Anhui Longlide Wrapping and Printing Co., Ltd v. BP Agnati S.R.L.

 

Cite as: Anhui Longlide Wrapping and Printing Co., Ltd v. BP Agnati S.R.L., The Supreme People’s Court (25 March 2013), in Fan Yang, Foreign-related Arbitration in China: Commentary and Cases, Part IV

Case identification

  • Date of Decision: 25 March 2013 

  • Court:

    • The Supreme People’s Court

    • The Higher People's Court of Anhui Province

  • Arbitral Tribunal:

    • N/A

  • Case number / Docket number:

    • No. 13 of the Fourth Civil Tribunal of the Supreme People’s Court [2013]

    • No. 00001 of the Higher People’s Court of Anhui Province [2013]

Classification of issues present

  • Application of the New York Convention: No

  • Key PRC law provision(s) at issue: Articles 10 and 16 of <The Arbitration Law of the People’s Republic of China”>; Article 16 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”>.

Descriptors: Arbitration agreement; Validity of arbitration agreement; Applicable law to the arbitration agreement; Seat/Place of arbitration; ‘Place of jurisdiction’; The law of the forum;   

 

 

 

 

Anhui Longlide Wrapping and Printing Co., Ltd v. BP Agnati S.R.L.  

An agreement to submit disputes to arbitration in the International Court of Arbitration of the International Chamber of Commerce with the “Place of Jurisdiction shall be Shanghai, China” was found to be a valid arbitration agreement under the PRC law. In its Report to the Supreme People’s Court, the Higher People's Court of Anhui Province formed two different opinions. Its majority opinion was that the arbitration clauses concerned were valid pursuant to article 16 of the PRC Arbitration Law; in particular, that the lower court’s finding that foreign arbitration institutions, such as the ICC Court of International Arbitration, could not conduct arbitration proceedings in the PRC, lacked legal basis. The minority opinion, however, was that the arbitration clauses concerned were invalid because pursuant to article 10 of the PRC Arbitration Law, foreign arbitration institutions could not conduct arbitration proceedings in the PRC. In its Reply, the Supreme People’s Court agreed with the majority view and found that the arbitration clauses concerned were valid under article 16 of the PRC Arbitration Law.

Case text (English translation)

(25 March 2013 No. 13 of the Fourth Civil Tribunal of the Supreme People’s Court [2013])

 

The Higher People’s Court of Anhui Province:

Your court’s Request for Instructions on an Application to Affirm the Validity of an Arbitration Agreement between Anhui Longlide Wrapping and Printing Co., Ltd and BP Agnati S.R.L. (No. 00001 of the Higher People’s Court of Anhui [2013]) submission has been received. Upon deliberation, our reply is as follows:

This is a case concerning the affirmation of the validity of an arbitration clause involving foreign elements. The parties have stipulated in their contract that any disputes arising from the contract shall be submitted to arbitration in the International Court of Arbitration of the International Chamber of Commerce, at the same time providing that the “Place of Jurisdiction shall be Shanghai, China.” Considering the context of the arbitration agreement, the clause “Place of Jurisdiction shall be Shanghai, China” shall be read as “the place of arbitration shall be in Shanghai.” Here, the parties failed to agree on the applicable law governing the determination of the validity of the arbitration agreement. Pursuant to article 16 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 law of the seat of arbitration, that is, the laws of the People’s Republic of China, shall be applicable in the determination of the validity of the arbitration agreement.

Article 16 of the Arbitration Law of the People’s Republic of China provides that an arbitration agreement shall contain the following particulars: (1) An expression of intention to apply for arbitration; (2) Matters for arbitration; and (3) A designated arbitration commission. The arbitration agreement in question contains an expression of intention to apply for arbitration, matters for arbitration and clearly specified the designated arbitration commission. [Thus, the said arbitration agreement] shall be valid. [Our court] agrees with your court’s majority opinion that the arbitration agreement is valid.

It is so replied.

 

Enclosed:

Request for Instructions on an Application to Affirm the Validity of an Arbitration Agreement between Anhui Longlide Wrapping and Printing Co., Ltd and BP Agnati S.R.L.

(30 January 2013 No. 00001 of the Higher People’s Court of Anhui Province [2013])

 

The Supreme People’s Court:

The Intermediate People’s Court of Hefei from our province submitted the Request for Instructions Concerning the Adjudication of Applicant Anhui Longlide Wrapping and Printing Co., Ltd’s Application to Confirm the Validity of an Arbitration Agreement (No. 00005 of the Intermediate People’s Court of Hefei [2011]) to our court. Pursuant to the Circular of the Supreme People's Court on Several Issues Concerning the Trial and Enforcement of Civil and Commercial Cases Involving Foreign Elements (Circular No. 51 of the Supreme People’s Court [2000]), our court accepted and reviewed the case in accordance with the law. [Our court] hereby reports the relevant facts and our court’s opinions:

 

I. The parties

Applicant: Anhui Longlide Wrapping and Printing Co., Ltd. Domicile: 150 Tiyu Lu, Industrial Park, Mingguang, Anhui, the People’s Republic of China.

Legal representative: Xu Longping, Chairman.

Agent ad litem: Qiu Xiaofen, Attorney, Anhui Heng Wei Law Firm.

Respondent: BP Agnati S.R.L. Domicile: Via Lecco 72, Vimercate (MB-Italy), Italy.

Legal Representative: Giuseppe Brivio, Chief Executive Officer.

 

II. Basic facts of the case

On 28 October 2010, the applicant, Anhui Longlide Wrapping and Printing Co. Ltd., (hereafter “Longlide”), the respondent, BP Agnati S.R.L., (hereafter “Agnati”) and SUMEC International Technology Co., Ltd. (hereafter “SUMEC”) signed a contract of sale numbered BPAC049/10. Clause 10.1 of the said contract stipulated that “Any disputes arising or related to this Contract shall be submitted to the International Court of Arbitration of the International Chamber of Commerce (“ICC Court of Arbitration”), for a final ruling rendered by one or more arbitrators pursuant to its Arbitration Rules. The place of arbitration shall be in Shanghai, China. Arbitration proceedings shall be conducted in English.”

It is in Longlide’s opinion that the validity of the abovementioned arbitration clause shall be determined pursuant to the laws of the People’s Republic of China. The said arbitration clause shall be invalid, since it was in violation of the relevant provisions in the Chinese law. Reasoning: (1) The ICC Court of Arbitration is not an arbitration institution regulated under the Chinese Arbitration Law, the [parties’] stipulation submitting to the said institution did not constitute a valid arbitration clause; (2) The arbitration proceedings conducted by the ICC Court of Arbitration in China were contrary to the public interest, infringing the sovereignty of the Chinese judiciary; (3) Even if the ICC Court of Arbitration may render an award in China, the award shall be classified as a “Domestic Award” under the Chinese arbitration law, which shall not be recognized and enforced pursuant to the United Nation’s Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereafter the “New York Convention”).

 

III. The opinions of the Intermediate People’s Court of Hefei

Upon review, it is in the Intermediate People’s Court of Hefei’s opinion that applications to confirm the validity of foreign-related arbitration agreements shall be governed by the intermediate people’s court at the place of the arbitration institution provided in the arbitration agreement, the place of signature for the arbitration clause, or the domicile of the applicant or the respondent. Considering that the applicant’s domicile is situated in Mingguang, Anhui, cases involving the examination on the validity of foreign-related civil commercial arbitration clauses shall be governed by the Intermediate People’s Court of Hefei. Therefore, the said court shall have jurisdiction over this case.

Article 16 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” stipulates that the examination of the effectiveness of an agreement for arbitration which involves foreign interests shall be governed by the laws agreed upon between the parties concerned; if the parties concerned did not agree upon the applicable laws but have agreed upon the place of arbitration, the laws at the place of arbitration shall apply; if they neither agreed upon the applicable laws nor agreed upon the place of arbitration or the place of arbitration is not clearly agreed upon, the laws at the locality of the court shall apply. Here, no applicable law was provided in the arbitration agreement in question. Instead, it was agreed that the place of arbitration shall be in Shanghai, China. Therefore, the laws of the People’s Republic of China shall be the applicable law governing the determination of the validity of the said arbitration agreement.

The arbitration agreement in question provided that any disputes related to the contract shall be submitted to the ICC Court of Arbitration for a final ruling rendered by one or more arbitrators pursuant to its arbitration rules. The place of arbitration shall be in Shanghai, China. Apart from providing that the arbitration institution shall be the ICC Court of Arbitration, the said arbitration agreement expressly stipulated that the place of arbitration shall be in Shanghai, China. The Chinese arbitration law does not expressly provide whether foreign arbitration institutions, for instance, the ICC Court of Arbitration, may conduct arbitration proceedings in China. However, since [the parties] chose to arbitrate in the People’s Republic of China, the said arbitration shall be regarded as domestic arbitration instead of “arbitral awards not considered as domestic awards” under the New York Convention. Article 10 of the Arbitration Law of the People’s Republic of China provides that the establishment of an arbitration commission shall be registered with the administrative department of justice of the relevant province, autonomous region or municipality directly under the Central Government. Thus, in China, arbitration is a professional service that requires special approval from the administrative authorities. The Chinese government has not opened the domestic arbitration market. Therefore according to the law, foreign arbitration institutions may not conduct arbitration proceedings in the People’s Republic of China.

Summarizing the above, the courts ruled that since the ICC Court of Arbitration is not an arbitration institution in conformity with the Chinese arbitration law, the [parties’] arbitration agreement providing submission of disputes for arbitration in the said institution was therefore not a valid arbitration clause. The court shall, pursuant to article 18 of the Arbitration Law of the People’s Republic of China, confirm that the arbitration clause stipulated in clause 10.1 of the contract of sale between Longlide and Agnati (Number: BPAC049/10; Date of signature: 28 October 2010) shall be deemed invalid.

 

IV. The opinions of our court

(i) Regarding the issue concerning the Applicable Law governing the determination of the validity of the arbitration clause in question

This is an application to confirm the validity of a foreign-related arbitration agreement. Pursuant to article 16 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” that,

The examination of the effectiveness of an agreement for arbitration which involves foreign interests shall be governed by the laws agreed upon between the parties concerned; if the parties concerned did not agree upon the applicable laws but have agreed upon the place of arbitration, the laws at the place of arbitration shall apply; if they neither agreed upon the applicable laws nor agreed upon the place of arbitration or the place of arbitration is not clearly agreed upon, the laws at the locality of the court shall apply,

no applicable law was stipulated in the contract of sale in question but [the parties] provided that the place of arbitration shall be in Shanghai, China. Therefore, the laws of the People’s Republic of China shall be the applicable law governing the determination of the validity of the arbitration clause in question. The collegiate panel reached a unanimous opinion regarding this issue.

 

(ii) Regarding the issue concerning the validity of the foreign-related arbitration agreement in question

Regarding this issue, upon deliberation, the collegiate panel advances the following two opinions:

According to the majority view, the arbitration clause in question is valid. Reasoning: Clause 10.1 of the contract of sale stipulated, “Any disputes arising or related to this Contract shall be submitted to the ICC Court of Arbitration, for a final ruling rendered by one or more arbitrators pursuant to its Arbitration Rules. The place of arbitration shall be in Shanghai, China. Arbitration proceedings shall be conducted in English.” Article 16 of the Arbitration Law of the People’s Republic of China provides that “An arbitration agreement shall contain the following particulars: (1) An expression of intention to apply for arbitration; (2) Matters for arbitration; and (3) A designated arbitration commission.” The contract of sale in question represented the true intention of the parties, and therefore it is legal and effective. The arbitration agreement in question contains an expression of intention to apply for arbitration, matters for arbitration and clearly specified the designated arbitration commission. Thus, it is a valid arbitration clause. The grounds supporting Longlide’s application to confirm the invalidity of the said arbitration clause are therefore not established. The court of first instance’s confirmation of the invalidity of the arbitration clause in question based on the reasoning that foreign arbitration institutions, such as the ICC Court of Arbitration, may not conduct arbitration proceedings in the People’s Republic of China lacked legal grounds.

According to the minority view, article 10 of the Arbitration Law of the People’s Republic of China provides that the establishment of an arbitration commission shall be registered with the administrative department of justice of the relevant province, autonomous region or municipality directly under the Central Government. In China, arbitration is a professional service which requires special approval from the administrative authorities. The Chinese government has not opened the domestic arbitration market. Therefore according to the law, foreign arbitration institutions may not conduct arbitration proceedings in the People’s Republic of China. In addition, the New York Convention classified arbitration into ad-hoc arbitration and institutional arbitration. The Arbitration Law of the People’s Republic of China establishes the system of institutional arbitration in China. Therefore, the clause providing arbitration in the ICC Court of Arbitration contained in the contract of sale in question shall be deemed invalid since it was in violation of the arbitration law.

Considering that this is a new type of case in judicial practice and that given the abovementioned differences in opinion, [our court] hereby submits a report to your court for [your court’s] instructions.