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CISG CASE PRESENTATION

China 18 April 2008 CIETAC Arbitration proceeding (PTA powder case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/080418c1..html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20080418 (18 April 2008)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2008/01

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Sweden (respondent)

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

GOODS INVOLVED: PTA powder (waste product)


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 25 ; 35 ; 49 ; 74 ; 84

Classification of issues using UNCITRAL classification code numbers:

4B2 [Scope of Convention (issues excluded): effect of contract on property];

25B [Definition of fundamental breach: substantial deprivation of expectation, etc.];

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

49A ; 49B [Buyer's right to avoid contract (grounds for avoidance): fundamental breach of contract; Timing of avoidance];

74A [General rules for measuring damages: loss suffered as consequence of breach];

84A [Restitution of benefits received: seller bound to refund price must pay interest]

Descriptors: Scope of Convention ; Property in the goods ; Passage of risk ; Fundamental breach ; Avoidance ; Damages ; Restitution ; Interest

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): Unavailable

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

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

PTA powder (waste product) case [18 April 2008]

Translation [*] by Jing Li [**]

Edited by Xiangyu Huang [***]

I. ARBITRATION PROCEEDINGS

A. Acceptance of case

The China International Economic and Trade Arbitration Commission South China Sub-Commission (originally named China International Economic and Trade Arbitration Commission Shenzhen Sub-Commission, renamed as "South China Sub-Commission" on 18 June 2004, hereinafter, "CIETAC" or "Commission") accepted the case (Case no. SHEN M2007075___) according to:

-    The arbitration clause in Purchase Contract No. 204041 (hereinafter, the "Contract") signed in May 2006 by Claimant A.H.A. International Co. Ltd. [of the People's Republic of China] (hereinafter, "[Buyer]"), and Respondent ___ Corporation [of Sweden] (hereinafter, "[Seller]"); and
 
-    The written Request for Arbitration submitted to CIETAC by the [Buyer] on 10 August 2007.

B. Arbitration clause

It is stipulated in the Contract that:

"All disputes in connection with this contract or the execution thereof shall be settled amicably by negotiation. In case no settlement can be reached, the case shall then be submitted to the China International Economic Trade Arbitration Commission for settlement by arbitration in accordance with the Commission's arbitration rules. The award rendered by the commission shall be final and binding on both parties. The fees for arbitration shall be borne by the losing party unless otherwise awarded."

C. Arbitration rules

The "China International Economic and Trade Arbitration Commission Arbitration Rules" (hereinafter, "Arbitration Rules"), which took effect on 1 May 2005, apply to this case.

On 24 August 2007, the Secretariat of CIETAC (hereinafter, the "Secretariat") sent the Notice of Arbitration, the Arbitration Rules, and the Panel of Arbitrators to both parties via express mail (EMS). Meanwhile, the Secretariat sent the Request for Arbitration to the [Seller].

D. Arbitration language

The text of the Contract and other evidence materials are in English. However, the Contract did not stipulate the arbitration language. Moreover, the [Buyer] submitted the Request for Arbitration in both Chinese and English. The Notice of Arbitration sent by CIETAC was in both Chinese and English, in which CIETAC notified the parties that if they did not choose another language to be used in the arbitration proceedings within fifteen days after the receipt of this Notice, the arbitration language would be Chinese and all of the documents thereafter would be in Chinese in accordance with Article 67 of the Arbitration Rules, "[w]here the parties have agreed on the arbitration language, their agreement shall prevail. Absent such agreement, the Chinese language shall be the official language to be used in the arbitration proceedings."

Since the parties failed to select another language for the arbitration, the arbitration language of the present dispute should be Chinese.

E. Formation of Arbitral Tribunal

The [Buyer] appointed Mr. ___ as arbitrator. The [Seller] did not appoint or entrust the Chairman of CIETAC to appoint an arbitrator; accordingly, the Chairman of CIETAC appointed Ms. ___ as arbitrator for the [Seller], as provided in the Arbitration Rules. Since the parties neither appointed the presiding arbitrator jointly, nor entrusted the Chairman of CIETAC to make this appointment within a specified time, the Chairman of CIETAC, pursuant to the Arbitration Rules, appointed Mr. ___ to be the presiding arbitrator. On 6 November 2007, these three arbitrators formed an arbitral tribunal (hereinafter, the "Tribunal") to hear this case.

F. Oral hearing

On 11 December 2007 at 9:30 in the morning, the Tribunal held an oral hearing at the venue of CIETAC South China Sub-Commission. The [Buyer]'s representative participated in the hearing; the [Seller] was not present at the hearing, nor did the [Seller] send a representative to participate in the hearing. Pursuant to Article 34(2) of the Arbitration Rules, the Tribunal proceeded with the arbitration and made a default award.

At the oral hearing, the Tribunal heard the statement of the [Buyer], examined the evidence, and investigated the facts.

After the oral hearing, the Secretariat sent the materials submitted by the [Buyer] at the hearing and the supplementary evidence submitted after the hearing via express mail (EMS) to the [Seller], and notified the [Seller] in writing that if the [Seller] found it necessary to have a second hearing, the [Seller] should submit a written request within twenty days after the receipt of this notice.

The [Seller] did not submit any such request within the specified time period.

G. Service of documents

The Secretariat has sent the Notice of Arbitration and its annexes, Notice of Formation of the Arbitral Tribunal, Notice of Oral Hearing, and Notice of Default Hearing to the [Seller] via express mail (EMS) at the address provided by the [Buyer] in its Request for Arbitration. The Secretariat inquired at the website of China Courier Service Corporation (EMS), and it was indicated that the status of these documents was "delivered". Therefore, all the arbitral documents were effectively sent to the [Seller]. However, the [Seller] failed to submit any written documents throughout the arbitral proceedings.

This case is now closed. The Tribunal, after discussing jointly, based upon the submitted documents and the facts identified at the oral hearing, renders this arbitral award.

II. [BUYER]'S CLAIM

The [Buyer] alleged that in May 2006, the [Buyer] and the [Seller] concluded the Contract, which stipulated that the [Seller] sells to the [Buyer] PTA powder (waste product) 300 tons, colored white to light yellow, with moisture content no more than 0.2%, and made in India. The price was US $290 per ton CIF the City of S___, and the total contract price was US $87,000. The latest date of shipment was 30 June 2006. The parties also agreed on the time of shipment, payment, inspection, and damages as detailed in the Contract. With regard to the arbitration clause, the parties agreed that "all disputes in connection with this contract or the execution thereof shall be settled amicably by negotiation" and "in case no settlement can be reached, the case shall then be submitted to the China International Economic Trade Arbitration Commission for settlement by arbitration in accordance with the Commission's arbitration rules."

On 29 April 2006, the China ___ Bank Anhui Branch issued a 90-day irrevocable usance letter of credit (No. LC7800320/___) (hereinafter, the "L/C") per the [Buyer]'s request with the [Seller] as the beneficiary. It was stipulated therein that installment delivery was allowed and the latest date of shipment was 31 May 2006.

However, since the [Seller] was not able to provide PTA powder from India, the [Seller] alleged in its e-mail to the [Buyer] on 21 August 2006 that the [Buyer] had agreed to substitute goods made in Indonesia. The [Seller] requested the [Buyer] to modify the terms of the L/C as: "Valid until 1 October 2006", "Port of shipment: Primary port in Indonesia", "Latest date of shipment: 10 September 2006", and "Origin: Indonesia".

The [Buyer] modified the L/C as required.

The [Seller] then delivered 141 tons, 93 tons, and 70 tons (totaling 304 tons) of goods with bills of lading numbered 6104136, 6104273, and 1740001 on 8 September, 11 September, and 2 October 2006, respectively, from Jakarta, Indonesia to the City of S___. The price of the goods was US $40,890, US $26,970, and US $20,300, respectively, totaling US $88,160.

On 22 November 2006, the Entry-Exit Inspection and Quarantine Bureau (hereinafter, "CIQ") of the City of S___ issued Inspection Reports after inspecting the above goods, and pointed out that the color of the goods was taupe, that the moisture content was 5.9%, and that the heavy metal level of the goods was impermissibly high, and therefore, the goods were scrap materials. According to the Law of the People's Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste and Guiding Principles of Differentiation for Solid Waste, the CIQ of the City of S___ categorized the delivered goods as industrial waste that would pollute the environment, and they were not allowed for import.

On 29 November 2006, the [Buyer] notified the [Seller] of the above situation via e-mail, requesting the latter to arrange for return of the goods and to inform the Swedish negotiating bank to cancel the payment under the L/C issued by the [Buyer]. However, the [Seller] did not act as required. Eventually, the issuing bank sent the full payment of US $88,160 to the [Seller]'s bank, equivalent to RMB 686,262.32 according to the then exchange rate quotation.

On 12 December 2006, the [Seller] agreed via e-mail to the return of the goods to Jakarta, Indonesia.

On 10 January 2007, the [Buyer] entrusted ___ International Logistics Co. Ltd. to ship the goods back to Jakarta, Indonesia. Thus far, the [Buyer] had incurred RMB 269,169.30, including import fees for preserving the goods (D/O fee, Customs inspection fee, overdue fee, Customs clearance fee, commodity inspection fee, lump sum charge, and port congestion charge) and export fees (ocean freight, THC, Customs inspection fee, booking charge, and Customs clearance fee).

On 4 January 2007 and 27 April 2007, China ___ Bank made payments to the beneficiary in the amount of US $20,300 and US $67,860, respectively, totaling US $88,160.

On 26 April 2007, the [Seller] confirmed the receipt of the payment under the L/C from the China ___ Bank via e-mail and promised to the [Buyer] that if the goods were resold to a third party, the [Seller] would compensate the [Buyer] for the latter's loss after the [Seller] receiving the payment from the third party. However, within the five months after the goods under the Contract arrived at Jakarta, Indonesia, the [Seller] continuously refused to take delivery of the goods. The [Seller] refused to return the contract price and compensate for the [Buyer]'s loss as well, even after the [Buyer]'s repeated expressions of its requirements.

The [Buyer] alleged that the [Seller] provided goods that did not conform to the Contract, and that the level of heavy metal of the goods was impermissibly high for import. The [Seller]'s breach frustrated the purpose of the Contract, and therefore, it constituted a fundamental breach of the Contract.

The [Buyer] in its Request for Arbitration requested the Tribunal to find that:

1)    The Contract was effectively terminated by the [Buyer] on 12 December 2006, and the [Seller] is responsible for the risk of damage to and loss of the goods after 12 December 2006;
 
2)    The [Seller] has accepted the 304 tons of goods that were returned to Jakarta, Indonesia and should be responsible for the cost arising from the unattended goods at the port of Jakarta.
 
3)    The [Seller] should immediately return the contract price of US $88,160, equivalent to RMB 686,262.32.
 
4)    The [Seller] should immediately compensate the [Buyer] for relevant fees of RMB 269,169.30 including Customs inspection fee, commodity inspection fee, overdue fee, and ocean freight that the [Buyer] paid for.
 
5)    The [Seller] should compensate the [Buyer]'s loss of interest on the payment of RMB 955,431.62 (the total of Items 3 and 4) calculated according to the interest rate for overdue RMB loans for the corresponding period issued by the People's Bank of China from the date the arbitration was requested to the date the payment was made by the [Seller] to the [Buyer].
 
6)    The [Seller] should be responsible for the costs incurred from this arbitration (including arbitration fee, translation fee of RMB 1,882, notarization fee of RMB 2,000, and attorneys' fee of RMB 20,000).

During the arbitration, the [Buyer] modified its second request to "confirm that the title of the 304 tons of goods has passed to the [Seller] on 12 December 2006, and that the [Seller] should be responsible for the legal liability arising from the goods left at the port of Jakarta". The [Buyer] also required that the payment under Item 3 and 5 should be in RMB.

After the hearing, the [Buyer] submitted an Attorneys' Opinion, stating the following supplementary opinion:

1. The General Principles of the Civil Law of the People's Republic of China (hereinafter, "General Principles") and the Contract Law of the People's Republic of China (hereinafter, "Chinese Contract Law) applied to the present dispute.

2. The Contract was validly concluded, and the parties were bound by the Contract.

The [Buyer] had performed its obligations under the Contract. The [Buyer] had issued the L/C with the [Seller] as the beneficiary and paid the contract price. However, the [Seller] did not fulfill the basic obligations under the Contract to provide conforming goods. The present dispute arose due to the [Seller]'s fault. Therefore, the [Seller] should be held responsible for its fault.

3. The [Buyer] was entitled to terminate the Contract, and the [Seller] agreed to the termination and return of goods via e-mail on 12 December 2006. Thus, the Contract was terminated on 12 December 2006. The title of the goods was passed to the [Seller] on the same day. Any risk of damage to or loss of the goods was then passed to the [Seller]. The [Seller] should be responsible for the cost and legal liability for the goods delivered back to and being stored at the port of Jakarta, Indonesia.

The [Seller] did not submit any response, participate in the hearing, or submit any written opinion or materials.

The [Buyer] submitted the following evidence:

  1)    The Contract;
  2)    List of calling history, showing that the Contract was concluded via facsimile;
  3)    The e-mail sent from Mr. F of the [Seller]'s firm to Mr. X of the [Buyer]'s firm on 20 August 2006;
  4)    Three relevant bills of lading and their respective commercial invoices, packing lists, certificates of origin, and certificates of quality;
  5)    Three Inspection Reports issued by the CIQ of the City of S___;
  6)    The e-mails between Mr. X of the [Buyer]'s firm, a third party PL Lim, and the domestic end-user, demonstrating indirectly that Mr. X has sent an e-mail to Mr. F of the [Seller]'s firm requesting the return of goods on 30 November 2006;
  7)    The e-mail reply sent from Mr. F of the [Seller]'s firm to Mr. X of the [Buyer]'s firm on 1 December 2006, stating that the [Seller] would study the issue and inform the [Buyer] thereafter;
  8)    The e-mail sent from Mr. F of the [Seller]'s firm to Mr. X of the [Buyer]'s firm on 12 December 2006;
  9)    The relevant proofs, statements of expense, and invoices issued by the ___ International Logistics Co. Ltd. concerning the import and return of the goods;
10)    The L/C issued by China ___ Bank, the applications for modification of the L/C by the [Buyer], and the modified L/C issued by China ___ Bank;
11)    Two Debit Notes issued by China ___ Bank on 4 January 2007 and 27 April 2007, respectively;
12)    The confirmation letter on the payments under the L/C issued by China ___ Bank Anhui Branch;
13)    Invoices on notarization fee, translation fee, and attorneys' fee.

III. OPINION OF THE ARBITRAL TRIBUNAL

A. Applicable law

The parties failed to agree in the Contract on the applicable law. Since the [Buyer]'s place of business is in China, the [Seller]'s place of business is in Sweden, and both China and Sweden are the Contracting State to the United Nations Convention on Contracts for the International Sale of Goods (1980) (hereinafter, the "CISG"), according to Article 142 of the General Principles and Article 1 of the CISG, the applicable law to the present case should be the CISG. For matters that are not governed by the CISG, the Chinese law should be applicable pursuant to the doctrine of the closest connection, because both the place of business of the [Buyer] and the place of arbitration are China.

B. The validity of the Contract

Since the CISG does not govern the matter of the validity of a contract, the Chinese law applies to this issue. The Contract was concluded after the negotiation of the parties, and the content of the Contract did not violate any mandatory provisions under the Chinese law. The Contract was actually performed. Neither of the parties objected to the validity of the Contract. Therefore, according to the relevant Chinese law, the Contract is valid and binding on the parties.

The [Seller] has received all of the documents that were sent by the Secretariat. However, the [Seller] did not make any counterclaims or response to the [Buyer]'s arbitral requests, nor was it present at the oral hearing or submit any written opinion or evidence within the time limit set forth by the Tribunal. Therefore, the Tribunal will identify the facts based on the written materials submitted by the [Buyer] and the [Buyer]'s statement at the oral hearing.

C. Performance of the Contract

After investigation, the Tribunal identifies the following facts:

1. On 29 May 2006, the parties concluded the Contract via facsimile.

2. On 20 August 2006, Mr. F of the [Seller]'s firm sent an e-mail to Mr. X of the [Buyer]'s firm stating that since the [Buyer] had agree to substitute the contractual goods with products made in Indonesia, the [Seller] required the [Buyer] to modify the relevant terms of the L/C.

3. On 22 August 2006, the [Buyer] notified the bank to modify the relevant terms of the L/C as required by the [Seller]. Thereafter, on 15 September 2006, the [Buyer] amended the L/C in order to extend the latest date of shipment for a second time.

4. The [Buyer] submitted three sets of bill of lading, packing list, commercial invoice, and certificate of origin, demonstrating that the [Seller] delivered 141 tons, 93 tons, and 70 tons of goods (totaling 304 tons) from Jakarta, Indonesia to the City of S___ on 8 September, 11 September, 2 October 2006, respectively, and the price was US $40,890, US $26,970, and US $20,300, respectively, totaling US $88,160. The [Seller] issued three certificates of quality showing that the goods were of the color white to light yellow, and the moisture content was no more than 0.2%.

5. On 22 November 2006, the CIQ of the City of S___ issued three Inspection Reports on the goods under the three bills of lading in the present case, indicating that the goods were dark grey or taupe in color, and the moisture content was 5.9%, 0.88%, 1.41%, and 1.27% [sic], respectively. The Inspection Reports concluded that "the goods contain a large amount of byproducts, heavy metals, and ashes from the production process of PTA. According to the Law of the People's Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste and Guiding Principles of Differentiation for Solid Waste, the goods are scrap materials."

6. On 30 November 2006, Mr. X of the [Buyer]'s firm sent an e-mail to Mr. F of the [Seller]'s firm stating that "[t]he heavy metal contain and appearance color were out of the allowable level by many folds. As such, the custom DEMAND that our company shipped this PTA back to THE ORIGINAL SHIPPER. We hereby notify your company about the return of goods. Please provide the information on the original shipper (including the name, address, telephone, fax, etc.) and allow the material to be returned." In this e-mail, the [Buyer] also requested the [Seller] to notify the Swedish bank to cancel the [Buyer]'s payment obligation under the L/C.

7. On 12 December 2006, Mr. F of the [Seller]'s firm replied via e-mail stating that "[w]e agree that your company ship the above 304MT PTA back to Jakarta, and we agree to take over the above goods at Jakarta."

8. On 10 January 2007, the [Buyer] returned all of the delivered goods to Jakarta, Indonesia.

9. According to the Debit Notes issued by the China ___ Bank, the China ___ Bank made payments of US $20,300 and US $67,860 on 4 January 2007 and 27 April 2007, respectively, under the L/C issued by the [Buyer].

D. Responsibility for breach of contract

Based on the above facts identified by the Tribunal, the [Buyer] has performed the obligation of issuing the L/C under the Contract. However, the [Seller] failed to provide goods that were conforming to the Contract, i.e., colored white to light yellow, with moisture content no more than 0.2%, because the goods delivered by the [Seller] were dark grey, with moisture content between 0.88% and 5.9%. Moreover, the goods are categorized as scrap materials and were not allowed for import. Pursuant to Article 35(1) of the CISG:

"The Seller must deliver goods which are of the quality, quantity and description required by the contract and which are contained or packaged in the manner required by the contract."

And according to Article 35(2) of the CISG,

"The goods do not conform with the contract unless they (a) are fit for which goods of the same description would ordinarily be used."

The goods provided by the [Seller] are not in conformity with the quality requirements under the Contract or the quality standards required by the China Customs for importation of PTA powder. This resulted in the [Buyer]'s inability to import the goods and frustrated the purpose of the Contract. Therefore, the [Seller] has fundamentally breached the Contract and should be responsible for the relevant liability for this breach.

E. Arbitral requests by the [Buyer]

1. The Contract was effectively terminated by the [Buyer] on 12 December 2006, and the [Seller] is responsible for the risk of damage to or loss of the goods after 12 December 2006

The Contract did not stipulate the situations where the parties are entitled to terminate the contract. Under Article 49(1) of the CISG, "[t]he buyer may declare the contract avoided (a) if the failure by the seller to perform any of his obligation under the contract or this Convention amounts to a fundamental breach of contract." Since the [Seller] had fundamentally breached the Contract, the [Buyer] was entitled to unilaterally terminate the Contract. The Tribunal supports the [Buyer]'s request concerning the termination of the Contract. However, the [Buyer] did not expressly request a termination of the Contract in its e-mail to the [Seller] dated 12 December 2006, and the evidence submitted by the [Buyer] did not contain correspondence between the parties concerning the termination of the Contract. Therefore, the Tribunal finds that the Contract is terminated on the date of this arbitral award is rendered.

The CISG does not address the passing of risk when the seller breaches the contract. The passing of risk of goods at issue should therefore be governed by the Chinese Contract Law. According to Article 148 of the Chinese Contract Law:

"Where the purpose of the contract is frustrated due to failure of the subject matter to meet the quality requirements, the buyer may reject the subject matter or terminate the contract; of the buyer rejects the subject matter or terminates the contract, the risk of damage to or loss of the subject matter is borne by the seller."

Since the parties had agreed on the return of the goods, the Tribunal supports the [Buyer]'s request that the [Seller] should bear the risk of damage to or loss of the goods from 12 December 2006.

2. The title of the 304 tons of goods was passed to the [Seller] on 12 December 2006, and the [Seller] should be responsible for the cost arising from the unattended goods at the port of Jakarta

Article 4 of the CISG provides that the CISG is not concerned with the effect which the contract may have on the property in the goods sold. Therefore, the matter of the passing of the property in the goods should be governed by the Chinese law. Article 133 of the Chinese Contract Law provides that "[t]itle to the subject matter passes at the time of its delivery, except otherwise provided by law or agreed by the parties." The Tribunal finds that the payment terms of the Contract are CIF the City of S___, and that the [Buyer] received the relevant documents concerning the goods including the bills of lading. However, since the goods did not conform to the Contract, the parties agreed to the return of goods to the port of Jakarta, Indonesia, and that the [Seller] was to take delivery of the goods at the port of Jakarta. Hence, the title to the goods has passed back to the [Seller] on 12 December 2006. In conclusion, the Tribunal supports the [Buyer]'s request that the title of the goods was passed to the [Seller] on 12 December 2006.

Because of the [Seller]'s fundamental breach of the Contract, the title of the goods was passed back to the [Seller]. Therefore, the relevant legal responsibility should be borne by the [Seller] after the goods were delivered back to and were stored at the port of Jakarta.

3. The [Seller] should immediately return the contract price of US $88,160, equivalent to RMB 686,262.32, and should immediately compensate the [Buyer] for relevant fees of RMB 269,169.30 including Customs inspection fee, commodity inspection fee, Customs clearance fee, overdue fee, and ocean freight that the [Buyer] paid for

The goods were returned due to the [Seller]'s fundamental breach of the Contract, upon the agreement of the parties. Moreover, the Tribunal has supported the [Buyer]'s request with regard to the termination of the Contract. Therefore, the [Seller] should return the paid contract price to the [Buyer].

Since the goods could not be imported into China due to the [Seller]'s fundamental breach of the contract, the [Seller] should be responsible for the inspection fee, storage fee, and overdue fee paid by the [Buyer] at the port of China. The [Buyer] returned the goods to the port of Jakarta, Indonesia upon the agreement of the [Seller], and thus, the [Seller] should also be responsible for the relevant costs.

The Tribunal notes that the two Debit Notes issued by China ___ Bank (the issuing bank) stated that the first installment paid on 4 January 2007 under the L/C was US $20,300, with an exchange rate of 7.8230:1, equivalent to RMB 158,806.90; the second installment paid on 27 April 2007 under the L/C was US $67,860, with an exchange rate of 7.7727:1, equivalent to RMB 527,455.42; and that the total payment was RMB 686,262.32. Therefore, the Tribunal supports the [Buyer]'s request that the [Seller] should return the contract price of RMB 686,262.32.

The statements of expense and invoices issued by the ___ International Logistics Co. Ltd. submitted by the [Buyer] showed that the [Buyer] paid the ___ International Logistics Co. Ltd. RMB 180,168.30 for the Customs clearance fee, inspection fee, and exchange D/O fee incurred from the import and return of the goods, and RMB 89,001 for the ocean freight and Customs clearance fee incurred from the export of the goods, totaling RMB 269,169.30. Therefore, the Tribunal supports this request by the [Buyer].

4. The [Seller] should compensate the [Buyer]'s loss of interest on the payment of RMB 955,431.62 (the total of Items 3 and 4 of the [Buyer]'s request) calculated according to the interest rate for overdue RMB loans for the corresponding period issued by the People's Bank of China from the date the arbitration was requested to the date the payment was made by the [Seller] to the [Buyer].

According to the analysis of the above Section E(3), the [Seller] should compensate the [Buyer] for the contract price and other costs in the amount of RMB 955,431.62 (686,262.32 + 269,169.30). Since the present dispute arose because of the [Seller]'s fundamental breach of the Contract, the [Seller] should be held responsible for the interest thereon. With regard to the contract price the [Seller] obtained under the L/C, the [Buyer]'s calculation of rate and starting date (i.e., 10 August 2007, the date of application for arbitration) is correct. However, the amount of RMB 269,169.30 paid by the [Buyer] for the clearance of Customs and ocean freight was not confirmed until the closing of the arbitration. Thus, the calculation of the interest on this amount should start from the date of the rendering of this arbitral award. Considering the [Seller]'s place of business (i.e., Sweden), the Tribunal finds that if the [Seller] delays to pay the above-mentioned payments, the interest on overdue payment should be calculated from 20 days after the rendering of this arbitral award.

5. The [Seller] should be responsible for the costs incurred from this arbitration (including arbitration fee, translation fee of RMB 1,882, notarization fee of RMB 2,000, and attorneys' fee of RMB 20,000)

The [Buyer] submitted invoices concerning these fees. Based on the facts of the present case and Article 46 of the Arbitration Rules, the Tribunal finds that it is reasonable for the [Buyer] to claim the attorneys' fee of RMB 20,000, translation fee of RMB 1,882, and notarization fee of RMB 2,000. Therefore, the Tribunal supports this request.

The arbitration fee should be borne by the [Seller] according to the above opinion of the Tribunal.

IV. AWARD

Based on the above facts identified, the Tribunal renders the following award:

(1)    The Contract (No. 204041) is terminated from the date of the rendering of this award; the [Seller] is responsible for the risk of the damage to or loss of the goods from 12 December 2006;
 
(2)    The title to the goods was passed to the [Seller] on 12 December 2006; the [Seller] should be responsible for the relevant legal liability incurred from the goods being stored at the port of Jakarta;
 
(3)    The [Seller] should return the contract price paid by the [Buyer] in the amount of RMB 686,262.32 and the interest thereon calculated from 10 August 2007 until the day of the complete payment at the rate of 0.21‰ daily;
 
(4)    The [Seller] should compensate the [Buyer] for the inspection fee, Customs clearance fee, and overdue fee incurred from the import of the goods in the amount of RMB 180,168.30 and the ocean freight and the export Customs clearance fee incurred from the return of the goods in the amount of RMB 89,001;
 
(5)    The [Seller] should compensate the [Buyer] for the translation fee of RMB 1,882, notarization fee of RMB 2,000, and attorneys' fee of RMB 20,000;
 
(6)    The arbitration fee for the present dispute is RMB 69,276, which should be borne by the [Seller]. The [Buyer] has paid in advance the full amount, and thus, the [Seller] should compensate the [Buyer] for the arbitration fee of RMB 69,276.
 
(7)    The expense of the arbitrators incurred from the present dispute is RMB 4,000, which is borne by the [Buyer]. The [Buyer] paid in advance RMB 4,000 for the expense. Therefore, the Tribunal does not need to return the prepaid fee to the [Buyer].

The [Seller] should make payment to the [Buyer] in the total amount of RMB 1,048,589.62, which should be paid in full within 20 days after the rendering of this arbitral award. If delayed, the [Seller] is obligated to pay the interest on the payment under Item 4 (i.e., RMB 269,169.30) at the rate of 0.21‰ daily from the twenty-first day after the rendering of this arbitral award.

This award is final and takes effect when rendered.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant, A.H.A. International Co. Ltd. of the People's Republic of China, is referred to as [Buyer] and Respondent, ___ Corporation of Sweden, is referred to as [Seller]. Amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB]; amounts in the currency of the United States (dollars) are indicated as [US $].

** 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 International Commercial Arbitration Moot (2006); Participant, Fifth Annual Willem C. Vis (East) International Commercial Arbitration Moot (2008).

*** Xiangyu Huang, Undergraduate, Wuhan University School of Law, China; participant Seventeenth Annual Willem C. Vis International Commercial Arbitration Moot (2010).

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Pace Law School Institute of International Commercial Law - Last updated April 27, 2010
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