Civil Ruling of Zibo Intermediate People’s Court

 (2015) Civil Ruling of Zibo Special Procedure No. 1, 19 January 2016

Petitioner: OLAM INTERNATIONAL LIMITED. Address: 9 TEMASEK BOULEVARD #11-02, SUNTECTOWERTWO SINGAPORE 038989

Legal Representative: Ashok Hegde, Executive Director and Global Supervisor, Department of Cotton

Authorized Representative: Luo Yun, Lawyer of Beijing Zhonglun (Shanghai Office) Law Firm

Authorized Representative: Xia Yan，Lawyer of Beijing Zhonglun (Shanghai Office) Law Firm

Respondent: Zibo Yinhua Mianma Ltd. Address: Room 408, Building No.4,Asian- Pacific Holiday Garden, Liuquan Road, High-Tech Industrial Development Zone, Zibo City, Shandong Province, PRC.

Legal Representative: Lin Shibo, Manager.

Authorized Representative: Yin Lianbing, Lawyer of Shandong Zicheng Law Firm

Authorized Representative: Xu Aihong, Lawyer of Shandong Zicheng Law Firm

The application of Olam International Ltd. (Olam Ltd.) for the recognition and enforcement of a foreign arbitral award against the defendant, Zibo Yinhua Mianma Ltd. (Yinhua Ltd.) was accepted by the court. The court established a collegial panel in accordance with the law to deliberate the case. Luo Yun and Xia Yan for the petitioner, as well as Yin Lianbing and Xu Aihong for the respondent, participated to the court hearing. The case is now closed.

The petitioner claimed that, on 14 May 2011, 7 July 2011 and 12 July 2011 respectively, the petitioner executed three separate Contracts for the Sale of Cotton. As provided by each one of the contracts, the petitioner shall sell to the respondent 500 tons of Brazil raw cotton. The date of shipment under all the three contracts was August 2012. The payment shall be made by an irrevocable Letter of Credit at sight, issued by the respondent in favor of the petitioner, 15 days ahead of the month of shipment. According to the contracts, should any dispute between the parties arise, the dispute shall be submitted to the International Cotton Association (ICA) for arbitration. The petitioner made certain down payment to the respondent after execution of the contracts. However, after the due date for the issuance of the L/C, despite requested by the petitioner for several times, the L/C was still not issued until 25 June 2013, and the respondent persistently ignored the petitioner’s request for its performance. On 25 June 2013, pursuant to the arbitration clause in the contracts, the petitioner filed an application for arbitration with the ICA. After receiving the application, the ICA delivered all the relevant notifications and files to the respondent by means of e-mail, mail and express. The respondent attended all the arbitral procedures, and submitted its defenses and related documents, in accordance with the arbitration rules of the ICA and the request of the tribunal. After cautious and careful deliberation on the evidence of this case, the tribunal rendered its award. On 18 July 2014, the ICA issued the arbitral award. The defendant filed a petition to the ICA within the time limit. On 27 February 2015, the ICA issued an arbitral award on the petition. The award became effective on the same day, and was binding on the parties. The petitioner hereby petitions the court to rule as follows: 1. Recognize the arbitral award rendered by the ICA on 27 February 2015 concerning the contractual dispute between the parties; 2. Enforce the respondent, in accordance with the law, to perform its obligation under the arbitral award, which is to pay the petitioner USD 803,707.14 and GBP 8,110, equivalent to RMB 5,211,675.83. 3. Enforce the respondent, in accordance with the law, to perform its obligation under the arbitral award, which is to pay the petitioner interest USD 48,054.99, equivalent to RMB 306,912.80, calculated since 20 March 2015 until the day of payment. (For the time being, the interest is calculated until 31 December 2015; Principal USD 803,707.14, annual rate 7.5%, daily interest USD 167.44.) 4. The respondent shall pay the cost of this lawsuit and the cost of enforcement.

In defense, the respondent applied to the court not to recognize and enforce the arbitral award rendered by the ICA on 27 February 2015 concerning the contractual dispute between the parties, based on the following facts and rationale: 1.The petitioner has not submitted the officially authenticated original arbitral award or officially authenticated copy of the arbitral award. 2. Yinhua Ltd. has not received the arbitral award, and thus the arbitral award is not yet effective. 3. In virtue of the subject matter of the case, according to the laws of China, the recognition and enforcement of the award will contradict the public order of China. 4. There is no valid arbitration agreement between the parties in respect of the dispute at issue. And thus the ICA has no jurisdiction over the dispute at issue. 5.The ICA failed to give proper notifications as to the appointment of the arbitrator and the arbitral procedure, and caused the respondent unable to submit its opinions. 6. The parties had no agreement on the constitution of the tribunal or the arbitral procedure, which did not conform to the law of England which is the arbitral seat. 7. The ruling of the arbitral award on certain factual aspects were incorrect. On 24 April 2013, the parties agreed on consensus to postpone the date of shipment under all the contracts to 10 September 2013, and in virtue of which there shall be no payment of interest. The respondent requested the court to reject recognition and enforcement of the arbitral award at issue.

To support its claim, the petitioner Olam Ltd. submitted the following evidences:

Evidence 1: Three Contracts for the Sale of Cotton numbered respectively as 11/B/00262, 11/B/00266 and 11/B/00270; The notarized copies of the aforementioned contracts; The notarial certificate of the translations of the three contracts. This evidence attests that Three Contracts for the Sale of Cotton were concluded between the parties, respectively on 14 May 2011, 7 July 2011 and 12 July 2011. In each of the contracts, it was agreed that the respondent procure 500 tons of Brazil raw cotton from the petitioner. The contracts provided that contractual disputes shall be resolved by arbitration in accordance with the arbitration rules of the ICA.

Evidence 2: No. 2-1 The notarized copy of the letter issued by ICA on 5 August 2015 concerning the arbitration between the parties. No. 2-2 The notarized copy of the arbitral award issued by the ICA on 27 February 2015 concerning technical issues pleaded by the respondent, and the notarized copy of the receipt for delivery of the award. No. 2-3 The notarized copy of the draft arbitral award issued by the ICA on 18 July 2014, and the notarized copy of the receipt for delivery of the draft award. No. 2-4 The notarized copy of the explanation for the modification to the draft award issued by the ICA on 18 August 2014. No. 2-5 The notarized copies of the notifications and files delivered by the ICA to the respondent. No. 2-6 The notarized copy of the registration documents of the ICA. These evidences attest that the ICA has, according to its constitution and rules, delivered to the respondent the files in relation to the commencement of the arbitral procedure, the appointment of the arbitrators, the constitution of the tribunal, directing orders for the procedure, the submission of defenses and evidential materials, the payment of arbitral fees, the issuance of arbitral award, the respondent’s petition, the respondent’s reply to the application’ s claim, the constitution of the committee for petition on technical issues, the award for technical issues and other relevant documents. The respondent, accordingly, appointed an arbitrator, submitted its defense and evidence, pleaded to the tribunal and actively engaged in the whole arbitral and petition procedure. On 18 July, the ICA issued the draft award. Within the duration for petition, the respondent pleaded to the ICA. On 27 February 2015, the ICA issued the award concerning the respondent’s petition, and the award became effective on the same day.

Evidence 3: The notarized translation of the draft arbitral award issued by the ICA on 18 July 2014. This evidence attests that the Chinese translation is identical to the original English text.

Evidence 4: The notarized translation of the explanation for the modification to the draft arbitral award issued by the ICA on 18 August 2014. This evidence attests that the Chinese translation is identical to the original English text.

Evidence 5: The notarized translation of the arbitral award issued by the ICA on 27 February 2015 concerning technical issues pleaded by the respondent. This evidence attests that the Chinese translation is identical to the original English text.

Evidence 6: The English and Chinese text of the constitution and rules of the ICA, which attests the notarized constitution and rules of the ICA.

Evidence 7: The business card of Lin Shibo, which attests that he is the responsible person for the respondent, whose position is the director of the board.

Evidence 8: The American Federal Prime Interest Rate published by Fedprimrinterest.com and the Chinese translation thereof. This evidence attests that the New York Prime Interest rate is the American federal prime interest rate, and that the federal prime interest rate on 20 March 2015 was 3.25%.

Evidence 9: The RMB central parity on 23 November 2015, the publication of which was authorized by China Foreign Exchange Trading Center. To attest: the RMB central parity on 23 November 2015 in interbank exchange market was: USD 1 for RMB 6.3867, GBP 1 for RMB 9.6966.

Evidence 10: The 1996 English Arbitration Act, which attests the lex arbitri.

The aforementioned evidences attest that there was a contractual relationship between the parties concerning the sale of raw cotton, and it was agreed on by the parties that disputes be resolved by arbitration by the ICA. The ICA has conducted arbitration in accordance with the arbitration agreement and rendered an arbitral award. That award is legally binding and shall be recognized and enforced.

The respondent submitted the following opinion on the petitioner’s evidence: In respect to Evidence 1, the respondent confirmed the authenticity of the three contracts, while held the view that the contracts are invalid. In respect to Evidence 2, the arbitral award, the notification and related files made by the ICA were not delivered to the respondent in accordance with law; The Chinese translation was unilaterally produced by an agent of the petitioner. The respondent objected to the admissibility of this evidence. The respondent did submit its defense in the foreign arbitral proceeding, but did not receive the arbitral award. The respondent raised objection against, and does not accept Evidence 3, 4 and 5, on the ground that the Chinese translation was unilaterally produced by an agent of the petitioner. The respondent raised no objection to Evidence 6,8, 9 and 10.

To support its argument, the respondent submitted the following evidences to this court:

Evidence 1-1 Interim Measures for the Administration of Import Tariff Quotas of Agricultural Products, contained in Order of the Ministry of Commerce and the State Development and Reform Commission, No. 4 (2003). 1-2 The 2011 Total Quantity, Conditions for the Application and Distribution Principle of Import Tariff Quotas of Grain and Cotton. 1-3 The 2012 Total Quantity, Conditions for the Application and Distribution Principle of Import Tariff Quotas of Grain and Cotton. To prove: China implements tariff quota on the importation of cotton. When the contracts at issued were concluded in 2011 and 2012, the respondent failed to obtain tariff quotas for the importation of cotton, which rendered the respondent unable to perform the contracts. If the contracts were to be performed, the performance would violate the public order of China and jeopardize the interest of the state.

The petitioner submitted the following opinion on the defendant’s evidence: The petitioner raised no objection against the authenticity of the documents, but objected against the defendant’s reasoning on the evidence. The respondent’s argument that the performance of the contracts at issue will violate the public policy and order of China, is nothing but a misinterpretation of the New York Convention. Article V(2)(b) of the New York Convention should be construed as permitting rejection to recognition or enforcement only when the recognition and enforcement of the arbitral award per se would contradict a stated public order. The substance of the arbitral award in the present case is that the respondent shall pay compensation and interest to the petitioner, and cannot be against the public order. In accordance with the contracts and the relevant judicial interpretation of the Supreme Peopled Court, the validity of the contracts shall be judged in accordance with the law of the UK. The contracts would still be valid even if Chinese law were applied.

In regard to the evidence submitted by both parties, after considering the parties’ opinions, this court holds as follows:

Since the respondent raised no objection against the authenticity of Evidence Nos. 1, 6, 7, 8, 9 and 10 submitted by the petitioner, these evidences are admissible. The respondent argued that it did not receive defendant’s Evidence No. 2. However, this evidence has been notarized by the state where it was formed, and also confirmed by the Chinese Embassy. The evidence is relevant to the present case with a lawful source, and is also capable of attesting certain facts. Its admissibility is thus confirmed. Evidence Nos. 3, 4, 5 are all notarial certificates for the identity of the original award and its translation. Though the respondent denied the authenticity of the translation, it failed to submit its own version of translation to argue that there is a disparity between its version and the petitioner's version of translation. It also failed to submit counterevidence to attest any mistake in the petitioner’s translation. The petitioner’s notarial certificates come from a lawful source and bear relevance to this case, and are thus confirmed as admissible by this court.

The petitioner confirmed the authenticity of all the respondent’s evidences, the admissibility of which is hereby confirmed by this court.

This court has ascertained the following facts: On 14 May 2011, 7 July 2011 and 12 July 2011 respectively, the petitioner executed three separate Contract for the Sale of Cotton, numbered respectively 11/B/00262, 11/B/00266, 11/B/00270 with the respondent. As provided by each one of the contracts, the petitioner shall sell to the respondent 500 tons of Brazil raw cotton. The date of shipment under all the three contracts was August 2012. The payment shall be made by an irrevocable Letter of Credit at sight, issued by the respondent in favor of the petitioner, 15 days ahead of the month of shipment. According to the contracts, should any dispute between the parties arise, such dispute shall be submitted to the International Cotton Association Ltd. (ICA) for arbitration. Afterwards, certain disputes arose concerning the performance of the contracts. On 25 June 2013, the respondent filed an application for arbitration with the ICA. Upon receipt of the application, the ICA delivered all the notifications and documents to the respondent through E-mail, Courier and Express. The respondent submitted its defense and related documents in the arbitral proceedings in accordance with the institutional rules of ICA and the requirements from the tribunal. The tribunal rendered an arbitral award. On 18 July 2014, the ICA filed the award. Within the time limitation for petition, the respondent filed a petition with the ICA. On 27 February 2015, the ICA issued an arbitral award in respect to the respondent’s petition, and delivered the award to the respondent and the petitioner. In December, 2015, the petitioner filed an application with this court, requesting recognition and enforcement of the arbitral award.

The court holds that: This case concerns a party’s application for the recognition and enforcement of a foreign arbitral award. The award at issue was rendered by the ICA and was seated in the United Kingdom. China and UK are both parties to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. In accordance with Article 283 of the Civil Procedure Law of the PRC, the court will review this case applying the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

In the present case, in addition to the application for the recognition and enforcement of the arbitral award, the petitioner has also submitted the notarized copy and Chinese translation thereof, the notarized copy and Chinese translation of the contracts which contain an arbitral clause, as well as the relevant evidentiary documents issued by the person in charge of the ICA. The aforementioned submission satisfies the requirements provided by Article IV of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. 

As for the recognition and enforcement of the award, the respondent submitted seven reasons for defense. The following analysis is directed against the seven reasons for defense respectively.

The first ground of defense concerns whether the petitioner has submitted the officially authenticated original arbitral award or an officially authenticated copy thereof. The Evidence 2 submitted by the petitioner in the hearing contains a notarized copy of the award and a notarized Chinese translation. The arbitral award at issue was notarized in UK, and the Chinese embassy in UK has confirmed that notarization. Thus, the requirements provided by Article IV of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards are satisfied.

The second ground of defense concerns whether the respondent has received the arbitral award at issue and whether the award is effective. Evidence 2 of the petitioner indicates that the ICA delivered through Federal Express the draft arbitral award to the defendant in August 2014, and the respondent filed an application for petition on technical issues with the ICA. The ICA delivered the arbitral award concerning the technical issue to the respondent through Federal Express in February 2015. The address in both deliveries were the registered address of the respondent, and is identical to the address in which the respondent received the application and the notification for hearing in this lawsuit. The delivery process was notarized in the UK, which is the arbitral seat, and was confirmed by the Chinese embassy in the UK. This fact is also supported by the respondent’s statement in the hearing that the respondent did submit a written defense for the arbitration. Hence the court does not uphold the respondent’s argument that the arbitral award is not effective because the respondent did not receive the arbitral award.

The third ground of defense concerns whether the recognition and enforcement of the award contradicts the public order of China. Article V(2)(b) of the New York Convention provides that the 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 the recognition or enforcement of the award would be contrary to the public policy of that country. As China is a member state of the New York Convention, the court of China, while deliberating such cases, shall bear the purpose of the Convention in mind and not be restricted by regional utilitarianism. The scope of judicial review shall be strictly confined to circumstances in which the fundamental public interests of China are at stake, inter alia, awards which may violate fundamental Chinese law principles, violate the sovereignty of China or are against the good customs of China. In the present case, the respondent argues that the performance of the contracts is against the public policy on the ground that it had no importing quota for cotton when the contracts were executed. However, the ICA awarded payment of compensation and interest by the respondent to the petitioner, rather than the actual performance of the contracts. Even if the contracts are invalid, the content of the award is not against the principle of Chinese law concerning the annulment and voidance of a contract. There is nothing in the ICA’s award which may put the fundamental public interests of China in jeopardy, inter alia, which may violate fundamental Chinese law principles, violate the sovereignty of China or are against the good customs of China. On that ground, this reason for defense of the respondent has not been established, and is not upheld by this court.

The fourth ground of defense was whether the ICA has jurisdiction over this dispute. Arbitration clauses were found in all three contracts at issue, the text of which were confirmed by the respondent in the arbitral proceedings. The respondent attended the proceedings without objecting to the validity of the arbitration clauses. Moreover, upon reception of the draft arbitral award, the respondent filed a petition with the ICA. All the aforementioned attests the fact that respondent has accepted the validity of the arbitration clauses and the jurisdiction of the ICA. The defense that there is no arbitration agreement has not been established.

The fifth ground of defense is whether the ICA has notified the respondent of its appointment of arbitrator and participation in the arbitral proceedings. The Evidence No. 2 of the petitioner indicates that on 26 June 2013 the ICA notified the respondent that the application for arbitration has been accepted, and that the respondent may elect an arbitrator. On 12 July 2013, the respondent replied to the ICA, appointing DUFENG as its arbitrator. The Evidence has been notarized. In hearing, the respondent stated that it has submitted its defense in the arbitral proceedings. Hence, the argument that the respondent made no appointment of arbitrator and submitted no opinion contradicts the fact, and is not accepted by this court.

The sixth reason for defense concerns whether the constitution of the arbitral tribunal is in accordance with the law of UK, which is the arbitral seat. Evidence No. 2 indicates that on 29 July 2013, the ICA notified the respondent that the chairman of the ICA has designated R. POLLARD as the presiding arbitrator. The rule was that each party appoint one arbitrator, and the chairman of the ICA appoint the presiding arbitrator. The respondent failed to prove that such rule is against the law of the UK, and this reason for defense is inadmissible.

The seventh reason for defense concerns whether the award was incorrect. This court holds that the present case is concerned with the recognition and enforcement of foreign arbitral award, the peopled court shall only review whether there are grounds for rejecting recognition and enforcement under Article V of the New York Convention. The substantive disputes of the contracts are not within the scope of the judicial review of the people’s court.

In hearing, the respondent raised the objection that this court had not granted it 30 days for the submission of defense, and that is against due procedure. In this regard, the court holds that the Ordinary Procedure of First Instance is not applicable in this case, and the respondent is not a foreign party without domicile in the PRC. Its request that this court shall grant it 30 days for the submission of defense is legally groundless.

Based on the aforementioned grounds，the documents submitted by the petitioner Olam Ltd. concerning the application for the recognition and enforcement of a foreign arbitral award are in accordance with the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and the respondent failed to submit any admissible evidence to prove that any ground exists for rejecting recognition and enforcement of the award rendered by ICA, as provided in Article V of the Convention. The application is in accordance with the Decision of the Standing Committee of the National Peopled Congress on China's Accession to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, promulgated on 2 December 1986, and is not against the reservation made by China thereof. Pursuant to Article IV and Article V of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, as well as Article 283 of the Civil Procedure Law of the PRC, the court rules as follows:

The Arbitral Award rendered by the ICA on 27 February 2015 in respect to the three contracts for the sale of cotton numbered 11/B/00262, 11/B/00266 and 11/B/00270, between Olam International Ltd. and Zibo Yinhua Mianma Ltd., shall be recognized and enforced.

The application fee RMB 500.00 shall be afforded by the respondent Zibo Yinhua Mianma Ltd.

This ruling is final.

Presiding Judge Song Xinxin 

Judge Su Xiaoyu 

Judge Zhu Fengtian 

19 January 2016 

Law Clerk Li Yujiao

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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.