The Supreme People's Court of the People's Republic of China 

Civil Ruling

(2020) Zui Gao Fa Shang Chu 4

Plaintiff: Guangzhou Aircraft Maintenance Engineering Company Limited (GAMECO). Domicile: Heng Shi Road, North Area, Baiyun International Airport, Guangzhou City, Guangdong Province, People's Republic of China.

Legal Representative: Li Tongbin, Chairman of the Board of Directors of GAMECO.

Attorney: Mu Yaping, ETR (Guangdong) Law Firm.

Attorney: Ye Huilun, ETR (Guangdong) Law Firm.

Defendant: Orient Thai Airlines Company Limited. Domicile: NO.222, Room 4322 B,Vibhavadi Rangsit Road, Sanam Bin Sub-district, Don Mueang District, Bangkok, The Kingdom of Thailand.

Legal Representative: Wang Yuxuan, Director.

Attorney: Gao Jianyi, Employee.

Attorney: Ge Xiaohong, Beijing Xiaohong Law Firm.

The Plaintiff, Guangzhou Aircraft Maintenance Engineering Company Limited (hereinafter "GAMECO") filed a lawsuit against the Defendant, Orient Thai Airlines Company Limited (hereinafter as"Orient Thai Airlines" ) over a disputed lien. On 9 April, 2020, the Guangzhou Intermediate People's Court of Guangdong Province registered the case (2020 Yue 01 Min Chu 427). In accordance with Paragraph 1 of Article 28 of the Civil Procedure Law of the People's Republic of China and Item 5 of Article 2 of the Provisions of the Supreme People's Court on Several Issues concerning the Establishment of International Commercial Courts, this Court issued a civil ruling (2020 ZuiGaoFa Min Xia 55) on 29 September, 2020, deciding that this case shall be tried by the First International Commercial Court. After registering the case on 17 December, 2020, this Court  tried this case in accordance with the law.

GAMECO claimed that: 

In July 2016, GAMECO signed an agreement with Orient Thai Airlines. The parties agreed that GAMECO provide maintenance service to Orient Thai Airlines' planes. The agreement provided that"Any dispute arising out of or in connection with this Agreement shall be submitted to the China International Economic and Trade Arbitration Commission (hereinafter 'CIETAC') for arbitration." After the signing, GAMECO repaired and maintained six airplanes sent by Orient Thai Airlines. GAMECO applied to CIETAC for arbitration on the ground that Orient Thai Airlines had defaulted in payment for repair and maintenance costs, material expenses, parking, and other costs to be reimbursed. On 3 September, 2019, CIETAC rendered an arbitral award that Orient Thai Airlines should pay for the repair and maintenance costs, material expenses, parking, and other costs to be reimbursed owed to GAMECO totaling USD 2,629,337.44, as well as interest, ligation costs, etc. On this basis, GAMECO applied for an order before the Court: 1) To confirm the legality of the lien on the four airplanes situated at GAMECO's site which were sent by Orient Thai Airlines to GAMECO for repair and maintenance; 2) To confirm that the proceeds of auction and sale of the four airplanes shall pay the debts in priority, including costs for repair and maintenance, materials, parking, and other costs to be reimbursed  (with a total of RMB 53,352,999 as of 3 September,2019) owed to GAMECO by Orient Thai Airlines; 3) To order that Orient Thai Airlines reimburse GAMECO for the attorneys' fees of RMB 350,000 for the realization of the lien, and that GAMECO enjoys priority on the proceeds of the auction or sale of the above airplanes; and 4) To confirm that Orient Thai Airlines shall bear the litigation costs of this case. 

Orient Thai Airlines objected to the jurisdiction of the case on the grounds that the case is a contract dispute, and according to the arbitration clause agreed upon by both parties, it should be submitted to CIETAC for arbitration, not be heard by the Guangzhou Intermediate People's Court of Guangdong Province.

GAMECO replied on the following grounds: 1) The case is a lien dispute, not a contract dispute. Lien is a legal right, not a contractual right, and disputes arising out of it should be characterized as property rights disputes instead of contract disputes. As a result, the arbitration clause did not apply to the case. As the legal relationship concerning lien rights involved parties not party to the arbitration clause, settling the disputes through arbitration would result in the arbitration exceeding its scope. In accordance with Article 2 of the Interpretation of the Supreme People's Court Concerning Some Issues on Application of the Arbitration Law of the People's Republic of China, the wording"any dispute" in the arbitration clause of the maintenance agreement should only refer to what the parties to the agreement had agreed upon, of which lien disputes are not a part. 2) Issues concerning disputes over the maintenance agreement had already been arbitrated and decided by an arbitral award. Therefore, issues concerning rights and obligations as well as liabilities due to breach have been resolved. 3) The term "any disputes arising out of this contract" in the maintenance agreement should not be expansively construed to include lien disputes. Application for arbitration on the basis of lien rights might result in either non-acceptance of arbitration or an arbitration that exceeds its scope. The case can only be heard by a people's court. For the above reasons, Orient Thai Airlines' objection should be dismissed.

Regarding the issue of jurisdiction in dispute between the parties, the Court finds the following facts:

On 18 July 2016, GAMECO and Orient Thai Airlines signed a General Terms Agreement in English. Both parties agreed that GAMECO shall provide maintenance services to Orient Thai Airlines for airplanes in China under temporary entry permits. It was set out in Article 19.1 of the Agreement that "Any dispute arising from or in connection with this Agreement shall be submitted to the China International Economic and Trade Arbitration Commission for arbitration which shall be conducted in accordance with the Commission's arbitration rules in effect at the time of applying for arbitration. The arbitral award is final and binding upon both parties. The language of the arbitration shall be Chinese."

On 3 December, 2018, GAMECO filed an application before CIETAC for arbitration, asking CIETAC to order that Orient Thai Airlines repay the costs owed to it including costs for repair and maintenance of the airplanes, material expenses, parking expenses, costs to be reimbursed, attorney fees, and travel expenses for this case, for a total of RMB 46,511,767.44.

On 3 September 2019, CIETAC rendered a written award (2019 Zhong Guo Mao Zhong Jing Cai Zi 1333) which ordered that: Orient Thai Airlines shall make payments to GAMECO for expenses owed including repair and maintenance, material expenses, and costs to be reimbursed for a total of USD 2,629,337.44 plus interests (at the rate of 2% per month starting from 1 October, 2017 until the date of payment); service fees for maintenance, material expenses, and other costs to be reimbursed for a total of USD 679,155.6 plus interests (at the rate of 2% per month from 2 June, 2018 until the date of payment); parking fees (at the rate of RMB 5,000 per plane per day until the date when all the planes depart from GAMECO's operating sites; attorney fees for a total of RMB 565,760; and dismissed all other arbitral applications filed by GAMECO. GAMECO shall pay 20% of the total amount (RMB 600,118) of the arbitration fees, i.e., RMB 120,023, while Orient Thai Airlines shall pay 80% of the total amount, i.e. RMB 480,094.4.

After review, this Court considers that this case involves a lien right dispute with foreign elements. The issue is whether, under Article 19.1 of the General Terms Agreement, the dispute in the case should be submitted for arbitration.

Paragraph 1 of Article 271 of the Civil Procedure Law of People's Republic of China provides that "Where, for disputes arising from foreign economic and trade activities or international transportation or maritime activities, the parties have included an arbitration clause in their contract or have reached a written arbitration agreement after a dispute arose to refer such disputes to an international arbitral institution of the People's Republic of China or any other arbitral institution for arbitration, the parties shall not institute an action in a people's court." This provision stipulates the parties' contractual obligation not to litigate arbitral matters before a court which is in breach of the arbitration agreement. Meanwhile, the stipulation clarifies the principle that a valid arbitration agreement excludes court jurisdiction, and that the people's court shall respect the arbitration agreement and enforce it.

In this case, Article 19.1 of the General Terms of Agreement signed by GAMECO and Orient Thai Airlines provides: "Any dispute arising from or in connection with this Agreement shall be submitted to the China International Economic and Trade Arbitration Commission for arbitration." The parties did not object to the arbitration clause, but argued whether lien disputes should be considered arbitral matters under the arbitration clause, which requires the interpretation of the arbitration clause. An arbitration clause is a contract agreed upon and signed by the parties to choose their dispute resolution methods and should be interpreted pursuant to the general principles of contract interpretation, i.e., the genuine meaning of the contract clause shall be determined by looking into the language, its context, contract intent, trade practices, and the principle of good faith. In the arbitration clause, the parties did not distinguish property disputes from contract disputes, nor did they limit the scope of arbitral matters to contract disputes. Instead, the parties agreed that "Any dispute arising from or in connection with this Agreement shall be submitted to the China International Economic and Trade Arbitration Commission for arbitration", which is an expansively broad agreement on arbitral matters, and by its ordinary meaning, the arbitral matters shall include: contract disputes concerning its existence, validity, modification, transfer, performance, breach, interpretation, termination, etc,  property disputes, tort disputes, and other disputes arising out of the General Terms Agreement (maintenance agreement), GAMECO filed a lawsuit in the Guangzhou Intermediate People's Court of Guangdong Province, claiming that Orient Thai Airlines had defaulted on the payment for maintenance and other fees under the maintenance contract and asked the court to confirm its lien on the four airplanes that Orient Thai Airlines had sent to it for maintenance. It also asked for priority of repayment from the proceeds of sale and auction of the four airplanes. Although this is a case of lien right dispute, the dispute arose from the parties' performance of the maintenance agreement, which falls under the scope agreed in the arbitration clause, that is, "Any dispute arising from or in connection with this Agreement". Therefore, this dispute should be submitted to CIETAC for arbitration. GAMECO's claim that issues governed by the arbitration clause should be limited to contract disputes and that lien right disputes should be excluded is inconsistent with the wording of the arbitration clause, thus lacking factual basis. 

Additionally, GAMECO in the case only sued Orient Thai Airlines, the party to maintenance agreement, not concerning any parties outside of the arbitration clause. The arbitration case (2019 Zhong Guo Mao Zhong Jing Cai Zi 1333) has decided the disputes between GAMECO and Orient Thai Airlines over rights and obligations concerning the service fee, material expenses, costs to be reimbursed, parking fees, and expenses occurred for maintenance; therefore the arbitration award did not involve a lien right dispute. This case concerns a property dispute arising out of the lien, and the issue to be resolved in the case is whether GAMECO is entitled to a lien upon Orient Thai Airlines' airplanes, and the priority of repayment from the proceeds of sale and auction of the airplanes. Such a dispute was not heard and decided in the arbitration case. Therefore, when GAMECO applies for arbitrating the lien dispute, it does not violate the finality rule of arbitral awards set out in Paragraph 1 of Article 9 of the Arbitration Law of the People's Republic of China.

In conclusion, the dispute in the case falls under the scope of arbitration set out in the General Terms Agreement, and the parties to this case shall resolve their dispute through arbitration. In accordance with Paragraph 1 of Article 271 of the Civil Procedure Law of People's Republic of China and Paragraph 3 of Article 208 of the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China. The Court rules as follows:

GAMECO's claims are dismissed.

This ruling is a final ruling.

Chief Judge       Shen Hongyu       

Judge        Xi Xiangyang       

Judge        Sun Xiangzhuang

Judge        Du Jun                 

Judge        Huang Xiwu         

12  August, 2021        

Judge Assistant          Li Na                   

Court Clerk         Zhang Wei          

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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.