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CISG CASE PRESENTATION

China 30 November 1998 CIETAC Arbitration proceeding (Glassware case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/981130c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 19981130 (30 November 1998)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1998/08

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: Australia (claimant)

GOODS INVOLVED: Glassware


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 84(1)

Classification of issues using UNCITRAL classification code numbers:

84A [Seller bound to refund price must pay interest]

Descriptors: 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) 1998 vol., pp. 2932-2935

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at n.105, 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

Glassware case (30 November 1998)

Translation [*] by Meihua Xu [**]

Edited by John W. Zhu [***]

The China International Trade and Economic Arbitration Commission (the Foreign Trade Arbitration Committee of the China Council for the Promotion of International Trade, hereafter, the "Arbitration Commission") accepted the case according to:

   -    The arbitration clause in Sales Contract No. 96GW016 signed by Claimant [Buyer], Australia __ Company, and Respondent [Seller], China Shanxi __ Import & Export Company on 29 May 1996; and
 
   -    The written arbitration application submitted by [Buyer] on 2 June 1998.

Since the amount in dispute in this case is less than renminbi [RMB] 500,000, according to the Arbitration Rules, which became effective on 1 October 1995, the summary procedure is applicable. Pursuant to Article 65 of the Arbitration Rules, the Chairman of the Arbitration Commission appointed Mr. P as the Presiding Arbitrator to form the Arbitration Tribunal to hear the case.

The Arbitration Tribunal examined the [Buyer]'s arbitration application and the attached evidence, and held a court session in Beijing on 12 November 1998. The [Seller] had received notice of the court session in advance, but did not send a representative to the session, nor did it explain the reason for its absence or submit a defense before the court session.

The Arbitration Tribunal processed this case by default based on Article 42 of the Arbitration Rules. The [Buyer] sent its agent to the court session who made further statements on the facts and reasons for the arbitration application, and answered the Arbitration Tribunal's questions.

After the court session, the [Seller] did not submit any arbitration defense notwithstanding being requested by the Secretariat of the Arbitration Commission.

Pursuant to the Arbitration Rules, this case has been concluded. The Arbitration Tribunal has handed down its award on the basis of the facts and existing materials.

The following are the facts, the Tribunal's opinion and the award.

I. FACTS

The following facts were stated in the [Buyer]'s arbitration application and at the court session.

On 29 May 1996, the [Buyer] and the [Seller] signed Contract 96GW016 (sales confirmation), by which the [Buyer] was to purchase 9,250 dozen glassware light green cups at a unit price of US $4.6/DZ CIF Sydney, totaling US $42,500.00.

During the performance of the contract, the goods were found to have severe defects after being inspected by the China Import & Export Commodity Inspection Bureau, Australia Branch (hereafter, CCIB Australia). After negotiations, the two parties signed a "negotiation agreement", by which they agreed to the following terms:

   -    Because the glassware had severe defects, the [Buyer] asked for return of the goods, which was accepted by the [Seller];
 
   -    The goods to be returned to the factory were to be reproduced;
 
   -    [Buyer] would bear the transportation fee from Sydney to Tianjin port;
 
   -    [Buyer] agreed to pay an extra RMB 4,400.00 for the 111,024 pieces of glassware to be reproduced;
 
   -    [Buyer] would also purchase an additional 10,008 pieces of glassware at a unit price of US $5.75/DZ CIF Sydney;
 
   -    The total amount of the goods was 121,032 pieces (6DZ/CTN, totaling 1,681CTN, shipped in three installments).

This agreement was a supplement to the original contract. After the [Seller] delivered the goods again, the [Buyer] discovered that the goods still had quality problems, which could severely affect the sales of the glassware; therefore, on 16 July 1997, the [Buyer] again asked CCIB Australia to inspect the goods. The result was, the goods were found to have many quality defects and there was a shortage of part of the goods.

On 11 September 1997, the two parties reached another "glassware resolution agreement" on the following terms:

   -    [Seller] shall refund the price of the goods of US $32,550.00 within six months, which was from October 1997 to March 1998. The remaining US $5,000.00 would be deducted from future payments when the [Buyer] made new purchases from the [Seller];
 
   -    [Buyer] would not make any further claims against the [Seller];
 
   -    [Buyer] need not return the goods delivered by the [Seller], which should be considered a compensation for the [Buyer]'s costs.

However, the [Seller] never refunded any payment to the [Buyer], raising finance difficulties; therefore, the [Buyer] asks the Arbitration Tribunal to rule that:

  1. [Seller] shall return the contract price of US $42,500.00 to the [Buyer];

  2. [Seller] shall pay the [Buyer]'s loss of interest, calculated from 1 April 1998 to the date of the award at an 8% annual interest rate;

  3. [Seller] shall pay 10% of the claimed amount, i.e., US $4,255.00, to compensate the [Buyer]'s loss of the arbitration fee.

II. OPINION OF THE ARBITRATION TRIBUNAL

(1) The applicable law

The [Buyer] and the [Seller] did not stipulate the applicable law in their contract, nor did they reach an agreement on the applicable law afterwards. Since the countries of the two parties, China and Australia, are Contracting States of the United Nations Convention on Contracts for the International Sales of Goods (hereafter, the "CISG"), therefore, the Arbitration Tribunal deems that the CISG should be applied in this case.

(2) [Seller]'s contract violation and compensation

      1. The contract signed by the two parties on 29 May 1996 submitted by the [Buyer] satisfies the requirements for contract formation as stipulated in the CISG. The content of the contract is clear and affirmative, and the signatures of the two parities indicated the two parties' mutual agreement;

      2. The Arbitration Tribunal examined the inspection certificates issued by CCIB Australia on 15 August 1996 and 21 July 1997, the "negotiation agreement" (28 December 1996) and the "glassware resolution agreement" (11 September 1997) and holds that the [Seller] violated the contract by delivering non-conforming goods to the [Buyer], which affected the [Buyer]'s reselling the goods and caused losses to the [Buyer]. Because the contract in this case is effective and binding on the two parties, according to the relevant provisions in the CISG, the [Seller] shall bear the responsibility for contract violation, and the [Buyer] is entitled to receive compensation from the [Seller].

Regarding the [Seller]'s responsibility in detail and the remedies for the [Buyer], the Arbitration Tribunal notes that on 11 September 1997, the two parties reached the "glassware resolution agreement", by which the [Seller] was obligated to refund US $37,550.00 to the [Buyer] within six months (from October 1997 to March 1998), and the remaining US $5,000 was to be deducted from the amounts payable by the [Buyer] in future transactions.

From the payment documents provided by the [Buyer] (T/T payment receipt and L/C), the Arbitration Tribunal confirms that the [Buyer] has paid the [Seller] US $42,550.00, and that the agreement between the two parties was in accordance with the relevant provisions in the CISG; meanwhile, the Arbitration Tribunal notes that the amount actually paid by the [Buyer] was inconsistent with the amount determined in the agreement, and the [Buyer] asked a refund of US $42,550.00 instead of US $37,550.00 in its arbitration application and at the court session.

Even though the [Buyer] has paid certain expenses, it has sold the non-conforming goods at a discount price which decreased its loss and the Arbitration Tribunal deems that the US $37,550.00 determined in the "glassware resolution agreement" is reasonable. Therefore, the Arbitration Tribunal does not accept the [Buyer]'s claim for the refund of US $42,550.00. Instead, the [Seller] shall refund US $37,550.00 to the [Buyer] as stipulated in the "glassware resolution agreement."

      3. For the [Buyer]'s loss of interest, according to Article 84(1) CISG, which stipulates that "if the [Seller] is bound to refund the price, he must also pay the interest on it, from the date on which the price was paid", the [Seller] shall pay the interest to the [Buyer] from 1 April 1998 at a 7% annual interest rate (since business loan interest rate in Australia was 6% ~ 8% then, and the average is 7%) to the date of this award.

The calculation in detail is US $37,550.00 7% 365 days number of days from 1 April 1998 to the date of this award.

      4. For the arbitration fee in this case, the Arbitration Tribunal holds that the [Buyer]'s claims are due to the [Seller]'s contract violation, and that most of the [Buyer]'s claims are supported by the Arbitration Tribunal. The Arbitration Tribunal also holds that the [Seller] delivered a certain amount of conforming goods, and the [Buyer] did not return the non-conforming goods to the [Seller], but resold them at a discount price In addition, the [Buyer] failed to provide evidence accordingly; therefore, its claim that the [Seller] should pay 10% of the total amount claimed as the arbitration fee cannot be accepted. Based on above, the [Buyer] shall bear 30% of the arbitration fee and the [Seller] shall bear 70%.

III. THE AWARD

The Arbitration Tribunal rules that:

      1. [Seller] shall refund US $37,550.00 to the [Buyer];

      2. [Seller] shall pay the interest on the aforesaid amount calculated from 1 April 1998 to the date of this award at 7% annual interest rate;

      3. The [Buyer] shall bear 30% of the arbitration fee and the [Seller] shall bear 70%. The [Buyer] has paid the entire arbitration fee in advance, therefore, the [Seller] shall pay back US $ __ to the [Buyer];

      4. [Buyer]'s other claims are dismissed.

[Seller] shall pay the aforesaid sum within 45 days 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 Australia is referred to as [Buyer] and Respondent of the Peoples' Republic of China 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].

** 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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