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

Civil Ruling

(2019) ZuiGaoFa Min Te 4

Claimants:

-Claimant 1: Zhang Lan, Female, Citizen of the Federation of Saint Kitts and Nevis, residing in Beijing, People's Republic of China [details omitted].

Attorney: Ji Chaoyi, East & Concord Partners.

Attorney: Zuo Xiuyang, Tianjin YunGong (Beijing) Law Firm.

-Claimant 2: Grand Lan Holdings Group (BVI) Limited. Domicile: PO Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

Representative: Qin Letian, Director of Grand Lan Holdings Group (BVI) Limited.

Attorney: Ji Chaoyi, East & Concord Partners.

Attorney: Chen Feng, East & Concord Partners.

-Claimant 3: Qiao Jiang Lan Development Limited. Domicile: PO Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

Representative: Qin Letian, Director of Qiao Jiang Lan Development Limited .

Attorney: Ji Chaoyi, East & Concord Partners.

Attorney: Chen Feng, East & Concord Partners.

Respondent:

-Respondent 1: La Dolce Vita Fine Dining Company Limited. Domicile: PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.

Representative: G Jacqueline Fangonil Walsh, Director of La Dolce Vita Fine Dining Company Limited.

Attorney: Fei Ning, Beijing HuiZhong Law Firm.

Attorney: Zhang Shutao, Beijing HuiZhong Law Firm.

On 12 July 2019, the CICC accepted an application to set aside the arbitral award (S20150473[2019]) of the China International and Economic and Trade Arbitration Commission (hereinafter referred to as 'CIETAC') between the claimants Zhang Lan, Grand Lan Holdings Group Limited (Grand Lan Holdings), Qiao Jiang Lan Development Limited (Qiao Jiang Lan) and the respondent La Dolce Vita Fine Dining Company Limited (La Dolce Vita). The CICC formed a collegiate bench according to the Civil Procedure Law of the People’s Republic of China to review. The review is now completed.

The claimants, Zhang Lan, Grand Lan Holdings Group Limited (Grand Lan Holdings) and Qiao Jiang Lan Development Limited (Qiao Jiang Lan) (hereinafter as ‘claimants’) have applied to set aside the arbitral award (S20150473[2019]) issued by the CIETAC. Their application is based on the facts and reasons listed as follows:

Firstly, the formation of the arbitral tribunal is inconsistent with the arbitration rules. On December 9 2013, the claimants and the respondent signed an Equity Transfer Agreement with the Amendment and Restatement (noted below as ‘Equity Transfer Agreement’). Article 13.2 of the Equity Transfer Agreement stipulates the formation of the arbitral tribunal. La Dolce Vita applied for arbitration (the Arbitration) with CIETAC by virtue of the arbitration clause set out in the Equity Transfer Agreement. The respondents of the Arbitration are the claimants of this case. Due to factors such as the governing law of the Equity Transfer Agreement being Hong Kong law and the required legal qualification of the arbitrators to be appointed, the multiple parties constituting the respondents of the Arbitration failed to reach an agreement on the arbitrator they would like to appoint. Article 27.3 of the China International and Economic and Trade Arbitration Commission Arbitration Rules, which are effective as of May 1 2012 ( hereinafter referred to as ‘2012 CIETAC Arbitration Rules’), stipulates that where either the claimant or the respondent fails to jointly nominate or jointly authorize the Chairman of CIETAC to appoint an arbitrator within fifteen (15) days from the date of its receipt of the Notice of Arbitration, the Chairman of CIETAC shall appoint all three members of the arbitral tribunal and designate one of them to act as the presiding arbitrator. Article 13.2 of the Equity Transfer Agreement incorporates the 2012 CIETAC Arbitration Rules by direct quotation and does not rule out the application of Article 27.3 of the 2012 CIETAC Arbitration Rules. The Arbitration is a multiple-party arbitration, and the Equity Transfer Agreement involves seven parties. The arbitration clause of the Equity Transfer Agreement uses the terms ‘claimant’ and ‘respondent’, without any definition or guidance of how to distinguish the roles among the parties. In order to solve the deadlock in the arbitration, caused by the appointment of arbitrators, CIETAC shall form the arbitration tribunal in accordance with Article 27.3 of the 2012 CIETAC Arbitration Rules. Article 27.3 of the 2012 CIETAC Arbitration Rules provides for a three-person tribunal. Thus, the Chairman of CIETAC shall appoint all three members of the arbitral tribunal and designate one of them as the presiding arbitrator. The arbitration notice issued by CIETAC to the parties on the appointment of arbitrators specifically pointed out that ‘Considering that there are three respondents in this case, please pay attention to the relevant provisions of Article 27.3 of the 2012 CIETAC Arbitration Rules.’This means that CIETAC also acknowledges that in the exceptional circumstances where the special agreement of the parties cannot be enforced, Article 27.3 of the 2012 CIETAC Arbitration Rules shall apply. The formation of the arbitral tribunal as required by CIETAC in the Notice of Arbitration totally departs from the principle of equal treatment in the process of arbitration. In order to avoid further loss to their arbitration procedural rights, the three claimants in this case jointly nominated one arbitrator, preserving their right to object. Finally, CIETAC formed the arbitral tribunal in a wrongful manner. Regarding this issue, the three claimants of this case have never waived their right to object.

Secondly, the formation of the arbitral tribunal by CIETAC departs from the principle of equal treatment in the process of arbitration, endangers the principle of due process, and violates public policy. In Siemens A.G & BKMI Industrienlagen GmbH v. Dutco Constr. Co. (noted below as ‘The Dutco Case’)，the Cour de Cassation of France in setting aside the decision by ICC ruled that the nomination of the arbitrators is a matter of public policy, which can be waived only after the dispute occurs. This case relates to the setting aside of a foreign-related arbitral award. Therefore the CICC shall take international arbitration practice and related arbitration judicial practice as references. The Cour de Cassation interpreted the equal right to nominate the arbitrators as a right that is part of the public policy as well as the core principle of procedural fairness for arbitration.

Thirdly, the proposition of La Dolce Vita that the interests of the claimants of this case are consistent, and the notion that the will of Zhang Lan is the will of Grand Lan and Qiao Jiang Lan is without merit. Grand Lan and Qiao Jiang Lan are incorporated in the British Virgin Islands, and both companies enjoy corporate personality and are capable of expressing their will independently. Zhang Lan is only the sole shareholder of Grand Lan and Qiao Jiang Lan. Both companies, Grand Lan and Qiao Jiang Lan, are operated by their directors respectively. Thus, the will of Zhang Lan is not the will of Grand Lan and Qiao Jiang Lan. Article 27.3 of the 2012 CIETAC Arbitration Rules shall be applied to every party in a multi-party arbitration without exception, and neither is the relationship between the parties necessarily a factor to be considered. When the parties jointly nominate the arbitrators, the relationship between the parties is beyond the scope of review for the People’s Court. Various domestic and international arbitration rules have similar provisions as Article 27.3 of the 2012 CIETAC Arbitration Rules. Issues on the amendment, enhancement and interpretation of arbitration rules are within the scope of autonomy of the relevant arbitration institution and it is not appropriate to interfere with these issues through judicial review.

Thus, the claimants of this case apply to set aside the arbitral award (S20150473[2019]) according to the Article 70 of the Arbitration Law of the People’s Republic of China and Article 274 of The Civil Procedure Law of the People’s Republic of China.

La Dolce Vita responded: 

Firstly, the special agreement of the arbitration clause in the Equity Transfer Agreement clearly stipulates the establishment of the arbitral tribunal, which amends and excludes the 2012 CIETAC Arbitration Rules concerning the establishment of the arbitral tribunal. All the cases submitted by the claimants and the respondent of this case prove that the arbitration clause of the Equity Transfer Agreement stipulates a special process to establish the arbitral tribunal, which amends and excludes Article 27.3 of the 2012 CIETAC Arbitration Rules.

First and foremost, according to the facts ascertained by the arbitral award, Zhang Lan is the sole shareholder of Grand Lan and Qiao Jiang Lan. By that, Zhang Lan holds 89.47% of the shares of the South Beauty Investment Company Limited, which is the Target Company. Thus, although there are seven parties to the Equity Transfer Agreement, due to the rights and obligations and the interests of all parties in the Agreement, only two parties are relevant to the Equity Transfer Agreement, namely, the buyer (the investment company controlled by the CVC Fund) and the seller (Zhang Lan and the company originally controlled by her) . The Equity Transfer Agreement has no other interested parties besides the CVC Fund and Zhang Lan. In this sense, the arbitration clause is clear in terms of the claimant and the respondent, which are the CVC Fund as the buyer and Zhang Lan as the seller respectively. In addition, even if the circumstances of amending an arbitration clause proposed by the claimants are applied, the arbitration clause still has already amended Article 27.3 of the 2012 CIETAC Arbitration Rules. 

Second, the arbitration clause did not grant CIETAC the power to nominate an arbitrator for the party that has already nominated an arbitrator. For the party who has already nominated an arbitrator, the right to appoint is not affected by the fact that another party did not nominate any arbitrator. It is only for the party that fails to complete the appointment of an arbitrator can CIETAC perform corresponding management duties and appoint an arbitrator on its behalf in order to advance the process. If in the arbitration case, Article 27.3 of the CIETAC Arbitration Rules applies directly, the right to appoint an arbitrator of the party which has appointed an arbitrator will be deprived directly, and a conflict would occur between this procedure and the presiding arbitrator’s appointment procedure. However the three claimants of this case has never objected to the presiding arbitrator’s appointment procedure. The arbitration clause of the Equity Transfer Agreement is neither unenforceable nor inconsistent with mandatory provisions. Thus, according to Article 4.3 of the 2012 CIETAC Arbitration Rules, the arbitration clause of the Equity Transfer Agreement shall be applied first.

Third, as the claimants of this case are controlled by Zhang Lan, no objective reasons or facts support the claim that an arbitrator cannot be appointed. Zhang Lan’s deliberate failure to perform the rights or duties under the arbitration clause of the Equity Transfer Agreement does not cause the arbitration clause to be ineffective. The claimants of this case ultimately appointed an arbitrator under the instructions of Zhang Lan. In the Arbitration, the claimants of this case changed their representatives, intending to create the impression that the interests of the claimants of this case are different, but the powers of attorney of the representatives in this case are all signed by Zhang Lan. After the establishment of the arbitral tribunal, the claimants of this case all entrusted the Duan & Duan Law Firm and the Gall Law Firm. Thus, Zhang Lan has the full capacity and very well should decide the arbitrator for the claimants of this case. Therefore, the so-called inability to appoint an arbitrator is in fact an intentional act, aiming to maliciously delay and obstruct the arbitration process by deliberately failing to appoint an arbitrator. This act of malicious obstruction of the arbitration tribunal’s formation will not make the arbitration clause in the case impossible to implement. 

Secondly, CIETAC shall follow the principle of good faith in the establishment of the arbitral tribunal, and CIETAC did provide the opportunity to the parties to express their opinions and to nominate arbitrators on an equal basis. The procedures of the establishment of the arbitral tribunal are pursuant with the principle of good faith and the interests of the parties involved. Article 9 of the 2012 CIETAC Arbitration Rules provides for the principle of good faith which should be applied to the entire process of arbitration. The claimants of this case, by refusing to nominate an arbitrator, violated the principle of good faith. In the Arbitration, CIETAC prioritized the application of the special agreement of the parties on the establishment of arbitral tribunal in accordance with Article 4.3 of the 2012 CIETAC Arbitration Rules. CIETAC provided the opportunity for the parties to fully express their opinions and to nominate arbitrators equally. These acts are consistent with the 2012 CIETAC Arbitration Rules.

Thirdly, when considering whether to set aside the arbitral award, the CICC should also consider whether the impartiality of the arbitration is affected. Even if the claimants’ claim of wrongful establishment of the arbitral tribunal is right, of which La Dolce Vita clearly denies, the impartiality of the arbitration is unhampered. Thus, the arbitral award shall not be set aside based on this claim. In addition, the facts in the Dutco Case are fundamentally different from the facts of this case. The Dutco case is a French case and should not be applied in China, thus it has no value in this case as a reference. 

Thus, the respondents ask the CICC to dismiss the claimants’ application to set aside the arbitral award.

The CICC organized two rounds of exchange of evidence. On March 20, 2020, the CICC organized an online inquiry, and the legal representatives of the claimants and the respondent fully expressed their opinions and cross-examined the evidence.

Upon examination, the CICC has found that:

On December 9, 2013, Zhang Lan, Grand Lan, Qiao Jiang Lan, the Target Company, the La Dolce Vita Fine Dining Group Holdings Limited (La Dolce Vita Group), the La Dolce Vita Fine Dining Holdings Limited (La Dolce Vita Holdings) and La Dolce Vita signed the Equity Transfer Agreement intended for the sale of 86.2% of valid shares of the Target Company. The Equity Transfer Agreement stipulates that the claimants of this case are referred to as the seller, and the La Dolce Vita is referred to as the buyer.

Article 13.2 of the Equity Transfer Agreement stipulates the establishment of the Arbitral Tribunal as follows: 

‘Any dispute (no matter contractual, pre-contractual or non-contractual) arising from or in connection with this contract, concerning the breach, the termination or the nullity and voidness of this contract, shall be submitted to the China International Economic and Trade Arbitration Commission (CIETAC) for arbitration and shall be conducted in accordance with CIETAC’s arbitration rules in effect at the time of signing this contract. CIETAC’s arbitration rules shall be incorporated into this article, and can be amended by other paragraphs of this article. The place of arbitration shall be Beijing. The number of arbitrators shall be three: one for the claimant, one for the respondent, and the third one (as the presiding arbitrator) shall be nominated according to the following procedures:

13.2.1 The Secretariat of CIETAC shall provide an identical list to all parties. The list shall include at least three candidates, all of whom should: (i) hold a valid certificate of admission as a legal practitioner in Hong Kong; (ii) not be a Chinese citizen;

13.2.2 The parties shall cross out from the list of candidates to whom they object, and rank the remaining candidates by preference (from the most preferred to the least preferred), and return the list to the Secretariat of CIETAC within fifteen (15) days upon receipt of the list;

13.2.3 Upon the expiration of the period stated in 13.2.2, CIETAC shall nominate the presiding arbitrator among the candidates approved by the parties in order of preference; and

13.2.4 In the event that the above mentioned process failed, the Chairman of CIETAC shall appoint the presiding arbitrator from the panel of arbitrators of CIETAC, who have the qualifications and meet the nationality requirements stated in 13.2.1；

For clarity: the parties agree that an arbitrator who is not in the panel of arbitrators of CIETAC may still be appointed, but only with the authorization of the Chairman of CIETAC.’

The arbitration rules in effect when the parties signed the Equity Transfer Agreement are the 2012 CIETAC Arbitration Rules, which became effective on May 1 2012.

Article 27 of The 2012 CIETAC Arbitration Rules stipulates that: 

‘Multiple-Party Tribunal:

1. Where there are two or more Claimants and/or Respondents in an arbitration case, the Claimants and/or the Respondents shall negotiate separately among themselves to jointly nominate or jointly entrust the Chairman of CIETAC to appoint an arbitrator for their side. 

2. The presiding arbitrator or the sole arbitrator shall be nominated in accordance with the procedures stipulated in Paragraphs 2, 3 and 4 of Article 25 of these Rules. When making such a nomination pursuant to Paragraph 3 of Article 25 of these Rules, the Claimants and/or the Respondents, shall negotiate separately among themselves to submit a list of their jointly agreed candidates.

3. Where either the Claimants or the Respondents fail to jointly nominate or jointly entrust the Chairman of CIETAC to appoint an arbitrator within fifteen (15) days from the date of its receipt of the Notice of Arbitration, the Chairman of CIETAC shall appoint all three members of the arbitral tribunal and designate one of them to act as the presiding arbitrator.’

On May 26 2015, CIETAC accepted the application for arbitration. The claimant was La Dolce Vita, and respondents were Zhang Lan, Grand Lan, and Qiao Jiang Lan.

CIETAC issued the first Arbitration Notice (017436/017437). This Notice confirmed that the 2012 CIETAC Arbitration Rules shall be applied, and informed the parties that: ‘please nominate an arbitrator according to the requirements set out in the arbitration clause of this case, and inform CIETAC your appointed arbitrator in writing within fifteen (15) days from the date of receipt of this Notice. If you fail to do so, the Chairman of CIETAC shall nominate the arbitrator on your behalf.’

On June 8, 2015, the La Dolce Vita submitted a letter within the deadline, nominating Mo Shi [Michael Moser] as the arbitrator. The Respondents of the arbitration submitted letters respectively on July 9, 2015, July 15, 2015, and August 24, 2015, indicating that the respondents were unable to nominate an arbitrator jointly and requested CIETAC to appoint three arbitrators on behalf of them according to the 2012 CIETAC Arbitration Rules.

In view of the fact that the Respondents failed to nominate an arbitrator jointly, on December 24 2015, the CIETAC issued the second Arbitration Notice (046796). This Notice clarified the stance of CIETAC as follows: in view of the fact that the parties have agreed that the 2012 CIETAC Arbitration Rules shall apply and the content of the rules shall be subject to amendment, in accordance with Article 4.3 of the 2012 CIETAC Arbitration Rules, the arbitration process shall be conducted in accordance with the arrangement of the parties set out in the arbitration clause, unless the agreement of the parties is unenforceable or is inconsistent with the mandatory provisions governing the arbitration process. CIETAC made its decision in the Notice that ‘the respondents shall nominate an arbitrator jointly, and notify CIETAC the name of the arbitrator in writing within fifteen (15) days from the date of receipt of the Notice. If the Respondents fail to do so, the Chairman of CIETAC shall nominate the arbitrator for the Respondents. The presiding arbitrator shall be appointed according to the agreement of the parties in the arbitration clause.’

The Respondents failed to reply in due time to the second Notice. On January 8, 2016, CIETAC issued the third Arbitration Notice (000692). This notice informed the Respondents: ‘Considering the actual situation in this case, the respondents shall nominate an arbitrator jointly and notify CIETAC of the name of the arbitrator in writing before January 25, 2016. If the respondents fail to do so, the Chairman of CIETAC shall nominate the arbitrator for the respondents.’

On January 22, 2016, Zhang Lan replied to CIETAC to express that in order to avoid further loss (the denial of the opportunity to nominate an arbitrator), she nominated Zhou Hanmin as the arbitrator, while preserving her right to object. On the same day, Grand Lan and Qiao Jiang Lan replied to CIETAC that in order to avoid further loss (the denial of the opportunity to nominate an arbitrator), they nominated Zhou Hanmin as the arbitrator, preserving their right to object. Even so, on February 7, 2016, and July 11, 2016, the respondents still replied to CIETAC that they objected to the establishment of arbitral tribunal.

On September 27, 2016, as the respondents had appointed an arbitrator, CIETAC issued the fourth Arbitration Notice (037258), and officially confirmed the establishment of the arbitral tribunal. This Notice pointed out that the claimant nominated Dr Mo Shi [Michael Moser] as the arbitrator, and the respondents nominated Zhou Hanmin as the arbitrator. Dr Su Shaocong is the only candidate on the list of presiding arbitrator candidates presented by the Secretariat of CIETAC both chosen by the Claimants and Respondents, thus, on the basis of the agreement of the arbitration clause approved by the parties, Dr Su shall be the presiding arbitrator according to the arbitration clause. On this date (September 27 2016) the above-mentioned arbitrators have already formed the arbitral tribunal to examine this case.

On April 28, 2019, CIETAC issued the arbitral award (S20150473[2019]) No.0591. At the time of the establishment of the arbitral tribunal, Zhang Lan was the sole shareholder of Grand Lan and  Qiao Jiang Lan, the sole director of Grand Lan and one of the two directors of Qiao Jiang Lan. According to the facts ascertained by the arbitral award, Zhang Lan held 89.47% shares of the Target Company through Grand Lan and Qiao Jiang Lan, and became the majority shareholder and indirect owner of the Target Company. The La Dolce Vita Group held 82.7% shares of the La Dolce Vita Holdings, and the La Dolce Vita Holdings held 100% shares of La Dolce Vita. The majority of the shares of the La Dolce Vita Group were controlled by CVC fund. The representative of CVC Fund undertook the equity transfer. The Equity Transfer Agreement was signed by Zhang Lan on behalf of herself, Grand Lan, Qiao Jiang Lan and the Target Company. The signatures of the La Dolce Vita Group, La Dolce Vita Holdings and La Dolce Vita were signed by one same person.

In the view of the CICC, this case concerns the setting aside of an arbitral award with foreign-related element, thus Article 70 of the Arbitration Law of the People’s Republic of China and Article 274 of the Civil Procedure Law of the People’s Republic of China shall apply.

In the view of the CICC, the issue in conflict of this case is whether the establishment of the arbitral tribunal is in accordance with the arbitration rules agreed upon by the parties, and whether the third clause of the first paragraph of Article 274 of the Civil Procedure Law of the People’s Republic of China should apply.

Firstly, Article 13.2 of the Equity Transfer Agreement has clear stipulations on the establishment of the Arbitral Tribunal, especially the nomination of the arbitrators. Article 27 of the 2012 CIETAC Arbitration Rules, which the parties chose to apply, concerns the establishment of a multiple-party tribunal. Article 27.3 provides for the handling of situation where multiple parties fail to jointly nominate an arbitrator. However, the parties have made another written agreement about the appointment of arbitrators by each side in the arbitration clause, but failed to reach an agreement on the situation where multiple parties cannot land on one arbitrator. Under such circumstances, how should the arbitration clause involved in this case be interpreted? The first way to interpret it is that the arbitration clause is only a simple replication of the 2012 CIETAC Arbitration Rules; the second way is that the arbitration clause focuses on the emphasis of the right of each side to nominate an arbitrator. In the view of the CICC, a clause of a contract should be interpreted in a way that gives it effect as far as possible, instead of making it meaningless or redundant.  Provided that there are no other strong reasons, the arbitration clause of the Equity Transfer Agreement shall not be deemed only to repeat Article 27 of the 2012 CIETAC Arbitration Rules, which would thus make the arbitration clause meaningless. Based on the word choice of the arbitration clause involved, the arbitration clause of the Equity Transfer Agreement shall be interpreted as each side is granted the right to nominate an arbitrator respectively as per the agreement. The right of the other side to nominate an arbitrator is unaffected where either the claimant’s side or the respondent’s side fails to jointly nominate an arbitrator. In the circumstances where each party is granted the right to nominate an arbitrator, CIETAC’s deprivation of one party’s right to nominate caused by the other party’s failure to nominate would be a violation of the other party’s autonomy. The source of the power of an arbitral tribunal is joint authorization of the parties. The contractual nature of arbitration determines that each party’s will shall be reflected to the maximum extent throughout the entire arbitration process, which ought to include the process of establishing the arbitration tribunal. Therefore, in the context where the arbitration clause explicitly empowers each side to nominate an arbitrator respectively, CIETAC shall respect that right, rather than directly applying Article 27.3 of the 2012 CIETAC Arbitration Rules and appointing arbitrators for both sides. Article 4.3 of the 2012 CIETAC Arbitration Rules stipulates that ‘Where the parties agree to refer their dispute to CIETAC for arbitration but have agreed on a amendment of these Rules or have agreed on the application of other arbitration rules, the parties’ agreement shall prevail unless such agreement is inoperative or in conflict with a mandatory provision of the law applicable to the arbitral proceedings. Where the parties have agreed on the application of other arbitration rules, CIETAC shall perform its appropriate administrative duties.’ The arbitration clause of the Equity Transfer Agreement clearly emphasizes the right of each side to nominate an arbitrator respectively. This clause is operative and is consistent with the mandatory provisions of the law applicable to the arbitral proceedings. Thus, this clause shall be respected.

Secondly, the status of the parties of this case in the Equity Transfer Agreement and the Arbitration is clear. The claimants of this case point out that one of the reasons for the application of Article 27.3 of the 2012 CIETAC Arbitration Rules is that the Equity Transfer Agreement did not define the scope of ‘the claimant’ and ‘the respondent’. Seven parties signed the Equity Transfer Agreement, which sets out clearly the seller and the buyer and their respective rights and duties. The seller includes Zhang Lan, Grand Lan, and Qiao Jiang Lan. Zhang Lan is the majority shareholder and indirect owner of the Target Company. The Equity Transfer Agreement is signed by Zhang Lan representing herself, Grand Lan, Qiao Jiang Lan and the Target Company. They shall be deemed to be one party of the Equity Transfer Agreement with a common interest. The buyer is La Dolce Vita. The La Dolce Vita Group, which holds 82.7% shares of the La Dolce Vita Holdings, and La Dolce Vita Holdings, which holds 100% shares of La Dolce Vita, assisted La Dolce Vita to undertake the equity transfer, and the details of the equity transfer was carried out by a representative who is a staff member of the CVC Fund. The Equity Transfer Agreement is signed by a person representing the La Dolce Vita Group, La Dolce Vita Holdings and the La Dolce Vita at the same time. They shall be deemed to be the other party of the Equity Transfer Agreement with common interests. According to the rights and duties of the Equity Transfer Agreement, and the relationship of the parties of the Equity Transfer Agreement, the seller and buyer of the Equity Transfer Agreement is clear, with Zhang Lan being the representative of the seller and the La Dolce Vita being the representative of the buyer. The terms ‘the claimant’ and ‘the respondent’ only appear in Article 13 of the Equity Transfer Agreement, which is the provision for governing law and method of dispute resolution, and no further definitions were given. Thus, the scope of the terms, ‘the claimant’ and ‘the respondent’, shall be interpreted based on the context of the contract and the background of the performance of the Equity Transfer Agreement. The rights and duties of the Equity Transfer Agreement only concern the buyer and the seller. The seller and the buyer can be deemed respectively as a party with common interests. In the process of contract performance and in disputes, conflict of interest only occurs between the seller and the buyer. The reason why the scope of the terms, ‘the claimant’ and ‘the respondent’, seems to lack clear definition in Article 13 of the Equity Transfer Agreement, is because at the time the Equity Transfer Agreement was concluded, it was uncertain which party would apply for arbitration. However, when the Arbitration began, ‘the claimant’ and ‘the respondent’ were clear, which correlated to the buyer or the seller respectively. Therefore, the scope of ther terms, ‘the claimant’ and ‘the respondent’, is specifically and clearly defined.

Thirdly, CIETAC gave enough time to the claimant and the respondent of the Arbitration to express their viewpoints, and conscientiously listened to the views of all parties. After CIETAC accepted the application for arbitration, it issued four Arbitration Notices to solicit the opinions of the parties regarding the nomination of arbitrators and other matters. In these Notices, CIETAC described its viewpoint in detail and the grounds for it to the claimants. The grounds for the method of establishing the arbitral tribunal, which CIETAC has explained to the parties, is persuasive. Upon the request of the three claimants of this case, CIETAC postponed the deadline for appointing an arbitrator multiple times. The period lasted for one (1) year and four (4) months, from the first Notice to inform the respondent of the arbitration case to nominate an arbitrator, to the fourth Notice to on the establishment of the arbitral tribunal, a sufficient period of time for the respondent of the arbitration case to appoint an arbitrator. In the Arbitration, although the respondent consisted of three parties, Zhang Lan is the sole shareholder of Grand Lan and Qiao Jiang Lan, the sole director of Grand Lan, and one of the two directors of Qiao Jiang Lan, and was granted relevant authority. Therefore, Zhang Lan, Grand Lan and Qiao Jiang Lan clearly are parties with common interests constituting one party in the Arbitration. The arbitration clause authorizes these parties to nominate one arbitrator jointly, and the implementation of this stipulation should meet no obstacles. The repeated refusal of the claimants of this case to jointly nominate an arbitrator, citing the reason that they could not reach an agreement on nomination, violates the principle of good faith, and this kind of behavior should not be encouraged. Furthermore, even though the claimants of this case preserved their right to object, they jointly appointed Zhou Hanmin as the arbitrator, rather than not jointly nominating anyone. Thus, the opportunistic behavior of the claimant’s attempt to use this preservation in the Arbitration to set aside an unfavorable arbitral award should not be encouraged.

Fourthly, the claimants of this case cited The Dutco Case to support their viewpoint. The Dutco Case is not binding on any Chinese courts, as it is a judgment from a French court. Moreover, the facts of The Dutco Case are not quite the same as those in this case, so the Ductco Case is insufficient as a proof. Furthermore, the claimants of this case submitted several copies of Cases Digest from the Claimants, which includes some cases in which the arbitration clause stipulated the right of the parties to nominate arbitrators. In these cases, CIETAC only appointed an arbitrator for one side constituted by multiple parties, when the parties fail to nominate an arbitrator jointly. Thus, these cases do not support the application of the claimants of this case.

In summary, the establishment of the arbitral tribunal in this case is not inconsistent with the arbitration rules stipulated by the parties. The application of Zhang Lan, Grand Lan Holdings Group (BVI) Limited and Qiao Jiang Lan Development Limited to set aside the arbitral award (S20150473[2019]) by CIETAC lacks factual and legal grounds, and the CICC does not support this application.

In accordance with Article 70 of the Arbitration Law of the People's Republic of China and Article 274 of the Civil Procedure Law of the People’s Republic of China, the CICC rules as follows:

The application of Zhang Lan, Grand Lan Holdings Group (BVI) Limited and Qiao Jiang Lan Development Limited shall be dismissed. 

The application fee of four hundred (400) RMB shall be paid by the applicant, Zhang Lan, Grand Lan Holdings Group (BVI) Limited and Qiao Jiang Lan Development Limited.

Presiding Judge Gao Xiaoli

Judge Xi Xiangyang      

Judge Ding Guangyu    

Judge YU Xiaohan        

Judge Guo Zaiyu          

December 29, 2020

Assistant Zhao Ke            

Clerk Zhang Yixin       

Related Links:

【（2019）最高法民特4号】张兰、盛兰控股集团（BVI）有限公司、俏江澜发展有限公司与甜蜜生活美食有限公司申请撤销仲裁裁决一案民事裁定书

*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.