The Intermediate People’s Court of Shijiazhuang (30 December 2014)

Civil Ruling of Shijiazhuang Intermediate People’s Court

(2013) Civil Ruling of Shijiazhuang First Instance Procedure No. 00525, 30 December 2014

Petitioner: CBH Grain Pty. Ltd (“CHB”).

Legal Representative: Neil Wandel, chairman of the board. 

Authorized Representative: Dai Yi.

Respondent: Hebei Sihai Development Ltd. (“Sihai”）

Legal Representative: Wang Shihai，chairman of the board.

Authorized Representative: Zhao Fujun.

On December 16, 2011, Petitioner applied for the recognition and enforcement of an arbitral award made by the Australian Grain and Feed Trade Association before the Chengde Intermediate People's Court of Hebei, and the Chengde Intermediate People's Court transferred the case to this court. After having accepted the case, this court, according to Chinese law, formed a collegial panel to hear the case. Petitioner entrusted agent Dai Yi, the respondent entrusted agent Zhao Fujun to attend the proceedings. The case is now closed.

Petitioner claimed that, on April 15, 2008, Petitioner and the respondent signed a contract for the sale of goods providing that about 30,000 metric tons of Western Australia Gail De and/or Hammelin and/or Stirling 2007/08 malt and barley were to be sold in bulk to the respondent. The contract for the sale of goods consists of two parts, one being the CFR Sales Confirmation signed and sealed by the two sides, and the other being the Contract attached to the General Terms and Conditions issued by the seller. Pursuant to Article 18 of the Contract and Article 18.1 of the General Terms and Conditions, any dispute or claim arising out of or in connection with the interpretation, performance or default of the Contract of the Sale of Goods shall be determined by arbitration by the Association of Cereals and Feedstuffs in London (“Association”). Because a dispute arose between the parties in the performance of the contract, on 29 July 2008, the petitioner appointed Mr. B. Leach as arbitrator, in accordance with the above arbitration clause under the sales contract. On 11 September 2008, since the respondent had not appointed his own arbitrator after the petitioner's application, Mr. J. Covo was appointed as a member of the arbitral tribunal. On 9 June 2009, Mr. R. W. Rookes was appointed as the third arbitrator and president. Although the respondent did not appoint his own arbitrator, it did not object to the jurisdiction of the arbitral tribunal throughout the arbitration process and made a reply on the merits. On 11 December 2009, the arbitral tribunal rendered a final decision, {the respondent shall pay the petitioner USD 3,506,250 and interest calculated at rate of 5% since 19 July 2008 to the date of payment, compounded monthly. In addition, the respondent shall bear the arbitrator's specified fee of GBP 105 and the arbitration fee of GBP 5,818 [according to the fact that it has been paid by the petitioner to the arbitrator, the respondent shall bear the interest of this part from the date of the issuance of the arbitral award (December 11,2009)] to the date of payment calculated at annual rate of 5%, compounded every three months.} The arbitral award has entered into force and was served to the respondent. In accordance with the arbitral award, the respondent shall pay the sums in the aforesaid request. In light of the fact that the PRC and the United Kingdom are both members of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, since the above ruling was rendered in London and the place of residence and principal office of the respondent were located in Chengde，Hebei, this court, as an Intermediate People's Court of the provincial capital city, shall have jurisdiction over the case.

The respondent argued as follows. Firstly, on the basis of CHB’s confirmation letter dated 16 April 2008 for the purchase of barley, the parties have not made a definite agreement on the way in which the dispute was resolved and have not agreed to take disputes to be arbitrated by the Association. In the process of arbitration, the contract mentioned by the petitioner has not been confirmed with the petitioner's signature, therefore the contract to arbitrate does not bind the respondent. Secondly, on 30 July 2008, the Company signed a memorandum with the petitioner’s representative office in Beijing to amend the confirmation letter, the topic of which is mainly about the goods subject of the contract, that is, price, quantity and L/C, but there is no agreement either to submit the disputes to the arbitration commission in this document, as the final memorandum for the performance of the contract. We request the court not to recognize and enforce the arbitral award on the application of the petitioner.

After the trial, this court found as follows. On April 15, 2008, the petitioner and the respondent made a contract for the sale of malt and barley goods. They signed a contract for the sale of goods, providing that about 30,000 metric tons of Western Australia Gail De and/or Hammelin and/or Stirling 2007/08 malt and barley would be sold in bulk to the respondent. The contract for the sale of goods consists of two parts, one being the CFR Sales Confirmation signed and sealed by the two sides. The CFR Sales Confirmation contains the goods, quantity, price, shipping period, shipping destination，unloading rate, Demurrage/dispatch, payment，weight, quality, status, specifications and other terms and conditions. It is provided in the part of the terms and conditions that, according to GPPL and Ausgrain2002 Charter Party, the above terms and conditions constitute the basis of the standard agreement of joint venture on grain, the standard contract will be sent to the respondent within 10 working days. And the "CFR Sales Confirmation" was just sent to the respondent by fax on the same day.

On 16 April 16 2008, the respondent received the fax, and on the day, signed for confirmation on the fax.

On 29 and 30 April 2008, with respect to the “CFR Sales Confirmation” providing 10 working days for the period, the petitioner send respectively, through electronic and e- mail express way, to the respondent the standard contract, namely: contract No. 80145 as GFR/CIF Contract for Grain Joint Venture Co., Ltd and the accompanying GFR/CIF Contract for the General Terms and Conditions of Grain Joint Venture Co., Ltd. Section 7 of the contract No. 80145 as Grain Joint Venture Co., Ltd. GFR/CIF Contract provides that the shipping period is from 1 June 2008 to 30 June 2008. Section 8 (Price) provides: according to the L/C at sight: USD 495.00 per ton, CFRFO China Qinhuangdao, with a safe port and a safe berth，contractual currency，or under a 90-day long-term letter of credit, the buyer must declare before the opening date: USD 500.00 per ton CFRFO China Qinhuangdao a safe port a safe berth, or 90 days away Letter of credit, the buyer shall declare before the date of issuance; or under the 180-day long-term letter of credit, the buyer shall declare before the opening date: USD 505.00 per ton CFRFO a safe port and a safe berth in Qinhuangdao, China. Section 9 provides: Contract currency: USD; Payment: Letter of Credit [see Section 5.1 (a) of the deletion of 30 days prior to the commencement of shipment, prior to May 15, 2008. Section 12: Arbitration: Arbitration of Cereals and Feed Trade Associations [Article 18.1 (b)]. Section 13. SPECIAL PROVISIONS Item 4: Other terms and conditions: According to GPPL and Ausgrain 2002 shipments.”

On 15 April, 15 May, 26 April and 12 June 2008, the buyer (respondent)’s and the seller (petitioner)’s agents negotiated the issue of the L/C. The buyer (respondent) communicated with the seller (petitioner) on 18 June, 11 and 17 July 2008, respectively. On 23 July, the seller (petitioner) sent a fax directly to the buyer (respondent) and agreed to extend the opening date of the letter of credit to 28 July, but told the buyer that he would claim for damage on the cause of breach of contract or apply for arbitration if the letter of credit was not opened as scheduled.

On 30 July 2008, at the CHB Beijing office, Wang Shihai, the petitioner's legal representative, Justin Swan, the global marketing manager of CHB (petitioner), Wang Gang, Chief Representative in the CHB Beijing office, and Jiang Zhaojin, marketing staff in the CBH Beijing office, recorded the process of the modification to contract No. 80145 on the quantity, letters of credit, price and others.

On 29 July 2008, the petitioner (seller) gave a grace period to the respondent (buyer) for the opening of the letter of credit. However, the respondent (buyer) did not open the letter of credit before 15 May, which constituted a breach of contract. Accordingly, the petitioner’s (seller) lawyer believes that the respondent’s (buyer) failure to open the letter of credit is a breach of contract. According to S12 of the contract and Article 18.1 of the General Terms and Conditions, any disputes and claims of this contract of the sales of goods with respect to the interpretation, performance, default, shall be settled by arbitration by the Grain and Feed Trade Association in London. With respect of the dispute between the parties on the performance of the contract, the petitioner (seller) appointed Mr. B. Leach as arbitrator, on the basis of the arbitration clause in the contract with the respondent (buyer). The respondent (buyer) did not appoint its own arbitrator.

On 12 September 2008, upon the request of the petitioner (seller), the Cereals and Feed Trade Association designated Mr. J. Covo as an arbitrator. On 9 June 2009, Mr. R. W. Rookes was appointed as the third arbitrator (president). The respondent (buyer) submitted a reply against the request of the petitioner (seller) to the Cereal And Feed Trade Association as follows.

On the one hand, (The seller) has not solved the problem of the quality of a ship of goods before the end of April 2008, according to which the next barley contract cannot be signed. On the other hand, the petitioner (seller) has not sent, according to the confirmation, a valid contract to the respondent (buyer) within 10 the working days after signature of the “confirmation” and there is no definite agreement on the settlement of the dispute and submission to the Arbitration Commission of the Grain and Feed Trade Association in the "Confirmation" signed by both parties. Therefore, the contract referred by the petitioner (seller) has not been confirmed by the respondent with signature, and the arbitral award rendered by the Arbitration Commission of the Grain and Feed Trade Association is not binding on the respondent (buyer). Furthermore, the petitioner (seller) Refused to accept the letter of credit.

On 21 July 2010, the Grain and Feed Trade Association, pursuant to the petitioner's request and the respondent's reply, held a hearing on the jurisdiction issues of the dispute: whether the “contract” was sent in a timely manner, whether the previous quality of the goods led to delay the performance of the contract, the time of opening of the letter of credit, whether the seller has the right to refuse to accept the letter of credit allegedly opened by the Xiamen Xiangyu Group, whether it constitutes a breach of contract by the buyer not to open the letter of credit and compensation. The tribunal decided as follows: "1. The Buyer shall pay the Seller USD 3,506,250 and interest calculated since 19 July 2008 to the date of payment at annual rate of 5 %, compounded every three months. 2. The parties shall bear their own legal fees respectively. 3. The costs of arbitration shall be borne by the buyer. If any party has paid in advance all or more than its own share of the costs, that party has the right to require the other party to pay, immediately, the amount in excess and the interest at the rate calculated, based on our decision, while the interest shall be calculated since the date of the issuance of the award until the date of payment. 4.In addition，the remuneration of the appointed arbitrator shall be borne by the buyer.

The respondent  did  not  object  before  the  Association  of  Cereals  and  Feed stuffs  to  the  application  for  arbitration.

The above facts are supported by the following evidence: CFR Sales Confirmation signed by the petitioner and the respondent, written edition of contract 80145 and the "General Terms and Conditions of Contract", the arbitral award of the Cereal and Feed Trade Association of Australia, the petitioner's request, the respondent's reply and the trial record.

This Court holds that: In view of the fact that China is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)，that the arbitral award was rendered by a London arbitration organization, and that the cause of action is an application for the recognition and enforcement of a foreign arbitral award, this Court has jurisdiction over the case pursuant to with the provision of Article 283 of the Civil Procedure Law of the PRC. Therefore, the present case shall be subject to the relevant provisions of the Civil Procedure Law of the PRC and the New York Convention.

The contract for the sale of malt and barley goods in bulk concluded by the petitioner and the respondent is composed of two parts. One is the CFR Sales Confirmation signed by both parties, and the other one is the contract attached with General Terms and Conditions. It is in accordance with the fact that on 15 April, 2008, the petitioner send the CFR Sales Confirmation to the respondent via fax, and the latter signed on the fax on the next; On 29 and 30 April 2008, the petitioner send to the respondent the texts of Contract No. 80145 as “GFR/CIF Contract for Grain Joint Venture Co., Ltd” and the “GFR/CIF Contract for the General Terms and Conditions of Grain Joint Venture Co., Ltd”, through electronic and e-mail express way. There is an arbitration clause in the GFR/CIF Contract for Grain Joint Venture Co., Ltd. Although the respondent has not signed nor sealed the above two documents, on 30 July of the same year, the parties signed the minutes of a meeting and made it clear they agreed that the amendment to the CFR/CIF Contract for the Grain Joint Venture Co., Ltd., only involved the quantity, the letter of credit and the price. Therefore, while the respondent did not specifically exclude the other provisions (including the arbitration clause) contained in the texts of the CFR7CIF Contract for Grain Joint Venture Co., Ltd and in the CFR/CIF Contract for the General Terms and Conditions of Grain Joint Venture Co., Ltd, CFR/CIF Contract for the Grain Joint Venture Co., Ltd., CFR/CIF Contract for the Grain Joint Venture Co., Ltd., the minutes of the meeting constitute the basis of the agreement between the parties. Accordingly, the arbitration clause in the CFR/CIF Contract of the Grain Joint Venture Co., Ltd. constitutes a written arbitration agreement between the parties. And once the arbitration agreement was reached, it was binding and independent of the other terms of the contract. The respondent has participated in the arbitration proceedings after the dispute arose between the two parties and submitted a reply on the merits. At the same time, the respondent did not challenge the jurisdiction of the tribunal before the Australian Grain and Feed Trade Association, which evidences the respondent’s acceptance of the jurisdiction of the arbitral tribunal. As a result, the petitioner is eligible, in accordance with the provision of S12 of the contract and article 18.1 of the General Terms and Conditions, to apply for arbitration before the Grain and Feed Trade Association with respect to any dispute or claim arising out of or in connection with the interpretation, performance or default of the Contract of Sale of Goods. The arbitral award is valid and binding. The respondent argued that the parties has not made a definite agreement on the way in which the dispute would be resolved and have not agreed to submit their disputes to the Arbitration Commission. In the arbitration, the contract mentioned by the petitioner has not been confirmed by the respondent with signature, so the provision to arbitrate before the arbitration commission is not binding on the respondent, and the reasons for the recognition and enforcement are not established. We do not support this argument.

In a nut, no ground provided in Article V of the New York Convention exist in the arbitral award rendered by the Committee on Grain and Feed Trade in respect of the case, and the award is valid and shall be recognized and enforced. According to the provisions of Article 283 of the Civil Procedure Law of the PRC, Article V of the New York Convention, the court decide as follows:

The court recognizes the validity of the arbitral award rendered by the Australian Grain and Feed Trade Association on 21 July 2010 between the petitioner, Australia CBH Grain Co., Ltd., and the respondent, Hebei Sihai Development Co., Ltd., and enforces it.

The application fee RMB 95506.00 shall be borne by the respondent, Hebei Sihai Development Co., Ltd. 

Presiding Judge: Huang Liangtao

Judge: Feng Mengjie

 Judge: Han Qiuping

30 December 2014

Clerk: Feng Rixin

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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.