls below the contractual requirement of capacity without the head. To add the head, the output of the extruding machine would become even lower. Since the extruding machine failed to meet the capacity standard, the last segment of the production line would be unlikely to conform to the Contract.

      d) About the list of restitution and measuring method.

            i) As to forming machine 1520-7.4MQR: The [Buyer] claimed compensation for 45% of the price of forming machine 1520, which is groundless to the [Buyer]'s stand. According to the [Buyer]'s assertion: forming machine 1520 manufactures four types of products in total, each shares 25% of the total cost. But from its inspection report, we can see the machine has a slight trembling problem when producing bellows of 500mm, with incomplete flaring in the end products, which falls within the range of the 25%, not the whole scenario. Furthermore, the capacity failure is completely ascribed to the extruding machine. In this sense, the measuring method of "45%" fails to be self-explanatory. In fact, much evidence from the [Buyer] has demonstrated the good quality of the forming machine, with products of good quality through a rigorous procedure of inspection. Therefore the [Buyer]'s claims should not be approved.

            ii) About forming machine 4020-7.4MQR: The [Buyer] claimed a compensation for 50% of the price of forming machine 4020, which is also conceived as groundless by the [Seller]. Even based on the [Buyer]'s inspection report No. SJW20050016, the problem of overheating and overcooling with the forming machine merely resulted from the lack of touch-proof screen, not from the forming machine itself. A warning sign with an exclamatory mark would cost at most RMB 100; the price of a protection net is within RMB 1,000. Even to concede it is also a quality problem without the safety sign, it is unreasonable to discount 50% of the machine. Additionally, the capacity problem lies in the extruding machines. The [Buyer]'s allegation that the forming machine only comes up with 10% capacity, is groundless. In light of the ample foregoing evidence provided by the [Seller], the forming machine has very good quality with qualified productions having passed a series of strict inspections. Therefore, the [Buyer]'s claims by no means should be supported.

            iii) About other losses. The inspection fee, accommodation and transportation, materials for testing, money in advance, etc., are of course to be borne by the [Buyer]. The [Seller] never consented to the inspection, let alone an inspection contrary the Contract. Hence, the inspection conducted on account of the [Buyer] is irrelevant to the [Seller].

2. The [Seller]'s counterclaim should be supported by the Tribunal in light of the plentitude of facts and evidence.

      a) The quality of the [Seller]'s forming machines satisfies the standard.

            i) The quality of the [Seller]'s forming machines has been approved by internationally authoritative institutions. The [Buyer]'s production and sale of double-wall bellows has acquired the International ISO9001: 2000 Product Quality Certificate, sufficient to prove the good quality of the [Seller]'s machinery and equipment, otherwise it could not have passed the rigorous international inspection.

            ii) The quality of the [Seller]'s forming machines has been approved by the national authoritative institution. Through investigation and evaluation of the forming machine by an expert team consisting of tens of people organized by the Ministry of Construction PRC, the forming machine was unanimously confirmed as qualified. Among all the evidence, the [Buyer] directly indicates in this state-level report that the eminent machine originated from "the forming machine incorporating the whole set of internationally advanced technology from [Seller]."

The [Buyer] only considered the state-level evaluation as an inspection report, with no direct objection against the quality approval.

            iii) The quality of the forming machines [Buyer] purchased has been approved by [Buyer] itself. See from a series of materials submitted to the Ministry of Construction PRC, Beijing Committee of Construction, Beijing Bureau of Technology Supervision, China Association for Engineering Construction Standardization, Shenyang Committee of Construction, Baotou Committee of Construction, the [Buyer] was content with the quality of its own machinery.

Seen from the contractual agreement, as long as the [Seller] supplies new machinery, it is deemed as qualified after the [Buyer] confirms; but the [Buyer] filed for arbitration in bad faith and refused to confirm, while unable to raise any objection in the face of the facts above. Therefore, in a legal sense, all these facts can absolutely be deemed as the approval of the production quality by the [Buyer].

            iv) The [Buyer]'s customers approved the quality of the [Seller]'s forming machine. In the same report submitted to the Ministry of Construction by the [Buyer], there are consumers' reports from Beijing Lujin Engineering Technology Co., Ltd and Beijing Pengkai Municipal Engineering Co., Ltd. These customers praised the good quality of bellows produced by the [Buyer].

The [Buyer] cast no objection to the evidence, but different understanding on the word "evaluation", thus the customer's approval is objective.

            v) The quality of the [Seller]'s forming machine was approved by the market. From the list of consumers on the [Buyer]'s website, we can see the [Buyer]'s clients have reached thirty-seven, sufficient to prove the good market review of the bellows manufactured by the [Buyer]. The [Buyer] cast no doubt on this list including Olympic construction and military construction, either.

            vi) The [Seller] has realized the ultimate goal of the Contract. That the products had obtained so much approval by May 2005 indicates that the ultimate goal for which the [Buyer] purchased the forming machines, i.e., for sale and profit, has come true. Simultaneously, pursuant to the registration form of scientific and technological achievement submitted to the Ministry of Construction by the [Buyer] itself, the annual performance of the [Buyer] is: the output value increased by RMB 72,000,000, the profit taxes increased by RMB 29,400,000. Hereby, it is obvious that the [Buyer] has materialized its ultimate goal of earning profits.

It is worth mentioning that, seen from the files submitted to the Ministry of Construction by the [Buyer], the increased output value and profit taxes directly emanated from the equipment and technology introduced from the [Seller], which is the statistics submitted to the state authoritative institution by the [Buyer] itself, with high authenticity and clear causation. In comparison, evidence the [Buyer] turned in to Beijing Local Tax Bureau seems ex parte (only with local tax, but no national tax, since production for sale is mainly subject to national tax), and the causation of the evidence is uncertain (there are too many potential factors leading to the loss). In this respect, the [Buyer] has realized the ultimate goal of the Contract, thus it is unjustified to reject making the remaining payment.

      b) The products manufactured by the [Seller]'s forming machines -- the double-wall bellows are not only qualified but also prominent, having reached both the national and the international standard for sale.

            i) State approval: The products manufactured by the forming machines conform to the PRC national standard. The bellows manufactured by the [Buyer] have passed the inspection conducted by the Sate Chemical Building Materials Testing Center in accordance with the national standard and all its indexes.

            ii) The self-approval by the [Buyer]: The products of the forming machines fulfilled the standard of the enterprise. Seen from the report submitted to the Ministry of Construction by the [Buyer] itself, the [Buyer]'s products conformed to the enterprise standard in "Q/HR AW0901-2003 Polyethylene double wall corrugated pipes" for the items in test by the Sate Chemical Building Materials Testing Center. Meanwhile, the [Buyer] submitted its products to many government agencies such as Beijing Bureau of Technology Supervision and registered for standard product, suffice to demonstrate the self-approval of the [Buyer].

            iii) International approval: Almost all the world employs the European standard, so the products of the forming machine can be sold worldwide if satisfying the European standard. The [Buyer]'s report to the Ministry of Construction shows that through the inspection of State Chemical Building Materials Testing Center, the items of the [Buyer]'s products in test all satisfied the European model draft prEN13476 (Pressure-free Buried Plastics Pipe System). It is not only China that adopts the European standard, but most of the countries in the world adopt such European standard the same as to adopt the European Exhaust Emission Standard, in other words, the [Buyer]'s products can be sold worldwide.

            iv) The products manufactured by the [Buyer]'s forming machine obtained market approval. The products manufactured by the forming machine share a large sale with a spacious consumer base and are widely-used. It received orders including Olympic construction and military construction. This kind of product is far more than qualified, it is outstanding and eminent.

            v) The [Buyer] has realized the ultimate goal of the Contract. The object of the Contract is to introduce advanced equipment and technology, to enhance market competitiveness. The aim of the enterprise is to maximize its profits. In the scientific and technological achievement evaluation report submitted to the Ministry of Construction, the [Buyer] wrote in stride that:

"[Buyer] introduced advanced forming machine and technology from Canadian [Seller] in whole set. Through the examination of State Chemical Building Materials Testing Center, the [Buyer]'s products satisfied both the enterprise's own standard and the European standard."

At the same time, the financial statement of the [Buyer] also shows that by introduction of advanced technology and equipment, the [Buyer] achieved an increase of output value worth RMB 72,000,000 and profit of RMB 29,400,000 right in the year. These specific data utterly came from the [Buyer], simultaneously filed with the State authoritative institution, with high authenticity and clear causation, and thus is highly convincing evidence.

II. RULING OF THE ARBITRATION TRIBUNAL

1. Applicable law and validity of the Contract

The Contract in the present case is silent on applicable law for dispute settlement. However, the States in which the [Buyer] and the [Seller] are located are both member States of the "United Nations Convention on Contracts for the International Sale of Goods" (hereinafter the "CISG"). Therefore, the Tribunal holds that, rules of the CISG should be applied. Considering that the place where the contract is signed, place of principal contractual performance and place of the arbitration are all in China, pursuant to the principle of closest connection, the Tribunal holds that in the absence of rules in the CISG, the disputes should be settled in accordance with PRC law. This was accepted by both parties in the hearing by explicit consent.

The Tribunal rules that, in the present case, the Contract was signed out of both parties' free will, embodying the true intent of both sides, and is not against the CISG or PRC mandatory law; hence the Contract was legal and valid with binding force. Both parties are obliged to observe and execute the Contract.

2. The facts at issue

According to trial investigation and relevant evidence submitted by both parties, the Tribunal clarified and confirmed the facts as follows:

On 8 April 2003, the [Buyer] and the [Seller] signed Contract HC20030408 (the "Contract").The Contract stipulates that the [Buyer] purchases two machines for the manufacture of corrugated plastic pipes:

   -    Bellows forming machine, Model No. 1520-7.4MQR manufactured by [Seller] of Canada, diameter ranging from 50mm (internal diameter) to 600mm (external diameter); and
 
   -    Bellows forming machine Model No. 4020-7.6MQR, diameter ranging from 200mm (internal diameter) to 1450mm (external diameter).

The total value of the Contract is US $2,836,859, CIF Tianjin New Port, China. The [Seller] was authorized to negotiate 90% of the total payment to the issuing bank with pertinent shipping documents; however, the remaining 10% can only be obtained with an inspection agreement signed by both sides and a letter of warranty period guarantee.

      b) After the Contact was signed, the [Buyer] paid the deposit and issued the L/C for 100% of the total contract value. The [Seller] dispatched the goods in two batches separately on 9 June 2003 and 27 June 2003 and then negotiated 90% of the contract value

The foregoing facts are not in dispute, with the Contract, L/C, B/L, insurance policy, invoice and pertinent negotiation receipts as evidence.

3. Analysis and ruling on the issues

The [Buyer] alleges that the forming machines provided by the [Seller] have quality defects, refused to pay the remaining 10% payment and claimed restitution. The [Seller] correspondingly alleges that the forming machines conform to the Contract and have no quality defects; also the [Buyer] has already been able to produce qualified products; and that the production problem [Buyer] encountered was due to the use of an unqualified extruding machine and other factors irrelevant to the [Seller].

After two hearings combined with materials and arguments submitted by both parities, the Tribunal synthesizes the issues as

   -    Whether there are quality defects in the forming machines provided by the [Buyer];
 
   -    Whether the [Buyer] has been able to use the forming machines to produce qualified products; and
 
   -    If not, what is the cause?

The Tribunal has analyzed and rules on these issues as follows:

a) On [Seller]'s position: There is no quality problem with the [Seller]'s machinery and the [Buyer] has been able to manufacture qualified product.

The [Seller] alleges that:

      The [Buyer] has been able to use the machines to manufacture qualified products, thus the machines do not have quality problems, mainly based on the reports about the [Buyer]'s competence to manufacture qualified products with the forming machine in dispute, published on the [Buyer]'s website, and the [Buyer]'s successful endorsement of pipeline construction including Olympic venues and significant military facilities;

      Besides that, the [Buyer]'s production of double-wall bellows HDPE has been certified by the ISO9001:2000 quality management system and the inspection report provided by the State Chemical Building Materials Testing Center concerning 12 items of the products. In addition the products of the [Buyer] have been honored as a model case by the Ministry of Construction after strict evaluation..

However, the [Buyer] responds that:

      The materials on the website cannot be expected to reveal the quality problems with the machines in dispute and the pipes they produce;

      The technological statistics of the website were provided by the [Seller], so problems are unlikely to be reflected on the website; and the number of the [Buyer]'s clients does not prove there is no problem with the products of the machines in dispute.

      Moreover, there is no direct link between the certificate of the quality management system and the quality of the machines in dispute itself along with their capacity of production as required by the Contract; the "Scientific and Technological Achievement Evaluation by Ministry of Construction" is merely an evaluation, which by no means can replace the inspection and appraisal of the machines themselves; whereas the inspection report of State Chemical Building Materials Testing Center conducted no inspection on the items like the outshaped flaring and flaring wall-thickness, etc. Evidence turned in by the [Seller] cannot exclude the possibility of quality problems with its machinery.

The Tribunal notes that the date of evaluation concerning "the Applicable Technology of Buried High Density Polytene Double-Sylphon Bellows (double wall)" as the model case of scientific and technological achievement of Ministry of Construction is February 2004. The "scientific and technological achievement evaluation credential of Ministry of Construction" dated at 9 February 2004 states that "the evaluation committee has approved the evaluation so that the products can be put into batch process", the other relevant evaluation opinions also stated "the products can be manufactured in batch type." Hence this evidence does not reflect the circumstance of batch-type production.

At the same time, the Tribunal notes the "Minutes I" of 30 June 2004 and "Minutes II" of 2 July 2004 (hereinafter "Minutes I" and "Minutes II", respectively) provided by the [Seller] and admitted by the [Buyer] demonstrate that the products and machinery at issue at least by July 2004 had the following problems:

   -    "whether the forming machine can produce bellows DN500";
 
   -    "leakage at the head section of forming machine DN600, the module of flaring is not sealed quite well";
 
   -    "the flaring goes out of shape";
 
   -    "the flaring wall thickness did not reach the imminent national standard ", etc.

However, the over ten transactions, including the important military constructions published on the website, took place from February 2004 to when problems recorded in Minutes I and Minutes II remained unsolved. But the "Beijing Standard Product Registration Form" was registered on 8 October 2003, the "Credential of Recommended Construction Product" granted by China Association for Engineering Construction Standardization happened on 3 March 2004, the "Shenyang Building Materials Registration and File Credential" provided by Shenyang City and Countryside Construction Committee took place on 27 May 2004, and so on. These evaluations all came into being before the problems recorded in Minutes I and Minutes II were settled. As for the twelve copies of inspection report provided by the State Chemical Building Materials Testing Center, the Tribunal noted that the flaring module was provided by the [Buyer], and the flaring of double-wall bellows plays a significant role in the production of pipes, whereas the inspection report did not involve the item for the wall thickness of flaring. Although the product inspection contains DN/ID800 and DN/ID1000 examining reports, the [Seller] did not identify the module used in DN/ID800 and DN/ID1000 production, neither can the [Seller] prove that the [Buyer] can manufacture this type of products by itself (the [Buyer] stated it is actually bought from other factories other than its own, in order to diversify its own products.) Here the Tribunal concurs with the [Buyer]'s assertion, i.e., quality management system certificates cannot directly exclude problems with the products and machinery.

Regarding the whole package of the [Seller]'s assertion on the [Seller]'s international reputation, the number of patents it has and other evidence, the Tribunal maintains that the [Seller]'s assertion that the machines at issue do not have any quality problem is inadequate, and thus should not be supported. Besides, the Tribunal cannot, as far as all the contemporary evidence including the foregoing materials in the present case indicates, draw the conclusion that nothing is wrong with the machines or that the [Buyer] has already been manufacturing qualified products.

b) On [Buyer]'s position: That the [Seller]'s machinery has quality defects.

The [Buyer] asserts that there are quality defects with the machinery provide by the [Seller], mainly in the following aspects:

Problem 1: Forming machine 1520 often trembled with broken safety lock when producing bellows with the internal diameter of 400 mm, failing to operate normally;

Problem 2: Forming machine 1520 cannot produce bellows with the internal diameter of 500mm;

Problem 3: The flaring wall thickness of bellows with internal diameter of 225mm, 300mm, 400mm produced by forming machine 1520 failed to meet the standard;

Problem 4: The three types of bellows aforementioned bear outshaped flaring right after leaving the factory, which gets worse after cooling down (24 hours later). The larger the scale is, the worse the problem is;

Problem 5: The flaring of bellows produced by forming machine 4020 with internal diameter of 500mm and 600mm is out of shape.

Problem 6: The flaring wall thickness of bellows with internal diameter of 500mm and 600mm produced by forming machine 4020 cannot meet the standard;

Problem 7: There is a leakage at the head section of forming machine 4020 when producing bellows with internal diameter of 600mm; and also overheating and overcooling item cannot pass the test;

Problem 8: The capacity of all types of products produced by the forming machines failed to satisfy the contractual requirement.

The main points of the [Seller]'s rebuttal are:

   -    The broken safety lock took place at the stage of adjustment, which disappeared after replacement of the screw;
 
   -    The inspection report provided by the [Buyer] states the machine cannot produce bellows with internal diameter 500mm normally; this does not mean the machine cannot produce this kind of bellows at all. Even if not, the problem lies in the extruding machine;
 
   -    The record of adjustment is formed in the running-in period. It is not just a record of the forming machine, but a record of the whole production line; the problems with the flaring wall thickness, out of shape and insufficient capacity so-called by the [Buyer], should be attributed to the material defects of extruding machine;
 
   -    The [Buyer] itself had authorized a state authoritative institution to conduct inspection and evaluation on its own products. Along with its own patent documents, it suffices to prove the [Buyer] has already been able to produce qualified products.

The principal evidence supporting the [Buyer]'s submission on the quality problem of the [Seller]'s machine is:

   -    The inspection report provided by State Quality Supervising and Testing Center of Plastic Engineering Products as to the [Buyer]'s production line of polytene double-sylphon bellows;
 
   -    The adjustment record;
 
   -    The minutes and memoranda in the adjustment period;
 
   -    Relevant testing data and other statements from factories using the [Seller]'s machinery.

      As for the inspection report provided by the State Quality Supervising and Testing Center for Plastic Engineering Products, the Tribunal found that it is an unilateral evaluation with only the [Buyer]'s authorization, hence it cannot be accepted by the [Seller]. In this regard, the Tribunal cannot adopt this piece of evidence for the quality of the machine in dispute.

      As for the adjustment record, i.e., the [Buyer]'s "SERVICE ENGINEERS REPORT", the Tribunal has found out it has nearly 80 copies, with signature and assent of both sides; while "the broken safety lock record of [Seller]'s facility" submitted by the [Buyer] on 9 May 2005 did not bear the signature of both sides, neither with the admission of the [Seller].

      As for the 17 pieces of evidence referred to in the "minutes and memoranda of the meeting with staff of [Seller] during adjustment period" also submitted by the [Buyer], the [Buyer] herein attempted to prove the machine in the present case keeps having quality problems. However, the Tribunal notes that, except for the Minutes of 16 September 2003, which bore both sides' signature and the admission of the [Seller], all the other 16 copies turned out without the [Seller]'s signature and admission.

      Concerning the "testing data" (including pertinent evidence supplemented by the [Buyer] on 13 September 2006) from November 2003 to August 2004 submitted by the [Buyer], only part of it bore the bilateral signature or admission of the [Seller].

      Regarding the evidence aforementioned, the Tribunal holds that evidence with bilateral signature or admission can be regarded as a source for the Tribunal to decide on relevant facts. As for the other evidence, the Tribunal shall take them into account in the whole sense.

The Tribunal notes especially, that the "Minutes I" recognized by both parties state that:

"Excessive temperature, the extruding machine of CCC Company had the problem of excessive temperature, which was also seen in the mould of head section of [Seller]. The two companies should separately solve their problem of exceeding temperature"; "there are other problems with [Seller]'s equipment as follows": "whether forming machine 1520 can produce pipe DN 500", "leakage at head section of DN 600, the flaring module is not sealed well", "the Products DN 400, DN 500 increased double-sylphon of the forming module and lacked spare modules", "leakage in the water jacket of DN225-SN8", "inadequate minimum length (A) of the spigot at the bellmouth", "carving characters in module", "Products DN300-SN4 and SN8 have no spare panels", "outshaped flaring", "the flaring wall thickness did not meet the imminent national standard" and "the products from forming machine 4020 failed to reach the capacity standard stipulated in the Contract", to name only a few.

In "Minutes II", the [Seller] and the supplier of extruding machine promised to "propose settlement of problems with their respective machinery and solve them in a certain time". Nevertheless, as for the foregoing problems to be solved by the [Seller], like "DN 500's problem at 1520 production line, [Seller] should continue to modify and adjust it, to ensure the modification of the affiliated module panel, not to affect the production of [Buyer]", "the problem of flaring wall thickness should be settled according to [Seller]'s previous promise", etc., the [Seller] did not submit sufficient evidence indicating the problems got completely solved except for the new delivery of mould, panel and carved characters.

In regard to the eight problems:

Problem 1: The Tribunal noted that the [Buyer]'s assertion that forming machine 1520 bore abnormal trembling and broken safety lock when producing bellows with internal diameter of 400 mm, is mainly based on the adjustment record with bilateral signature on 9, 10, 11 and 13 September 2003, i.e., "SERVICE ENGINEERS REPORT". The [Seller] contends that the problem was solved after replacement of the screw. Simultaneously, the Tribunal noted the "the machinery of [Seller] still has the following problems" stated in "Minutes I" and "Minutes II" does not include the problem of "trembling machine and broken safety". Concerning the foregoing problems, the [Buyer] alleged that they turned up during the early period of adjustment, after which no ample evidence affirms the existence of the problems. Therefore, the [Buyer]'s assertion here lacks ample evidence. The Tribunal cannot support it.

Problem 2: The Tribunal noted that, the source of the [Buyer]'s assertion that forming machine 1520 cannot produce bellows with internal diameter 500mm is the inspection report on the [Buyer]'s double-sylphon bellows production line provided by State Quality Supervising and Testing Center of Plastic Engineering Products which was unilaterally authorized by the [Buyer]. Since this inspection report was authorized solely by the [Buyer], the Tribunal shall not adopt it. Meanwhile, the Tribunal noted that, even according to the report, it only indicated "failed to produce normally" the bellows with internal diameter of 500 mm, not "failed to produce at all." Therefore the [Buyer]'s assertion that the forming machine 1520 cannot produce bellows with internal diameter of 500mm lacks sound evidence.

Problems 3, 4, 5, 6: The [Buyer] submits that the double flaring wall thickness of bellows with internal diameter 225mm, 300mm, 400mm produced by forming machine 1520 failed to meet the standard simultaneously with outshaped flaring, and that the double flaring wall thickness of bellows with internal diameter 500mm and 600mm produced by forming machine 4020 failed to meet the standard simultaneously with outshaped flaring. The [Buyer] requested and also the Tribunal affirmed the adjustment records, i.e., 22 copies of the "SERVICE ENGINEERS REPORT" in aggregate dated from 16 September 2003 to 12 January 2004 with bilateral signature, and the minutes of 16 September 2003. These records contained the problems with inadequate flaring wall thickness and outshaped flaring, etc. The minutes of 16 September 2003 also recorded that the pipes were problematic in that "the bellmouth thickness did not satisfy the standard. The thickness of the products provided by [Seller] is 6.10mm, while the actual thickness was only 3.28 mm", some is even far from the required size. So the [Seller] decided to reproduce the moulds with diameter 225mm. Moreover, the Tribunal noted that, Minutes I and Minutes II also recorded the [Seller]'s machine had problems like "outshaped flaring", "the flaring wall thickness failed to meet the imminent national standard", and so on. The [Seller], though, promised to solve the relevant problems in accordance with Minutes II, and submit evidence that it reproduced and delivered the moulds to the [Buyer] later on. The current evidence including "Confirmation on the Accomplishment of Module Carving" (which confirmation document is only subject to the end of module carving, not the effective settlement of quality problems so-called by the [Buyer]. The [Buyer] agreed on this point with no contention) provided by the [Buyer] on 28 March 2005 intended to prove the successful settlement of problems stated in Minutes I and Minutes II. This whole cluster of evidence listed above cannot prove the settlement of the foregoing problems.

Problem 7: There was a leakage on the head section of forming machine 4020 when producing bellows with internal diameter 600mm, and the overcooling and overheating item could not pass the test. The Tribunal noted that, the [Buyer]'s submission on the failure of overcooling and overheating item accords with the inspection report on the [Buyer]'s double-wall bellows production line provided by the State Quality Supervising and Testing Center of Plastic Engineering Products that was authorized unilaterally by the [Buyer]. The Tribunal cannot affirm the inspection report due to the unilateral authorization. Concerning the leakage problem, both Minutes I and Minutes II recorded "there was a leakage at the head section of DN 600, and the flaring module was not sealed well", the [Seller] promised to solve it. On the contrary, all the contemporary evidences turned over by the [Seller] cannot effectively prove the entire settlement of the problem.

Problem 8: The [Buyer] alleged that all types of products manufactured by the two sets of forming machine failed to meet the capacity requirement stipulated in the Contract. The Tribunal noted that it specifically indicates that:

   -    Forming machine 1520 cannot produce bellows with internal diameter 500mm normally, the capacity of the machine can only reach one-third of what the Contract stipulates;
 
   -    Forming machine 1520 was trembling when producing bellows within internal diameter 400mm, thus could not operate normally;
 
   -    The flaring of forming machine 4020 went out of shape when producing bellows with internal diameter 500mm and 600mm and failed to meet the contractual thickness standard, the paramount cause of which lies in the mould, thus resulting in failure to introduce the mould with internal diameter of 800-1200mm and hence impeded the production.

Associated with the previous evidence, the Tribunal maintains that, although the [Buyer] failed to prove forming machine 1520 was unable to produce bellows with internal diameter of 500mm, Minutes I and Minutes II both recorded "whether forming machine 1520 can produce pipes DN500", "DN 500 had problems on Production Line 1520, [Seller] should continue to modify and adjust it", indicating problems remained with Production Line 1520. Whereas the [Seller] had no ample evidence showing that the problem got solved. Therefore, the Tribunal affirms the [Buyer]'s assertion, since the problem remained unsolved, the capacity of products were certainly to be affected. As to forming machine 1520 trembling when producing bellows with internal diameter 400mm thus failed to work normally, the Tribunal has vetoed the [Buyer]'s assertion when addressing Problem 1. Identically, since, when analyzing earlier Problems, the Tribunal has affirmed that forming machine 4020 has the problem with outshaped flaring and inadequate wall thickness against the contractual standard, the Tribunal holds that it is understandable that the [Buyer] failed to introduce mould with diameter 800-1200mm, which thereby had an impact on the product capacity.

To summarize the foregoing, it is the Tribunal's opinion that, the double-wall bellows manufactured by the [Buyer] do have quality defects, some of which were reflected on the machines provided by the [Seller].

4. Liability

The Tribunal noted that the [Seller] submitted that the forming machines it provided are only party of the production line. [Seller] alleged that the problems with production showed up only due to unqualified extruding machine and for other causes not attributable to the [Seller]. By investigation, the "Range of the [Buyer]'s Supply" as Appendix 4 of the Contract stipulates that the [Buyer] should provide appropriate:

"single-screw extruding machine in order to produce high density polytene double-sylphon bellows. The pressure at the head section should not exceed 350 bar. The extruding output should not exceed 1400 kilograms per hour. Melting polypropylene should be well plastified, with maximum temperature 210 C".

But relevant materials showed that the extruding machines as complement sets did not conform to the Contract. For instance, the parameter of the complementing extruding machine to Production Line 4020 and 1520 submitted by the [Buyer] indicates the maximum output is only 900 kg/h. The output of one extruder in case is even only 400 kg/h, which is also the actual result recorded in the two copies of inspection report provided by the State Quality Supervising and Testing Center of Plastic Engineering Products. Except for one, all the other extruding machines failed to meet the required maximum output. Meanwhile the technical parameters of the extruders' melting pressure indicated in the inspection report mentioned above also fell far below the contractual standard.

The Tribunal also noted that relevant evidence affirmed that there was some problem with the extruding machine, just as recorded in Minutes I "the extruding machine of CCC Company had the problem of excessive temperature, which was also seen in the mould of head section of [Seller]. The two companies should separately solve their problem of exceeding temperature." The "Testing Data" dated June and August 2004 with bilateral signature and admission submitted by the [Buyer] on 13 September 2006 also indicated the problem with the extruding machine that it always exceeded the ceiling temperature 210C stipulated in the appendix of the Contract.

To conclude: According to all the evidence in the present case, the Tribunal finds that the [Buyer] did not submit ample evidence to prove either the absolute settlement of the extruding machine problems or non-existence of problems with other parts of the production line apart from the forming machine. At the same time, the [Buyer] failed to prove that, if the extruding machine, as an important complementing set of the bellows production line, fails to match the bellows forming machine that it will not affect the manufacture of the products. Consequently, the Tribunal cannot come to the conclusion that the problem arising in the production of bellows is attributed to the quality problem with the forming machines provided by the [Seller].

Simultaneously, according to the foregoing facts and analysis, the Tribunal finds that, the [Seller] did not submit sufficient evidence that there was no quality problem with the double-wall bellows manufactured by the [Buyer], nor did [Seller] submit sufficient evidence on the non-existence of problems with the forming machines themselves.

The Tribunal has tried to detect the problem via expert team in accordance with the [Seller]'s petition, in order to find out whether there were problems with the [Seller]'s machinery and if yes, whether it had anything to do with the quality defects in the products, and the Tribunal has already conducted much preparatory work such as selecting experts, organizing preparatory meeting of evaluation and so on. However, it is impossible for the evaluation work to continue, considering that the [Seller] finally gave up the evaluation petition and the parties were not willing to cooperate.

Based on the foregoing facts, it is the Tribunal's opinion that, in the relevant aspects on whether the forming machine has quality defects, especially whether the quality problems with the products have causal link with the forming machine provided by the [Seller], both the [Seller] and the [Buyer] are responsible for the failure of burden of proof.

5. On the [Buyer]'s claims and the [Seller]'s counterclaims

The [Buyer] requested the [Seller] to bear the restitution due for breach of the Contract, namely:

   -    Compensation of US $615,259.35 for Bellows forming machine 1520-7.4MQR;
   -    Compensation of US $757,308.00 for Bellows forming machine 4020-7.6MQR
   -    Other losses and expenses of RMB 533,458.38 and attorneys; fees of RMB 102,629.

The Tribunal noted that the basis for the [Buyer]'s foregoing claim is the allegation that the [Seller]'s forming machines have problems with inadequate capacity, broken safety lock, wall thickness; that [Seller] has failed to manufacture qualified products. In light of the Tribunal's previous analysis and ruling on relevant facts and liability, the Tribunal holds that, the [Buyer]'s claims lack sufficient reason and evidence, thus should not be approved.

As for the [Seller]'s counterclaims against the [Buyer] to clear the remaining 10% payment of US $283,685.90, overdue fine, attorneys' fees and other losses amounting to RMB 1,000,000, the Tribunal noted that, according to the Contract term concerning clearance of the remaining 10% payment in the Contract, it requires that the inspection agreement be signed by both sides. However, in the present case, the machines in dispute did not pass the inspection and the agreement was not signed. Therefore, the precondition for the 10% payment was not fulfilled. Also according to the judgment on the facts and analysis on the liability, the Tribunal holds that the [Seller]'s counterclaims lack sufficient reason and evidence. They cannot be approved by the Tribunal, either.

III. AWARD

Based on the above, the Arbitration Tribunal holds as follows:

(1)   All of the [Buyer]'s claims are overruled.
 
(2)   All of the [Seller]'s counterclaims are overruled.
 
(3)   The arbitration fees RMB 240,284 in the present case, shall be borne by the [Buyer] in the whole, but counteracted with the prepaid arbitration fees of equal amount the [Buyer] has turned in to the Arbitration Commission.

The arbitration fees for the counterclaims US $ 8,635, shall be borne by the [Seller] in the whole, but counteracted with the prepaid arbitration fees of equal amount the [Seller] has turned in to the arbitration committee.

This award is final, and shall take effect upon adjudication.


FOOTNOTES

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

** Weiyuan Ma, Excellent Graduate from Tsinghua University, Beijing China; participant in the Sixth Willem C. Vis (East) International Arbitration Moot Held in Hong Kong SAR; expected to pursue LL.M.

*** Wang Minna, Tsingua University representative in the "Fifteenth Annual Willem C. Vis International Commercial Arbitration Moot" in 2008 (Counsel for both sides); Third Place in "Fifth Annual CIETAC International Commercial Arbitration Moot" in 2007 (Counsel for Respondent).

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Pace Law School Institute of International Commercial Law - Last updated October 21, 2009
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