QingdaoMaritime Court

Civil Ruling of Qingdao Maritime Court

(2014)Qing-Hai-Fa-Hai-Chu-Zi-721, 22 July 2014

Petitioner: Summer Maritime Limited

Legal Representative: Xiao-Hui Chen, Director

Attorney: Hui Yuan, Zhi-Qiang Tian, Guangdong Jinghai Law Firm (Qingdao Branch)

Respondent Shandong Haina Real Estate Corp.

Legal Representative: Su-Quan Guo, Chairman of the Board- Attorney: Bo-Zhao Wang, Shandong Jingrui Law Firm

This Application of Summer Maritime Limited for recognition and enforcement of foreign arbitral award, which was made by London Maritime Arbitrators Association on 27 February 2014 and settled the disputes between Summer Maritime Limited and Shandong Hainan Real Estate Corp. which arose out of by the “Letter of Guarantee” of “Trans Summer” on 4 July 2014, was submitted to this case. After the court accepted the application, the court formed a collegiate bench according to the laws. This case is now closed.

The petitioner alleges that: the petitioner and Haide International Holding (HK) Limited signed a time charter on 4 July 2014. They agreed that Haide International Holding (HK) Limited chartered the “Trans Summer” and the time will be 58 to 60 months. In order to guarantee of the performance of the time charter, the respondent offered the “Letter of Guarantee” to the petitioner on 4 July 2014, in which the respondent guaranteed for all the obligations, responsibilities, commitments and guarantees of the Haide International Holding (HK) Limited under the time charter. The “Letter of Guarantee” had an arbitration clause and states: "The applicable law of this Letter of Guarantee is English law and it shall be interpreted according to the English law. Any disputes aroused under this Letter of Guarantee should be submitted to London Maritime Arbitrators Association in London and settled according to the English Arbitration Act (1996) and rules accepted, modified, reenacted by London Maritime Arbitrators Association". Afterwards, the petitioner delivered the shipping to the Haide International Holding (HK) Limited according to the time charter. Because the Haide International Holding (HK) Limited breached the contract and the respondent refused to performance its liability to guarantee, which seriously harmed the interest of the petitioner, the petitioner applied to arbitration in London based on the “Letter of Guarantee”. The petitioner appointed John Schofield as arbitrator while the respondent appointed David Farrington. The tribunal was formed by these two arbitrators. On 27 February 2014, the tribunal rendered the Final Award on the dispute between the petitioner and respondent according the English Arbitration Act. The award said: 1) The tribunal think the “Letter of Guarantee” was signed under the actual and ostensible authority of the guarantor. The owner of the vessel had the right to claim against guarantor 4,011,330,87 US $, which was the loss of the petitioner caused for the charter breaching the contract, and 857,418.12 US $, which was rental that had not paid by the charter yet. 2) The guarantor in this case shall immediately give 4,868,748.99 US $ and its interests from 1 July 2012 for 4.5% of compounded quarterly interest; 3) The guarantor shall pay fees of this arbitration and fees of the owner of the shipping caused by this arbitration. The interests of the fees will be calculated from the date of the issue of this award to the date of payment and the interest rate was 4.5% of compounded quarterly interest. If the parties cannot get an agreement on the amount of the owner of the shipping, the tribunal would decide the amount according to Article 63(5) the “English Arbitration Act” and the tribunal reserves its jurisdiction. The guarantor also shall pay the arbitration fee 28,750.00 GBP. But if the arbitration fees were pre-paid by the owner of the shipping, the owner could request the charter to pay the fees and its interests immediately. The interest of the fees will be calculated from the date of the owner payment the arbitration fees to the date of payment and the interest rate was 4.5% of compounded quarterly interest. 4) This decision shall be final. The tribunal reserves its right to decide any other disputes caused by this case.

Now the final award has been sent to the respondent and has become finally effective, but the respondent has refused to perform its obligation under this award yet. So the petitioner request the court recognize and enforce this final award made by the London Maritime Arbitrators Association on 27 February 2014.

The respondent contends that:

1. The involved “Letter of Guarantee” is a foreign security. According to Article 6 of the Judicial Interpretation of the Supreme People's Court on Some Issues Regarding the Application of Security Law of the PRC, a foreign security contract shall be invalid if the security is not approved or registered with the relevant administration authorities. Therefore, according to Article V(2) of the New York Convention, the recognition or enforcement of the award applied by the petitioner would be contrary to the public policy and public order of the China and Chinese courts shall refuse to recognize and enforce this award. The respondent is no the actual contracting party to the “Letter of Guarantee” involved and to the arbitration agreement. This contract was signed by any other person who forged the signature of the respondent’s legal representative and deceived and used the legal seal of the respondent. Meanwhile, the persons who signed the contract and used the seal of the respondent lack the capacity to legal conduct of offering a “letter of Guarantee” if such a conduct of they have not approved by the respondents Board of Directors or Board of Shareholders. So the “Letter of Guarantee” and the arbitration clause are invalid, and the foreign arbitration institution does not have jurisdiction. The foreign award rendered under this arbitral award shall be refused to recognize and enforce under the New York Convention.

2. According to Article V(1)(b) of the New York Convention, recognition and enforcement of the award may be refused, at the request of the party, against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case. The respondent has not received proper notice said in this article and have known the arbitration from other party.

The court identified facts that the petitioner and Haide International Holding (HK) Limited signed a time charter on 4 July 2014. They agreed that Haide International Holding (HK) Limited chartered the “Trans Summer” and the time will be 58 to 60 months.

On the same day, the respondent offered the “Letter of Guarantee” to the petitioner. The “Letter of Guarantee” said the respondent, as a guarantor, will guarantee for all the obligations, responsibilities, commitments and guarantees of the Haide International Holding (HK) Limited under the time charter. The arbitration clause in this ''Letter of Guarantee” said: “The applicable law of this Letter of Guarantee is English law and it shall be interpreted according to the English law. Any disputes aroused under this Letter of Guarantee should be submitted to London Maritime Arbitrators Association in London and settled according to the English Arbitration Act (1996) and rules accepted, modified, reenacted by London Maritime Arbitrators Association.”

Afterwards, Haide International Holding (HK) Limited breached the time charter on the process of performance. The petitioner requested an arbitration to London Maritime Arbitrators Association against the respondent based on the “Letter of Guarantee". The petitioner appointed John Schofield as arbitrator while the respondent appointed David Farrington. The tribunal was formed by this two arbitrator. The tribunal did not have a hearing since parties agreed to do so.

On 27 February 2014, the tribunal rendered a final award on the disputes aroused of the “Letter of Guarantee” of the “Trans Summer” which offered on 4 July 2014. The decision of the award as follows:

A.The tribunal think the “Letter of Guarantee” was signed under the actual and ostensible authority of the guarantor. The owner of the vessel had the right to claim against guarantor 4,011,330,87 US $, which was the loss of the petitioner caused for the charter breaching the contract, and 857,418.12 US $, which was rental that had not paid by the charter yet.

B.The guarantor in this case shall immediately give 4,868,748.99 US $ and its interests from 1 July 2012 for 4.5% of compounded quarterly interest.

C The guarantor shall pay fees of this arbitration and fees of the owner of the shipping caused by this arbitration. The interests of these fees will be calculated from the date of the issue of this award to the date of payment and the interest rate was 4.5% of compounded quarterly interest. If the parties cannot get an agreement on the amount of the owner of the shipping, the tribunal would decide the amount according to Article 63(5) the “English Arbitration Act” and the tribunal reserves its jurisdiction. The guarantor also shall pay the arbitration fee 28,750.00 GBP. But if the arbitration fees were pre-paid by the owner of the shipping, the owner could request the charter to pay the fees and its interests immediately. The interest of these fees will be calculated from the date of the owner payment the arbitration fees to the date of payment and the interest rate was 4.5% of compounded quarterly interest.

D. This decision shall be final. The tribunal reserves its right to decide any other disputes caused by this case.

The petitioner submitted the notarial deed, numbered (2014) Qing Shi Zhong Zheng Min Zi 004367 and issued by the Shi Zhong notary office, Qingdao, Shandong Province, and Verification Certificate Domestic Express Mail Service. This evidences proved the respondent signed for mailed Final Award, which was mailed by the deputy of the petitioner, on 10 June 2014. The payment obligation decided in this award have not performed by the respondent until now.

The petitioner has submitted original the “Letter of Guarantee”, which involved arbitration clause, and copy of the Final award, which has been notarized.

Our court holds that: this is a case for recognition and enforcement of foreign arbitral award, which settled a dispute on maritime security for time charter. According to Article 31 of Some Provisions of the SPC on the Scope of Cases to be Entertained by Maritime Courts, cases on disputes over contracts of maritime guaranty are within the scope of the maritime courts, so the arbitral award which settled such a dispute is a maritime arbitral award. According to Article 11 of the Special Maritime Procedure Law of the PRC, when the parties apply for enforcement of maritime arbitral award, apply for recognition and enforcement of a judgment or written order of a foreign court and foreign maritime arbitral award, an application shall be filed with the maritime court of the place where the property subjected to execution or of the place where the person subjected to execution has its domicile. In this case, the court has jurisdiction because the respondents domicile is in Ri Zhao, Shandong Province, which is within the jurisdiction scope of this court. Since China and the UK are all contracting party of the New York Convention and the place of the arbitral award is London, the UK, according to Article 283 of the Civil Procedure Law of the PRC, the New York Convention will be used in this case.

The respondent contends recognition or enforcement of the involved arbitration is contrary to the public policy and public order of the China. According to Article V(2)(b) of the New York Convention, recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that the recognition or enforcement of the award would be contrary to the public policy of that country. The court holds that even though the involved foreign security contract is not approved and registered by relevant administration authorities and violated Chinese laws on foreign security, it does not constitute a violation of public policy of China. Recognition of the involved foreign arbitral award does not violate the fundamental legal principles of China, or infringe on state sovereignty of China, or threat the national security or public security, or violate the good social customs, or endanger the basic public interests of China. So the court does not support the respondent’s this objection.

The respondent contends that the “Letter of Guarantee” and arbitration clause are invalid, and the foreign arbitration institution does not have jurisdiction because contracts are signed by any other person who forged the signature of the respondent's legal representative and deceived and used the legal seal of the respondent and the persons lack the capacity for legal conduct of offering a “Letter of Guarantee” since such a conduct have not been approved by the Board of Directors or Board of Shareholders of the respondent. According to Article V(1)(a) of the New York Convention, “recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that the parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity…” The respondent is a Chinese legal person and the applicable law on his civil acts capacities is Chinese law. According to Article 36 of the General Principles of the Civil Law of the PRC, a legal person's capacity for civil Rights and capacity for civil conduct shall begin when the legal person is established and shall end when the legal person terminates. The court holds the respondent have the civil acts capacities of offering foreign-related securities as long as it exists. The reasons contended by the respondent that contracts are signed by any other person who forged the signature of the respondent's legal representative and the persons lack the capacity for legal conduct of offering a “Letter of Guarantee” since such a conduct have not been approved by the Board of Directors or Board of Shareholders are irrelevant with the civil acts capacity of the respondent. The court will not review the reasons above since they are not the legal reason under the New York Convention. So the court does not this objection since it does not have any legal basis.

The respondent also contends they did not receive the proper notice mentioned in Article V(1)(b) of the New York Convention. Article V(1)(b) of the New York Convention provides “recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that (b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case”. In this case, the respondent not only appointed the arbitrator and submitted their response to arbitration to the tribunal, they also submit joint statement to the tribunal together with the petitioner by their own agents. Therefore, the objection does not have any factual basis and the court does not support it.

To conclude, the petitioner has submitted the original of “Letter of Guarantee” and Final Award which have been notarized. These materials meet the requirement of Article IV of the New York Convention. There is no evidence that the foreign arbitral award in this case have any circumstances mentioned in Article V of the convention, which is the legal basis for courts to refuse to recognize and enforce foreign arbitral awards. The petitioners have sufficient evidence and justification for this application. This application meets the requirements of Civil Procedure Law of the PRC and the New York Convention and China’s reservation, so the court decides to support the application.

Pursuant to Article 283 of Civil Procedure Law of the PRC and related provisions of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, we hereby decide as follows:

Recognize the legal force of the Final Award which made on 27 February 2014 by two English arbitration, John Schofiel and David Farrington, on the disputes of the “Letter of Guarantee” for the “Trans Summer”.

The cost of this lawsuit is RMB 500 Yuan, which shall be paid by the respondent Shandong Haina Real Estate Corp.

 Chief Judge  Hua Li

Judge  Yan-E Wang

 Judge  Ke-Ke Wang

 22 July 2014

 Clerk Wen-Wen Xu

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*The original text is Chinese and has been translated into English for reference only. If there is any inconsistency or ambiguity between the Chinese version and the English version, the Chinese version shall prevail.