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CISG CASE PRESENTATION

China 16 June 1997 CIETAC Arbitration proceeding (Leather case)
[Cite as: http://cisgw3.law.pace.edu/cases/970616c1.html]

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

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Case identification

DATE OF DECISION: 19970616 (16 June 1997)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1997/15

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: Italy (respondent)

GOODS INVOLVED: Leather


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 18 ; 53 ; 54 ; 78 [Also cited: Article 30 ]

Classification of issues using UNCITRAL classification code numbers:

18A [Criteria for acceptance of offer];

53A [Buyer's obligation to pay price];

54A [Obligation to pay includes enabling steps];

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

Descriptors: Acceptance of offer ; Price ; Letters of credit ; 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) 1997 vol., pp. 2045-2048

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at nn.109, 160, 191, Nordic Journal of Commercial Law (2/2005)

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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

Leather case (16 June 1997)

Translation [*] by Fan Wei [**]

Translation edited by Meihua Xu [***]

According to the arbitration clause in Sales Contract No. 95HFG053 signed on 1 August 1995 between Claimant [Seller], ___ Import and Export Company, Henan, China and Respondent [Buyer], ___ Company of Italy, and the application for arbitration filed by [Seller] on 13 May 1996, the China International Economic & Trade Arbitration Commission (CIETAC) has agreed to hear this case.

The Arbitration Commission sent a notice of arbitration and its attachments to [Buyer] on 16 May 1996, and on 12 June 1996 received a letter in reply from [Buyer] dated 30 May 1996. In the letter, [Buyer] objected to the jurisdiction of the Arbitration Commission on the ground that [Buyer]'s signature was affixed to the face side of the contract, and the arbitration clause was contained in the reverse side of the contract on which he did not sign. [Seller] responded to [Buyer]'s objection as follows:

     1. The contract, including the face side and the reverse side, was faxed to [Buyer].

     2. [Seller] mailed the original contract to [Buyer] in duplicate after the parties reached agreement on the contract, and [Buyer] mailed one of the original contracts back to [Seller] after he signed the contract.

     3. The legend "Other clauses see overleaf" is recorded in the lower portion of the face side of the contract, near the signature position.

Having examined the documents and other related materials submitted by [Seller] and [Buyer], the Arbitration Commission found that:

     1. The arbitration clause on the reverse side of the contract is a part of the contract.

     2. [Buyer] received the original contract; furthermore, he signed, amended and mailed the contract to [Seller].

     3. [Buyer] and [Seller]'s signatures on the contract demonstrated that they both accepted all clauses of the contract.

In the light of the above and under the provisions of Article 2 of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and Article 4 of the CIETAC Arbitration Rules, the Arbitration Commission handed down a decision on jurisdiction in Beijing on 10 October 1996. The Arbitration Commission determined that it has jurisdiction over the disputes arising from Contract No. 95HFG053 concluded between [Seller] and [Buyer], and re-determined the time period for appointing arbitrators, and for [Buyer] to file a statement of response and counterclaim if desired.

The Secretary-General of the Arbitration Commission sent its decision on jurisdiction to [Buyer] by Express Mail Service in time. [Buyer] did not name an arbitrator; nor did [Buyer] filed a statement of defense within the time period specified by the Arbitration Commission.

According to the CIETAC Arbitration Rules, the Chairman of the Arbitration Commission has named Mr. P as presiding arbitrator for this case. [Seller] has named Mr. A and the Chairman of the Arbitration Commission has named Mr. D because [Buyer] failed to name an arbitrator. These three arbitrators formed a Tribunal on 13 November 1996 for the case.

On 20 November 1996, the Secretary-General of the Arbitration Commission sent Notice No. ___ (96) on formation of the Arbitration Tribunal and Notice No. __ (96) on the hearing to [Buyer] by Express Mail Service, notifying [Buyer] of the formation of the Arbitration Tribunal and the date of hearing. [Buyer] signed the receipt for the aforesaid arbitration documents on 25 November 1996.

On 5 December 1996, the Arbitration Commission received a fax from [Seller] in which [Seller] requested a correction of some typographical errors contained in the jurisdiction decision.

On 6 December 1996, the Arbitration Commission issued a "correction of the decision of jurisdiction over disputes for payment for leather arising from Contract No. 95HFG053", and sent the correction to both parties by Express Mail Service on the same day.

On 8 January 1997, the Secretary-General of the Arbitration Commission sent Notice No. ___ (96) of hearing to [Buyer] in fax again, reminding [Buyer] of the opportunity to participate in the hearing.

The Tribunal has carefully examined the written materials submitted by [Seller], and a trial was conducted on 15 January 1997, in which [Buyer] was represented by its agent, and statements were made as to facts and legal issues, and responses were provided to the Tribunal's inquiries. [Buyer] did not authorize any agents to attend the hearing, nor did [Buyer] present any reasons. The Tribunal held a default hearing per the provisions of Rule 42 of the CIETAC Arbitration Rules.

On 20 January 1997, the Secretary-General of the Arbitration Commission sent Letter No. ___ (97) given by the Tribunal to [Buyer] by fax and Express Mail Service, respectively. In the letter, the Arbitration Tribunal explained the circumstances of the hearing, invited the buyer to submit response documents, and inquired whether [Buyer] wished to request a second hearing by letter before 10 February 1997. [Buyer] did not submit a reply within the foresaid term.

On 3 March 1997, the Tribunal received a letter dated 13 February 1997 from [Buyer] in which [Buyer] only objected to the jurisdiction of the Tribunal and did not submit any related materials of this case.

The hearing of this case was then concluded. The Tribunal, on the basis of the written application for arbitration and its attachment submitted by [Seller], the results of the hearing and the additional written materials submitted by [Seller], made a default award by consent per the provisions of Rule 42 of the CIETAC Arbitration Rules.

The facts of the case, the opinion of the Tribunal, and the award are as follows:

I. FACTS OF THE CASE

[Seller] and [Buyer] entered into Sales Contract No. 95HFG053 on 1 August 1995. The contract provided for the sale of 120,000 square feet of leather by installment, at a unit price of US $1.36 per square foot. The total price of the goods was US $163,200. Method of payment is by irrevocable letter of credit at sight, and the inspection certificate shall be issued by the independent inspection agency appointed by [Buyer].

[Buyer] opened the letter of credit on 2 August 1995, and amended it on 7 November 1995, in which the shipment date of the letter of credit was extended to 15 November 1995 and the validity period of the letter of credit was extended to 1 December 1995.

On 15 November 1995, [Seller] shipped to [Buyer 53,282.50 square feet of leather valued at US $72,464.20, and presented all documents as required by the letter of credit to Bank of China, Henan Province Branch.

On 12 January 1996, [Seller] received a notice from the bank, which said the payment under Contract No. 95HFG053 was blocked by an Italian court. [Seller] then applied to the Arbitration Commission for settlement of this case.

[Seller]'s position

     (1) Facts

[Seller] stocked the leather immediately after [Buyer] opened the letter of credit on 2 August 1995. The independent inspection agency appointed by [Buyer] did not make any objection after carefully inspecting the contract goods on 5 November 1995 and issued the inspection certificate.

[Seller] delivered the goods as required by the contract. [Buyer]'s application to the Italian court to block the payment constituted a breach of contract, which led to [Seller]'s inability to exchange foreign currencies in time and caused [Seller] to suffer serious damages.

     (2) Claims

1. [Buyer] should compensate [Seller] for the price of the goods amounted to US $72,464.20 plus the corresponding interest of renminbi [RMB] 50,522.04;

2. [Buyer] should bear the attorneys' fee of RMB 34,058.

3. [Buyer] should bear the arbitration cost.

On 21 January 1997, [Seller] alleged that the interest should be calculated at the rate of 1.008% per month from 3 January 1996 to 31 May 1996, and at the rate of 1.2% per month from 3 May 1996 to 3 January 1997. The interest was as follows:

US $72.464.20 x 95% x 8.3 = RMB 571,380.21
RMB 571,380.21 x 1.008% x 4 = RMB 23,038.05
RMB 571,380.21 x 1.2% x 8 = RMB 54,852.50
RMB 23,038.05 + RMB 54,852.50 = RMB 77,890.55

On 19 May 1997, [Seller] amended its claims. The amendment is as follows:

The sum of US $72,464.20 applied before should include a 5% commission fee, however, the sum of US $70,652.59 blocked by the Italian court only include a 2.5% commission fee, and the Italian bank had paid another broker the other 2.5% commission fee when accepting the letter of credit. Therefore, [Buyer] should pay [Seller] US $70,652.59 for the price of the goods and the interest should be calculated based on US $70,652.59.

II. OPINION OF THE ARBITRATION TRIBUNAL

1. Applicable law

Although the parties did not specify any applicable law in the contract, in view of the fact that the countries of both parties ([Seller]'s place of business being China, [Buyer]'s, Italy) are signatories of the United Nations Convention on Contracts for the International Sale of Goods (CISG), the CISG should apply in this case.

2. Performance of the contract

[Seller] delivered the goods, handed over all the documents related to them in time, as required by the contract; the independent inspection agency appointed by [Buyer] considered that the goods delivered by [Seller] conformed to the specification of the contract, and issued the inspection certificate; [Buyer] took delivery of the goods delivered by [Seller] by providing the original bill of lading on 8 January 1996. [Buyer] opened an irrevocable letter of credit through ___ Bank pursuant to the provisions of the contract, however, [Seller] did not get the payment under the contract after delivering the goods because the [Buyer] applied to an Italian court to block the payment deposited in the Italian bank.

[Seller] has performed its obligations under the contract per the provisions of article 30 of the CISG. [Buyer] has breached the contract by not having paid the price for the goods as required by the contract per the provisions of Article 53 and Article 54 of the CISG.

Though the payment method under the contract was irrevocable letter of credit and [Buyer] opened the letter of credit, a letter of credit is just one of the methods for paying the price for the goods. It is a compelling obligation for [Buyer] to pay the price for the goods when the [Seller] has completely performed its obligations.

In order to fulfill his contractual obligations, [Buyer] should pay the price for the goods by other reasonable methods because the letter of credit opened by [Buyer] was blocked by the Italian court according to [Buyer]'s application and the [Seller] has already delivered the goods as required by the contract.

Therefore, the Tribunal approves [Seller]'s claims that [Buyer] should pay the price for the goods and the corresponding interest. The interest calculated at the rate of 10% annually is reasonable because [Seller] could not produce sufficient evidence of the method of interest calculation. The [Buyer] shall pay to the [Seller] the price for the goods US $70,625.59 and the corresponding interest RMB 58,641.65 (US $70,652.59 x 8.3 x 10% x 1 = RMB 58,641.65).

3. Concerning the [Seller]'s claim that [Buyer] should bear the attorneys' fee, the Tribunal holds that the ground for this payment is insufficient and hence the claim is rejected.

4. [Buyer] shall bear the arbitration cost.

III. THE AWARD

For the reasons stated above, this Tribunal grants the following award:

   1.     [Buyer] shall compensate [Seller] for the price of the goods, US $70,652.59.
 
   2. [Buyer] shall compensate [Seller] for the corresponding interest in the sum of RMB 58,641.65.
 
   3. [Seller]'s arbitration request for compensation of the attorneys' fee is rejected.
 
   4. [Buyer] shall bear the arbitration cost for the case. [Seller] has pre-paid the arbitration fee in the sum of RMB ___, offsetting the arbitration cost. Therefore, [Buyer] shall compensate [Seller] the arbitration cost in the sum of RMB ___.
 
   5. Within 45 days from the date of this award, [Buyer] shall remit to [Seller] a payment of the above-mentioned amount provided by items 1, 2 and 4, with a late payment annual interest of 12%.

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] and Respondent of Italy 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].

** Fan Wei. LL.M. Candidate, New York University School of Law; LL.B., East China University of Politics and Law.

*** 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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