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CISG CASE PRESENTATION

China 17 June 1994 CIETAC Arbitration proceeding (Warm rolled steel plates case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/940617c1.html]

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

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Case identification

DATE OF DECISION: 19940617 (17 June 1994)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1994/08

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Germany (respondent)

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

GOODS INVOLVED: Warm rolled steel plates


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 74 ; 79

Classification of issues using UNCITRAL classification code numbers:

74A ; 74A1 ; 74B [General rules for measuring damages: loss suffered as consequence of breach ; Includes loss of profit; Outer limits of damages: foreseeability of loss;

79C [Impediments excusing party from damages: non-performance attributable to third-party contractor]

Descriptors: Damages ; Profits, loss of ; Foreseeability of damages ; Exemptions or impediments

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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): Zhong Guo Guo Ji Jing Ji Mao Yi Zhong Cai Wei Yuan Hui Cai Jue Shu Hui Bian [Compilation of CIETAC Arbitration Awards] (May 2004) 1994 vol., pp. 872-874

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 (PRC) Arbitration Award

Warm rolled steel plates case (17 June 1994)

Translation [*] by Zheng Xie [**]

Translation edited by Meihua Xu [***]

China's International Trade and Economic Arbitration Commission [hereafter, the Arbitration Commission] accepted this case according to:

   -    The arbitration clauses in Contracts No. 93 REER 046DE and 93 REER046002DE signed by Claimant [Buyer], Henan __ Import and Export Company, and Respondent [Seller], Germany __ Corporation; and
 
   -    The written arbitration application submitted by [Buyer] to the Arbitration Commission on 3 July 1993.

The Chairman of the Arbitration Commission appointed Mr. P as the presiding arbitrator according to the Arbitration Rules. Mr. P, Mr. A appointed by [Buyer], and Mr. D appointed by [Seller] formed the Arbitration Tribunal and heard the case.

On 13 April 1994, The Arbitration Tribunal held a court session in Beijing. Both parties attended the session. They made oral statements and arguments, and answered the Arbitration Tribunal's questions. After the session, the parties submitted supplementary materials.

The Arbitration has concluded the case. According to the written materials and the result of the court session, the Arbitration Tribunal handed down its award by consent.

The following are the facts, the opinion of the Arbitration Tribunal and the award.

FACTS

On 29 January 1993, [Buyer] and [Seller] signed Contracts No. 93 REER046DE and 93 REER046002DE (hereafter, No. 001 and No. 002). The contracts stipulate that [Buyer] purchases 5,000 MT warm rolled steel plates for US $1,480,000, and that the time of shipment is April 1994. On 20 February 1993, [Seller] wrote to [Buyer] stating:

"We agree the latest time for issuing L/C is 23 February 1993. Please send us the copy of the L/C on February 24."

On 23 February 1993, [Buyer] executed L/Cs No. LC41193004 and No. LC41193005 for 5.000 MT warm rolled steel plates. On 7 May 1993, [Seller] wrote to [Buyer]'s attorney alleging that because of a manufacturer's technical problem, production capacity was reduced 35%, so [Seller] could not deliver the goods on time.

POSITION OF THE PARTIES

[Buyer]'s position

[Buyer] asserts that the international market price for warm rolled steel plates was increasing after the contract was signed, which is the true reason for [Seller]'s failure to deliver the goods. [Buyer] therefore applied for arbitration.

[Buyer] asserts that after issuing the L/Cs, [Buyer] urged [Seller] to deliver the goods on time, and to notify of the time of shipping in advance; however, [Seller] neither performed its obligation, nor did it give any justifiable reasons. When [Buyer] urged [Seller] to deliver the goods on time, [Seller] did not notify of the definite time of shipping. Then, [Seller] asserted that it could not deliver the goods because it could not book a ship. After that, [Seller] alleged that because of a manufacturer's technical problem, its production capacity was reduced 35%. According to Clause 14 of the contract, [Seller] should provide the evidence issued by a relevant authority to prove force majeure if it exists, but [Seller] did not provide such evidence. The real reason for non-delivery is the increasing market price, so [Seller] should be liable for [Buyer]'s damages due to [Seller]'s breach.

[Buyer] bought 5,000 MT warm rolled steel plates from [Seller] in order to provide the goods to its domestic client. On 21 January 1993, [Buyer] signed an agency contract for importing steel with Henan Metal Company. This contract states that [Buyer] will get 3% of the contract price as an agency fee; and that if [Buyer] does not provide the goods on time, it shall indemnify the damages, which are 5% of the contract price, and interest on the loan from the bank.

[Buyer]'s claim

Accordingly, [Buyer] claims for:

1. [Seller] to indemnify [Buyer]'s loss, US $118,400 (including damages paid by [Buyer], US $74,000, and agency fee US $44,400), and interest on bank loan, renminbi [RMB] 799,200;

2. [Seller] to pay [Buyer]'s attorneys' fee;

3. [Seller] to pay the arbitration fee.

[Seller]'s defense

To [Buyer]'s claims, [Seller] alleges:

1. On 2 February 1993, [Seller] wrote to [Buyer] agreeing that [Buyer] could issue the L/Cs no later than 23 February 1993, and requesting [Buyer] to send the copy of the L/Cs on February 24; however, [Seller]'s Beijing office received two unclear copies of L/C by fax on February 25 and 26. On February 26, [Seller] wrote again to [Buyer] stating:

"23 February 1993, the last day to issue the L/C has passed, but we did not see the L/C. If you still want us to perform the contract, the production shall be postponed to May or June 1993; the time of shipment shall be June or July; and the price shall be increased US $5/MT."

[Buyer] did not reply. On March 3, [Seller]'s Beijing office faxed to [Buyer] once again stating:

"We did not receive the L/C for 1,000 MT under Contract No. 002. Have you issued it?"

[Seller] received the L/C for this 1,000 MT of goods on 10 March. It is [Buyer] who first breached the contract, because it did not send the copy of the L/Cs on 24 February 1993 as agreed by the parties. Accordingly, [Seller] should not be liable.

2. On 7 May 1993, [Seller] faxed to [Buyer]'s attorney notifying that because of a technical problem, production capacity was reduced 35% and [Seller] could not deliver the goods. On June 1, [Seller] received the certificate of force majeure provided by supplier, Hessrs, Metal Trade Kosice and approved by the Slovak Republic Commerce Union, and sent it to [Buyer] on June 8. Because of force majeure, [Seller] should not be liable for late delivery or non-delivery.

3. [Buyer] has not provided sufficient evidence to prove damages.

      a. [Seller] alleges that there is not sufficient evidence to support a 3% agency fee from Henan Metal Company. In addition, according to the law of the People's Republic of China, the highest agency fee shall be no more than 1.5%, so 3% agency fee is not reasonable.

      b. Article 74 of CISG states:

"Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."

[Seller] could not foresee that [Buyer]'s client would buy the warm rolled steel plates by bank loan, so it is unjustifiable for [Buyer] to claim for interest on the bank loan; moreover, it is three months from 23 February when [Buyer] issued the L/C to 21 May, but [Buyer] claims for four months' interest.

[Buyer]'s response

To [Seller]'s defense, [Buyer] asserts:

1. [Seller]'s fax of 20 February 1993 did not mention sending the copies of the L/Cs on 24 February as a precondition to agree to issue the L/Cs before 23 February. [Buyer] sent the copy of the L/C to [Seller] on 24 February. Also [Buyer] did not receive the fax of 26 February that [Seller] states was sent.

In any event, the parties agreed to issue the L/Cs before 23 February and [Buyer] issued the L/Cs on 23 February, so it performed this obligation.

2. [Buyer] did not receive the proof of force majeure issued by the authority, so [Seller]'s liability could not be exempted according to the force majeure clause.

OPINION OF THE ARBITRATION TRIBUNAL

1. The evidence provided by [Buyer] and [Seller] shows that on 23 February 1993 [Buyer] issued the L/Cs according to the contract, and on 24 February 1993, sent the copy of the L/C to [Seller]'s Beijing Office. Accordingly, [Buyer] complied with its obligation to execute the L/C, and [Seller] should have notified of the time of shipment and delivered the goods.

2. [Seller] did not provide sufficient evidence to show that it had sent an effective certificate of force majeure in time. In addition, the contracts between [Buyer] and [Seller] did not specify who would manufacture the goods; thus, although one manufacture had a production problem, [Seller]'s liability could not be exempted; it could order the goods from other factories. Accordingly, [Seller] cannot cite the force majeure clause.

[Seller] breached the contract and shall be liable for damages.

3. To [Buyer]'s claims, according to Article 74 of CISG, the Arbitration Tribunal holds that, when signing the contract, [Seller] could not foresee that [Buyer]'s client would buy the warm rolled steel plates by bank loan, and [Buyer] did not inform [Seller] about this. Thus, the Arbitration Tribunal does not support [Buyer]'s claim for interest on its client's bank loan.

[Seller] shall indemnify [Buyer]'s expected profits: the agency fee, 3% of the contract price, and the damages [Buyer] paid to its client, 5% of the contract price.

The Arbitration Tribunal does not support [Seller]'s assertion that the agency fee shall not exceed 1.5% of the contract price because [Seller] did not provide evidence to support this allegation.

4. [Buyer] did not provide evidence for a specific attorneys' fee, so the Arbitration Tribunal cannot support this claim by the [Buyer].

5. [Seller] shall pay the entire arbitration fee.

THE AWARD

1. [Seller] shall indemnify [Buyer] US $118,400.

2. [Seller] shall pay the entire arbitration fee.

[Seller] shall pay the above amount within 30 days of the date of this award.

This is the final award.


FOOTNOTES

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

** Zheng Xie, LL.M. Washington University in St. Louis, LL.M., BA in Economics, University of International Business and Economics, Beijing.

*** Meihua Xu, LL.M. University of Pittsburgh School of Law on an Alcoa Scholarship. She received her Bachelor of Law degree, with the receipt of Scholarship granted by the Ministry of Education, Japan, from Waseda University, Tokyo, Japan. Her focus is on International Business Law and International Business related case study.

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