Civil Ruling of Foshan Intermediate People's Court, Guangdong Province

(2014)Fo Zhong Fa Min Er Chu No.125, 29 June 2015

Claimant: ECOMUSA, INC., United States of America 

Legal representative: Eduardo L. Esteve, Chairman of the board 

Attorney: Huang Liping, lawyer from Bierens Law Firm, Shanghai 

Attorney: Zhao Bing, lawyer from Bierens Law Firm, Shanghai

Respondent: Foshan Nanhai Zhaoli Textile Co., Ltd. Nanhai District, Foshan, Guangdong Province, the PRC

Legal representative: Yang Zhongfeng, manager

Attorney: Xia Bin，lawyer from Yinli Law Firm, Guangdong Province

Attorney: Chen Lei, lawyer from Yinli Law Firm, Guangdong Province

The Claimant ECOMUSA, INC. applies for the recognition of foreign arbitral award. On 30 July 2014, the court accepted the case and organized the first hearing on 11 September 2014. The attorney of ECOMUSA, INC.-Zhao Bing and the attorney of Foshan Nanhai Zhaoli Textile Co.，Ltd. (hereinafter referred as “Zhaoli Co.，Ltd.”)- Xia Bin attended the hearing. On 13 November 2014, the court organized the second hearing. The attorney of ECOMUSA, INC.-Huang Liping and the attorney of Zhaoli Co., Ltd. --Xia Bin and Chen Lei attended the hearing. Now the court finished the review of this case.

The claimant, ECOMUSA, INC., held that in 2012, it appealed for an arbitration to International Cotton Association Limited (hereinafter referred as “ICA”) because of the cotton business contract which was between ECOMUSA, INC. and Zhaoli Co., Ltd On 4 January 2013, an arbitral award was made by ICA and then took legal effect, whereas Zhaoli Co.，Ltd. did not execute this arbitral award. For the sake of protecting the legal rights，ECOMUSA, INC. applied for the recognition and execution of this foreign arbitral award according to the law.

Zhaoli Co., Ltd. claimed: Firstly, the trade relationship did not exist between Zhaoli Co., Ltd. and ECOMUSA, INC. The sales contract which was provided by ECOMUSA，INC. Did not have any binding force to Zhaoli Co.，Ltd. Neither did Zhaoli Co., Ltd. have an agreement on purchasing 300-ton raw cotton with ECOMUSA, INC. nor stamping the contract with seal and signing the contract. The items in this contract did not have legal binding force on the condition that Zhaoli Co.， Ltd. did not accept the agreement with the legal form of seal and signature. It is incorrect to make this award when ICA does not find out the basic facts. Therefore, the court should not recognize this award. Secondly，this award which was made by ICA violated the demand of due procedure since ICA did not comply with its duty of notification in arbitration process. Zhaoli Co., Ltd. lost the opportunity to respond to the lawsuit because Zhaoli Co., Ltd. did not receive any email or express information from ICA. Thirdly，ICA did not serve the arbitral award to Zhaoli Co.，Ltd. which made Zhaoli Co., Ltd. lose the right to appeal Fourthly, this award which violates the basic principal of taking the law as criterion and the fact as ground and the principal of seeking truth from facts and correcting the mistakes whenever discovered contradicted with the public policy in our country and is against the basic principal of legal due process. Based on the reasons above, the court should refuse to recognize and enforce the award.

The court found out that on 23 July 2012, ECOMUSA, INC. appealed for an arbitration to ICA, claiming for compensation for USD 207163,73 from Zhaoli Co., Ltd. because of the business contract which was signed between the parties. Zhaoli Co.，Ltd. did not submit any materials to ICA or make any comments during the arbitration procedure. On 4 January 2013, ICA made an arbitral award which ordered Zhaoli Co., Ltd. to pay USD 189765.1 and its interest. Then ECOMUSA, INC. applied for the recognition and enforcement of this award to the court.

The court held as follows: This award was made by ICA in Britain. Both the United Kingdom and China are member countries to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which means the court needs to review this award according to the provisions in the Convention.

The issue in our case is: 1. Whether an arbitration clause exist or not; 2. Whether ICA notified Zhaoli Co., Ltd. about arbitration matters in conformity with the rules.

As for the first issue, ECOMUSA, INC. stated that they concluded the contract that contained arbitration clause with Zhaoli Co., Ltd. by fax, hence the carrier or format of the contract was fax files. ECOMUSA, INC, pointed out that they submitted the fax files to ICA and could not get it back immediately. Under this circumstance, ECOMUSA, INC. submitted a statement which was about arbitration matters and made by John Gibson-chairman of ICA to the court and then went through the procedures for notarization and attestation. In the statement, Gibson asserted that the contract attached to the statement was an accurate and real copy. The court found that the contract attached to the statement was the copy of the fax files which were stamped by the seal of Zhaoli Co., Ltd. And the bank account which was engraved on the seal of Zhaoli Co., Ltd. was the one that they have ever used. The fax time and number recorded on this copy of the fax-file could verify the claimant’s statement about the process of making contract. Testimony from witness -Liu for ECOMUSA, INC. in court can also confirm the process of making contract. Based on the existing evidences, the court could make a conclusion that the parties have made a contract and achieved an agreement on arbitration clause. In the light of the fact that the copy attached to the statement was an accurate and real one, we can consume that ECOMUSA，INC. has submitted “a duly certified copy” that accords with Article IV(l)(b) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. In view of this, we confirm that there exists an arbitration clause between two parties.

As for the issue whether arbitration organization notified Zhaoli Co., Ltd. about arbitration matters in conformity with the rules, arbitration notice can be sent to the last known principal place of business or registered office by post or any other recognized international courier, according to article 316  about notice in “bylaws and rules of the International Cotton Association Limited” (2011 Edition). Through our investigation, the company address which is specified on the top of the contract and on the seal which can be seen on the copy attached to the statement is the one that arbitration organization sent arbitration documents to. This address is the principal place of business of Zhaoli Co., Ltd. which arbitration organization could know lately. Sending notice and other documents by arbitration organization by means of post conforms to the provisions about notice in “bylaws and rules of the International Cotton Association Limited”. Therefore, arbitration organization has served the arbitration documents to Zhaoli Co., Ltd. according to the legal process. FedEx’s mail records which are attached to the statement that is submitted to arbitration by ECOMUSA, INC. shows that the mail which was sent to Zhaoli Co., Ltd. by arbitration organization has been delivered successfully. Based on these, the court firmly believes that Zhaoli Co., Ltd. has been informed properly during arbitration process.

In conclusion, the evidences which were provided by ECOMUSA，INC. could illustrate that there is an arbitration clause between the parties and arbitration organization has served the arbitration documents to Zhaoli Co., Ltd. The court does not agree with respondent’s statement that they refuse to recognize and enforce the arbitral award made by ICA. ECOMUSA, INC. applies for the recognition of foreign arbitral award，which is supported by our court, conforming to the provisions in “the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards”. According to article III of the New York Convention, article 238 of the Civil Procedure Law of the PRC，article 548 of the Interpretation of the Supreme People's Court on the application of the PRC Civil Procedure Law , the court makes the judgement as follows: recognizes the award rendered to settle the dispute between ECOMUSA, INC. and Foshan Nanhai Zhaoli Textile Co., Ltd. by International Cotton Association Limited on 4 January 2013.

The application fee is CNY 500, which should be paid by claimant ECOMUSA, INC.

This judgement shall be legally effective once it is served.

Chief Judge: Luo Kaiyuan

Assistant Judge: Li Wei

Assistant Judge: He Xihong

29 June 2015

Court Clerk: Pan Min

Related Links:
ECOMUSA与佛山市南海兆利棉纺针织有限公司申请承认和执行外国仲裁裁决特殊程序民事裁定书

*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.