Heilongjiang Province Heihe City Intermediate People’s Court Civil Ruling

(2015) Heihe Intermediate Court Foreign Related Commercial Arbitration No. 1, 23 December 2015

Claimant，Krasilnikov Sergei Vitalevich，male.

Counsel for the Claimant, Qiu Xiaofeng, Attorney from Heilongjiang Province Far East Legal Group Law Firm.

Counsel for the Claimant, Meng Qihong, Attorney from Heilongjiang Province Far East Legal Group Law Firm.

Respondent, Heilongjiang Xinhe Dadao Automobile Trade Co., Ltd. Legal Representative, Tao Wei Counsel for the Respondent, Zhao Hongwei, female.

Concerning the case of recognition and enforcement of foreign arbitral awards between the Claimant Krasilnikov Sergei Vitalevich (hereinafter referred to as Sergei) and the Respondent China Heilongjiang Xinhe Dadao Automobile Trade Co., Ltd. (hereinafter referred to as Xinhe Dadao), after the Court accepted the case on 16 July 2015, a panel was duly formed, and a public hearing was held. Qiu Xiaofeng, counsel for the Claimant, Krasilnikov Sergei Vitalevich, and Zhao Weighong, counsel for the Respondent attended the hearing. The case is now closed.

The Claimant Krasilnikov Sergei Vitalevich submits that he signed the Contract No. HLHH525-2011-B005 (hereinafter the Contract) on 5 September 2011. According to Clause 2 of the Contract, the arbitration clause in the Contract, the Claimant an application for arbitration on related dispute against the Respondent to the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (hereinafter referred to as the ICAC). The arbitral tribunal rendered an award on 15 January 2014 concerning this $108,150.00 Russian private company owner Krasilnikov Sergei Vitalevich against China Heilongjiang Xinhe Dadao Automobile Trade Co., Ltd. case (No.201 / No. 2012). According to International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation Rules (hereinafter the ICAC Rules) and the Contract, once the award is made, it is final and binding on the parties. However, the Respondent has not yet to fulfilled its payment obligation under the above-mentioned arbitral award To protect Sergei’s interests, the arbitral award directs Xinhe Dadao to pay Sergei the $108,150.00 balance and 72,000.00 rebels to compensate theClaimants costs of arbitration in total of 364,639.53 rubles. According to the PRC Civil Procedure Law, Notice of the Supreme Peopled Court on Implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Acceded to by China and other relevant provisions, the Claimant now requests this People’s Court to recognize and enforce this award made by ICAC on 15 January 2014 (No. 201/2012). The Claimant also requests the Court to execute the Respondent’s assents by transferring it to the Claimant or its designated representative. The Claimant request the arbitration fees in the case be counted into the executed assets and be transferred to the Claimant or its designated representatives altogether.

The Respondent submits that on 22 January 2008 Xinhe Dadao signed contract HLHH525-2008-B003 with Amur Industry Co. Ltd. (hereinafter Amur Industry). Due to Amur Industry’ failure to pay the balance of the payment for the car in accordance with the contract, the car manufacturer withdrew the car deposit, which caused damages to the Respondent, the car manufacturer and the Amur Industry. Under the contract HLHH525-2008-B003, the Russia party failed to unwind, and affected the Amur Industry’s normal operation. Therefore, Amur Industry suggested to the Claimant and the Respondent to sign the Contract on 5 September 2011, and to transfer USD 108,150.00 to the Respondent through the Contract to complete the foreign exchange liquidation in the Amur Industry contract HLHH525-2008-B003. After Amur Industry activated its company bank account and asked for a loan, it would corporate with the Respondent to buy the cars. On 21 December 2011, Krasilnikov Sergei Vitalevich Private transferred USD 108,150.00 to the Respondent in accordance with the terms of the Contract. Krasilnikov Sergei Vitalevich requested the Respondent to bring USD in cash to Blagoveshchensk City to meet with Misha, the manager of Amur Industry, and signed the contract HLHH525-2008-B003 Annex on 15 February 2012. On 21 February 2012, the translator of the Respondent, carrying USD108.150.00, went to the Asia-Pacific Bank with the accountant of Amur Industry. The US dollars could only be transferred into Amur Industry’s account. Therefore, Alexei, the son of Amur Industry manager, asked He Chunguang, a Chinese man working in Russia, to open a personal account. The Respondent deposited the US dollars into He Chunguan’s bank account and transferred the USD108，150.00 to Amur Industry’s account through this personal account. Amur Industry’s manager, Misha, knew well about this process. On May 5, 2012, Krasilnikov Sergei Vitalevich Private transferred USD 27,750.00 to the Respondent and informed the Respondent that 1) this foreign currency was the deposit for the 3-dump truck in the Contract, 2) after the vehicle was produced and sent to Heihe, Amur Industry would pay the remaining USD 108,150.00. On June 17, 2012, Krasilnikov Sergei Vitalevich Private requested to sign a supplemental agreement of the contract HLHH525-2011-B005 to extend the contractual period to November 1, 2012. Until November 1, 2012, Krasilnikov Sergei Vitalevich Private had not paid the remaining USD 108,150.00. On August 17, 2012, the Respondent returned the USD27.750.00 to Krasilnikov Sergei Vitalevich through bank. Krasilnikov Sergei Vitalevich Private is a company registered by Amur Industry. They are nominally two companies, but in fact they are the same company. Their telephone numbers and addresses are the same. Therefore, the USD108，150.00 were returned and Amur Industry’s manager knew well about this. On November 2, 2012, the Respondent received a letter saying that the Claimant did not approve the departure and the refund. The Claimant’s behavior is unreasonable.

To support its claim, the Claimant submitted the following evidence to this Court:

1.A copy of the Contract (Contract No. HLHH525-2011-B005), which aims to demonstrate the existence of trading relationship between the parties and expressly agreed arbitration clause in the Contract.

During the cross-examination, the Respondent submits that, according to the evidence, the parties did have a trading relationship. But the contract was signed because the Amur Industry wanted the Respondent refund its liquidated damages and was signed under the instruction of the Amur Industry.

2, The ICAC award (with Chinese translation, certified by the PRC in the Russian Federation Embassy Notary Office), which aims to demonstrate that to protect the Claimant’s interest，the award directs the Respondent to recover debt USD108,150.00, the cost of the arbitration proceedings 72,000.00 rubles to compensate the Claimant’s costs of arbitration of 364,639.53 rubles.

During the cross-examination, the Respondent submits that it has received the award, but it believes that the award was unfair.

3.The service notice and recipient (with Chinese translation, certified by the PRC in the Russian Federation Embassy Notary Office), aims to demonstrate that the ICAC has served the Respondent the notice of arbitration succession and the arbitral award.

The submits no objection during the cross-examination.

4.3 supplementary agreements regarding evidence 1 (with Chinese translation, certified by the PRC in the Russian Federation Embassy Notary Office). The 3 supplementary agreements were agreements reached during the process of performing the Contract, which aim to demonstrate that the contract is true and the parties have indeed performed the Contract.

During the cross-examination, the Respondent submits that the supplementary agreements are only annexes to the contract HLHH525-2011-B005, which stipulated the contract performing form and the product specifications. The supplementary agreements were sealed and brought over by Misha from the Amur Industry.

The Respondent Heilongjiang Xinhe Dadao Automobile Trade Co., Ltd. did not submit any evidence to the Court.

After the trial investigation and taking into account the parties’ submission during the cross-examination, the Court notes the following:

Evidences 1, 2, 3 and 4 submitted by the Claimant are true, legitimate and relevant. The evidences can support its claims and shall be admissible.

After examination, the Court notes that on September 5, 2011, the Claimant and the Respondent signed the contract HLHH525-2011-B005 in regard to selling 3 automobiles. The contract contained that "Any disputes, objections or claims arising out of the contract or related to the contract including the performance of the contract, the breach of the contract, the suspension or failure of the contact should be submitted to arbitration, except matters within national court jurisdiction. The arbitration shall take place in the Claimant’s state. If the arbitration takes place in China, it should be administered by CIETAC according to CIETAC rules. If the arbitration takes place in Russia, it should be administered by ICAC according to ICAC rules. The arbitration is final and binding on the parties. The arbitration cost shall be borne by the losing party." After disputes arising from the performance of the contract, the Claimant requested arbitration to the ICAC. The arbitral tribunal notified the Respondent to attend the hearing by correspondence, while the Respondent did not appear. The ICAC tribunal heard the case in the Respondents absence on January 14, 2014 and delivered the award No. 201/2012 on January 15. The award directs the Respondent to recover debt $108,150.00, the cost of the arbitration proceedings 72000.00 rubles to compensate the Claimant’s costs of arbitration of 364,639.53 rubles to protect the Claimant’s interest. According to the ICAC Rules and the contract, the arbitral award is final and binding on the parties once made, but Respondent has not fulfilled its payment obligations under the arbitral award.

The Court also notes that, according to the correspondence recipient and the records from the Russia post office internet, the NOl800-201/3093 International Business Arbitration Court letter sent by the ICAC secretary on December 10, 2013 has reached the Respondent on December [the date on the original copy of the award is November] 22, 2013. This letter is in regard to the notice of the hearing on January 14, 2014 and the notice of the personnel forming the arbitral tribunal. On January 16, 2014, the ICAC secretary sent out the No. 1800-201/89 International Commercial Arbitration Court letter to deliver the Respondent the ICAC award NO 1800-201. According to the correspondence recipient and the Russia post office internet records, the letter had been delivered to the Respondent. According to Article 16.3 and 16.2 of the ICAC Rules, “the statements of claim, statements of defence, notices of the hearing, arbitral awards, and orders shall be sent by registered mail with return receipt requested” “A communication shall be deemed received on the day when it is received by a party or when it should have been received if sent as specified in the preceding subparagraphs of this paragraph.”

The Court notes that according to Article 283 of the Civil Procedure Law of the PRC “Where an arbitral award of a foreign arbitral institution requires recognition and enforcement by a people's court of the PRC, a party shall apply directly to the intermediate people's court at the place of domicile of the party against whom enforcement is sought or at the place where the property thereof is located, and the people's court shall process the application in accordance with an international treaty concluded or acceded to by the PRC or under the principle of reciprocity.” In this case, the Respondent is register in Hehei City. Therefore, the Court has jurisdiction on this case.

In regard to the applicable law in this case, China is a party to Convention on the Recognition and Enforcement of Foreign Arbitral Awards (i.e., the New York Convention). According to the commercial reservation and reciprocity reservation declared upon accession, the New York Convention shall be applied when recognizing and enforcing an award made in the territory of another contracting state concerning disputes arising out of legal relationships, whether contractual or not, which are considered as commercial under Chinese law. Disputes in this case arising out of the commercial legal relationship according to Chinese law. The arbitral award in Russia, which is a contracting state of the New York Convention. Thus, the Court shall apply the Convention on the Recognition and Enforcement of Foreign Arbitral Awards when examining this award.

According to Article 4 of the Notice of the Supreme People's Court on Implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Acceded to by China,

After receiving a party's application for recognition and enforcement of an arbitral award, the people's court of China having jurisdiction shall examine the arbitral award. If the court deems that the arbitral award does not fall under the circumstances set out in paragraphs 1 and 2 of Article V of the 1958 New York Convention, it shall rule to recognize the award as binding and enforced the award according to the rules of procedure in the Civil Procedure Law (Trial Implementation). If the court deems that the arbitral award falls under any of the circumstances set out in paragraph 2 of Article V or the evidence provided by the party against whom the award is invoked proves that the award falls under any of the circumstances set out in paragraph 1 of Article V, it shall rule to dismiss the application and refuse recognition and enforcement of the arbitral award.

Article V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards provides:

“1. 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:

(a)The parties to the agreement referred to in article II were, under the law applicable to them，under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

(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; or

(c)The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or

(d)The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties，or，failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

(e)The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

2. 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 that country; or

(b)The recognition or enforcement of the award would be contrary to the public policy of that country.

According to article 18.2 of the Treaty on Civil and Criminal Judicial Cooperation Between China and the Russian Federation, “The requested authority may review whether the award meets the provisions of this Treaty, but it shall not make any substantive decision review.” Therefore, the Court shall not make substantive review against the award in this case.

The Court notes that the Claimant has submitted the certified copy of the ICAC award No. 201/2012 and official translations according to the Convention on the recognition and Enforcement of foreign arbitral awards. Besides, the Respondent has recognized the authenticity of the above award.

In this case, the Respondent submits that the award shall not be recognized and enforced based on the following reasons:

1. The Respondent believed the ICAC Award No. 201/2012 is unfair and should not be recognized and enforced. Since the Contract signed by the Claimant and the Respondent contained an arbitration clause and the Respondent has not provided any evidence of its defense, the grounds for the request to not recognize and enforce the award does not meet the conditions under Article V of the New York Convention. Therefore，the Respondent's defense lacks factual basis，and cannot be supported by the Court.

2. The Respondent submits that it signed the contract to unwind for the Amur Industry. This case was planned by the Amur Industry. The Claimant is another company registered by the Amur Industry. There was no interaction between the Claimant and the Respondent, and the request to buy the cars or refund was denied. However, according to Article 18.2 of the Civil and Criminal Judicial Assistance Treaty between the PRC and the Russian Federation, “The requested authority may review whether the award meets the provisions of this Treaty, but it shall not make any substantive decision review.” Therefore, the Court shall not make substantive review against the award in this case. This defense cannot be supported by the Court.

In summary, the grounds for refusing recognition and enforcement of the award are unsubstantiated and cannot be supported by the Court. Accordingly, the Court ruled that the effectiveness of such arbitral award shall be acknowledged and enforced. In accordance with Article V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Article 18.2 of the Treaty of Civil and Criminal Judicial Assistance between the PRC and the Russian Federation, and Article 283 of the Civil Procedure Law of the PRC, after discussion within the judicial committee, the Court ruled as follows:

The Russian Federation Chamber of Commerce of the International Commercial Arbitration Tribunal Case No. No. No.201 / 2012 case of arbitral awards are recognized and enforced.

Court acceptance fee RMB 10886.00, postage RMB200.00 shall be borne by the Respondent Heilongjiang Xinhe Dadao Car Trade Co., Ltd.

This ruling will take immediately effect once serviced.

Presiding Judge LIU Shujun

Judge WANG Xiaofang

Judge ZHANG Yan

December 23, 2015

Clerk ZHONG Yuan

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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.