Civil Ruling of the Fourth Intermediate People’s Court

(2015)Fourth Intermediate Civil (Commercial) Special Character

Petitioner (arbitration claimant): Danish Architectural Design Company, Arktema, with domicile at Danish Frederiksgade, 32DK-8000AarhusC.

Legal representation: Peter Hartmann Berg & Wilhelm Berner-Nielsen.

Attorney: Fu Min, Beijing Day-consultant Law Firm.

Attorney: Zhou Qian, Beijing Day-consultant Law Firm.

Respondent (arbitration respondent): Cui Xiaoyan, female, born on 15 April 1971.

The collegiate bench has been constituted by presiding judge Ji Dong, judge Wen Zhijun3 Judge Gao Jing after the case concerning the application of recognition and enforcement of foreign arbitral award made by Danish Arktema Architectural Design Company was accepted by the court and a public trial was conducted. Zhou Qian, attorney of the petitioner, Danish Arktema Architectural Design Company participated in the proceedings. Cui Xiaoyan, the respondent was legally subpoenaed but not present at the proceedings. Now the trial of this has been finished.

The specific claims of the Claimant is as following: 1. Asked the court to recognize and enforcement the arbitral award made in Copenhagen, Denmark; 2. Forced the respondent to sign and perform the arbitral award, including: (1) Pay the Claimant receipts of custody, CNY 955,000, plus interest from November 5, 2010 to the date of final payment (interest from November 11, 2010 to September 28, 2015 is CNY 350,202.43); (2) Pay the Claimant receipts of custody CNY 185,591.69, plus interest from April 20,2011 to the date of final payment (interest from April 20, 2011 to September 28, 2015 is CNY 61,262.53); (3) Return the loan, CNY 79,800 to the Claimant, plus interest from April 22, 2010 to date of final payment (interest from April 20, 2010 to September 28, 2015 is CNY 26,341,43); (4) Pay the Claimant EUR 17,500, 70% of the arbitration costs which has been prepaid by the Claimant; (5) Pay the Claimant the legal fees and other expenses incurred in this case, namely Danish kroner 210,000 and CNY 34,895; 3. Order the Respondent to bear the costs paid to apply for recognize and enforce the arbitral award above.

The facts and reasons claimed by the Claimant are as following: The Claimant, Arktema Architectural Design Company, incorporated in Danish, once appointed Cui Xiaoyan as its chief representative in Beijing. The Claimant intended to withdraw from the Chinese market at the end of 2008, but there was still some part of contract payment not received, and the Respondent was willing to set up its own company in the aid of the brand and consumer resources of the Respondent. After negotiation, the two parties signed a “franchise agreement” and agreed: (1) The Claimant allowed the Respondent to use the trademark of the Claimant (Article 3.1 of the protocol) and take over the consumers of the Claimant (Article 4.2 of the protocol); (2) The Respondent to receive the outstanding debt on the behalf the Claimant with no charges paid by the Claimant (4.2.1 of the protocol); (3) The Claimant lend certain percent of the amount of the money received by the Respondent to the Respondent (Article 5.1 of the protocol), and the Respondent should return the loan to the Claimant after the agreement has been rescinded (Article 11.1.2 of the protocol).

The Respondent used the near-tone character of Arkitema to set up a one-person limited liability company, Beijing Arkitema Architectural Design Consultant Ltd. Corp. (later renamed Beijing Oriental Yi Nuo Inventive Culture Development Ltd. Corp.). As of August 2010, the Respondent successively received liabilities amount to CNY 11430591.69 on behalf of the Claimant. Therefore, the Claimant lent CNY 79,800 to the Respondent in return. Due to the delay of the payment to the aforementioned sum, the Claimant notified the Respondent to rescind the agreement on March 21, 2011, and required the Respondent to pay the aforementioned receipts of custody and return the aforementioned loan. Subsequently, the Respondent agreed to the dissolution of contract. However, as for the aforementioned sum, the Respondent has not paid and returned despite the fact that the Claimant repeated bombarded.

In order to maintain its own rights and interests, the Claimant submitted this dispute to arbitration in Denmark according the arbitration clause in Article 13.1 of the agreement, which provides that: ''Any dispute arise out of or in connection with this contract shall not be submitted to the court but referred to arbitration and settled in accordance with the Danish law." The tribunal rendered the final award on May 27, 2014.

The Respondent has not performed its obligations under the award. According to Article III of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”）which provides: “Each contracting state shall recognize the arbitral awards as binding and enforce them in accordance with the rules of the procedure of the territory where the award is relied on”, under the conditions laid down in the following articles and in the Supreme People's Court judicial interpretation: The notification concerning the implementation of the New York Convention, the Claimant requests the court to recognize this award and enforce it.

The respondent was legallyby the court, but did not appear in the proceedings, nor submitted evidence, which is deemed as a waiver of the corresponding procedural rights.

the court found that the Claimant and the Respondent entered into a franchise agreement, agreed to: (1) The Claimant allowed the Respondent to use the trademark of the Claimant (Article 3.1 of the protocol) and to take over the consumers of the Claimant (Article 4.2 of the protocol); (2) The Respondent to receive the outstanding debt on the behalf the Claimant with no charges paid by the Claimant (Article 4.2.1 of the protocol); (3) The Claimant lend certain percent of the amount of the money received by the Respondent to the Respondent (Article 5.1 of the protocol), and the Respondent should return the loan to the Claimant after the agreement has been rescinded (Article 11.1.2 of the protocol).

The arbitration clause in the agreement, Article 13.1, provides: "Any dispute arise out of or in connection with this contract shall not be submitted to the court but referred to arbitration and settled in accordance with Danish law".

The Respondent used the near-tone character of Arkitema to set up a one-person limited liability company-Beijing Arkitema Architectural Design Consultant Ltd. Corp. (later renamed Beijing Oriental Yi Nuo Inventive Culture Development Ltd. Corp.). As of August 2010, the Respondent successively received liabilities amounting to CNY 1,140,591.69 on behalf of the Claimant.

In November 2012, the Claimant submitted the dispute to arbitration in Denmark. According to Article 13 of the franchise agreement, the law applicable to the arbitral proceedings is Danish law.

Since there is no stipulation regarding the seat and the language of the arbitration. In the procedural order issued on 5 August 2013, the tribunal decided that the place of arbitration shall be Copenhagen, Denmark, and the language shall be English according to Articles 20 and 22 of the Danish Arbitration Act.

On 27 May 2014, the tribunal rendered the final award and confirmed the following facts according to the content of the award:

The Claimant is Arkitema Company. The first Respondent is Beijing Oriental Yi Nuo Inventive Culture Development Ltd. Corporation (“Yi Nuo Company”，previously known as Beijing Arkitema Architectural Design Consultant Limited Corporation). The second Respondent is Tracy Cui (also called Cui Xiaoyan). The tribunal is constituted of Henriette Gernaa, Professor Kim Sommer Jensen (co-arbitrator) and Jan Heiner Nedden. M.M (presiding arbitrator). The seat is Copenhagen, Denmark.

On 19 December 2012, the first and the second Respondents received the Notice of Arbitration and the Application for Arbitration. The Claimant appointed Henriette Gernaa as arbitrator and requested the two Respondents to appoint their party- appointed arbitrator within 30 days.

Since the two Respondents failed to appoint an arbitrator within the time period stipulated in Article 11(2) of the Danish Arbitration Act, on January 24, 2013, the Claimant requested the court of Aarhus to appoint an arbitrator on behalf of the two Respondents. On 25 February 25 2013, according to Article 11(3) of the Danish Arbitration Act, the court of Aarhus appointed Prof, Kim Sommer Jensen as the party-appointed arbitrator for the two Respondents after verification and confirmation of the impartiality and independence and the absence of conflict of interests in this specific dispute. Then, on 11 March 2013, the two co-arbitrators appointed Jan Heiner Nedden as the presiding arbitrator. On the same day, the latter accepted the designation, after verification and confirmation of his impartiality and independence and the absence of conflict of interests in this specific dispute.

On 18 March 2013, the tribunal informed both parties by letters that the tribunal had been formed and asked them whether they had any doubts of the designation of arbitrators, they should make requests within 15 days according to Article 13(2) of the Danish Arbitration Act. Then, there was no doubts brought up by parties.

On 5 August 2013, the tribunal sent to both parties the “arbitration contract” signed by the tribunal members and the Claimant, along with procedure order No.1. On 4 September 2013, the presiding arbitrator received the pleadings of the second Respondent. The first Respondent did not submit any pleading within the time period given by the tribunal.

On 11 November 2013, the second Respondent submitted to the presiding arbitrator its rebuttal along with an unnumbered appendix. On the same day, the first Respondent submitted its rebuttal to the presiding arbitrator. Then, the presiding arbitrator sent the aforementioned rebuttals and appendix to the parties and to the two co-arbitrators.

Subsequently, the two Respondents did not attend the conference call on the proceedings held in accordance with the notification of the arbitral tribunal and the trial of the tribunal on 11 March 2014. The tribunal issued its procedural order No. 5. In this procedural order, the tribunal instructed the parties to submit their post-hearing submissions before 4 April 2014 and reminded the two Respondents to comment on the recent document submitted by the Claimant in their post-hearing submission. The tribunal sent the digital audio files of the hearing along with procedural order No. 5 to both parties. On 4 April 2014, the second Respondent notified by email the presiding arbitrator that she had received the digital audio files of the trial but could not submit the post-hearing submission within the deadline of April 4, 2014, and requested an extension of time. On the same day, the presiding arbitrator forwarded the email to the Claimant and to the two co-arbitrators. Then, the tribunal granted an extension of time to allow Respondents to submit their post-hearing submission and statements of expenses before 15 April 2014.

On 15 April 2014, the second Respondent submitted her post-hearing submission to the presiding arbitrator. The first Respondent did not submit any post-hearing submission within the extended time limit.

On 16 April 2014, the tribunal announced that the proceedings were closed and informed the parties that the final award would be released on time.

On May 27, 2014, the tribunal rendered the following final award:

-The tribunal has no jurisdiction over Claimant’s claims against the first Respondent under to the “franchise agreement” and the “loan agreement”；

-The tribunal has no jurisdiction over Claimants claims against the second Respondent under to the “consulting agreement”;

-the tribunal has jurisdiction With regard to the claims claimed by the Claimant to the second Respondent according to the “franchise agreement” and “loan agreement” and the claims made by the second Respondent to the Claimant;

-Order the second Respondent to pay the Claimant CNY 95,5000 plus interest, from November 5, 2010 to the date of the final payment, based on the benchmark interest rate published；.by the Danish National Bank in accordance with the Danish Interest Act plus 7 percentage points;

-Order the second Respondent to pay the Claimant CNY 185,591.69 plus interest, from April 20, 2011 to the date of the final payment, based on the benchmark interest rate published by the Danish National Bank in accordance with the Danish Interest Act plus 7 percentage points;

-Order the second Respondent to pay the Claimant CNY 79,800 plus interest, from April 20, 2011 to the date of the final payment, based on the benchmark interest rate published by the Danish National Bank in accordance with the Danish Interest Act plus 7 percentage points;

-Order the second Respondent to bear 70% of the arbitration costs and the fees for arbitrators, namely EUR 17,500 and the second must pay these fees to the Claimant since the Claimant has prepaid these fees. Order the Claimant to bear the remainder of the arbitration costs and fees for arbitrators, namely EUR 7,500;

- Order the second Respondent to undertake 70 percent of the legal fees and other fees costed by the Claimant, namely Danish kroner 210,000 (excluding VAT) and CNY 34,895 (excluding VAT) and therefore these fees must be paid to the Claimant. Order the Claimant to undertake the remainder of these fees;

- Order the two Respondents to bear their own legal fees and other fees (if any);

-Rejected all other applications and claims.

On August 22, 2014, the Ministry of Foreign Affairs of the Kingdom of Denmark issued a “certification” in Copenhagen according to “Hague Convention” signed on October 5, 1961, this disclosure document signed by Poul Johannisson as a notary public, stamped with the seal of the Copenhagen city court, numbered as DNK- 00375247, signed by Lotter Greve and stamped with the seal of the Ministry of Foreign Affairs of the Kingdom of Denmark.

In addition, the Claimant submitted three statements to the court to prove the arbitral award has entered into force on May 27, 2014.

On November 11, 2014, the presiding arbitrator Jan Heiner Nedden made a statement in response to Mr. Gregersen’s request: “In my capacity as the chairman of the tribunal, I declare and confirm the following facts: Jan Heiner Nedden as the presiding arbitrator, Henriette Gernaa and Kim Sommer Jensen as two co-arbitrators heard together the case between the Claimant and the two Respondents. On May 27, 2014, the tribunal rendered the final award. The final award was sent to both parties on the same day. I attached the hard copy of the email sent to both parties on May 27, 2014，the final award enclosed (see in Annex 1, does not contain attachments referenced therein). I also enclosed the post office receipt of the registered letter and the hard copy of the envelope (see Annex 2). On June 19，2014，the second Respondent sent an email to the presiding arbitrator in response to the email containing the final award (see Annex 1) sent on May 27, 2014 (see Annex 3). I then forwarded this email to the Claimant and the first Respondent and to the two co-arbitrators (see Annex 4).The email sent by the second Respondent on June 19, 2014 (see again Annex 3) confirmed that the second Respondent has received and noticed the final award. In addition, I hereby confirm that the final award on May 27, 2014 is binding on both parties according to the arbitration clause between parties and the Danish Arbitration Act in 2005.1 noted, in this respect, based on the knowledge of the tribunal, that none of the parties have applied for the amendment or addition of the final award within 30 days after they received the award. Thus, in accordance with Article 38(1) of the Danish Arbitration Act and Article 480 of the Danish Law of Judicial Administration, both parties should perform their obligations under the award, and the performance must be completed within 14 days from the rendering of the final award. My colleagues, the two co-arbitrators, Henriette Gemaa and Professor Kim Sommer Jensen will confirm their acceptance of the aforementioned contents through separate letters.”

On November 12, 2014, Kim Sommer Jensen made a statement: “I confirm that the letter of Mr. Jan Heiner Nedden of November 11，2014 reflects my rational understanding. I，as one co-arbitrator of the aforesaid arbitration procedure，endorse the statement made by the presiding arbitrator of the aforesaid arbitration.”

On November 14, 2014, Henriette Gernaa made a statement: “I confirm that the letter of Mr. Jan Heiner Nedden of November 11,2014 reflects my rational understanding. I，as one co-arbitrator of the aforesaid arbitration procedure, endorse the statement made by the presiding arbitrator of the aforesaid arbitration.”

The above three statements, went through the procedure of notarization and certification.

In addition, the Claimant provided the business registration information of the first Respondent and the identity information of the second Respondent. The Claimant confirmed: The tribunal is ad-hoc.

The above facts are proved by the “franchise agreement”，the “arbitral award”，the relevant correspondence, declarations and statements of the parties and other evidences.

The court finds that, according to Article 283 of the Civil Procedure Law of the PRC, the court has jurisdiction.

In accordance with the provision of Article 3 of the PRC Law Applicable to Foreign-Related Civil Relation, the parties may expressly choose the applicable law to foreign- related civil relation. Based on the available evidence, the franchise agreement expressed the true intention of both parties. According to this agreement, disputes arising from this agreement shall be settled by arbitration and in accordance with Danish law. The agreement above does not violate the prohibitive regulation of Chinese law, and is therefore valid.

China and Denmark are both parties of New York Convention, and the award involves a dispute concerning the performance of the signed franchise agreement. This dispute belongs to the dispute arising from contractual and commercial legal relation. Thus, according to the relevant provisions of the Supreme People’s Court’s Notice concerning the implementation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards which China has accessed into , the New York Convention applies to this case. Article V of the New York Convention made a specific, clear enumeration concerning the situations where the recognition and enforcement of foreign arbitral awards may be refused. Thus, the question whether there is exists situations to refuse enforce should be resolved based on Article V of the New York Convention.

Article V of the New York Convention stipulates the following: 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 parties3 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. 

Based on the available evidence in this case，the arbitration agreement signed by both parties is legal and valid. The constitution of the arbitral tribunal complies with the Danish Arbitration Act. The procedure is legal and the dispute resolved by arbitration is within the arbitration agreement and does not violate the public policy of China. Namely, there is no situation mentioned in Article V in this arbitration. Thus, we should recognize this award.

Since none of the circumstances stipulated in Article 274 of the Civil Procedure Law of the PRC exists, this award shall be enforced.

In summary, the Claimant's claims are legal and based on evidence. Pursuant to Article V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Article 3 of the PRC Law Applicable to Foreign-Related Civil Relation, Article 144, Article 239, Article 283 of the Civil Procedure Law of the PRC and Article 540, Article 545, Article 548 of the Supreme People's Court’s interpretation concerning the application of Civil Procedure Law, the court rules as follows:

-Recognizes the arbitral award concerning the Claimant, Danish Arkitema Architectural Design Corporation，and the Respondent，Cui Xiaoyan5 made by an ad-hoc tribunal on May 27, 2014, in Copenhagen, Denmark. The Respondent, Cui Xiaoyan, shall perform the obligation of payment under the arbitral award within 30 days from the date of the service of the verdict. The Claimant can apply to the court for compulsorily enforcement if the Respondent, Cui Xiaoyan, does not preform the obligation within the time limit above.

-Order the Respondent，Cui Xiaoyan, to bear the court’s acceptance fees，CNY 500 (to pay within 7 days after this verdict come into force).

This verdict is final.

Presiding judge: Ji Dong

Judge: Gao Jing

Judge: Wen Zhijun

16 November 2015

Assistant Judge: Cui Xibin

Court Clerk: Hao Xue

Related Links:
丹麦阿科迪玛建筑设计公司（ArkitemaK/S)与崔晓琰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.