Zhengzhou Intermediate People's Court of the PRC Civil Judgment

[2014]Zheng Min San Chu Zi Di No.50, 3 February 2016

Claimant: LH Asian Trade Finance Fund Ltd.

Legal representative: Craig James Dimmick, Director of LHAsian Trade Finance Fund Ltd.

Attorney: Zhengmingjiu, lawyer from Shangzheng Law Firm, Shanghai.

Attorney: Hexiaodan, lawyer from Shangzheng Law Firm, Shanghai.

Respondent: Zhengzhou Aluminum Co., Ltd.

Representative of action: the bankruptcy administrator of Zhengzhou Aluminum Co., Ltd.

Attorney: Yuxiaolong, member of the bankruptcy administrator.

Attorney: Lijunhong, member of the bankruptcy administrator.

The claimant, LH Asian Trade Finance Fund Ltd. (hereinafter “LHAsian”) and the respondent, Zhengzhou Alumimim Co., Ltd (hereinafter “ZA”), apply for the recognition and enforcement of a foreign arbitral award. The Court accepted the case and comprised the panel according to the law. The attorneys of the claimant LHAsian, Zheng Mingjiu and He Xiaodan, and the attorneys of the respondent, Yu Xiaolong and Li Junhong, attended the Court, The Court now finished the hearing and review of the case.

The claimant LHAsian claimed that the case relating to a guarantee dispute between LHAsian and ZA has been arbitrated before SIAC. On September 11, 2013, SIAC decided the issue and made arbitral award (2012) No.151. The award is as follows: (a) the respondent shall pay the claimant the principal USD 9,789,269.33 and the interest calculated from May 7, 2012 to the day the arbitral award was made with a 10% interest annual rate; (b) the respondent shall pay the arbitration expenses USD 225,136.76 USD and SGD 53,579.57. The respondent refused to perform the arbitral award. Considering that the PRC and the Republic of Singapore are both the contracting parties to the New York Convention, according to articles 282, 283 of the Civil Procedure Law of the PRC, and the Notification of the Supreme Court Concerning the Enforcement of the Convention on the Recognition and Enforcement of Foreign Arbitral Award, the claimant applied to the Court: (1) recognize and enforce the arbitral award (2012) No. 151 made by SIAC; (2) enforce the respondent’ s obligation of payment; (i) the respondent shall pay the principal USD 9,789,269.33 and liquidated damages for USD 1,319,539.87 (calculated with a 10% annual interest rate from May 7, 2012 to September 11, 2013); (3) the respondent shall bear the legal fee for the recognition and enforcement of the case.

The respondent claimed that the Court should overrule Claimant’s application and deny to recognize and enforce the arbitral award (2012) No. 151 made by SIAC. The reasons are as follows: (a) the arbitral proceedings conducted by SIAC were inappropriate, thus the impartiality of the tribunal was affected. The tribunal failed to give arbitration notice and service of documents to the respondent, and to guarantee the respondent’s right to present evidence and to cross-examine，which caused the fault of fact-finding in the arbitration; (b) as to the issue of the debt and the guarantee, considering the relevant material that the bankruptcy administrator only received after the court summons arrived, and the audit conclusion made by the audit firm in the bankruptcy proceedings, the bankruptcy administrator maintained that the principal of the original loan is USD 9,642,075.28. Moreover, the fact that the interest rate changed in later period is not clear, which leads to the false determination of the arbitral award related to the amount of the principal and interest.

The claimant LHAsian submitted the following evidence to support its claim:

First group: (1) the authenticated and notarized arbitral award, and its Chinese translation; (2) the letter of guarantee made by the respondent, in which the claimant is regarded as beneficiary, and its Chinese translation; (3) the authenticated and notarized business registration certificate of LHAsian, and its Chinese translation; (4) the authenticated and notarized certificate of identity of the LHAsian’s legal representative (including English version); (5) the authenticated and notarized letter of attorney from LHAsian (including English version); (6) the letter from Zhongzheng Law Firm, Shanghai. The above-mentioned documents are intended to prove the competency LHAsian as claimant in this case.

Second Group: the notarized relevant evidence that the claimant LHAsian had sent the documents relating to the arbitration to the respondent ZA, and their Chinese translation. (1) the email sent by LHAsian to ZA on August 22, 2012. The document of EMS with a number of EF259000085CS, and its inquiry form. The above evidence is used to prove that LHAsian had sent the notice of arbitration to the respondent ZA in the form of an email and an EMS express delivery on August 22, 2012; (2) (2012)Hu Lu Zheng Jing Zi Di No.3902 Notarial Certificate.(2012)Hu Lu Zheng Jing Zi Di No.3905 Notarial Certificate. Above evidences are used to prove the claimant LHAsian had sent the appointment letter of sole arbitrator, the arbitration rules, the arbitration notice and other documents to the respondent ZA, in the form of email and EMS express delivery. (3) (2013) Hu Lu Zheng Jing Zi Di No.201 Notarial Certificate.(2013)Hu Lu Zheng Jing Zi Di No.203 Notarial Certificate. Above evidences are used to prove that LHAsian had sent the Arbitration Application and relevant evidences to the respondent ZA, with email on January 18, 2013 and EMS express delivery on January 21,2013; (4) (2013)Hu Lu Zheng Jing Zi Di No.888 Notarial Certificate.(2013) Hu Lu Zheng Jing Zi Di No. 943 Notarial Certificate. Above evidences are used to prove that LHAsian had sent arbitration relevant evidences to the respondent ZA, in the form of email and EMS express delivery on March 28,29, 2013. (5) (2013) Hu Lu Zheng Jing Zi Di No.1054 Notarial Certificate (2013)Hu Lu Zheng Jing Zi Di No.1131 Notarial Certificate. The above evidence is used to prove that LHAsian had sent to the respondent ZA the witness testimony and the application to the arbitral tribunal of exemption from oral hearing/decision based on documentary evidences; (6) the email sent by LHAsian to the respondent ZA on May 15, 2013. The EMS document of details with the No. 1019343370703. The above evidence is used to prove that the claimant LHAsian sent the Opening Statement to the respondent ZA, by email on May 15, 2013 and by EMS express delivery on May 16, 2013.

Third group: the notarized and authenticated relevant evidence that SIAC had sent the arbitration relevant documents to the respondent ZA, and its Chinese translation. (1) notarial certificate annex 1 ——email; Notarial certificate annex 2—— DHL express delivery receipt and inquiry form. The above evidence is used to prove that SIAC had sent the notice of arbitration and the arbitration rules to the respondent ZA, by email on August 24，2012 and by express delivery on August 27, 2012. (2) notarial certificate annex 5——email, notarial certificate annex 6—DHL express delivery receipt and inquiry form. The above evidence is used to prove that on October 5, 2012, SIAC sent the respondent ZA the Proposed List of Sole Arbitrator on which are listed Francis Xavier, CHAN LENGSUN, ZIA MODY, by email and express delivery. (3) notarial certificate annex 7——email. Notarial certificate annex 8——DHL express delivery receipt and inquiry form. The above evidence is used to prove that on December 12, 2012, SIAC sent the Appointment Letter of Arbitrator to the respondent ZA by email and express delivery, according to which Francis Xavier had been appointed as sole arbitrator by SIAC. (4) notarial certificate annex 10----email, notarial certificate annex 11 —DHL express delivery receipt and inquiry form. The above evidence is used to prove that SIAC had delivered the arbitral award to the respondent ZA, by email on September 12，2013 and by express delivery on September 13, 2013 respectively.

Fourth group: (a) the notarized and authenticated relevant evidence that SIAC had sent the arbitration documents to the respondent ZA, and their Chinese translation. (1) notarial certificate annex 1 ——email, notarial certificate annex 2——DHL document of details. The above evidence is used to prove that the sole arbitrator delivered the letter of instruction to the respondent by email and by express delivery on December 21， 2012. (2) notarial certificate annex 3—email. Notarial certificate 4—report of the documents service. The above evidence is used to prove that the sole arbitrator sent the Notice of Exemption from Hearing by email, post and by fax on May 6, 2013.

Fifth group: (1) notarial certificate (2014) Hu Lu Zheng Jing Zi Di No. 2711 which is used to prove that Ren Tao is one of the respondent’s staff. (2) (2012) Hu Lu Zheng Jing Zi Di No.3902 notarial certificate Communication No. 27. This is used to prove that Ren Tao is the linkman of the respondent and Li Congfu under the guarantee letter, (3) (2012) Hu Lu Zheng Jing Zi Di No. 3902 notarial certificate Communication No.22, which is used to prove that the email address xingming200710@126.com is the contact email of the respondent and Li Congfu under the guarantee letter.

Sixth group: UNCITRAL Arbitration Rules, which are used to prove that the ways of service set under the UNCITRAL Arbitration Rules include email, express delivery, fax and so on.

The respondent ZA has made its statement of defence towards the evidence submitted by the claimant LHAsian: 

The above-mentioned evidence is true. However, the aims of proof shall be denied. On the first group, ZA claims that it has not received the arbitral award. About Evidences (2), the respondent claims that it lacks delegation procedure before the claimant LHAsian sent relevant arbitration documents representing SIAC. About Evidences (3) and (4), there is no evidence indicating that SIAC has successfully sent the relevant documents with email. In fact, ZA has not received any email from SIAC and the two email addresses mentioned in the above evidence do not belong to ZA. In addition, some evidence indicate that the above-mentioned email addresses have been rejecting emails since December 2012. It was obviously inappropriate for SIAC to insist on an invalid service since it was aware that the emails had been rejected. Other efficient ways to send the documents should have been applied. Concerning the fax number, ZA claims that the number shown in evidence does not comply with the number owned by ZA at the present stage, and the respondent has never received any fax as a matter of fact. Whether the fax number was used before needs to be verified. Concerning express delivery, ZA claims to know nothing about the linkman named Ellen Xu related to express delivery so that no evidence indicates that the documents have been successfully delivered to the respondent by express delivery. In fact, ZA has never received any arbitration documents sent by express delivery. About evidences (5), the evidence obtained from the website China Commodity Net was uploaded in 2014, while the arbitral tribunal sent the relevant documents in 2012. Therefore, the evidence has no value to prove the matter relevant document been sent to the respondent ZA. Moreover, the identity of RenTao is unable to be affirmed by a single message acquired from internet. Meanwhile, the Li Congfu’s statement of facts relating to the arbitration case should not been regarded as the ZA’s point of view concerning dealing with the litigation affairs. The fact that the email addresses were used before the start of arbitration procedures does not mean the addresses should been accepted by ZA as the valid email addresses to receive arbitration documents. The arbitration lacks factual service procedures because the tribunal did not select notary or embassy to deliver the documents. The arbitration could have selected more rigorous and appropriate ways to deliver the documents since the arbitral tribunal had charged a fee of more than USD 200,000. ZA has no objection to the Evidences (6) UNCITRAL Arbitration Rules.

ZA submitted the following evidence to the Court: (2014) Zheng Min Si Po Zi Di No.1 civil ruling paper, the notice concerning setting liquidation committee, bankruptcy administrator and affirming the obligation of company related personnel. These evidences are used to prove that the respondent ZA had entered the state of bankruptcy reorganization, thus the claimant shall withdraw the litigation claims and report creditor's claims to the bankruptcy administrator.

LHAsian states its opinion that it has no objection to the authenticity of the evidence. The claimant has reported its claims according to the relevant regulations set by the bankruptcy administrator. The ruling of this case can be beneficial for bankruptcy administrator to confirm the claims legally and impartially.

After the review, the Court affirms the authenticity of the following facts:

On May 5, 2015, the respondent ZA issued a guarantee letter to the claimant LHAsian. According to the guarantee letter, the respondent ZA undertook the guarantee liability for the loan agreement between the claimant LHAsian and Mingguan limited company. The respondent ZA committed that，it would compensate for all the losses the claimant LHAsian suffered from Mingguan limited company's breach of the loan agreement5 and there was no precondition required for the guarantee liability, which meant that the respondent ZA immediately undertook guarantee liability when the contract breach occurred. Article 10 of the letter of guarantee provided that all notices and communications should be made in writing and should be delivered by special carrier, fax and postage prepaid mail to the relevant parties’ addresses, fax number or other addresses to fulfill the goal of the letter guarantee. The timing that any notice or communication under the letter of guarantee should be recognized to be delivered, given and received was as follows: (i) the date of the actual delivery, through special carrier, (ii) the date of transferring, through fax. (iii) the next date of posting, through mail. Address: Dianchang Road No. 10, Zhongyuan District, Zhengzhou City, Henan Province, PRC. Recipient: Ellen Xu. Fax number: 86371-67518556. Article 26 of the letter of guarantee provided that the letter of guarantee should be interpreted according to Singaporean Law. Article 27 provided that any disputes or compensation claims arising from breach/termination/voidance of the agreement or the letter of guarantee，should be settled through arbitration under the presenting valid UNCITRAL rules, in Singapore, (a) arbitration should be governed by SIAC under its relevant regulations, (b) the arbitrator should be appointed by the director or vice director of SIAC. (c) sole arbitrator, English used in arbitration.

On August 225 2012, the claimant, LHAsian, submitted a request of arbitration to SIAC for the reason that the respondent ZA had not compensated the losses caused by Mingguan company’s breach of the loan agreement. SIAC accepted the case, and then sent the Notice of Arbitration, the Arbitration Rules, the Proposed List of Sole Arbitrator, the Appointment Letter of Arbitrator, the Instruction Command, the Arbitration Application, and the Notice of Exemption from Hearing, by emails (email addresses: 13783590981@139.com, xingming200710@126.com) from August 24, 2012 to May 6, 2013, by DHL express delivery (address: Dianchang Road No.l0,Zhongyuan District, Zhengzhou City, Henan Province, recipient Zhengzhou Aluminum Co., Ltd, linkman Ellen Xu), and by fax (fax number: 0371-67518556). Meanwhile, the claimant LHAsian sent the documents relating to the arbitration to the respondent ZA through email and EMS express delivery. The mail process and inquiry process records were notarized by Shanghai Notary Public Office. During the arbitration process, the respondent ZA did not participate in the arbitration and submitted no defence opinion or evidence.

On September 11, 2013, SIAC made its final decision. The award was as follows: (a) the respondent ZA shall pay the amount of 9,789,269.33 USD to the claimant LHAsian based on the letter of guarantee, (b) the respondent shall pay the following amount to the claimant LHAsian: (i) interest for breach of contract, calculated from May 7, 2012 to the day the arbitral award was made, based on the principal USD 9,789,269.33 and a 10% annual rate; (ii) the arbitration fees USD 225136.76 and SGD 53,622.37 confirmed by SIAC. On September 12 and 13, 2013, SIAC sent the arbitral award to the respondent through email and DHL 

Article 2 of the UNCITRAL Arbitration Rules provides that a notice including a notification, communication or proposal, shall be deemed to be received: a notice is received if it is physically delivered to the addressee or delivered at the addressee’s place of business, habitual residence, or mailing address. If, after reasonable inquiry, the above-mentioned addresses cannot be found, a notice is deemed to have been received if it is sent to the addressee’s last-known place of business, habitual residence, or mailing address. A notice shall be deemed to have been received on the day it is delivered through above methods. Article 3 provides that, the party initiating recourse to arbitration shall communicate to the other party a notice of arbitration. Article 15 provides that one party shall send all the documents submitted to the arbitral tribunal to the other party at the same time.

The Court further finds: (1) about the loan agreement between the claimant LHAsian and Mingguan limited company, the respondent ZA and Li Congfu issued a letter of guarantee respectively. The guarantee content of the two letters of guarantee is the same. After Mingguan limited company's breach of the loan agreement, based on the provisions of the letters of guarantee, the claimant LHAsian initiated an arbitration against the respondent ZA and Li Congfu respectively. On September 11, 2013 SIAC made arbitral awards Nos.151 and No.152 concerning the claims. On May 15, 2015, the Court rendered (2015) Zheng Min Chu Zi Di No. 55 civil ruling paper, the arbitral award No. 152 made by SIAC in 2012, has legal effect in the PRC. During the process of hearing，the claimant LHAsian confirmed that the creditor’s rights guaranteed by the respondent ZA and by Li Congfu are identical. Any payment from the respondent ZA or from Li Congfu can result in the reduction of their debts. The compensation from the two debtors cannot exceed the total amount of creditor’s rights.

二、On November 5, 2014, the Court accepted the application of bankruptcy reorganization from the respondent ZA. Li Congfu is the legal representative of the respondent ZA. In the mails exchanging between the respondent ZA and claimant LHAsian under the letter of Guarantee, the email used by the respondent ZA is “xingming200710@126.com”.

三、 RenTao is the minister of international department of ZA. He used to negotiate with the claimant LHAsian, representing the respondent ZA and Li Congfu, with respect to the letter of guarantee. His email is “13783590981@139.com”.

After the review, the Court holds as follows:

The present case relates to the recognition and enforcement of a foreign arbitral award. The claimant requests the recognition and enforcement of arbitral award (2012) No. 151 made by SIAC. Singapore and China are both contracting parties of the New York Convention. The issue submitted to SIAC is a contract dispute arising from the letter of guarantee made by the respondent. The documents comply with the requirement of Article IV of the New York Convention concerning notary, authentication and translation. In addition, the residence of the respondent ZA is located in the district within the jurisdiction of the Court. Considering the above reasons, the Court has jurisdiction on this case.

According to the Civil Procedure Law of the PRC and the Notification of the Supreme Court Concerning the Enforcement of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, whether the arbitral award shall be recognized and enforced shall be reviewed in accordance with the New York Convention. The contending focus of the two parties is whether the procedure of SIAC arbitration is valid. First, according to the letter of guarantee between the claimant and respondent, the letter of guarantee shall be governed and interpreted under Singaporean law, and the disputes arising from the performance of the letter of guarantee shall be arbitrated in Singapore through the then effective UNCITRAL Arbitration Rules. Because the intention expression is genuine and valid, SIAC's acceptance of the guarantee dispute is in accordance with the agreement concerning the dispute resolution. Second, through the analysis of the evidence submitted by two parties, the Tribunal affirms that the documents relating to the arbitration have been delivered to the respondent ZA by SIAC, the arbitrator and the claimant LHAsian, by email, express delivery and fax which are in accordance with the requirement of the UNCITRAL Arbitration Rules. Meanwhile, the mail address, linkman and fax number are consistent with the letter of guarantee, and the email address which received the documents is also the address used in the business by the respondent ZA. Thus, it can be inferred that the service of SIAC was appropriate and valid, so that the respondent ZA had received the notices of the arbitrator’s appointment, of appearance and of defence statement submission. Therefore, the Court rejects respondent's defense that it could not exercising its rights because of inappropriate arbitration procedures conducted by SIAC.

In conclusion, the arbitral award issued by SIAC is not subject to paragraphs (1) and (2) of Article V of the New York Convention not to the reservation clause made by the PRC when it joined the Convention. Therefore, the arbitral award shall be recognized and enforced. According to Article 283 of the Civil Procedure Law of the PRC and Articles IV and V of the New York Convention, the judgment is as follows:

The arbitral award (2012) No. 151 between LH Asian Trade Finance Fund Ltd and Zhengzhou Aluminum Co.，Ltd, rendered by SIAC on September 11，2013, shall be recognized and enforced in China.

The application fee of this case is 500 RMB, which should be paid by the respondent ZA.

This judgment is final.

Chief Judge: Zeng Xiaotan

Judge: Ma Li

Judge: Liu Pingan

February 3, 2016

Court Clerk: Song Xuejiao

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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.