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CISG CASE PRESENTATION

China 3 April 1996 CIETAC Arbitration proceeding (Plastic bags case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/960403c1.html]

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

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Case identification

DATE OF DECISION: 19960403 (3 April 1996)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1996/17

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: Netherlands (respondent)

GOODS INVOLVED: Plastic bags


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 7 ; 62 ; 74

Classification of issues using UNCITRAL classification code numbers:

7C22 [Recourse to general principles on which the Convention is based: estoppel, waiver];

62A [Seller may compel performance of any of buyer's obligations];

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

Descriptors: General principles ; Waiver ; Estoppel ; Specific performance ; Damages

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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) 1996 vol., pp. 1074-1077

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Joint translation project:
New York University School of Law
and Pace University School of Law


 

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

Plastic bags case (3 April 1996)

Translation [*] by Jun Wang [**]

Edited by Meihua Xu [***]

Shanghai Sub-Commission of China International Trade and Economic Arbitration Commission (hereinafter CIETAC Shanghai Sub-Commission) accepted this dispute on 2 November 1994 according to:

   -    The arbitration clause in the six contracts: 94D-097, 94D-126, 94D-138, 94D-142, 94D-153 and 94D-180, signed by the Claimant [Seller], Shanghai __ Ltd., and the Respondent [Buyer], Netherlands ___Corporation, in April and May 1994; and
 
   -    The written arbitration application submitted by [Seller] to CIETAC Shanghai Sub-Commission in November 1994.

In accordance with the Arbitration Rules of the Arbitration Commission, the presiding arbitrator Mr. P, appointed by the Chairman of the CIETAC, arbitrator Mr. A, appointed by the [Seller], and arbitrator Mr. D appointed by the [Buyer], formed an Arbitral Tribunal to hear this case on 3 March 1995.

The Arbitration Tribunal reviewed the [Seller]'s Request for Arbitration, the [Buyer]'s Statement of Defense and the supplemented evidence materials submitted by the [Seller] and the [Buyer], and held a court session on 10 April 1995 in Shanghai. Representatives of the [Seller] and the [Buyer] attended the court session, expressed their opinions and reasons, answered the questions raised by the Tribunal and debated. After the court session, the [Seller] and the [Buyer] submitted supplementary materials within the specified period. The [Seller] requested permission to amend his claim and this request was granted by the Arbitration Tribunal. The Arbitration Tribunal thought it necessary to give the [Buyer] added time to defend, and upon the written request of the Arbitration Tribunal, Shanghai Sub-Commission agreed to extend the award time to 3 February 1996.

The following are the details of the case, the opinions of the Arbitral Tribunal, and the award.

DETAILS OF THE CASE

The [Seller] and the [Buyer] signed Contracts 94D-097, 94D-126, 94D-138, 94D-142, 94D-153 and 94D-180 in April and May 1994. The contracts provide:

   -    94D-097. price: CFR ROTTERDAM, US $15,181.00; period of shipment: 10 to 15 July 1994;  
   -    94D-126. price: CFR ROTTERDAM, US $15 470.00; period of shipment: early July, 1994; 
   -    94D-138. price: CFR ROTTERDAM, US $19,890.25; period of shipment: late July, 1994; 
   -    94D-142. price: CFR ROTTERDAM, US $15,470.00; period of shipment: late September, 1994; 
   -    94D-153. price: CFR ROTTERDAM, US $30,940.00; period of shipment: middle July, 1994; 
   -    94D-180. price: CFR ROTTERDAM, US $10,875.00; period of shipment: middle August, 1994.

The payment clauses of the six contracts are all D/P SIGHT. The [Seller] arranged to ship the above goods in August 1994; the actual dates of shipment are: 94D-097, 94D-126, 94D-142, and 94D-180 on 17 August 1994; 94D-138 on 2 September 1994; on 25 August, the [Seller] informed the [Buyer] that he would ship the goods under Contract 94D-153 by fax. These actual dates of shipment were confirmed by the [Buyer] by fax without dissent. According to the payment condition of D/P SIGHT, the bank notified the [Buyer] to pay for the documents from 20 August to 20 September 1994. On October 5, 1994, the [Buyer], through his bank, expressed his intention to refuse to pay for the goods. On 7 October 1994, the [Buyer] submitted an application to a Netherlands court for detention of and preservation of documents under the six contracts during the course of litigation, alleging a dispute between the [Buyer] and the [Seller] over other contracts. The Netherlands court adopted the requested preservation measures and, on 11 October 1994, issued an order detaining all the documents under the six contracts. Thus the [Buyer] was not able to pick up the goods and the [Seller] was not able to obtain payment for the goods. The retention of the goods in Rotterdam caused economic losses to the [Seller] too. After negotiations with the [Buyer] failed, the [Seller] applied to the Commission for arbitration, requesting that the [Buyer] be directed to:

1. Perform Contracts 94D-097, 94D-126, 94D-138, 94D-142, 94D-153 and 94D-180 and pick up the goods at the port of Rotterdam;

2. Pay the expense caused by his refusal to pick up the goods, amounting to US $3,425;

3. Bear the arbitration fee.

The [Seller] changed the above petition to direct the [Buyer] to:

1. Pay for the goods under Contracts 94D-097, 94D-126, 94D-138, 94D-142, 94D-153 and 94D-180, amounting to US $90,302.89, and immediately pick up and make disposal of the goods;

2. Bear the arbitration fee.

The [Seller] pointed out that:

      1. The [Seller] and the [Buyer] chose arbitration as the method of solving problems in the above six contracts, but did not indicate the applicable law; the parties never signed the memo of General Transaction Terms and never affirmed that the laws of the Netherlands were to apply in case of dispute between the parties;

      2. The [Seller] alleged that although the actual dates of shipment were later than those stipulated in the contracts, the [Buyer] did not express any dissent and it could be regarded that the parties agreed to the change of the shipment clause; thus, the [Buyer] lost his right to avoid the contract. The [Seller] and the [Buyer] had explicitly stipulated in all six contracts that any dispute should be submitted for arbitration, thus excluding the possibility that a Netherlands court could have jurisdiction over this case. Therefore, the [Buyer] should not have applied to the Netherlands court for a detention-of-documents order, and should bear the liability for the [Seller]'s loss caused by such application;

      3. The [Seller] has shipped the goods and submitted relevant documents to the bank pursuant to the contracts, thus fully performed his obligations under the contracts. The [Buyer] should have performed his obligation to pay upon receipt of notice from the bank to pay for the documents. [Buyer]'s behavior -- his refusing to pay, pleading that the [Buyer] and the [Seller] had a dispute over other contracts -- constituted a serious breach of contract and the [Buyer] should bear the liability.

The [Buyer] defended that:

      1. The [Seller] and the [Buyer] have formed a set of customs and practices and General Transaction Terms in their long term transactions, as to which the [Seller] did not express any dissent. Article 17 of these General Transaction Terms stipulates that laws of the Netherlands are to be applied to solve trade disputes between the [Seller] and the [Buyer]. In the agreement regarding page 2 of Contract SCT9.17.046 (also 94D-142) signed by the [Seller] and the [Buyer] on 27 April 1994, it is also stipulated that other clauses should comply with the General Transaction Terms. Therefore, Netherlands law should be applied to this case. The [Buyer]'s behavior -- applying to a court to detain the documents -- is not a contractual act between the [Seller] and the [Buyer], but a legal act independent of this contract dispute. The [Buyer] exerted his legal rights with respect to this other dispute; it has nothing to do with this case.

      2. The Arbitration Rules of the China International Economic and Trade Arbitration Commission do not state that a party cannot apply to a court for property preservation where there is an arbitration clause. According to international arbitration rules and customs, a party may apply to a court for property preservation where there is an arbitration clause by submitting the application to the court via the Arbitration Commission or directly to the court. Therefore, the [Buyer]'s behavior of applying to the Netherlands court for property preservation was not wrong. Moreover, the decision of property preservation was made by the Netherlands court, so the [Seller] should express his dissent to the court not the [Buyer]. In fact, after accepted the defense application of the [Buyer], the Netherlands court gave the [Seller] sufficient opportunity to defend and held a hearing session. The [Seller] neither submitted written dissent to the Netherlands court nor attended the hearing session. [Seller] is therefore to be reasonably regarded as having accepted the court's decision.

      3. The premise is that the [Buyer] gets the documents after he pays. However, the documents under the six contracts have been detained by the Netherlands court; accordingly, the bank could not transfer the documents without a court order. Therefore, even if the [Buyer] were to pay for the goods, [Buyer] cannot acquire the documents under the contracts and pick up the goods to perform the contacts. This result is caused by the court, the [Buyer] is exculpated.

      4. The [Seller] did not ship the goods under Contracts 94D-097, 94D-126, 94D-138, 94D-142, 94D-153 and 94D-180 in accordance with the period of shipment written in contracts, which constituted a delay of delivery. Pursuant to Article 4 of the General Transaction Terms, the [Buyer] has the right to avoid the contracts without notifying courts or arbitration Tribunals, and to refuse to pick up the goods under the contracts.

The [Buyer] did not submit any written Statement of Defense in response to [Seller]'s changed Request for Arbitration.

OPINION OF THE ARBITRAL TRIBUNAL

Hearing the respective expressions of both parties' representatives and reviewing the relevant written evidence, the Tribunal, rendered its opinion as follows:

1. Applicable law

The [Buyer] alleged that Netherlands law should be applied as stipulated in Article 17 of the General Transaction Terms. However, the Arbitration Tribunal holds that none of the six Contracts that the [Seller] and the [Buyer] signed included the General Transaction Terms as any part of the contracts.

   -    Despite both parties having signed the agreement regarding page 2 of Contract SCT9.17.046 on 27 April, the first line of the contract indicates that the agreement made by the parties in this attachment is on the conditions included on page 2 of Contract SCT9.17.046, and the second page thereof has not become an additional clause of these six contracts.
 
   -    The Arbitration Tribunal notes that Contract SCT9.17.046 94D-12) was signed on 7 May 1994 and the shipment term thereof is totally different from the shipment term stipulated in the agreement of 20 April 1994. The [Seller] and the [Buyer] should perform the contract in accordance with the contract signed on 7 May.
 
   -    Accordingly, the Arbitration Tribunal concludes for all six contracts that the clauses (including the referenced General Transaction Terms on this page) referred to in the agreement signed on 27 April 1994 are not legally binding on the [Seller] and that the governing law of all six contracts in dispute is not Netherlands law.

The Arbitration Tribunal holds that, based on the facts, the [Seller] is a Chinese company and the [Buyer] is a Netherlands company, and that the shipment of the goods was in China, and that the payment was in the Netherlands, and considering other factors related to this case, the CISG is to be applied.

2. Whether the [Buyer] has the right to refuse to pick up the goods under the six contracts because of the delayed shipment by the [Seller]

The [Buyer] refused to pick up the goods under the contracts pursuant to Article 4 in the General Transaction Terms. Where the General Transaction Terms applies to the parties' dealings, the [Buyer] would have the right to avoid contracts without notifying courts or arbitration tribunals, or to refuse to pick up the goods under the contracts. However, as mentioned above, the General Transaction Terms did not constitute any part of the six contracts the parties signed, and the 4th clause of the General Transaction Terms cited by the [Buyer] is not binding on the parties.

And considering the shipments:

   -    Except for the goods under Contract 94D-142 that were shipped on 17 August 1994 (which was earlier than originally scheduled for late September 1994), and the goods under Contract 94D-180 were shipped on 17 August 1994 which was scheduled for mid-August 1994 in the contract, shipments of the goods under the other four contracts was delayed to some extent. Therefore, the [Buyer] had the right to refuse the goods under Contracts 94D-097, 94D-126, 94D-138 and 94D-153, which right, however, should have been exerted before the [Seller] shipped the goods.
 
   -    Moreover, reviewing the actual process, the [Buyer] knew explicitly that the [Seller] did not ship the goods strictly in accordance with the contracts, but [Buyer] did not terminate the contracts. In this case, once the [Seller] ships the goods and transfers the documents to the [Buyer] via the bank requesting the [Buyer] to pay for the documents, the [Buyer] loses the right to refuse the goods.

Therefore, the Arbitration Tribunal does not support the [Buyer]'s claimed right to refuse the goods because of the [Seller]'s delayed shipment.

3. Whether the [Buyer]'s behavior - applying to the Netherlands court for detainment of documents -- is a breach of the arbitration clause

The Arbitration Tribunal noted that the [Buyer] had applied to a Netherlands court for detainment of documents, alleging that the [Seller] announced an intent to avoid the existing contract and to cease to supply goods to the [Buyer] for reasons the [Buyer] regarded as invalid and ambiguous. The [Buyer] therefore applied to a court to have the documents detained. Reviewing the materials the parties provided with [Buyer]'s application for detainment of documents, the Arbitration Tribunal holds that the legal act of the [Buyer] in the Netherlands had nothing to do with the six contracts; therefore, it does not breach the arbitration clauses in the six contracts.

4. Whether the [Buyer] is free from his obligations under the contract because the Netherlands court detained the six bills of lading and relevant documents

The [Buyer] alleged that the documents under the six contracts have been detained by the Netherlands court, that the bank could not transfer the documents without court order, and that, even if the [Buyer] paid for the goods, it could not acquire the documents under the contracts. The [Buyer] thus could not pick up the goods under the contracts. The [Buyer] alleged that this result was caused by the court with the [Buyer] exculpated.

The Arbitration Tribunal holds that:

   -    According to these six contracts, the payment clauses are all documents against payment.
 
   -    The Netherlands court decided that the [Buyer] has the right to have the six sets of documents detained, the bank therefore is not able to deliver the documents; this is a fact.
 
   -    However, this result is totally caused by the [Buyer]'s improper selection of detention mechanisms.

Therefore, the [Buyer] cannot be exculpated. Whether or not to release the order for detention of the documents by the court is up to the [Buyer]. Of course, this does not have effect on the [Buyer]'s other legal rights against the [Seller] besides the six contracts.

AWARD

Based on the above, the Arbitration Tribunal concludes:

1.     The [Buyer] should pay for the goods that have been sent out, amounting to US $90,302.89 within 45 days from the date the award is made, with interest at a rate of 2/1000 per day to be added for overdue payments;
 
2. The [Seller] should pay 10% of the arbitration fee; while the [Buyer] shall pay 90%; the [Seller] has paid RMB ___ in advance; the [Buyer] shall pay RMB ___ to the [Seller] within 45 days from the date the award is made, with interest at a rate of 2/1000 per day to be added for overdue payments;
 
3. The other petitions are dismissed.

The award is final.


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] and Respondent of the Netherlands 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].

** Jun Wang, LL.M. in Corporate Law, Law School of New York University; LL.B. Law School of Peking University; B.A. in Economics, CCER (China Center for Economic Research) or Peking University.

*** 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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