The Maritime Court of Xiamen (10 December 2014)

(2014) Xia Hai Fa Ren Zi No. 14, 10 December 2014

Petitioner: Daewoo Shipbuilding & Marine Engineering Co., Ltd.

Legal representative: Gao Zaihao, Acting Director and President 

Attorney: Li Rongcun, lawyer from Jinghai Law Firm, Xiamen, Guangdong 

Attorney: Yang Dongyang, lawyer from Jinghai Law Firm, Xiamen, Guangdong

Respondent 1: ALPHA ELEPHANT INC. Co., Ajeltake Road, Ajeltake Island, Majuro, Republic of the Marshall Islands，MH 96960。

Respondent 2: Noel Venture Limited，Monrovia，Liberia.

The Petitioner, Daewoo Shipbuilding & Marine Engineering Co., Ltd. (“DSME”), the Respondent, ALPHA ELEPHANT INC Co. (“ALPHA ELEPHANT”) and Noel Venture Limited (“Noel”) applied for the recognition of a foreign arbitral award. On 13 October 2014, the Court accepted the case and comprised the panel according to the law. The Court has now finished the hearing and reviewed this case.

The Petitioner, DSME. claimed that on 8 May 2007, it signed a shipbuilding contract with KELEPHANT. as the buyer. The ship was called “Aelephant” (Ship Number 5330) and oil tankers of which have load capacity over 317 thousand tons. Article 13 of the contract provided that all the disputes about the fee of the shipbuilding shall submit to London, UK and resolved by arbitration according to English Arbitration Act 1996 and the valid terms of the London Maritime Arbitrators Association (“LMAA”)when the dispute arises. The two parties signed supplementary contracts 1，2 and 3 respectively on 8th May 2007 and November 28th，2008. On January 18th, 2010, the buyer of the shipbuilding contract changed its name from KELEPHANT into AELEPHANTINC. In 3rd February of the same year, the buyer further changed its name into ALPHAELEPHANTINC. The two agreements about the change of subject provided that disputes arising from this contract shall be resolved according to article 13 of the shipbuilding contract, and article 13 was therefore combined into the agreements about change of subject. On 5th July 2010, ALPHAELEPHANTINC (as the buyer), DSME (as the builder) and Noel signed a Ship Sale and Purchase Contract, as the supplementary contract 4. According to the contract, ALPHAELEPHANTINC shall pay for the delay of payment for the first time, which amounts to 25 million dollars, and Noel shall pay for the second time, which amounts to 30 million dollars. The payment obligation shall be performed by 11 phases, since one week after the day for the delivery of contract (June 30th, 2010). Article 16 of the contract provided that all disputes should be submitted to arbitration according to Article 13 of the shipbuilding contract. On July 29th, 2011, ALPHAELEPHANTINC (as the buyer), DSME (as the builder) and Noel signed a Ship Sale and Purchase Contract, as the supplementary contract 5. The contract provided that ALPHAELEPHANTINC and Noel guaranteed the performance of the contractual obligation, and promised the validity of guaranty. Noel confirmed and accepted that “glory mortgage contract” (Glory Advance Corporations sets first priority mortgage for Claimant on “Glory Advance’’ ship) as the guaranty of the second time payment for the delay (as defined in the supplementary contract 4). Noel also combined Article 16 (which referred to Article 13 of the shipbuilding contract) of the supplementary contract 4 into supplementary contract 5. As ALPHAELEPHANTINC and Noel did not perform the obligation under the shipbuilding contract, DSME had to submit the case to arbitration in London according to Article 13 of the shipbuilding contract. Because the two Respondents did not designate arbitrators within the assigned time，LMAA’s arbitrator John Colin Sheppard was appointed as the sole arbitrator. On May 13th, 2014, Mr. John Colin Sheppard delivered the “Arbitral award Concerning “Aelephant” (Ship Number 5330), the May 8th, 2014 Shipbuilding Contract” (“Arbitral Award 5330”). As Arbitral Award 5330 was based on a valid arbitration agreement between the parties, decided and published by legally comprised tribunal. Further, the award deals with the debt that guaranteed in a case, which concerns a maritime dispute about the affirming the creditor’s right between ALPHAELEPHANTINC and Glory Advance Corporations, and accepted by Maritime Court, Xiamen, PRC. According to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”）and the Notification from Supreme Court of the PRC concerning enforcement of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the application for the recognition of this arbitral award is legally effective in PRC.

To support and prove its claim, the Claimant provided the shipbuilding contract of “Aelephant”（Ship Number 5330)，the supplementary contracts 1, 2, 3, 4, 5, the two contracts about the change of subjects, the first priority mortgage registration certificate, the ship ownership certificate, encumbrance certificate, Arbitral Award 5330, and the affidavit of Counsel Viviennee Deltraud Pitroff (from Holman Fenwick Willan Law Firm) dated 19th February 2014. All the above evidences produced in Korea and the UK, are all notarized by the notary office in the country of origin, and authenticated by the Embassy of the PRC in the country of origin.

Based on the address DSME had provided, the Court sent a copy of the application for recognition of foreign arbitral award, the notice of responding to the action, notice of the composition of tribunal, and the evidences submitted by Petitioner. On 15th May 2014, all the above legal documents were sent through EMS (No. EE869536033CN, EE869536016CN to recipient designated by ALPHAELEPHANTINC and Noel, which is Rongxin TMT Transportation Corporation Ltd. (hereafter referred to as “Rongxin”, postal code: 11071, telephone: 0227239559). On 17th May, Rongxin signed for the receipt representing two Respondents, with the seal of Rongxin (The seal was with the address and telephone number consistent with what provided by Petitioner.) But the two Respondents neither object to the application from the Petitioner, nor submit any evidence within the 30-day limit set by the Court.

After the review, the Court affirms the authenticity of the notarized or authenticated evidences from Petitioner, and adopts the facts illustrated by Petitioner according to the evidences. Meanwhile, the Court figures out that “Aelephant”, (Ship Number 5330) shipbuilding contract provided in Article 13 that “… (a) all disputes concerning whether the ship consistent with the regulation of Ship Classification Society or other administrative organs shall be submitted to Ship Classification Society or other administrative organs，and their decision shall be final and binding to both contractual parties, (b) All other disputes shall be submitted to arbitration in London, UK. The builder and buyer shall designate one arbitrator individually, and the two designated arbitrators shall appoint the third arbitrator together. The arbitration shall be conducted according to Arbitration Act 1996 (of England) and the valid terms of London Maritime Arbitrators Association (“LMAA”) when dispute arises.” Article 18 (Representative) provided that, “the buyer designate Rongxin to receive the notices about the contract, and the notice shall be transferred to KELEPHANT Corporation (The recipient: President Su Xinji; Fax: +88622719- 2699; E-mail: ...), except that the buyer notified the builder in writing to change the representative.” Article 19 (Notification and Language) provided that, “All the notification, request, command, order, suggestion and correspondence concerning financial or legal issues under this contract, shall send by the registered mail by air, express, delivered in person or faxed with written confirmation. The notification is considered sent out and effective when the mail arrives at the delivery address. But ten days after the registered mail by air is sent out, and five days after the express is sent out, they are considered delivered. All the notification and correspondence concerning the contract shall be written in English. In both contracts about change of subject, Su XInji signed his name as representative and director of KELEPHANT Corporation，AELEPHANTINC and ALPHAELEPHANTINC.

at the disputes arising from this contract shall be solved according to Article 13 of shipbuilding contract, which is incorporated into this contract. Article 1 (Definition and Explanation) of the supplementary contract 4 provided that “TMT” referred to Rongxin, a company established according to Taiwan Law. Article 4 (Modification of Contract) of

supplementary contract 5 provided that “……………‘Glory Letter of Tranfer’ is a first priority Letter of Transfer, in which the owner of Glory promised to transfer the profit, insurance and expropriation compensation of Glory to the builder. ‘Glory Mortgage Contract’ is the first priority ship mortgage contract, according to which the owner of Glory as the mortgager, set the builder as mortgagee. ‘Glory Guaranty’ refers to the ‘Glory Mortgage Contract’ and ‘Glory Letter of Transfer’. ‘Owner of Glory’ is the Glory Advance Corporation, a company established under Panama Law. ‘Mortgage contract’ refers to ‘Glory Mortgage Contract’, the second priority mortgage contract, and the third priority mortgage contract. Article 9 provided that Article 1.3-1.5, article 13, 15, and 16 are all incorporated into this supplementary contract.”

On July 29th，2011，the Glory Advance Company (the owner of “Glory Advance” Ship) concluded a mortgage contract with the Petitioner，according to which，the “Glory Advance” Ship is mortgaged for the “Aelephant” shipbuilding contract and the second time payment for late delivery (amounts to 41,770,111 US dollars), and the mortgage has preliminarily registered in the flag state of “Glory Advance” Ship--Panama. On August 24th 2011，The Republic of Panama’s general administration for ship mortgage registration formally registered for the mortgage of “Glory Advance” ship. According to the Petitioner’s inquiry to mortgage registration office, Panama’s embassy in London under authorization of Panama General Administration of Commercial ship, issued the ship ownership certificate and encumbrance certificate on 26th November 2013. According to the certificates, Glory Advance Company is the owner of “Glory Advance” ship, and the Petitioner has registered for the first priority mortgage, which amounts to 41,770,111 US dollars.

On November 27th 2013, Counsel Viviennee Deltraud Pitroff (from Holman Fenwick Willan Law Firm) represented DSME, and appointed Mr. John Colin Sheppard from LMAA as the arbitrator for “Aelephant” ship disputes. In the next day, Mr John Colin Sheppard accepted the designation. On December 10th，2013, Counsel Viviennee Deltraud Pitroff faxed to Miss Monica Chen in Rongxin (The fax number is 00886227235086)，and stated, “Attached please find the notification of the designation of arbitrator by my client. The notification should have sent to the new address of Rongxin, but we knew from our client that Rongxin changed the location this year, so the fax number is the best way to contact." In the next day, Mr. Lawrence Lee from DSME delivered the notification of appointment to Miss Monica Chen in person, but did not receive any response.

On November 30th, Counsel Yiviennee Deltraud Pitroff notified the two Respondents twice, asserted that according to Section 17 of the Arbitration Act 1996, the two Respondents had 7 days to appoint the arbitrators, or Mr. John Colin Sheppard would be the sole arbitrator. However, after 7 days, there was no reply. On 8th January 2014, Holman Fenwick Willan Law Firm notified the two Respondents that Mr. John Colin Sheppard would be the sole arbitrator in this case. To make it clear that the Petitioner’s claim was also relevant to Noel, who is the principal debtor, Holman Fenwick Willan Law Firm notified Noel again on 14 January to request it designate arbitrator within 14 days. Noel did not reply. The law firm then notified on 29 January that Noel had 7 days to designate arbitrator, or Mr. John Colin Sheppard would be the sole arbitrator. Noel still did not reply. On 6 February 2014; Holman Fenwick Willan Law Firm informed Mr. John Colin Sheppard in writing that the two Respondents did not designate arbitrators, and reaffirmed that Mr. John Colin Sheppard is the sole arbitrator in this case. At the same time, the Law Firm said, “the message was send to ALPHA ELEPHANT INC (transferred by Rongxin) though fax and e-mail (The contact information is as follows: Rongxin Company; Recipient, Mr. Su Xinji; Fax, 00886227235082; Recipient, Miss Monica Chen; E-mail, monica.chen@tmtship.com). As we cannot contact Noel under the address written in the contract, we try to contact it by the address that it registered in Liberia, and then transferred by Liscr Trust Company (80 Broad Street, Monrovia, Liberia). We suggest that if you need to contact with or send any document to Noel, you may use mail or fax (00886227235082), and copy to Mr. Su Xinji at the same time. Finally, we had already delivered copy of our remedy request to the Respondents." On 19th February, Counsel Viviennee Deltraud Pitroff testified under an oath with the notarization of notary---Nigelp Ready from London. The testimony with a set of documents including e-mails, faxes, letters, can be used to confirm the above facts.

On 13th May 2014, the sole arbitrator, Mr. John Colin Sheppard, issued Arbitral Award 5330. The award stated that “On 19th March 2014, I faxed to the first Respondent and e-mail to the second Respondent，the content of message (the Lawyer of Claimant also mail the documents to two Respondents with the same content) was as follows: As the Request for Remedy from DSME has sent to you on 17th February 2014, and the Respondents did not reply, I, as the sole arbitrator，hereby make the order that Respondents shall submit the reply to request before 9th April 2014, 17:30……On 10th April 2014, I faxed to the first Respondent and e-mail to the second Respondent as follows (the Lawyer of Claimant also mail the documents to two Respondents with the same content): For the order I delivered on 19th March 2014, I knew from the e-mail of Holman Fenwick Willan Law Firm on 10th April 2014 that the Respondents did not reply to the request within the time limit. I hereby deliver the final order: the Respondents shall submit the reply to request before 25th April 2014, 17:30. If the Respondents do not submit the reply within the time limit in final order, according to Section 41 (7)(c) of the Arbitration Act 1996,I would make no further notification，and make award basing on the documents that already submitted…..Until 25th April 2014, 17:30, both Respondents did not reply to the request…….I，hereby，after review all the written materials and evidences, make and issue the final arbitral award and reserve the jurisdiction on other issues that have not decided in this award. The award is as follows: (a) the Claimant succeed in claiming for USD28,250,000 as compensation from the first Respondent (ALPHA ELEPHANT INC), and also the fifth to twelfth installment with interest (annual rate 10%) and compound interest. The compound interest of the fifth to eleventh installment shall be calculated since the agreed delivery date, and the twelfth installment shall be calculated 3 years after the agreed delivery date. All the compound interest shall be calculated every three months until the actual payment, (b) The first Respondent shall pay the Claimant the money mentioned in (a) as soon as possible, (c) The Claimant succeed in claiming for 20,885,000 US Dollars to the second Respondent (Noel), and also the interest (annual rate 10%) and compound interest for fourth to eighth installment (the amounts are USD617,500, USD520,000, USD422,500，and USD325,000 respectively). The compounding interest shall be calculated since the agreed date for payment, until the actual payment, (d) The second Respondent shall pay the Claimant the money mentioned in (c) as soon as possible, (e) The Claimant succeed in claiming for the cost arising from article 9.4 of supplementary contract 4.1 hereby decide that the two Respondents shall pay the cost and fees with interest (annual rate 5%) and compounding interest. The amount shall be calculated every 3 months since the day that the Claimant payed for these cost and fees, until the actual payment of two Respondents, (f) The two Respondents shall pay for the arbitration fees and undertake joint liability for the Claimant's cost. At the same time, the Respondents shall pay the compounding interest of arbitration fees, which is calculated every 3 months since the issuance of the award until the actual payment, with the 5% annual rate 5%. The two Respondents should undertake the joint liability for the fee of arbitration, which amounts to 3,500 pounds. If the fee of the arbitration is completely or partly payed by the Claimant already, the Claimant is entitled to ask Respondents pay back the money, and also claim for the interest and compounding interest."

 The Court further find out that on 6 December 2013, our Court auctioned off the detained “Glory Advance” Ship for RMB 5 8,700,000. The Petitioner，as the first priority mortgagee of “Glory Advance” Ship, applied for the registration of creditor’s right and was approved by the Court. After that, the Petitioner initiated a lawsuit against Glory Advance Company to affirm the maritime claim. Because the amount of claim for ship mortgage shall be determined upon the result of arbitration concerning shipbuilding contract, on 27th March 2014, the Court decided to suspend the lawsuit.

The Court held as follows: The Petitioner submitted the dispute to arbitration according to the arbitration clause in the shipbuilding contract, and then apply for the recognition of Arbitral Award 5330 in the territory of China, which constitutes an application for recognition of foreign arbitral award. The award the Petitioner seeks for recognition is related to the principal creditor’s right guaranteed by “Glory Advance” ship，which had been auctioned off by the Court. The Petitioner had legally applied for the registration of creditor's right and initiated a lawsuit for affirming the maritime claim. Therefore, according to Article 13 of the Supreme Courts interpretation concerning several issues about application of Special Maritime Procedure Law of the PRC, our Court, as the place where the money from Ship auction is located, has the jurisdiction. The PRC and the UK both are contracting parties to the New York Convention, and according to Article 283 of the Civil Procedure Law of the PRC, the Court shall apply the New York Convention to review the case. The dispute about the shipbuilding contract arising from the contractual commercial legal relationship, it can be resolved by arbitration according to the PRC Law. According to the address provided by the Petitioner, the Court sent a copy of the Application for Recognition of Foreign Award, the Notice to Respond to the claim and the other legal documents to the recipient (Rongxin) designated by the two Respondents. Rongxin’s confirmation of the receipt can be recognized as an acceptance，made by the two Respondents, for the delivery of documents. However, the two Respondents have not objected to the application for the recognition of foreign arbitral award within the designated time limit. Consequently, the Court believes that the two Respondents have no objection to Arbitral Award 5330. Also, Arbitral Award 5330 does not contradict the public order of the PRC.

In conclusion, according to Article 283 of the Civil Procedure Law of the PRC and the New York Convention, the Court makes the judgment as follows: The arbitral award concerning the shipbuilding contract of “Aelephant” Ship，issued on 13 May 2014 by Mr. John Colin Sheppard from the LMAA, has legal effect in the PRC.

The application fee of this case is RMB 500，which should be paid by the Respondents, ALPHA ELEPHANT INC and Noel Venture Limited.

This judgment is final.

Chief Judge: CAI Fujun

Judge: CHEN Ya

Judge: YU Jianlin

12 December 2014

Court Clerk: Li Yu

Related Links:
申请人大宇造船海洋株式会社与被申请人阿尔法象有限公司、诺尔商业有限公司申请承认外国仲裁裁决民事裁定书

*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.