(2015) First Civil Division of Zhaoqing Court Arbitration No.26, 19 October 2015

Petitioner: Jacobson Golf Course Design, Inc.

Authorized agent: ChenNaiwei, lawyer, Allbright Law Offices. 

Authorized agent: Cong Lu, lawyer, Allbright Law Offices.

Respondent: Sihui Zhenhui Garden Property Development Co., Ltd. 

Legal representative: Kuang Haifeng, chairman of the boarder.

Respondent: Sihui Huiguan Investment Co., Ltd.

Legal representative: Kuang Haifeng, chairman of the boarder.

Authorized agent for the respondents: Liu Xiabo, Dentons (Guangzhou) Law Firm. 

Authorized agent for the respondents: Chen Qingmiao, Dentons (Guangzhou) Law Firm.

The dispute arising from the application for recognition and enforcement of a foreign arbitral award among the petitioner and the respondents are accepted by this court on 19 May, 2015. And a collegial panel was constituted, according to the law, with judge Li Xiaodong as presiding judge, judge Cai Hongmao and assistant judge Lu Cuihua participating in the case review. The case is now closed.

The petitioner’s claims are as follows. The application arose from the outstanding golf course design service fee. On 15 May, 2013, an application for arbitration was filed to the International Dispute Resolution Center of the American Arbitration Association (“AAA”)，in accordance with the arbitration clause of section 7.3 of the “golf course design contract” ("Contract"), requesting the respondent to pay and compensate the relevant loss. On 26 October, 2013, the arbitrators held the first preparatory meeting with the parties. At the meeting, the parties: (a) accepted the constituted arbitral tribunal; (b) agreed to take all requests relating to the dispute referred to in the application or to the dispute referred to in the application, as well as all defenses or demurrer relating to any potential dispute counterclaim, to the arbitration and jurisdiction of the arbitral tribunal; (c) agreed that the provisions of the arbitration agreement contained in section 7.3 of the Contract shall apply to all matters raised in this arbitration; (d) agreed to take the laws of the State of Illinois as the substantive law; (e) agreed that the arbitration shall be carried out in accordance with Construction Industry Arbitration Rules and Mediation Procedures of the AAA and supplemented with AAA Nexus Disputes Supplementary Procedures and International Commercial Arbitration Supplementary Procedures. On 25 August，2014，the International Dispute Resolution Center of the AAA issued a final award of on the case registered as No. 50110T0046713. I) The petitioner is allowed to apply to the court for the recognition and enforcement of the award in accordance with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Convention). Both China and the United States are parties to the Convention. In accordance with Article I of the Convention, when an arbitral award arising from a dispute between a natural person or a legal person, which is made in the territory of a State, is sought for recognition and enforcement, the convention shall apply. This final ruling was filed by the branch of the AAA International Dispute Resolution Center in accordance with Article I of the Convention, with a procedure conducted in accordance with the Construction Industry Arbitration Rules and Mediation Procedures of the AAA and supplemented by the AAA Nexus Disputes Supplementary Procedures and International Commercial Arbitration Supplementary Procedures, which is conform with article I of the Convention. The petitioner hereby applied to this court to recognize and enforce the arbitral award in accordance with the Convention. II) This arbitral award shall be recognized and enforced where there exists no ground of refusing to recognize and enforce an award provided in Article V of the Convention, i. There is no existence of incapacity of the parties to the arbitration agreement. The petitioner is legally incorporated under the laws of Illinois, with a good reputation in Illinois, and the respondent is an effectively continuous business entity. Therefore, there was no incapacity of the petitioner and the respondent according to their respective laws. ii. the arbitration agreement was valid. All disputes and disputes arising out of this Contract shall be submitted to the AAA for arbitration in accordance with section R-2 of Rules and Mediation Procedures, if the parties agree to take the dispute to arbitration under this rule, or if they are instituted to the AAA and the arbitration is initiated pursuant to that rule, it shall be deemed that the parties authorize the Association to conduct the arbitration. The power and liability of the AAA are governed by the parties’ arbitration agreement and these rules and executed by the representatives appointed by the American Arbitration Association. The AAA may, at its discretion, assign its affiliates to the arbitration. Any arbitration conducted under this rule may only be heard by an individual or organization authorized by the AAA or by the AAA itself. The arbitration agreement between the parties indicates not only the American Arbitration Association, but also the Construction Industry Arbitration Rules and Mediation Procedures, and the arbitration agreement was valid, iii. This arbitration was in line with due process. On 2 June，2013, the petitioner sent the notice of arbitration to the respondent. On 26 October, 2013, the arbitrators and the parties held their first preparatory meetings, and the parties clarified the procedural issues, including acceptance of the constituted tribunal; and agreed to take all requests, as well as all defenses or requests and any potential counterclaims related to the arbitration and the jurisdiction of tribunal; and agreed that the provisions of the arbitration agreement contained in section 7.3 of the Contract should apply to all matters raised in this arbitration; agreed that the law of Illinois was the substantive law and that the arbitration should be subject to the Construction Industry Arbitration Rules and Mediation Procedures of the AAA supplemented with the AAA Nexus Disputes Supplementary Procedures and the International Commercial Arbitration Supplementary Procedures. At the same time, the arbitrator issued a schedule No. 1 (S0 #001) and made detailed provision of the production of evidence. Before the hearing, the arbitral tribunal held several additional pre-hearing meeting. When the second pre-hearing meeting was conducted on 16 January 2014, the respondent confirmed that it would not claim for compensation by Mr. Gabriel Flores in this arbitration and stated that it would claim millions of dollars from the petitioner. However, it did not file a claim at last. At the third pre-trial meeting of 23 February, 2014, the parties agreed on the procedural matters involved in the hearing. On 17 March, 2014, the arbitrators and all the parties visited the construction site of the golf course. On 18 March, 2014, the arbitral tribunal carried out a review of the evidence in Guangzhou, and the petitioner and two lawyers for the respondents appeared before the tribunal. The petitioner submitted the testimony of witnesses. The respondent referred to and disclosed a series of witnesses who might appear before the tribunal, but in the process of the trial, the respondent confirmed only Mr. Kwun FaiCho (Managing Director of Zhenhui Park) as a witness. The parties also presented documentary evidence at the hearing and submitted the materials before the trial and submitted their comments after the hearing to clarify their positions respectively. At the post-trial meeting on 28 April, 2014, the parties' lawyers were asked if they wanted to submit further evidence. The attorneys of each party confirmed that no further evidence was required and that both their clients and they had been given foil and impartial opportunity to elaborate their argument on the case. In accordance with the instructions of the arbitrators and with the consent of both parties, the proceedings of the arbitration ended on 5 May, 2014 and culminated in a final decision on 25 August, 2014. In summary, the arbitration procedure was open and transparent, the arbitration was in strictly accordance with the due process. Both the composition and arbitration procedure of the arbitral tribunal are consistent with the parties' agreement and the Illinois law and the Construction Industry Arbitration Rules and Mediation Procedures. The respondent was duly informed and fully aware of the arbitration information and was given a fair hearing opportunity to state its opinion and to claim its right，in accordance with the legitimacy of the arbitral proceedings, iv. In accordance with section 7.3 of the Contract, the issues decided were within the scope of the arbitration agreement. All disputes and disputes arising out of this Contract should be submitted to the AAA for arbitration in accordance with the Arbitration Rules of Construction. At the same time, pursuant to the parties’ agreement at the first pre-trial meeting, the parties agreed to take all claims, as well as all defenses or all defenses relating to the request and any potential counterclaim to the AAA for arbitration within its jurisdiction, and agreed that section 7.3 shall apply to all the issues referred to in this arbitration, v. The ruling was binding on the parties and there was no ground for setting aside or suspending the enforcement. According to the certificate issued by the American Arbitration Association International Dispute Resolution Center, the award was a final decision and a true and accurate copy of the association file. And it had been sent to the respondent's attorney. The final decision was binding on the parties, and there is no case of setting aside or suspending the enforcement vi. There was arbitrability for the dispute, and there was no conflict with the public order. Article 2 of the Arbitration Law of the PRC stipulates that contract disputes and other disputes arising from property rights between citizens, legal persons and other organizations of the equal subject may be arbitrated. This dispute arose from a contractual commercial dispute between legal people of equal status and there was arbitrability for this dispute. In accordance with the provision of the Decision of the Standing Committee of the National People's Congress on the Implementation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the Convention shall apply in the dispute arising from contractual or non-contractual commercial legal issues defined by the law of the PRC in the territory of the PRC. And there is no conflict with the public order in the present award. To sum up, we apply to the court for recognition and enforcement of the arbitral award of No. 50110T0046713. In the course of the trial, the petitioner expressly required only for enforcement of the first, second and third request of the award and ignored the interest arising from the overdue payment in the first request. And the total amount requested is 552,852.26 (175,000 + 133,875 + 243,977.26 = USD 552,852.26).

The respondents, Zhenhui Company and Yuan Yuan Company, argued as follows. I. The evidence materials provided by the petitioner, such as the identification, authorization information, arbitral award, design contract and others, do not meet the relevant foreign-related litigation notarization requirements. According to the civil procedure law and Article 523 of the Interpretation of the Supreme People's Court on the application of the "Civil Procedure Law of the PRC", the documents provided by the petitioner were somewhat in a mess and could not be distinguished. Whether the evidence was fully notarized and certified and whether the requirements conformed with the requirement shall be determined by the court. II. It is in conflict with the public policy of China for the petitioner to apply for recognition and enforcement of the arbitral award. Pursuant to Article V(2)(b) of the Convention, "the recognition or enforcement of the award would be contrary to the public policy of that country," and the court should not be recognized and the enforcement the arbitral award. The details of the dispute are as follows, i. the award violates Article 2, 13 and 26 of the PRC Construction Law, and the petitioner violated the relevant provisions of this law when it contracted the respondent's design work without the compulsory qualification stipulated in Chinese law. ii. the petitioner violated the PRC Bidding Law when it did not bid in accordance with the Chinese law on contracting a design contract. The Interpretation of Supreme Peopled Court on The Application of Law for Reviewing Construction Contract provides that the construction contract is invalid if the contractor has not obtained the construction enterprise qualification, or there is no bidding process for the construction projects with requirement of compulsory biding. Articles 7 and 8 of the Construction Engineering Survey and Design Management Regulation stipulate that the state engages qualification management system for the entities working on construction engineering survey and design activities, and the contractors shall contract construction projects within the qualification level. And the petitioner violated Articles 7 and 11 of the Regulation on the Quality Management of Construction Projects and the provision of the Notice of the Ministry of Construction about Issuing the Interim Provisions on the Administration of Foreign Enterprises Engaging in Construction Project Designing Activities within the PRC which provides: Where a foreign enterprise is to undertake construction project designing business within the PRC, it shall select at least one Chinese designing enterprise with a construction project designing qualification certificate issued by the administrative department of construction to carry out Sino-foreign cooperative designing activities (hereinafter referred to as cooperative designing), and shall undertake designing business within the scope of the qualification certificate of the said Chinese designing enterprise(s). The construction entity shall take the responsibility of preliminary review on whether the foreign enterprise cooperating on designing has designing ability and the foreign enterprise passing the preliminary review may cooperate in design. And the contract between the parties shall be reported to the provincial construction department for the record.” However, the petitioner neither cooperated with the Chinese designing enterprise nor took the foreign enterprise for a preliminary review and report it to the provincial construction department for the record. According to the Notice on the issues of reporting the designing qualification for specialized construction project by foreign-owned engineering design consulting enterprises or institutions, this case is not within the scope of independent design of the application. According to the Regulation on Bidding for Survey and Design of Construction Projects, the petitioner violated the rules and laws of China and this constitutes a violation of Chinese public policy pursuant to the provisions of the Convention, we hereby requested the court not to recognize and enforce the arbitral award. Although the petitioner believes that there exists no ground provided in Article V(l) of the Convention in their application for recognition of the enforcement of the award, and there exists no situation of incapacity，however, the petitioner who worked on a design project without the qualification provided by the compulsory regulation does not have the capacity. Ill The actual entity performing the "golf course design contract" is Zhenhui Park company, which has no substantive relevance with Zhenhui Park company. In summary, we apply for this court to deny the application of the recognition and enforcement of the US arbitral award.

The petitioner provided the following evidence to support its argument.

Evidence 1, notarization and certification documents. Supporting that the evidence provided by the petitioner is true and accurate;

Evidence 2, No. 50110T0046713 Arbitral award and Certificate (Chinese and English). Supporting for the application of the petitioner requesting the recognition and enforcement of the award;

Evidence 3, the petitioner qualification certificate. Supporting that the petitioner is based on the law of the United States is the effective legal entity;

Evidence 4, letter of authorization. Supporting that the Petitioner is legally authorized;

Evidence 5, the "Golf Course Design Service Contract" signed by the petitioner and the respondent, Yuan Guan Company (Chinese and English version). Supporting that the petitioner is subject to the arbitration clause of the agreement;

Evidence 6, the "Golf Course Design Service Contract" signed by the petitioner and the respondent Zhenhui Park (Chinese and English version), supporting that the petitioner Zhenhua Park Company is subject to the arbitration clause of the agreement;

Evidence 7, the "contract price change book" (in English) signed by the petitioner and the respondent supporting that the parties on the "golf course design service contract" carried out price changes;

Evidence 8, Testimony of the Mr. Cao Guanhui, on the side of the respondent (Chinese and English). Supporting that Mr. Cao Guanhui is the main decision-maker of the two respondents and the two petitioners share the same English name as "Si Hui Real Estate Development Company";

Evidence 9, the petitioner's president's passport. Supporting the identity of the president of the petitioner;

Evidence 10, a statement of a senior staff affiliated with the president of the respondent. Supporting the identity of the president of the petitioner;

Evidence 11, the proof of the fact that the award has been serviced to the attorney of the respondent. Supporting that the American Arbitration Association serviced the award to the respondent's lawyer through FedEx;

Evidence 12, No. 50110T0046713 Arbitral award, the petitioner's qualification certificate，the letter of modification and Mr. Cao Guanhui’s written testimony in both Chinese and English. Supporting the accuracy of the notarized Chinese evidence.

The respondents did not submit any evidence to the court, however, they, after the trial, provided copies of Reply on The Establishment of The Sihui City Sports Park Management Center, Sihui City Sports Company Investment Cooperation Agreement" and "Reply on Issues about The Sihui City Sports Park Investment Cooperation Agreement.

According to the above evidence, comprehending with combination of the statements of the parties, the Court recognize the following facts.

The petitioner and the respondents, respectively in May and September signed the "Golf Course Design Contract", which stipulated as follows. The petitioner should supply the project design for the respondent to build an 18-hole golf course, and the respondent should pay the design fee (USD 300,000) remitted by the respondent to the petitioner directly with the following timetable: 15% after the signing of the contract, 35% after the stadium analysis and the beginning of the design, 40% for the cost of construction, 10% after the last course service and the final acceptance of construction, if the petitioner's design fee expired for 15 days, the overdue fine calculated at the rate of 18% would be paid to the petitioner. And the petitioner was entitled to suspend the subsequent services of the agreement and hold the fond which had been paid until the respondent paid the arrears. The design fund was calculated without adjustment of any tax payable to China. If the fund involves any such kind of payment, it should be afforded by the respondent. If the petitioner did not pay the relevant fees to the petitioner on due, the respondent shall be deemed to breach the contract. As a result, before the clearance of the payment, all the basic design service fees and the additional service charges, including attorneys’ fees incurred in the execution of the contract, together with the payment in advance, should be paid by the respondent immediately. Any differences and disputes arising from this contract would be taken to arbitration in accordance with the Construction Industry Arbitration Rules and Mediation Procedures, and all the arbitral award could be recognized or enforced by a court with jurisdiction, the primary right for the interpretation of the contract was subject to the United States of America Illinois law. The petitioner and the respondent signed on two contracts separately. On 23 January, 2009, the petitioner and the respondents signed a "Modification Letter" to the above contract: they should add USD 70,000 to the contract amount for the new holes of the original contract and the re-design of the existing C field 9 holes, the total amount of the new agreement including the Modification Letter was USD 370,000. Since the respondent failed to pay the fund on due to the petitioner in accordance with the contract, the petitioner applies to the International Dispute Resolution Center of the AAA for arbitration. The respondents were required to pay compensation of USD 175,000 for the actual loss5 and the attorneys' fees, expenses and interest at rate of 18% which the petitioner was entitled to claim for. On 25 August, 2014, the Arbitration Tribunal of the International Dispute Resolution Center of the AAA made the final award No. 50110T0046713: i. The arbitral tribunal ruled that Jacobson Golf Course Design ("Jacobson" or "Petitioner") win in the resolution of the dispute and Huijman company and Huiguan company lost in the case. The respondent should pay the compensation to Jacobson for a loss of USD 175,000.00. The respondents shall make the payment within thirty (30) days from the date of the final decision; if the payment was overdue, the interest shall be calculated from the expiry of the 30-day period at the rate equal to the weekly average of the one-year fixed-term bond yields in the previous calendar week issued by the US Federal Reserve System Management Committee, ii. The arbitral tribunal ruled that Jacobson should receive an interest until the date of the award with the amount of USD 133,875.00. iii. The arbitral tribunal ruled that Jacobson should receive a lawyer fee of USD 243,977.26. iv. The total management fee of the International Dispute Resolution Center ("ICDR") of the International Arbitration Association ("AAA") was USD 4,040.00 and shall be borne by both parties. The total remuneration and expenses of the arbitrator WAS USD 79,259.00 and should be equally shared by both parties, v. The award with finality was the final decision on all requests in the arbitration. All claims that are not expressly supported in this award were rejected, vi. This award could be signed with any number of copies, each one of which should be regarded as an original document, all the documents constituted the final award of the arbitral tribunal. For the reason that the respondents did not comply with the award. Subsequently, 19 May, 2015, the petitioner applied to the Court for recognition and enforcement of award No. 50110T0046713 rendered by the International Dispute Resolution Center of the American Arbitration Association on August 25, 2014.

The Court holds that this case is a case arising from an application for recognition and enforcement of foreign arbitral awards, and the relevant provisions of the Civil Procedure Law of the PRC and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards shall apply. Both the residence of the respondents and the location of the main property are within the jurisdiction of this court, and this court has jurisdiction over the case. Based on the evidence submitted by the petitioner, the arbitral tribunal of the International Dispute Resolution Center of the Arbitration Association of the United States of America has rendered award No. 50110T0046713, and on 19 May, 2015, the petitioner made the application to this court, which did not violate the provision of the calculation of the period of application for enforcement stipulated in the legal document was from the last day of the implementation duration with duration of two years, provided in "PRC Civil Procedure Law". The award with finality supplied by the petitioner to the court, the Golf Course Design and other documents were legally notarized，certificated and translated. The submission of the application documents complies with the provisions in the Convention. Both the PRC and the United States are parties to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and the final award of the Arbitration Tribunal of the International Arbitration Center of the American Arbitration Association has been served on the parties, as a result, the application filed by the petitioner for recognition and enforcement of the foreign arbitral award complies with the laws of the PRC.

Considering that the petitioner, Jacobsonc, at the court hearing, only applied for enforcement of the first, second and third claims of the award, and that the issue of application is not out of the scope of the award, this court approve the application.

On whether the recognition and enforcement the arbitral award in this case is inconsistent with China’s public order. Article V(2) the Convention on the Recognition and Enforcement of Foreign Arbitral Awards provides “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: (a) The subject matter of the difference is not capable of settlement by arbitration under the law of the country; or (b) The recognition or enforcement of the award would he contrary to the public policy of that country” in this case，the dispute arising from the performance of the design contract between the parties arose out of a contractual commercial legal relation in nature. As a result, in accordance with the provisions of Chinese law, it can be submitted to arbitration. Although the petitioner claimed that the behavior of the petitioner's design violates the mandatory provisions of our laws, administrative regulations and departmental rules, and this court should reject the application for the recognition and enforcement of the US arbitral award on the ground of violation of public policy, however, the violation of the compulsory regulation in China cannot completely equal to the contradiction with the public policy in China. Therefore, the recognition and enforcement of the arbitral award in this case does not constitute a violation of the fundamental interests of our society and the basic principles of the law. As a result, the ground of rejecting the recognition and enforcement of the award for the reason of violation of public interest argued by the respondent does no stand.

On whether the arbitral award is binding on Zhenhui Park Company. In September 2008, section 7.3 of the Contract between Yuen Hui Park Company and Jacobson Golf Course Design provided that all disputes and disputes arising from this contract would be solved by arbitration in accordance with the Construction Industry Arbitration Rules and Mediation Procedures. That is, the parties have agreed in the contract on an arbitration clause and on the selection of applicable laws, according to Article II (Jurisdiction) of the Arbitral Award which stipulated "the respondent directly recognized and recognized by his attorney that the GCDA contract is binding for the parities and both of them are involved in the whole process of arbitration and made demurrer actively. Zhenhui Park Company at the start point of the arbitration recognized and agreed with the jurisdiction of the arbitration tribunal. According to Illinois law, the applicable law of the GCDA contract, the arbitration clause is an effective and enforceable agreement." Zhenhua Company and Huiguan Company have already admitted that the GCDA contract is binding for them and agreed with the jurisdiction of the arbitral tribunal. Therefore, the arbitral award made by the arbitral tribunal is binding on Zhenhui Park Company.

In summary, there is no ground, in the arbitral award issued by the arbitration tribunal of the International Dispute Resolution Center of the American Arbitration Association, for rejecting the recognition and enforcement of the award under Article V of the Convention. The award is consistent with both the Decision of The Standing Committee of NPRC for Accession to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the provisions of the reservation statement made by China upon its accession to the Convention, and the award shall be recognized and enforced. According to Article 283 of the Civil Procedure Law of the PRC and Article V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, this court find as follows.

This court recognizes the validity of the final award No. 50110T0046713 rendered by the arbitral tribunal of the International Dispute Resolution Center of the American Arbitration Association on 25 August 2014. The respondents shall comply with the obligation of payment stipulated in the arbitral award within 30 days from the date of delivery of this decision. This court will make and enforcement upon overdue performance.

The application fee of RMB 36683.47 shall be borne by the respondents.

This decision shall be final.

Presiding Judge Li Xiaodong

Judge Cai Hongmao

Assistant Judge Lv Cuihua

19 October, 2015

Clerk He Guihao

Related Links:
Jacobson Golf Course Design、四会臻汇园物业发展有限公司等申请承认和执行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.