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CISG CASE PRESENTATION

China 23 March 2007 CIETAC Arbitration proceeding (Offset printing machines case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/070323c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20070323 (23 March 2007)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2007/08

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Hong Kong (claimant)

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

GOODS INVOLVED: Offset printing machines


Classification of issues present

APPLICATION OF CISG: Yes, to the extent the CISG addresses issues not covered by the domestic laws of the PRC

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 8

Classification of issues using UNCITRAL classification code numbers:

8C [Interpretation of party's statement or other conduct: interpretation in light of surrounding circumstances]

Descriptors: Intent ; Burden of proof

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): Unavailable

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

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

Offset printing machines case [23 March 2007]

Translation [*] by Lin Wah Tong [**]

Edited by Jing Li [***]

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

I. PROCEDURE

The China International Economic and Trade Arbitration Commission South China Sub-Commission ("CIETAC-South China", originally named the China International Economic and Trade Arbitration Commission Shenzhen Commission, renamed as The China International Economic and Trade Arbitration Commission South China Sub-Commission since 18 June 2004, hereinafter, "CIETAC" or the "Arbitration Commission") accepted the case (Case No. SHEN M2006125X) according to:

-    The arbitration clause in Contract No. INFO-2622 (hereinafter, referred to as the "Contract"), signed by the Claimant A Co., Limited [of Hong Kong] (hereinafter "[Seller]") and the 1st Respondent H Limited [of the People's Republic of China] (hereinafter "[End-user]") and the 2nd Respondent G Limited [of the People's Republic of China.] (hereinafter "[Buyer]"); and
 
-    The Application for Arbitration submitted by the [Seller] on 4 September 2006.

Article 22 of the Contract stipulates that:

"Any dispute arising from the performance of the Contract shall be resolved by friendly negotiation among the parties. In case no agreement can be reached by the parties, the dispute shall be submitted to the China International Economic and Trade Arbitration Commission and resolved under relevant laws of China. The arbitration award shall be the final decision accepted by the parties, and the arbitration fee shall be borne by the losing party in the arbitration."

The CIETAC Arbitration Rules promulgated by the China International Economic and Trade Arbitration Commission (hereinafter, the "Arbitration Rules") which took effect on 1 May 2005 are applicable to this case. The amount in dispute in this case does not exceed RMB 500,000 yuan, thus according to Article 50(1) of the Arbitration Rules, summary procedure shall apply.

On 14 September 2006, the Secretariat of CIETAC (the "Secretariat") forwarded the Notice of Arbitration, and the submitted documents, the Arbitration Rules, the List of Arbitrators, the fee schedule of the appointment of the arbitrators to the [End-user] and the [Buyer] according to the addresses provided by the [Seller] by express mail. Relevant documents were also delivered to the [Seller] on the same day.

On 18 September 2006, the aforementioned arbitration documents that had been sent to the [Buyer] were returned by the post office because the recipient had moved from the address. The Secretariat notified the [Seller] of this situation immediately and requested the [Seller] to find out the last known place of business, registration, residence or mailing address of the [Buyer] and inform the Arbitration Commission. On 19 September 2006, the Arbitration Commission re-delivered the aforementioned arbitration documents by express mail to the [Buyer] at the new address provided by the [Seller], and on 21 September 2006, the documents were served. The relevant arbitration documents were served on the [End-user] on 17 September 2006.

On 8 October 2006, the [Buyer] submitted its statement of defense. On 13 October 2006, 19 October 2006 and 27 November 2006, the [End-user] submitted its statement of defense, legal person business license (copy), authorized document and relevant evidence, respectively. On 27 November 2006, the [Seller] submitted its supplementary evidence. The Arbitration Commission timely forwarded the aforementioned documents to the other parties.

The parties did not appoint or entrust the Secretariat to appoint an independent arbitrator within the stipulated period. The Chairman of the Arbitration Commission therefore appointed Mr. Z as the independent arbitrator according to the Arbitration Rules. The independent arbitrator, Mr. Z formed the Arbitration Tribunal on 7 November 2006 for this case.

The Secretariat decided to open a court session for this case in CIETAC-South China at 9:00 a.m. on 27 November 2006.

The Arbitration Tribunal opened a court session in CIETAC-South China as scheduled. Representatives of the [Seller] and the [End-user] attended the hearing, but the [Buyer] was absent. During the hearing, the [Seller] and the [End-user] made statements on the facts and their claims, provided original evidence, had cross-examination, debated on legal issues and answered inquiries of the Arbitration Tribunal.

After the court session, the Secretariat timely notified the [Buyer] of the hearing, and forwarded relevant supplementary evidence submitted by the [Seller] and the [End-user] to it.

The [Seller] and the [End-user] both submitted their advocacy and relevant materials after the hearing. The [End-user] also submitted supplementary opinion and counterclaims. The Arbitration Commission timely forwarded the aforementioned documents to the other parties. Since the [End-user] did not submit its counterclaims within the stipulated period, the Arbitration Tribunal deemed that the [End-user] had never submitted any counterclaims, and notified the [Seller] and the [Buyer] that no response was necessary to the [End-user]'s counterclaims.

The Arbitration Tribunal decided to open the second court session for this case and issued a list of questions concerning the case together with the Notice of Arbitration to the parties. On 22 January 2007, the [Seller] submitted an application to postpone the hearing. The application was granted after consideration by the Arbitration Tribunal. The Tribunal requested the parties to submit their written opinion or supplementary evidence regarding the list of questions attached in the Notice of Arbitration, and consulted the parties regarding the arrangement of the second court session. The [Seller] and the [End-user] submitted their response to the issue but no response was received from the [Buyer]. The Secretariat timely forwarded all the submissions to the parties.

The [End-user] submitted that the second court session should be held with the presence of all three parties while the [Seller] submitted that it was not necessary to hold a second court session. After consideration of the facts in this case, the Arbitration Tribunal decided not to hold a second court session. The Secretariat timely notified the parties of the aforementioned decision of the Arbitration Tribunal.

Considering the complexity of the dispute, the Arbitration Tribunal could not make a decision within the stipulated period according to the Arbitration Rules and requested to postpone the date of decision. The Secretariat considered the request necessary and reasonable, and thus postponed the date of decision to 23 March 2007 according to Article 56 of the Arbitration Rules.

Upon the closing of the case, the Arbitration Tribunal handed down the arbitration award based on the evidence submitted by the parties, verified facts and applicable law.

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

II. THE FACTS AND POSITION OF THE PARTIES

1. On 14 March 2003, the [Seller], the [End-user] and the [Buyer] signed a contract for the sale of LX Sheet-fed Offset Printing Machines. The material facts of this case are as follows:

(1) The Goods. The Contract was signed by the [Seller] and the [Buyer] according to the following terms. The [Seller] agreed to sell and the [Buyer] agreed to purchase the following goods (Article 1):

Item Commodity Quantity Unit Unit/Price Sub Total
1 LX Sheet-fed Offset Printing Machine (See attachment for product specifications) 1 Set

JPY83,000,000.-CIF

TIANJIN, CHINA

Total: JPY83,000,000.-CIF Tianjin, China
Total: Japanese Yen Eighty Three Million Only (CIF Tianjin, China)

(2) Manufacturing Country and Manufacturer: X Corporation, Japan (Article 2)

(3) Date of Shipment: March 2003 (Article 5)

(4) Carriage of goods: Shipping (Article 6)

(5) Loading Port: Port of Yokohama, Japan (Article 7)

(6) Destination Port: Xingang Port, Tianjin, China (Article 8)

(7) Insurance: On buyer account (Article 9)

(8) Payment: The [Buyer] shall issue an irrevocable L/C to the manufacturer, X Corporation as the beneficiary payee at total Contract price 30 days before the loading of goods. The L/C shall be payable upon stipulated documents under Article 11 of the Contract. (Article 10).

(9) Documents: (i) Shipment: a full-set of clean on-board Bills of Lading to order, blank endorsed with indication of freight prepaid, specifications of the goods and notification of the destination port to the [Buyer]; (ii) Commercial invoice specifying the Contract No. in triplicate; (iii) Packing List in triplicate; (iv) Certificate of goods issued by the manufacturer in duplicate; (v) A copy of the e-mail, letter or fax of the notification of loading within 48 hours upon loading; and a full set of documentations faxed to the [Buyer] within 48 hours after loading of goods; (vi) Certificate of origin issued by the Japan Chamber of Commerce and Industry in duplicate. (Article 11)

(10) Notification of loading: The [Seller] shall notify the [Buyer] of the Contract No., name of goods, quantity, invoice amount, gross weight of goods, ocean vessel and the shipment date by e-mail, letter or fax within 48 hours after loading of the goods. (Article 12)

(11) Breach of Contract: The [Buyer] shall bear any loss and expenses which includes but is not limited to the interest and expenses of storage arising from the failure of issuing or amending the L/C. If the [Buyer] postpones the payment or issuance of the L/C, the date of delivery shall be postponed accordingly. (Article 17)

(12) Transfer of Ownership of Goods: The ownership of goods shall be transferred to the [Buyer] after the entire payment of the Contract has been settled. (Article 20)

(13) Governing Laws: The Contract shall be governed by and interpreted in accordance with the laws of the People's Republic of China, and the United Nations Convention on Contracts for the International Sale of Goods (the "CISG") and other international treaties and usages shall also be reference of the Contract. (Article 21)

(14) Signature of Parties. A) The Contract is signed by the [Buyer], the [End-user] and the [Seller] in triplicate and each party keeps a copy of it; B) The attachment of the Contract shall be part of the Contract which has an equivalent effect to the main content of the Contract. (Article 24)

The [Seller] also signed a supplementary agreement with the [Buyer] and the [End-user] regarding the payment terms of the Contract (hereinafter, referred to as "Supplementary Agreement"). The contents are as follows:

  1. Arrangement for the payment of the Contract: Total amount: JPY 83,000,000

    (1)    The [Buyer] shall issue a 100% irrevocable L/C at sight where JPY 50,000,000 shall be payable upon the documents and the remaining Contract price (i.e., JPY 33,000,000) shall be paid by 180-day usance L/C. The [End-user] shall deposit JPY 50,000,000 at an equivalent amount to RMB as the first payment to the [Buyer]'s account before the irrevocable L/C at sight is issued. RMB 1,000,000 yuan out of the aforesaid payment shall be paid by 14 March and the remaining payment shall be settled 20 days after the issuance of L/C but before the date of the bill's retirement.
     
    (2)    Interest on the remaining Contract price (i.e., JPY 33,000,000), which shall be paid to the [Seller] at an annual rate of 4%, amounts to JPY 660,000. The total amount of the principal and the interest is JPY 33,660,000. The [End-user] shall settle such amount in one payment to the [Buyer] at an equivalent amount to RMB before the expiry date of the usance L/C; and the [Buyer] shall deliver such payment to the [Seller]. If the [End-user] settles the remaining amount due in advance, the amount of interest shall be calculated according to the respective due dates of payment.
     
    (3)    Currency rate of the Contract price: The amount shall be calculated at the market currency rate. The [Buyer] shall arrange an import bill advance for a period of three months for the [End-user] (The amount of the bill shall be the amount of L/C at sight, i.e., JPY 50,000,000) so the [End-user] can choose to purchase at an appropriate currency rate. The interest incurred during the period of bill advance shall be paid by the [End-user] to the [Buyer] (at an annual rate of 3% on a daily basis). If the currency rate reaches JPY 120 / US $1 or above, the [Seller] shall promise a market currency rate. If the rate does not reach JPY 120 / US $1, the [Seller] shall then promise a prime rate of JPY 120 / US $1 to the [End-user].
     
    (4)    Settlement of the remaining Contract price: The remaining Contract price shall be a credit support for import finance offered by the [Buyer] to the [End-user]. Disputes in quality, installation, tests and acceptance of the machines shall not be factors avoiding the payment. The [End-user] shall not refuse or delay the remaining payment based on the aforementioned factors. An initial investigation report shall be signed by the time of the conclusion of Contract. Details of the investigation report such as date of acceptance shall be specified on the date of acceptance. Such report shall only be used for the purpose of issuance of L/C and the final acceptance protocol shall be signed after the installation and test of the machines. (Article 1).

  2. Ownership and the right of disposal of the machines: The ownership and the right of disposal shall belong to the [Buyer] before all the remaining payment of the Contract has been settled. The [End-user] shall not utilize the machines for the purpose of pledge, guarantee and realization. Failure to settle the payment on time by the [End-user] shall be deemed a breach of contract by the [End-user] and the [Buyer] shall have the right to collect the machines and the machines shall be at the [Buyer]'s disposal. (Article 2).

  3. The invoice for the machines and transfer of the ownership: The [Buyer] shall issue an invoice of the machines to the [End-user] after the remaining payment has been settled. (Article 3).

  4. Insurance: The [End-user] shall be responsible for the property insurance of the machines and the period of insurance shall be at least one year since the installation of the machines. The amount insured shall be 110% of the Contract price. Any loss arises shall be borne by the [End-user] if it fails to purchase property insurance for the machines under this Agreement. (Article 4).

  5. This Supplementary Agreement shall be part of Contract No. INFO-2622 [Note by the Arbitration Tribunal: The Contract] signed by the three parties and takes effect accordingly. (Article 5).

The parties had a dispute regarding the performance of the Contract and did not reach an agreement so the [Seller] submitted the dispute to arbitration and raised the following claims:

(1)    The [Buyer] and the [End-user] shall settle an amount of RMB 428,954.82 yuan consisting of RMB 350,252.98 yuan for the contract price and RMB 78,701.84 yuan for the penalty for delay in payment.
 
(2)    The [Buyer] and the [End-user] shall be responsible for the attorney's fee of the [Seller], i.e., RMB 17,000.00 yuan.
 
(3)    The arbitration fee shall be borne by the [Buyer] and the [End-user].

The facts and grounds of claims submitted by the [Seller]

  1. The [Seller] performed its obligation in compliance with the Contract. After the investigation of the machines, the [Buyer] and the [End-user] signed an acceptance protocol certifying the conformance of the machines on 27 June 2003. It was the [Seller]'s position that it had performed its obligations while the [End-user] had not settled the payment for the machines before 26 September 2003.

  2. The [End-user] failed to perform its duty within the stipulated period and deprived the right of protection to the [Seller]'s legal interest. It was clear that the [End-user] failed to settle the outstanding payment. Under the urging of the [Seller], the [Buyer] and the [End-user] admitted their failure to settle the outstanding payment but they made a number of excuses to avoid the payments.

The [End-user]'s defenses

1.    The Contract price amounting RMB 5,892,405.04 yuan was fully settled by the [End-user], including:

(1)    1.5% of the total price of the goods as the import agency charge payable to the [Buyer], i.e., RMB 86,112.50 yuan.
 
(2)    RMB 5,740,833 yuan for the price of import machines, i.e., RMB 5,740,833 yuan 8.3 = US $691,667 x 120 = JPY 83,000,000. Under Article 1(3) of the Supplementary Agreement, the highest rate of exchange currency shall be JPY 120 / US $1 agreed by the [End-user].
 
(3)    The amount of interest under Article 1(2) of the Supplementary Agreement: RMB 45,650 yuan 8.3 = US $5,500 x 120 = JPY 660,000.
 
(4)    Interest of the bill advance under Article 1(3) of the Supplementary Agreement: RMB 19,809.54 8.3 = US $2,387 x 120 = JPY 286,403.

The total amount of the above four items was RMB 5,892,405.04 yuan. The amount was fully paid to the [Buyer] in accordance with the Contract and the payment terms required by the [Buyer]. The [End-user] had never received any notification of the time of exchange allocation and the currency rate from the [Seller] and the [Buyer].

2.    The [Seller] claimed in its arbitration submission that "it was clear that the [End-user] failed to settle the outstanding payment; under the urging of the [Seller], the [Buyer] and the [End-user] admitted their failure to settle the outstanding payment; instead they made a number of excuses to avoid the payment." It was the [End-user]'s position that the [Seller] failed to provide sufficient evidence.

In conclusion, the [End-user] claimed that the payment of the Contract was fully settled and the claims of the outstanding payment submitted by the [Seller] were wrong and groundless. The claims should be dismissed.

The [Buyer]'s defenses

  1. The [Buyer]'s role of being an import agent for the goods was complete upon 1 July 2003.

  2. The dispute concerning the outstanding payment between the [Seller] and the [End-user] should be properly resolved between the two parties only.

In conclusion, the [Buyer] claimed that including it as a party in the submission for arbitration was wrong, groundless and had no legal basis. The claims against it should be dismissed.

The [End-user]'s supplementary opinion

1.    An amount of RMB 5,892,405.04 yuan in total was paid by the [End-user] to the [Buyer] and such payment was confirmed by the [Seller] and the [Buyer]. The [End-user] had paid an amount of the agreed Contract price, i.e., RMB 5,733,640 yuan for the machines as stipulated in the Supplementary Agreement. The amount should be calculated as follows:
 
 
-    The total amount of the Contract price should be JPY 83,000,000 which was equivalent to US $691,666.67 (Currency rate of US $ and JPY= 1: 120, under Article 3 (1) of the Supplementary Agreement), and RMB 5,733,640 yuan after conversion of the exchange currency.
 
 
-    Note: Article 1(3) of the Supplementary Agreement stipulates that "… if the currency rate reaches JPY 120 / US $1 or above, the [Seller] shall promise a market currency rate. If the rate does not reach JPY 120 / US $1, the [Seller] shall then promise a prime rate of JPY 120 / US $1 to the [End-user]". Based on the aforementioned terms and the exchange quotation of the Bank of China submitted by the [Seller] during the hearing on 27 November 2006, the converted amount of JPY 83,000,000 should be US $671,521 and RMB 5,566,640 yuan (calculated at the selling rate of exchange currency provided by the People's Bank of China, i.e., currency rate of US $ and RMB = 1: 8.2896). If the amount was calculated according to the aforementioned formula, the [Seller] should refund the difference of an amount of RMB 167,000 yuan to the [End-user] (RMB 5,733,640 yuan - RMB 5,566,640 yuan = RMB 167,000 yuan).
 
    The [End-user] had paid an amount of RMB 5,892,405.04 yuan which included RMB 5,733,640 yuan for the machines and RMB 158,765.04 yuan for the import agency charge and other expenses. The aforementioned calculation indicated that all the payments were settled by the [End-user] under the payment terms of the Contract.

Taking the "Note" into consideration, an amount of RMB 167,000 yuan was overpaid by the [End-user].
 

2.    The Contract was concluded on 14 March 2003 while the obligations were performed on 31 August 2004. It was questionable that the [Seller] did not claim for the outstanding payment until September 2006. The [End-user] requested a reasonable explanation from the [Seller].
 
3.    The amount of RMB 6,242,658.02 yuan claimed by the [Seller] in its arbitration submission was based on a different exchange currency rate. [Arbitration Tribunal's note: The amount included agency charge and the interest of usance L/C. The total Contract price claimed by the [Seller] was JPY 83,000,000 which shall be converted to RMB 6,022,797.06 yuan.]

Two exchange allocations were arranged throughout the performance of the Contract. The first allocation involved JPY 49,800,000 at a rate of JPY117.64 / US $1; the second allocation involved JPY 33,200,000 at a rate of JPY 109.53 / US $1. Both aforesaid allocations were arranged without the knowledge of the [End-user]. According to Article 1(3) of the Supplementary Agreement, the [End-user] should pay at a maximum rate of JPY 120 / US $1. The aforementioned difference of the currency rate shall be outside the responsibility of the [End-user].

The [End-user] is a domestic enterprise, the [Buyer] is an import and export enterprise, and the [Seller] is a foreign enterprise. The [Buyer] should be responsible for notifying the [End-user] of the exchange quotation throughout the course of two exchange allocations. During the performance of the Contract, the exchange currency rate had reached a high rate of JPY 123.6 / US $1. The [End-user] would have saved more than RMB 10 yuan for the cost but for the failure to notify it of the currency rate by the [Buyer]. The irresponsible act by the [Buyer] and the [Seller] had led to the loss arising from the difference of the exchange currency rate. The price difference arising from the exchange currency rate which was irrelevant to the [End-user] should be borne by the [Buyer] and the [Seller].

Submission by the [Seller]'s representative

1. The claims submitted by the [Seller] were based on clear facts and solid grounds

The fact was clear that the [End-user] and the [Buyer] had not settled the outstanding payment; and under the urging of the [Seller], the [End-user] and the [Buyer] refused to settle the payment. The [Seller]'s representative took the position that the fundamental issue of this case was clear and the claims submitted and the facts being relied upon by the [Seller] were indisputable. The Arbitration Tribunal should confirm the claims and hold in favor of the [Seller].

2. The claims submitted by the [Seller] were based on lawful grounds

(1)    The outstanding amount payable to the [Seller] should be RMB 350,252.98 and the [End-user] admitted such amount during the hearing.
 
(2)    Regarding the protracted non-payment of the [End-user] and the [Buyer], the [Seller] was acting in accordance with the facts and the laws to claim for a breach penalty against the [End-user] and the [Buyer].
 
(3)    The attorney's fee arising for the claims of the outstanding payment resulted from the non-performance of the [End-user] and the [Buyer]. The [End-user] and the [Buyer] should be responsible for the attorney's fee according to the Arbitration Law of the People's Republic of China (hereinafter, referred to as the "Arbitration Law").

3. Issues in dispute in this case

(1)    The amount for the import printing machines

According to the evidence obtained by the [Seller] from the [Buyer], the payment for the printing machine in dispute should be a sum for purchasing foreign exchange. The amount should be RMB 6,022,797.06 yuan according to the market currency rate and the amount of RMB 5.740,833 yuan determined by the [End-user] was not true.
 

(2)    Relevant issues concluded in the Supplementary Agreement

First, Article 1(1) of the Supplementary Agreement stipulates that:

"The [Buyer] shall issue a 100% irrevocable L/C at sight where JPY 50,000,000 shall be payable upon the documents and the remaining Contract price (i.e., JPY 33,000,000) shall be paid by 180-day usance L/C. The [End-user] shall deposit JPY 50,000,000 at an equivalent amount to RMB as the first payment to the [Buyer]'s account before the irrevocable L/C at sight is issued. RMB 1,000,000 yuan of the aforesaid payment shall be paid by 14 March and the remaining payment shall be settled 20 days after the issuance of the L/C but before the date of the bill's retirement."

The content of the agreement which was concluded by the three parties should be recognized as true and valid. The [End-user] should perform its obligation of settling the payment according to the payment terms.

Second, Article 1(3) of the Supplementary Agreement stipulates that the exchange currency rate shall be a market rate, i.e., according to the fixing rate of exchange currency provided by the People's Bank of China.

Third, Article 1(3) of the Supplementary Agreement requires the [Seller] to provide the [End-user] a special offer but such offer should be conditional. It means that the [Buyer] shall arrange import bill advance for a period of three months for the [End-user] so it can choose to purchase at an appropriate currency rate. The interest incurred during the period of the bill shall be paid by the [End-user] to the [Buyer]. If the currency rate reaches JPY 120 / US $1 or above, the [Seller] shall promise a market currency rate. If the rate does not reach JPY 120 / US $1, the [Seller] shall then promise a prime rate of JPY 120 / US $1 to the [End-user]. There is a definite limitation, i.e., the period. The special offer promised by the [Seller] shall be provided within the period stipulated in Article 1 (3) of the Agreement. The [End-user] did not perform its obligation within the period agreed by the [Seller], thus it was not entitled to the special rate promised by the [Seller].

According to the fixing rate provided by the People's Bank of China, the exchange currency rate reached JPY 120 / US $1 or above during that period. Since the [End-user] did not settle the payment accordingly, the special offer for that particular period should not be extended arbitrarily. Therefore, the final amount should be the sum submitted by the [Seller].

4. The application for arbitration submitted by the [Seller] was in accordance with the arbitration clause concluded by the three parties under Article 22 of the Contract.

Submission by the [End-user]'s representative

1.    The [End-user] had performed its obligations of payments under the Contract. The [End-user] had paid an amount of RMB 1,000,000 yuan by remittance on the day of signing the Contract. After that, the [End-user] made a number of remittances to the [Buyer] one after another. The sum of the remittances was RMB 5,892,405.04 yuan up to 31 August 2004, including the price of the goods and the import agency charge payable to the [Buyer] (See Agreement of tender awards kept by the [Buyer] for the exact amount), interest on the payment and interest on the bill advance. For details of the calculation, see the supplementary opinion submitted by the [End-user]. In conclusion, the [End-user] had already performed its obligation of payment and the Seller]'s claims were groundless.
 
2.    The claims of the amount payable to the [Seller] were not reasonable. The sum of RMB 6,242,658.02 yuan claimed by the [Seller] was groundless and the exchange currency rate of RMB and JPY was neither the rate concluded in the Contract nor the real-time exchange quotation. The [End-user] requested evidence supporting the currency rate from the [Seller]. Apart from that, the [Buyer] as an agent of foreign trading had never presented relevant documents regarding the remittance to the [End-user] such as L/C, bill advance and exchange allocation since the day of signing the Contract. As a result, the [End-user] was neither able to recognize most of the details when arranging the remittance nor able to prove whether the calculations submitted by the [Seller] were true and lawful. The [Seller] submitted a statement of exchange settlement provided by the Bank of Communications during the hearing. The date indicated on the statement was 15 July 2003 which was two months since the first payment, i.e., JPY 50,000,000 by the [End-user]. According to the exchange currency by that time, the amount paid by the [End-user] was illogical and unfair. The [End-user] would not have admitted its legality and truthfulness, and thus the claims were unacceptable. In addition, the [Seller] had never presented the original copy of such statement. Under the principles set forth in Several Provisions of the Supreme People's Court on Evidence in Civil Proceedings (hereinafter, referred to as "Provisions on Evidence"), Arbitration Rules and Arbitration Law, the claimant shall be responsible for producing evidence in support of its claims. The evidence submitted shall be the original document or item, and this is a case where original evidence is required. Under the circumstances that the Claimant [Seller] failed to provide the original document of its evidence, the [End-user] would not admit the evidence submitted by the [Seller].
 
3.    The amount of goods converted to RMB was calculated according to the [Buyer]'s instruction. Therefore, any loss arising from the difference of the exchange quotation should not be borne by the [End-user].

The [End-user] is an enterprise which does not have the right to engage in foreign trade. If it needs to import machines, it must sign an agreement with an enterprise which has the right to engage in foreign trade. That enterprise will act as an agent on behalf of the [End-user] and sign a contract with a foreign enterprise for the import of goods. In this case, the [Buyer] is an enterprise which is approved by the state and given the right to engage in foreign trade as an agent. Although the [End-user] did not sign a separate foreign trade contract with the [Buyer], the Contact and the Supplementary Agreement signed by the three parties indicated that:

      The [Buyer] was acting on behalf of the [End-user] an agent in foreign trade; the major duties of the [Buyer] should be converting the payment of RMB by the [End-user] to JPY and transferring the payment to the [Seller].

      Under such circumstances, the [End-user] was neither responsible for the conversion of currencies nor the investigation of the currency rate, thus it could only arrange the remittance according to the [Buyer]'s instructions.

The instructions and notification by the [Buyer] were not only the obligations under the Contract, but also the practice and legal obligations in international trade. Article 17 of the Provisional Rules on Foreign Trade Agency System (hereinafter, referred to as "Provisional Rules on Agency") promulgated by the Former Ministry of Foreign Economy and Trade in 1991 stipulates that

"The agents shall provide the principals with the quotations for the entrusted commodities on the international market and make timely report of the business development and of how the agents' obligations are performed."

In addition, under the provisions of the Contract Law of People's Republic of China (hereinafter, referred to as the "Contract Law"), the contract between the [End-user] and the [Buyer] belonged to a contract for brokerage. Article 418 of the Contract Law stipulates that "where the broker sells at a lower price or buys at a higher price than the price set by the principal, consent shall be obtained from the principal." The [Buyer] as a broker was responsible for the purchase of foreign exchange. It should not only notify the [End-user] of the exchange currency rate in time, but also provide timely information on any increase or decrease of the RMB payable arising from the variation of the exchange currency. Consent should also be obtained from the [End-user] if there was any price difference for the purchase of the foreign exchange. In fact, the [Buyer] neither fully performed its obligation of notification nor obtained the consent from the [End-user], so the [End-user] had been paying the remaining amount under the instruction of the [Buyer] until the amount was paid off.

Article 19 of the Provisional Rules on Agency stipulates that

"In case of the failure of implementation of import or export contracts, incomplete, delayed or implementation inconsistent with the terms of the contracts due to the failure of agents to implement the obligation under the agency agreement, the agents shall compensate the principals for their losses thus incurred, and shall assume by themselves all the responsibilities towards the foreign parties."

Therefore, in case of any loss arising from the difference of the currency rate existed, it should be the [Buyer]'s responsibility to compensate the [Seller].

Apart from that, the acts of the [Buyer] further proved that the [End-user] had settled the payment. According to the Supplementary Agreement, the [Buyer] shall issue an invoice of RMB payment to the [End-user] after all the remaining payment has been settled. In this case, the [Buyer] had issued an invoice specifying the remittance of RMB to the [End-user]. It was only possible for the [Buyer] to issue the invoice after the remaining payment of goods had been settled by the [End-user].
 

4.    The [Buyer] as an agent in foreign trade should be responsible for the entire performance of the obligations under the Contract. The [Buyer]'s obligations should not cease at the time of acceptance of goods. Instead, its obligation should go along with the entire course of the performance of the Contract, including the demand of each receivable payment and notification of the amount of the converted JPY based on each receivable payment. It was groundless in law and facts for the [Buyer] to claim that its obligation should cease upon the date of acceptance of the goods. The [End-user] would not have remitted the aforesaid amount but for the instructions of the [Buyer].

In conclusion, the [End-user] as the remitting party had arranged the remittance of the entire price of goods under the instructions of the [Buyer], and thus the [End-user] did not breach the contract.

After the court session, the Arbitration Tribunal issued a list of questions to the parties. The contents were as follows:

  1. The payment terms agreed by the [Buyer] under the Contract: The [Buyer] shall issue an irrevocable L/C of the Contract price, i.e., JPY 83,000,000 to the manufacturer, X Corporation as the beneficiary. Had such an obligation performed accordingly throughout the course of the performance of the Contract? How was the progress of such performance? Why should the equivalent amount of RMB to JPY 33,000,000 under the Supplementary Agreement be paid by the [End-user] to the [Buyer] and transferred to the [Seller] by the [Buyer]? Did the [Seller] receive any payment of RMB throughout the performance of the Contract?

  2. Article 1(4) of the Supplementary Agreement stipulates that "the remaining Contract price shall be a credit support for import finance offered by the [Buyer] to the [End-user]." What does it imply? How was that term performed throughout the course of performance?

  3. Article 1(3) of the Supplementary Agreement stipulates a term of import bill advance. What does it imply? What was the arrangement of that term throughout the course of performance?

  4. How was the rate variation for the conversion between JPY and US $ throughout the course of performance? -- i.e., From the date on which the [End-user] made the first payment to the date on which the [End-user] made the last payment.

  5. Did the [Seller] regard the [End-user] or both the [End-user] and the [Buyer] as the "respondent" in its application for arbitration?

The [Seller]'s response to the questions

  1. The Supplementary Agreement amended the issuance of the L/C. The Contract required an L/C of JPY 83,000,000 issued by the [Buyer]. This term was modified in the Supplementary Agreement to provide for an L/C at sight of JPY 50,000,000 and a 180-day usance L/C of JPY 33,000,000. In the actual performance of the Contract, an L/C at sight of JPY 49,800,000 and a 180-day usance L/C of JPY 33,000,000 were issued.

  2. The [Seller] had never received any payment of RMB throughout the course of performance of the Contract.

  3. Article 1(4) of the Supplementary Agreement stipulates that "the remaining Contract price shall be a credit support for import finance offered by the [Buyer] to the [End-user]." The "credit support for import finance" actually set out the conditions for the payment that "disputes in quality, installation, tests and acceptance of the machines shall not be factors avoiding the payment, and the [End-user] shall not refuse or delay the remaining payment based on the aforementioned factors."

  4. There are an export bill and import bill for the bill advance. The import bill advance: The bank will offer the import company credit finance for a short period upon receipt of the documents listed in the L/C. Throughout the performance of the Contract, the [Seller] agreed to the three-month bill advance offered by the [Buyer] to the [End-user]. In the actual performance of the Contract, the [Buyer] submitted to the issuing bank its application for the import bill. After the assessment of the negotiating bank, the [Buyer] signed a formal agreement of bill advance with the bank and confirmed the amount, period of the bill, interest rate and the date of repayment.

  5. Throughout the course of performance, the period of payment for the [End-user] was from 17 March 2003 to 2 September 2003, and the currency rate of JPY and US $ varied from JPY 104.2142 / US $1 to JPY 121.0061 / US $1. The currency rate of JPY and US $ of March, April, July and August in 2003 which could be traced from the exchange quotation on the website of the Bank of China reached JPY 120 / US $1 or above. The [End-user] could refer to the market currency rate from time to time and purchase at the best currency rate. At the same time, the [Seller] had provided certain chances for the [End-user] to purchase at its own preference, but the [End-user] still did not settle the payment within the stipulated period according to the Supplementary Agreement. Therefore, the outstanding payments should be borne by the [End-user] and the [Buyer].

  6. The term "Respondent" in the Application for Arbitration refers to both the [End-user] and the [Seller].

The [End-user]'s response to the questions

  1. The [End-user] had paid the [Buyer] for the goods at the rate of JPY 120 / US $1 according to the terms of the Contract. Whether the [Buyer] had made the payment of RMB to the [Seller] or whether the [Seller] had received any payment of RMB should be irrelevant to the [End-user]. The [End-user] had little knowledge of the transaction between the [Seller] and the [Buyer].

  2. The credit support for import finance refers to a loan offered by the [Seller] to the [End-user] with corresponding interest. The [Seller] allowed the repayment by the [End-user] to be delayed for half year, and the [End-user] was required to pay the interest. It was a fact that the [End-user] had delayed the payment, but currency should be irrelevant to such delay.

  3. The [End-user] is a domestic enterprise that is not familiar with the bill advance and issues of exchange currency such as variation of the rate. It was simply making the payment of RMB under the instructions of the [Buyer].

  4. The definition of the term "Respondent" in the Application for Arbitration should be explained by the [Seller].

The [End-user]'s statement in response to the [Seller]'s reply

  1. Performance of the Contract: The [End-user] had settled the entire amount of the first payment according to the Contract, i.e., JPY 50,000,000, including RMB 1,00,000 yuan paid on 14 March 2003, RMB 900,000 yuan and RMB 1,552,788.27 yuan in equivalent US $ on 8 April 2003. The sum of the three payments was RMB 3,452,788 yuan which was equivalent to JPY 49,919,830.4095 (RMB 3,452,788 yuan / 8.3 x 120). It indicated that the [End-user] had settled the first payment on 8 April 2003 according to the Contract and the obligation of an L/C at sight of JPY 49,800,000 was fulfilled. One thing to be clarified was that the date for the first payment by the [End-user] should be 14 March 2003 rather than 17 March 2003 as claimed by the [Seller]. Besides, neither the provisions of the Contract nor during the course of actual performance of the Contract was 2 September 2003 fixed as the last date of payment.

  2. Variation of the currency rate: The representative of the [Seller] had presented a document concerning the variation of the currency issued by the People's Bank of China prior to the hearing proving that the actual currency rate of JPY and US $ had reached JPY 123.62 / US $1 before the payment of the L/C. The [End-user] claimed that the first payment of the L/C should be calculated at the actual fixing rate of exchange currency. The [End-user] did not understand why the [Seller] claimed that the currency rate varied from JPY 104.2142 / US $1 to JPY 121.0061 / US $1. An explicit period defining the currency rate was a key factor to this case. The inconsistency of the currency rate would affect the Contract price accordingly.

  3. The choice of currency rate: The [End-user] emphasized that it was neither able to purchase exchange currency as a domestic enterprise nor choose an appropriate time for the purchase. Throughout the course of performance, the [End-user] was paying the corresponding amount of RMB to the [Buyer] under its instructions. Neither the [Buyer] nor the [Seller] notified or reminded the [End-user] of when the purchase should be made. Even the [End-user] would like to make the purchase, the amount of RMB was fully paid to the [Buyer]. Without the notification of the [Buyer] and the [Seller], the [End-user] was not able to purchase exchange currency. Apart from that, the [Seller] claimed that it had provided certain chances for the [End-user] to purchase at an appropriate rate. However, the fact was that the [Seller] had never notified the [End-user] of such matter so far. Under such circumstances, the [End-user] claimed that the response of the [Seller] was not convincing and was also contrary to the facts.

In conclusion, the [End-user] had fully settled the entire Contract price. The issue of outstanding payment did not exist and the [End-user] should not be responsible for any outstanding payment.

The [Buyer] did not submit any response to the questions.

III. THE ARBITRATION TRIBUNAL'S OPINION

1. Applicable law

The [Seller] is a registered legal entity of Hong Kong under the People's Republic of China and the [End-user] and the [Buyer] are registered legal entities of the People's Republic of China. The manufacturer of the object in dispute in this case is X Corporation of Japan, and the loading port and destination port are Yokohama Port in Japan and Xingang Port of Tianjin in China, respectively. Article 21 of the Contract concerning the governing law stipulates that:

"The Contract shall be governed by and interpreted in accordance with the laws of the People's Republic of China; and the United Nations Convention on Contracts for the International Sale of Goods (the "CISG") and other international treaties and usage shall also be reference of the Contract."

The Arbitration Tribunal holds that the laws of the People's Republic of China shall be applied to the dispute in this case and that issues which are not covered by the laws of the People's Republic of China shall refer to the CISG and other international treaties and usage.

2. Effectiveness of the Contract

The Contract and the Supplementary Agreement were signed by the [Seller], the [End-user] and the [Buyer] under friendly negotiation. The terms are true and do not contravene the laws of the People's Republic of China and administrative regulations. The Arbitration Tribunal holds that the Contract is effectively established and shall be legally binding on each party.

3. Delivery of the goods

The evidence indicates that the [Seller] had issued a commercial invoice, packing list and certificate of origin for the goods under the Contract. The Arbitration Tribunal notes that acceptance protocol signed by the [Seller] with the [End-user] and the [Buyer] on 27 June 2003 and 1 July 2003, respectively, indicates that the goods under the Contract (LX Sheet-fed Offset Printing Machines) were installed by the [Seller]'s engineer at the [End-user]'s company from 17 April 2003 to 29 April 2003. Operation and printing tests were carried out and the result indicated that the quality was in conformity with the Contract. The equipment, printing paper, manual, appliance, fittings and components of the machines were all checked. No evidence indicated that the [End-user] and the [Buyer] had any dispute on the goods delivered by the [Seller]. In conclusion, the Arbitration Tribunal holds that the [Seller] has fulfilled its obligation of the delivery of goods under the Contract.

4. Payment for the goods

The evidence showed that the [End-user] had paid an amount of RMB 5,892,405.04 yuan to the [Buyer]. Neither the [Seller] nor the [Buyer] had any dispute on the amount of RMB paid by the [End-user]. Regarding the payment by the [Buyer], the [Seller] claimed that the amount of the L/C at sight issued was JPY 49,800,000 and the amount of the usance L/C was JPY 33,200,000. The evidence presented could not prove that the [Seller] had raised any dispute concerning the issuance of an L/C of JPY 83,000,000 as the payment by the [End-user] to X Corporation as the beneficiary under the Contract. Neither the [End-user] nor the [Buyer] had raised any dispute on this matter. Therefore, the Arbitration Tribunal confirms the aforementioned facts.

5. The major dispute in the case

The parties had a dispute on the performance of payment. The [Seller] claimed that the amount payable by the [End-user] should be RMB 6,242,658.02 yuan, including RMB 6,022,797.06 for the price of goods under the Contract, RMB 169,607.98 yuan for the import agency charge and RMB 50,252.98 for the interest on the 180-day usance L/C. Deducting the payment of RMB 5,892,405.04 yuan paid by the [End-user], there was still an outstanding amount of RMB 350,252.98 yuan. Therefore, the [Seller] claimed against the [End-user] and the [Buyer] for RMB 350,252.98 yuan for the payment of goods and RMB 78,701.84 yuan for the breach penalty resulting from the delayed payment. The [End-user] claimed that it had fully settled the payment of RMB 5,892,405.04 according to the Contract, and that this payment was made to the [Buyer]. The [Buyer] claimed that it was only acting as an agent for the import of goods, and it should not be involved in the issue of the outstanding payment because its duty was complete on 1 July 2003.

Based on the aforementioned claims of the [Seller], the [End-user] and the [Buyer], each party holds to its own argument. The Arbitration Tribunal concludes that the issue in this case is whether the grounds supporting the claims of RMB 350,252.98 yuan for the payment of goods and RMB 78,701.84 yuan for the breach penalty should be established.

6. The [Seller]'s claims

According to the customer statement and the statement of interest on the outstanding payment incurred by J Limited of Beijing submitted by the [Seller] as the evidence, the [Seller] in fact claimed for the aforementioned payment and the breach penalty against the [End-user].

The Arbitration Tribunal notes that the terms of payment and delivery of goods under the Contract and the Supplementary Agreement are as follows:

1. Article 1 of the Contract is an agreement between the [Seller] and the [Buyer] for the sale of LX Sheet-fed Offset Printing Machines at JPY 83,000,000 (CIF Port of Tianjin, China). Article 10 of the Contract stipulates that "the [Buyer] shall issue an irrevocable L/C to the manufacturer, X Corporation as the beneficiary for the total Contract price 30 days before the loading of goods." Article 1(1) of the Supplementary Agreement stipulates that "an amount of JPY 50,000,000 out of the total Contract price shall be payable upon the documents and that the remaining Contract price (i.e., JPY 33,000,000) shall be paid by 180-day usance L/C. The [End-user] shall deposit JPY 50,000,000 at an equivalent amount to RMB as the first payment to the [Buyer]'s account before the irrevocable L/C at sight is issued. RMB 1,000,000 yuan out of the aforesaid payment shall be paid by 14 March and the remaining payment shall be settled 20 days after the issuance of the L/C but before the date of the bill's retirement". Article 1(2) of the Supplementary Agreement stipulates that "the [End-user] shall settle the remaining payment (i.e., JPY 33,000,000) and the corresponding interest (JPY 660,000) at an equivalent amount to RMB before the expiry date of the usance L/C; and that the [Buyer] shall deliver such payment to the [Seller]. If the [End-user] settles the remaining amount due in advance, the amount of interest shall be calculated according to the respective due dates of payment.

2. Article 14 of the Contract stipulates that "the [Buyer] shall be entitled to claim damages against the [Seller] within 90 days after the goods are delivered to the destination if any non-conformity of the quality, specification and quantity which is neither within the scope of the carrier nor the insurance company is found". Article 20 of the Contract stipulates that "the ownership of goods shall be transferred to the [Buyer] after the entire payment of the Contract has been settled." Article 2 of the Supplementary Agreement stipulates that "the ownership and the right of disposal shall belong to the [Buyer] before all the remaining payment of the Contract has been settled; that the [End-user] shall not utilize the machines for the purpose of pledge, guarantee and realization; and that failure to settle the payment on time shall be deemed a breach of contract by the [End-user] and the [Buyer] shall have the right to collect the machines and the machines shall be at its disposal."

3. Based on the aforementioned terms of the Contract and the Supplementary Agreement, the

Payment to be received by the [Seller] shall be under an irrevocable L/C for the total amount of the Contract price (i.e., JPY 83,000,000) issued by the [Buyer] to X Corporation as the beneficiary; and the currency of the transaction shall be JPY. The amount payable by the [End-user] shall be paid to the [Buyer] in RMB. With regard to the payment terms under the Contract, the [End-user] shall not be obliged to pay the [Seller] in RMB directly. Apart from that, the agreement concerning the transfer of ownership indicates that the ownership of the goods shall be transferred from the [Seller] to the [Buyer], and then from the [Buyer] to the [End-user].

The evidence indicated that the [End-user] had been making payment in RMB to the [Buyer] by remittance throughout the performance of the Contract; and the [Buyer] then issued an invoice of the RMB payment to the [Seller]. The [Seller] claimed that it had never received any payment in RMB from the [End-user] so far. However, no evidence indicated that the [Seller] had raised any dispute regarding the payee and the payment method throughout the performance of the Contract and the arbitration proceeding. Therefore, the Arbitration Tribunal concluded that the payment method in the international sale of goods under the Contract and the Supplementary Agreement was confirmed by the parties; and such agreement on the payment method had been performed.

Based on the above discussion, the Arbitration Tribunal indentified that the payee whom the [End-user] should pay for the goods in RMB under the Contract should be the [Buyer] instead of the [Seller]. According to the basic principles of the General Principles of the Civil Law of the People's Republic of China, the claimant shall have the right to demand in civil law as specified by the contract or according to legal provisions when raising a claim for payment. Therefore, the Arbitration Tribunal holds that the claim submitted by the [Seller] for the payment of RMB 350,252.98 yuan against the [End-user] is not supported by the Contract and the law.

The Arbitration Tribunal notes that the [Seller] and the [End-user] held to their own argument concerning the amount payable by the [End-user]. The amount and the composition of payment submitted by the [Seller] and the [End-user] are presented in Table 1 and Table 2, respectively:

TABLE 1. The amount and composition of payment submitted by the [Seller]

Item
Original amount (JPY)
Currency rate
Converted amount (RMB)
L/C at sight
49,800,000
0.0704849
3,510,148.02
Usance L/C
33,200,000
0.0756822
2,512,649.04
Agency charge
 
 
169,607.98
Interest of 180-day usance L/C (Annual Rate 4%)
664,000
0.0756822
50,252.98
Total
 
 
6,242,658.02
Settled payment
 
 
5,892,405.04
Outstanding payment
 
 
350,252.98

TABLE 2. The amount and composition of payment submitted by the [End-user]

Item
Original amount (JPY)
Currency rate
Converted amount (RMB)
Payment of L/C
83,000,000
JPY 120 / US $1; RMB 8.3/ US $1
5,740,833
Agency charge
 
 
86,112.50
Interest of 180-day usance L/C (Annual Rate 4%)
660,000
JPY 120 / US $1; RMB 8.3/ US $1
45,650
Interest on bill advance
286,403
JPY 120 / US $1; RMB 8.3/ US $1
19,809.54
Total
 
 
5,892,405.04

The [End-user] raised the following defenses concerning the amount and the composition of payment submitted by the [Seller]:

  1. The amount of RMB 6,242,658.02 yuan receivable by the [Seller] was unreasonable because the currency rate was neither based on the rate under the Contract nor in accordance with the exchange quotation in that period.

  2. The statement of exchange settlement of the Bank of Communications supporting the payment of goods submitted by the [Seller] indicated the date of the currency rate which was one day after the payment made by the [End-user]. It was unfair to calculate the amount payable by the [End-user] based on that currency rate.

  3. The [Seller] failed to provide the original document of the aforementioned statement and the authenticity of that evidence was questionable.

The Arbitration Tribunal also notes that, apart from the statement of the Bank of Communications questioned by the [End-user], the documents supporting the [Seller]'s claims concerning the amount receivable and the composition of the payment were the fax memorandum dated 27 July 2006 and a number of invoices provided by the [Buyer]. In addition to the amount receivable and the composition of payment, the customer statement provided by the [Seller] also indicated that "A Limited paid an amount of RMB 300,000 to Opt-Electo Industries Co. Ltd. as a deposit of usance L/C for the [End-user]."

After verification of the aforementioned evidence and consideration of the [Seller]'s claims, the Arbitration Tribunal concluded that the [Seller] failed to identify the currency rate relied upon by it under the Supplementary Agreement for the calculation of the Contract price in RMB before the Tribunal. No evidence was provided to support the fixing of the currency rate of JPY and US $ in that period. The [Seller] also failed to explain the time period for calculating the interest for the 180-day usance L/C, the calculation of the agency charge and the deposit of RMB 300,000 for the usance L/C. The evidence presented did not indicate that the [Seller] and the [Buyer] had given any instruction concerning the time and the amount of payment which was different from the actual performance of the [End-user]; and had not raised any dispute regarding the aforementioned issues. Under such circumstances, the Arbitration Tribunal concluded that the [Seller] had neither established a complete evidential chain nor reasonable explanation supporting its claim of the amount receivable and the composition of the payment. According to the burden of proof under the provisions of evidence in civil procedures, the party concerned shall be responsible for producing evidences to prove the facts on which its own allegations are based. The Claimant [Seller] shall bear the burden of proof to support its claims, otherwise, it shall undertake the unfavorable consequence. Therefore, the Arbitration Tribunal cannot affirm the claims of the amount receivable and the composition of the payment submitted by the [Seller]; and thus the claim for the payment of RMB 350,252.98 yuan against the [End-user] shall not be upheld.

The claim submitted by the [Seller] for the payment of RMB 350,252.98 yuan against the [End-user] is not supported by the Contract and the law, and the evidence supporting the amount receivable and the composition of the payment did not satisfy the burden of proof so the Arbitration Tribunal cannot uphold the claim of the [Seller]. Accordingly, the breach penalty of RMB 78,701.84 arising from the outstanding payment shall not be upheld.

In addition, the verified facts showed that the [Buyer] had issued an L/C at sight of JPY 49,800,000 and a usance L/C of JPY 33,200,000 according to the Contract. The evidence presented did not indicate that the [Seller] had raised any dispute on the performance of aforementioned payment by L/C. Therefore, the Arbitration Tribunal concludes that the consideration of the goods under the Contract has been achieved. It was unfair for the [Seller] to claim for the payment under the same Contract against the [End-user] again.

The Arbitration Tribunal notes that the [Seller] referred both the [End-user] and the [Buyer] as the "Respondent" in its response to the questions raised by the Tribunal. It meant that the [Seller] also claimed for the aforementioned amount of payment and the breach penalty against the [Buyer]. Based on the verified facts, the issuance of an L/C at sight of JPY 49,800,000 and a usance L/C of JPY 33,200,000 yuan indicated that the [Buyer] had already fulfilled the obligation of payment by L/C under the Contract. Apart from that, the [Seller] had never raised any dispute on the performance of Contract by the [Buyer], nor had the [Seller] submitted any statement or evidential material to support such claims. The evidence submitted could not prove that the [Buyer] owed the [Seller] an amount of RMB 350,252.98 yuan; and / or that there was any breach of contract whereby a breach penalty of RMB 78,701.84 should be paid to the [Seller]. Therefore, the [Seller]'s claims against the [Buyer] for the aforementioned payment cannot be upheld by the Arbitration Tribunal.

In conclusion, the [Seller] has not established sufficient grounds for its claims against the [End-user] and the [Buyer] for payment for the goods and of the breach penalty; thus the Arbitration Tribunal cannot uphold the [Seller]'s claims. Under such circumstances, the Arbitration Tribunal also dismisses the [Seller]'s claims (2) and (3). Thus, the [Seller] shall bear the entire attorney's fee and arbitration fee incurred in this case.

IV. AWARD

Based on the above verified facts and confirmation of the investigation in this case, the Arbitration Tribunal handed down the following award:

(1) The [Seller]'s claims are dismissed.

(2) The [Seller] shall bear the entire arbitration fee of RMB 25,608 yuan (i.e., US $3,216.84), which has been paid to the Arbitration Commission by the [Seller] in advance.

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


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Hong Kong is referred to as [Seller]; Respondent of Mainland China is referred to as [Buyer]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of Japan (Japanese yen) are indicated as [JPY]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB ___ yuan].

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

*** Jing Li, Associate, Institute of International Commercial Law, Pace University School of Law; LL.M., University of Texas at Austin, School of Law; Master of Law and LL.B., Sun Yat-Sen University School of Law, China; Participant, Thirteenth Annual Willem C. Vis (East) International Commercial Arbitration Moot (2008).

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Pace Law School Institute of International Commercial Law - Last updated May 5, 2010
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