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CISG CASE PRESENTATION

China 16 May 1995 CIETAC Arbitration proceeding (Leather bags case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/950516c1.html]

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

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Case identification

DATE OF DECISION: 19950516 (16 May 1995)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1995/10

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: United States (respondent)

GOODS INVOLVED: Leather bags


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 62 ; 78

Classification of issues using UNCITRAL classification code numbers:

62A [Seller's right to compel performance (seller may compel performance of any of buyer's obligations): payment of price];

78A [Interest on delay in receiving price or any other sum in arrears]

Descriptors: Price ; Interest

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): 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) 1995 vol., pp. 1577-1580

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at nn.75, 189, Nordic Journal of Commercial Law (2/2005)

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Case text (English translation)

Queen Mary Case Translation Programme

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

Leather bags case (16 May 1995)

Translation [*] by Meihua Xu [**]

Edited by John W. Zhu [***]

The China's International Trade and Economic Arbitration Commission (hereafter, the "Arbitration Commission") accepted the case according to:

   -    The arbitration clause in Contract No. E93NT9QX033 signed by Claimant [Seller], China __ Trade Company and Respondent [Buyer], America __ Company on 6 April 1993; and
 
   -    The written arbitration application submitted by [Seller] on 15 August 1994.

On 30 August 1994, the Arbitration Commission sent the arbitration application and the entire written documents submitted by the [Seller] to the [Buyer] by registered mail and asked the [Buyer] to appoint an arbitrator within twenty days and to submit its written arbitration defense within forty-five days after it received the mail. However, the [Buyer] did not respond.

On 13 October 1994, the Arbitration Commission sent a fax to the [Buyer] asking it to appoint an arbitrator immediately, but again with no response by the [Buyer].

On 7 November 1994, the Arbitration Commission sent the arbitration notice and the [Seller]'s entire arbitration documents to the [Buyer] by TNT international express mail, but was later informed by TNT's fax sent from Honolulu of U.S. that the [Buyer] refused to take the mail and asked the mailman to lie to the [Seller] by saying the address of the [Buyer] had changed.

Considering the above facts, and regarding Article 26 of the Arbitration Rules, which states that "if the Respondent does not appoint or ask the Chairman of the Arbitration Commission to appoint an arbitrator, following Article 16 of the Arbitration Rules, the Chairman of the Arbitration Commission should appoint an arbitrator for the Respondent", the Chairman of the Arbitration Commission appointed Ms. D as the [Buyer]'s arbitrator. Ms. D, Ms. P, the Presiding Arbitrator appointed by the Chairman of the Arbitration Commission, and Mr. A, the arbitrator appointed by the [Seller], formed the Arbitration Tribunal to hear this case.

On 27 December 1994 and 18 January 1995, the Secretary of the Arbitration Commission sent the Arbitration Tribunal formation notice and the notice of court session to the [Buyer] first via fax and then reconfirmed by registered mail.

The Arbitration Tribunal examined the evidence submitted by the [Seller] and on 2 March 1995 a court session was held in Beijing. The [Seller] made an oral statement in the court session and answered the Tribunal's questions. The [Buyer] received the entire documents and notices of the case, but did not submit an arbitration defense, nor did it present in the court session, or state the reason for its absence.

The [Seller] submitted supplementary evidence after the court session. The Secretary of the Arbitration Commission sent the aforesaid documents to the [Buyer] on 10 March 1995, and informed the [Buyer] of the court session held on 2 March and advising that if the [Buyer] wanted a second court session, it should send the request by fax before 30 March 1995, otherwise, the Arbitration Tribunal would hand down a judgment by default. However, the [Buyer] never responded.

The Arbitration Tribunal made this award based on the materials available and the court session. The following are the facts, the Tribunal's opinion and award.

I. FACTS

On 6 April 1993, both parties signed Contract E93NT9QX033, by which the [Buyer] purchased 38,700 leather bags for a total price of US $139,690 FOB Shanghai. It was stipulated in the contract that the delivery port was Shanghai and that the [Buyer] shall make the payment by Telegraphic Transfer (T/T). The parties also agreed orally that the payment day should be within ninety days after loading.

After signing the contract, the [Seller] immediately prepared the goods for shipment. As requested by the [Buyer], on 5 June 1993, the [Seller] delivered 25,894 bags, which totaled US $101,866.70. The [Buyer] accepted the Bill of Lading for the goods.

On 24 August 1993, the [Buyer] orally raised quality problems, such as that some shoulder belts and trademarks had fallen off and some fasteners were not stitched well, and stated that it was going to provide a videotape as the evidence, which was never received by the [Seller]. In any event, the [Buyer] has never submitted any evidence to prove these alleged quality problems.

On 20 September 1993, because the goods were detained by the American Customs, the [Buyer] asked the [Seller] to postpone the payment day to within three months after the goods were released by Customs. After that, the [Seller] has repeatedly asked the [Buyer] to pay the price, but with no response by the [Buyer].

On 2 November 1993, the [Buyer] informed the [Seller] that the goods had been released by Customs.

The [Seller] asserts that even as promised by the [Buyer], the payment should have been made before 2 February 1994, but the [Buyer] still has not made the payment.

On 14 March 1994, the [Seller] urged the [Buyer] to pay the price through its lawyer, suggesting that if the [Buyer] made the payment by the end of March, the [Seller] would consider resigning its right to claim compensation or loss of interest, and otherwise, the [Seller] had to file arbitration application. The [Buyer] did not respond to this suggestion, but had a misunderstanding that the [Seller] had not paid the manufacturer and that there was a dispute between the [Seller] and the manufacturer, which is irrelevant to the instant dispute. Then the [Seller]'s lawyer responded that the [Seller] had already made payment to its manufacturer and again urged the [Buyer] to make the payment, but with no response by the [Buyer].

The [Buyer]'s violation of the contract has caused severe economic loss to the [Seller]; therefore, the [Seller] filed this arbitration application and asks the Arbitration Tribunal to rule that:

  1. [Buyer] shall immediately make the payment of US $101,866.70 to the [Seller];

  2. [Buyer] shall pay interest from 2 February 1994 to the day the payment is made at an 8.5% monthly rate;

  3. [Buyer] shall pay the arbitration fee and the [Seller]'s costs of attorneys' fee and traveling fee.

The [Seller] explained its arbitration claims as follows.

  1. The [Buyer] has not provided any evidence to show the non-conformity of the goods and, according to Article 15 of the contract, "if the goods do not conform to the contract, the [Buyer] has to claim compensation within 30 days after the goods arrive at the destination port"; therefore, it should be deemed that the goods are conforming goods.

  2. The [Buyer] promised to make the payment within three months after the goods were released by Customs, however, no payment has been made. The [Buyer] has broken its promise, which constitutes a violation of contract.

  3. The [Buyer]'s repeated violation of the contract has caused severe economic loss to the [Seller]. According to related articles under the Law of the People's Republic of China on Economic Contracts Involving Foreign Interest and the United Nations Convention On Contracts for the International Sales of Goods (hereafter, the "CISG"), the [Seller] has the right to claim compensation.

Because of the [Buyer]'s delay in making payment, the [Seller] could not make capital turnover, which also caused the [Seller]'s loss of interest. Due to the [Buyer]'s violation of the contract, the [Seller] had to file this arbitration application, and the [Buyer] should have foreseen the costs of arbitration fee, attorneys' fee (renminbi [RMB] 25, 000 with written evidence), and traveling fee before signing the contract, therefore, the [Buyer] should bear the aforesaid costs.

II. OPINION OF THE ARBITRATION TRIBUNAL

     (1) The applicable law

The parties did not stipulate the applicable law in their contract. The Arbitration Tribunal deems that the law of the [Seller]'s place of business, Chinese law, should be applied. Considering the fact that both China and the United States of America are Contracting States of the CISG, and according to the Law of the People's Republic of China on Economic Contracts Involving Foreign Interest, the CISG can also be applied.

     (2) The payment

The Arbitration Tribunal examined the documents which include the Bill of Lading and the Packing List submitted by the [Seller] and found that the [Seller] has delivered 25,894 bags to the [Buyer], which totals US $101,866.70. According to the fax sent by the [Buyer] on 2 November 1993, the goods were released by Customs.

The [Buyer] has raised objection to the quality of the goods, but no examination certificate that shows non-conformity of the goods had been provided. Even the videotape, which the [Buyer] said could be evidence of this, has not been presented. The Arbitration Tribunal deems that the [Seller] has performed its obligation to deliver the goods, and the [Buyer] has received the goods; therefore, the [Buyer] should pay the price. The Arbitration Tribunal accepts the [Seller]'s claim of payment of US $101,866.70.

     (3) The loss of interest

The Arbitration Tribunal deems that the [Buyer] shall pay the [Seller]'s loss of interest calculated from 2 February 1994 to the day the payment is made at 8% annual rate. The payment day should be 90 days after the delivery date, which is 5 June 1993. However, on 20 September 1993, the [Buyer] asked the [Seller] to postpone the payment day to be within three month after the goods were released by Customs, which was accepted by the [Seller].

On 14 March 1994, the [Seller] suggested that the [Buyer] make the payment by the end of March 1994, but the [Buyer] did not respond. The [Seller]'s suggestions were conditional, and the payment day agreed by both parties was three months after the goods were released by the American Customs, which was 2 November 1993, therefore, the loss of interest should be calculated from three months after 2 November 1993, which is 2 February 1994.

     (4) The [Seller]'s other losses

The [Buyer] refused to make the payment and did not provide any evidence to prove that there was quality problem with the goods, which has constituted a breach of the contract. Therefore, the [Seller] should be reasonably compensated for the loss resulting from the [Buyer]'s violation of the contract. The [Buyer] shall also bear the [Seller]'s attorneys' fee of RMB 25,000.

     (5) The arbitration fee

The arbitration fee was incurred because of the [Buyer]'s unilateral violation of the contract, therefore, the [Buyer] should bear the entire arbitration fee.

III. THE AWARD

The Arbitration Tribunal rules that

     (1) [Buyer] shall pay the price of US $101,866.70 to the [Seller];

     (2) [Buyer] shall pay the [Seller]'s loss of interest calculated from 2 February 1994 to the day the payment is made at 8% annual rate;

     (3) [Buyer] shall pay the [Seller]'s attorneys' fee of RMB 25,000;

     (4) [Buyer] shall pay the entire arbitration fee.

[Buyer] shall pay the aforesaid sum within forty-five days after this award takes effect.

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 [Seller]; Respondents of the United States of America is referred to as [Buyer]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (Renminbi) are indicated as [RMB].

** 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.

*** John W. Zhu, LL.M. China University of Political Science and Law (National Graduate Scholarship); Bachelor of Law, Southwest University of Political Science and Law; Double Degree, English Literature, Sichuan International Studies University, Chongqing, China. Focus: International Economic Law.

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Pace Law School Institute of International Commercial Law - Last updated June 29, 2006
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