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CISG CASE PRESENTATION

China 11 June 1999 CIETAC Arbitration proceeding (Agricultural chemical products case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/990611c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 19990611 (11 June 1999)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1999/29

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Switzerland (claimant)

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

GOODS INVOLVED: Agricultural chemical products


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 62 ; 78 [Also cited: Article 61 ]

Classification of issues using UNCITRAL classification code numbers:

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

77A ; 78B [Interest on delay in receiving price or any other sum in arrears; Rate of interest: denial of compound interest]

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) 1999 vol., pp. 2064-2067

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at nn.123, 158, 196, 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

Agricultural chemical products case (11 June 1999)

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 clause in Contract No. 94XT-004 signed on 7 October 1994 in Zhuhai, by Claimant [Seller], Swiss ___ Company, and Respondent [Buyer], Zhuhai ___ Company; and
 
   -    The written arbitration application submitted by [Seller] to the Arbitration Commission on 10 September 1998.

On 15 September 1998, the Secretariat of the Arbitration Commission sent the notice of the arbitration, [Seller]'s application, the Arbitration Rules of China International Economic and Trade Arbitration Commission (taking effect on 10 May 1998, hereafter, the Arbitration Rules) and the list of arbitrators by express mail to [Buyer]'s address provided by [Seller], requesting [Buyer] to appoint an arbitrator and submit his defense and written materials. The report of the express mail company shows that [Buyer] received the above documents on 18 September 1998. According to Article 77 of the Arbitration Rules, the notice of arbitration of this case has been served.

[Seller] authorized the Chairman of the Arbitration Commission to appoint Mr. A as the arbitrator; because [Buyer] did not appoint an arbitrator within the stipulated period, the Chairman, according to Article 26 of the Arbitration Rules, appointed Mr. D as arbitrator; according to Article 24 of the Arbitration Rules, the Chairman appointed Mr. P as the presiding arbitrator. The above three arbitrator formed the Arbitration Tribunal on 14 December 1998 to hear this case. At the same day, the Secretariat of the Arbitration Commission sent the notice of the formation of the Arbitration Tribunal to [Seller] and [Buyer] by registered mail, express mail and fax. The express mail to [Buyer] was returned with the note that "This company is cancelled." According to Article 77 of the Arbitration Rules, this notice has been served.

On 4 January 1999, the Secretariat of the Arbitration Commission notified [Seller] that the express mail to [Buyer] was returned, and requested [Seller] to submit written documents to notify whether he wanted to continue this arbitration. On 21 January 1999, [Seller] faxed to the Arbitration Commission requesting continuation of the arbitration.

The Arbitration Tribunal reviewed the application materials submitted by [Seller], and following discussion with the Secretariat, decided to hold the court session on 15 April 1999 in Beijing. On 1 March 1999, the Secretariat sent by registered mail, and also according to Article 77 of the Arbitration Rules, authorized Global Law Office to send the notice of the court session to [Seller] and [Buyer].

On 15 April 1999, the Arbitration Tribunal held a court session in Beijing. [Seller] sent his representative to attend the court session. [Buyer] did not attend. According to Article 42 of the Arbitration Rules, the Arbitration Tribunal held the court session by default. [Seller]'s representative made statements, answered the Arbitration Tribunal's questions, and submitted a calculation of interest for late payment. After the court session, on 26 April 1999, [Seller] submitted a "Confirmation of the amount of subject matter" and "Supplementary statement" and other written materials.

On 30 April 1999, the Arbitration Tribunal through the Secretariat authorized Global Law Office to send the information about the court session, and [Seller]'s statements in the session and written materials submitted after the court session to [Buyer], requesting him to submit his written defense or other materials before 31 May 1999, and notifying him that if he requests the Arbitration Tribunal to hold the second court session, he should submit his written request within the above period. [Buyer] did not submit any written defense or other materials within the stipulated period.

Considering the written materials and the two court sessions, the Arbitration Tribunal has concluded the case and handed down its award by consent.

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

FACTS

On 7 October 1994, [Buyer] and original A Company (hereafter, A Company) signed a contract placing orders for Purchases No. 94XT-004 (hereafter, the contract), which stipulates that [Buyer] purchases DUAL 720 EC Agricultural chemical products for the total price of US $100,000. The price term is CIF Zhuhai, and the payment term is D/A 60 days, with China Construction Bank Zhuhai Branch as the collecting bank.

On 17 December 1994, A Company shipped the goods under the contract. On 9 January 1995, A company received the notice of confirmation from the collecting bank to accept the D/A 60 days. The notice states that the expiration date of payment is 9 March 1995. [Buyer] did not make payment to A Company before 9 March 1995.On 29 July 1996, [Buyer]'s legal representative and Manager Liang __ faxed a Notice of Import Settlement of Exchange Statement stating that the payment has been made. After checking it, A company found that this notice referred to payment under other contracts, Contracts No. XT-001, 002 and 003, but the payment under this contract has not been made. A Company urged [Buyer] many times, but [Buyer] did not make the payment.

On 6 March 1996, A Company and B Company merged into Swiss __ Company (hereinafter: [Seller]). The merger contract took effect on 20 December 1996. After merging, [Buyer] accepted A's liabilities including the payments owed. [Seller] is qualified to claim for the payment under this contract. Because [Buyer] did not make the payment, [Seller] filed this application for arbitration. [Seller] requests the Arbitration Tribunal to make the following awards:

1. [Buyer] shall pay the contract price, US $100,000, and interest on this amount from 9 March 1995, when the payment should have been made, to 15 April 1999, when the court session was held, with the preferential interest rate of 8.5% on 9 July 1998 described in the application, US $39,779.99. The total amount is US $139,779.99.

2. [Buyer] shall pay [Seller]'s part of the attorneys' fee, which is 5% of the amount awarded;

3. [Buyer] shall bear the entire arbitration fee.

The following is the interest list for late payment.

Principle
Owed
Value
Date
Closing
Date
Total
Date
Annual
Rate
Total Interest
Amount
Principle
and Interest
US $100,000.00 1995-3-9 1996-3-9 366 8.50% US $8,500.00 US $108,500.00

US $108,500.00 1996-3-9 1997-3-9 365 8.50% US $9,222.50 US $117,722.50
US $117,725.50 1997-3-9 1998-3-9 365 8.50% US $10,006.96 US $127,728.91
US $127,728.91 1998-3-9 1999-3-9 365 8.50% US $10,856.96 US $138,585.87
US $138,585.87 1999-3-9 1999-4-15 37 8.50% US $1,194.12 US $139,779.99

[Seller] has filled a Supplementary statement that according to the agreement between [Seller] and his attorney, the attorney fee (including traveling expenses) shall be 6% of the subject matter; the initial payment, US $5,000, has been paid to the attorney, and the remaining part shall be paid after the Arbitration Tribunal makes the awards. [Seller]'s actual attorney fee is 6% of the subject matter, but [Seller] requests the Arbitration Tribunal to award 5% of the subject matter.

As to [Seller]'s above claims and facts, [Buyer] did not make any defense or objection.

THE OPINION OF THE ARBITRATION TRIBUNAL

1. Applicable law

The contract does not stipulate the applicable law. Because [Seller]'s business place is in Swiss, and [Buyer]'s business place is in China. These two countries are parties of the United Nations Convention on Contracts for the International Sale of Goods (1980) (CISG). Thus, the Arbitration Tribunal holds that CISG is applied to this case.

2. [Seller]'s qualification

[Seller] submitted the notarial certificate of merger issued by Swiss notary, Christian Bruckner on 23 December 1996. This notarial certificate shows that after signing the contract with [Buyer], on 6 March 1996, A company signed a merger contract with B Company and Swiss __ Company. After the approval of the shareholders meeting on 20 December 1996, Swiss __ Company was registered. Then, Swiss __ Company accepted all of the liabilities and capital of A Company and B Company.

On 21 October 1997, Swiss __ Company wrote to [Buyer] requesting him to pay the contract price, US $100,000, and interest. [Buyer]'s legal representative and manger Liang __ signed the receipt of this correspondence. [Buyer] did not object to [Seller]'s qualification.

According to the above notarial certificate and the correspondence, and the fact that [Buyer] did not make any objection to [Seller]'s qualification when receiving the notice of arbitration and other documents, the Arbitration Tribunal holds that [Seller] is qualified in this arbitration.

3. [Seller]'s claims

[Seller] asserts that after signing the contract, on 17 December 1994, A Company shipped the goods by two installments, delivered the documents to the collecting bank, China Construction Bank Zhuhai Branch, and presented for acceptance. The collecting bank confirmed that on 9 January 1995, [Buyer] presented the documents for acceptance, but [Buyer] did not make payment before 9 March 1995 by D/A60 days.

[Buyer] did not raise any objection to [Seller]'s above statements and evidence. [Seller] asserts that [Buyer]'s Notice of Import Settlement of Exchange Statement is for the payment under other contracts, not under this contract. [Buyer] neither objected to this assertion, nor provided any contrary evidence.

After reviewing the contract, invoice, B/L and statement of account, etc., provided by [Seller], the Arbitration Tribunal holds that on 1 December 1994, [Seller] delivered the goods by two installments of US $100,000 and US $21,000 each. [Seller] delivered the documents No. NR571776-01 and NR571777-01. [Buyer] received the documents by bank's acceptance, and got the ownership of the goods and took the delivery, which shows that [Seller] fulfilled the duty of delivery. [Buyer] did not make the payment after accepting the documents and taking the delivery, which constitutes a breach of contract. According to Articles 61 and 62 of CISG, "If the [Buyer] fails to perform any of his obligations under the contract ", "The [Seller] may require the [Buyer] to pay the price ", and Article 78, "If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it" , and the above opinion 2, the Arbitration Tribunal upholds [Seller]'s claim for US $100,000 and interest.

After reviewing the interest list of late payment submitted by [Seller], the Arbitration Tribunal holds that [Seller]'s assertion that the bank's preferential interest rate on the day the arbitration was filed shall be used, lacks evidence. In addition, [Seller]'s claim for compound interest lacks contractual and legal basis. The Arbitration Tribunal holds that it is reasonable for [Buyer] to make the payment at the annual interest rate of 7%. From 9 March 1995 to 15 April 1999, the closing date, [Buyer] shall pay [Seller] the interest, US $100,000 X 49 months/12 months X 7% = US $28,283.33.

As to [Seller]'s claim for the attorneys' fee, 5% of the awarded amount, because [Seller] did not provide evidence, after considering [Seller]'s winning of this case and the complexity and time consuming nature of this case, the Arbitration Tribunal holds that, according to Article 59 of the Arbitration Rules, it is reasonable for [Buyer] to pay the attorney fee, US $9,000.

4. The arbitration fee

Because the dispute in the case was caused by [Buyer]'s breach, and most of [Seller]'s claims are upheld, [Buyer] shall bear the entire arbitration fee.

AWARD

The Arbitration Tribunal makes the following award:

1. [Buyer] shall pay [Seller] the contract price, US $100,000, and interest, US $28,583.33;

2. [Buyer] shall pay part of [Seller]'s attorneys' fee, US $9,000;

3. [Buyer] shall bear the entire arbitration fee. [Seller] has paid the arbitration fee in advance. Thus, [Buyer] shall pay [Seller] ___ .

4. [Buyer] shall pay the total amount of US $144,186.33 within 45 days of the date of the award.

This is the final award.


FOOTNOTES

* For purposes of this translation, Claimant of the Switzerland is referred to as [Seller]; Respondent of the People's Republic of China is referred to as [Buyer]. Amounts in the currency of the United States (dollars) are indicated as [US $].

** 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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Pace Law School Institute of International Commercial Law - Last updated February 10, 2006
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