Golden Star Co., Ltd v. Korea Marine Transport Co. Ltd

 

Cite as: Golden Star Co., Ltd v. Korea Marine Transport Co. Ltd, The Supreme People’s Court (3 November 2011), in Fan Yang, Foreign-related Arbitration in China: Commentary and Cases, Part IV (2014)

Case identification

  • Date of Decision: 3 November 2011 

  • Courts:

    • The Supreme People’s Court

    • The Higher People's Court of Shandong Province

  • Arbitral Tribunal:

    • N/A

  • Case number / Docket number:

    • No. 47 of the Fourth Civil Tribunal of the Supreme People’s Court [2011]

    • No. 25 of the Higher People’s Court of Shandong Province [2011]

Classification of issues present

  • Application of the New York Convention: No

  • Key PRC Arbitration Law provision(s) at issue: Article 4

  • Some Provisions of the Supreme People's Court on the Scope of Cases to be heard by Maritime Courts

 

Descriptors: Intention to arbitrate; Consent to arbitration; Incorporation of arbitration clauses; Arbitration clauses contained on the back of the bill of lading; Reference to the arbitration clauses on the front of the bill of lading; non-negotiable and telex-release bill of lading; Obligation to notify the existence of the terms and conditions contained on the back of the bill of lading

 

 

 

Golden Star Co., Ltd v. Korea Marine Transport Co. Ltd   

A reference on the front of a non-negotiable and telex-release bill of lading (B/L) sample to the arbitration clauses contained on the back of the bill of lading was found insufficient to evidence an arbitration agreement between the consignee and the carrier. In its Report to the Supreme People’s Court, the Higher People’s Court of Shandong Province stated two different opinions. The first opinion was to find that the arbitration clause contained on the back of the B/L in question should not be binding on Golden Star, because Korea Marine did not issue the original B/L and failed to discharge its obligation to notify Golden Star of the existence of the terms and conditions contained on the back of the B/L. The second opinion was to find that Golden Star was deemed to have actual knowledge of the contents of the B/L in question, because the clause “INCLUDING BUT NOT LIMITED TO ARBITRATION CLAUSE” stipulated on the front right-bottom side of the B/L in question was printed in block letters, which was clearly different from other texts printed. Since the arbitration clause contained on the back of the B/L submitted by Korea Marine stipulated that the Korean Law governed the validity of arbitration clauses, and according to the Korean Arbitration Law, the arbitration clause should be valid. In its Reply, the Supreme People’s Court found that Korea Marine could not rely on the words “including but not limited to arbitration” printed on the front of the B/L sample alone to prove that Golden Star had actual knowledge of the arbitration clauses and consented to arbitration in Korea as stipulated on the back of the B/L. Accordingly, the Supreme People’s Court found that the Qingdao Maritime Court had jurisdiction over the case.

Case text (English translation)

(3 November 2011 No. 47 of the Fourth Civil Tribunal of the Supreme People’s Court [2011])

The Higher People’s Court of Shandong Province:

Your court’s Request for Instructions <No. 25 from the Higher People’s Court of Shandong [2011]>, has been received. Upon deliberation, our reply is as follows:

In this case, Korea Marine Transport Co. Ltd, the appellant, issued a sample telex-release bill of lading (B/L), which explicitly stated that it was non-negotiable. Although the consignor had sent the B/L sample to the consignee Golden Star Co., Ltd, the respondent, for picking up the goods, Xing Peng as the consignee, could not obtain relevant information about the applicable law and arbitration clauses contained on the back of the B/L through ordinary transfers of the B/L. The appellant could not rely merely on the words “including but not limited to arbitration” printed on the front of the B/L sample to prove that the respondent possessed actual knowledge of the arbitration clauses and consented to arbitration in Korea as stipulated in the arbitration clauses.

From the evidence available, the consignee, in this case the respondent, and the carrier, in this case the appellant, had not reached consensus on arbitration. This case relates to a dispute regarding contract of carriage of goods by sea, with Qingdao as the free on board (FOB) port, thus, it is not against the PRC law for the Qingdao Maritime Court to hear this case pursuant to <Some Provisions of the Supreme People's Court on the Scope of Cases to be heard by Maritime Courts>. We agree with your opinion that the Qingdao Maritime Court has jurisdiction over this case.

Note, however, that before the Qingdao Maritime Court delivered its Judgment on jurisdiction it should follow the relevant procedures to report the case to our court (the Supreme People’s Court) through your court (the Higher People’s Court of Shandong). Please pay attention to this in your future work.

 

Enclosed:

Request on instructions regarding the validity of an arbitration clause contained in the contract of carriage of goods by sea between Korea Marine Transport Co., Ltd. and Golden Star Co. Ltd

(22 September 2011 No. 25 from the Higher People’s Court of Shandong [2011])

The Supreme People’s Court:

 

When reviewing the dispute on jurisdiction regarding a contract of carriage of goods by sea between the appellant Korea Marine Transport Co., Ltd. and the respondent Golden Star Co. Ltd our court found that telex-release bill of lading (“B/L”) in question contained an arbitration clause.

To handle this case seriously, upon our court’s deliberation, pursuant to relevant provisions including the <Circular of the Supreme People's Court on the Relevant Issues Regarding the Handling of Foreign-related Arbitration and Arbitration of a Foreign Country by the People's Court> (No. 18 of the Supreme People’s Court [1995]) and <Circular of the Supreme People's Court on Several Issues Regarding the Trial and Enforcement of Foreign-related Civil Commercial Cases> (No. 51 of the Supreme People’s Court [2000]), our court hereby report the issue concerning the validity of the arbitration clause involved for your court’s examination.

 

I. The parties

Appellant (Defendant in original trial): Korea Marine Transport Co., Ltd. Domicile: 15FL Hanjin Building, 118, Namdaemunro 2-Ga, Jung-gu, Seoul, Korea.

Legal representative: Park Jonog-Seug, Chairman.

Respondent (Plaintiff in original trial): Golden Star Co., Ltd. Domicile: 1166 Nguyen Bing Khiem, Hai An, Hai Phong, Vietnam.

Legal representative: Du Mengzhang, Vice General Manager.

 

II. Basic facts of the case

The respondent initiated a litigation claim in the Qingdao Maritime Court and submitted that on 23 May 2010, the appellant accepted the carriage of Henan Prosper Skins & Leather Enterprise Co. Ltd.’s three 40-foot container of lambskin goods handed over in Qingdao Port. Upon loading the goods on board, the appellant issued a telex-release B/L numbered KMTC-TA02021073 with the respondent being the consignee. When the respondent picked up the goods upon their arrival in Hai Phong, Vietnam, it was discovered that leakage occurred, damaging part of the goods. The respondent requested that the court make an order that the appellant shall compensate the respondent’s losses arising from damaged goods plus interest.

It is in the Qingdao Maritime Court’s opinion that as the contract of carriage of goods by sea in question operates by way of telex-release, the original B/L had not been issued by the appellant. It is not possible for the respondent to obtain information regarding the clauses contained on the back of the B/L through transfer by endorsement on the back of the B/L. Therefore, the parties did not reach a common intention regarding the applicable law and arbitration clauses contained on the back of the B/L. Being a dispute concerning a contract of carriage of goods by sea with Qingdao as the free on board (“FOB”) port, the court, being the maritime court governing the place of performance for the contract in question, shall have jurisdiction over this case.

The appellant appealed, submitting that despite the appellant’s failure to issue the original B/L, it had sent the consignor a sample telex-release B/L. Upon the consignor’s confirmation, the appellant had sent the respondent the sample telex-release B/L for picking up goods. The telex-release B/L submitted by the respondent indicated its knowledge of the terms and conditions contained in the B/L. Therefore, the telex-release B/L should be binding on the respondent. The arbitration clause contained in the telex-release B/L in question should be legal and effective. The respondent shall submit disputes arising from the contract of carriage of goods by sea in question to arbitration. The appellant requested that the court dismiss the ruling made in the original trial and make an order that the respondent shall submit the disputes for arbitration in Korea, or dismiss the respondent’s litigation claims. The respondent submitted in defence that since the appellant failed to issue the original B/L to the respondent, it did not receive the original B/L and had no knowledge of the terms and conditions contained on the back of the B/L. Therefore, the terms and conditions, including arbitration clauses, contained on the back of the B/L do not bind the respondent. Even if the clauses contained on the back of the B/L were applicable, no clear provisions as to arbitration institutions were provided the arbitration clause, and so it shall be null and void. Even if the clause were valid, it shall not bind the respondent as Qingdao is the place of performance for the contract in question, the original trial court had jurisdiction.

The bottom right corner of the front page of the B/L submitted by the appellant in appeal stipulates that: IN ACCEPTING this Bill of Lading, the Merchant expressly accepts and agrees to all its terms and conditions on the face and back hereof, INCLUDING BUT NOT LIMITED TO ARBITRATION CLAUSE, whether written, typed, stamped or printed, or otherwise incorporated, notwithstanding the non-signing of this Bill of Lading by the Merchant. Article 1.B on the back of the B/L stipulates that: “Merchant” includes the shipper consignor owner and receiver of Goods and the holder of this Bill of Lading. Article 3.A stipulates that the contract evidenced by or contained in this Bill of Lading shall be governed by Korean Law, except as may be otherwise provided for herein. Article 3.B stipulates that: Any and all claims, disputes, controversies, or differences whatsoever which may arise between the Carrier and the Merchant, out of or in relation to or in connection with or under this Bill of Lading, or for the breach of any obligation of the Carrier or the Merchant under this Bill of Lading shall be finally settled by arbitration in Seoul, Korea in accordance with the Arbitration Rules of the Korean Commercial Arbitration Board and under Laws of Korea. The award rendered by the arbitrator (a) shall be final and blinding upon both parties concerned...

 

III. Opinions of our court

This case relates to a dispute arising from a contract of carriage of goods by sea supported by a telex-release B/L. Our court advances two opinions regarding the determination of the validity of the arbitration clause contained in the B/L in question.

According to the first opinion, the appellant had never issued the original B/L to the consignor. Although the appellant submitted in appeal that it supplied a sample telex-release B/L, in view of the formalities, the front and the back of the B/L were written in English. No evidence can be found supporting the submission that the appellant had discharged its obligation to notify the other party regarding the existence of terms and conditions contained on the back of the B/L. The clause did not indicate parties’ intention to reach a consensus. Subsequent to the occurrence of the dispute, no new supplementary agreements as to dispute resolution had been reached between the parties. Therefore, the arbitration clause contained on the back of the B/L in question shall not be binding on the respondent.

According to the second opinion, although the appellant had never issued the original B/L to the consignor, considering the respondent’s grounds supporting its litigation claims and the B/L submitted, the respondent possessed actual knowledge of the contents of the B/L in question. As the clause “INCLUDING BUT NOT LIMITED TO ARBITRATION CLAUSE” stipulated on the front right-bottom side of the B/L in question is printed in block letters, which is clearly different from other texts printed, the respondent should have noticed the existence of the arbitration clause contained in the B/L in question. The arbitration clause contained on the back of the B/L submitted by the appellant stipulates that the Korean Law shall be the Applicable Law governing the determination of the validity of arbitration clauses, and that arbitration shall be held in Seoul, Korea pursuant to the International Arbitration Rules of the Korea Commercial Arbitration Board. According to the provisions in the Korean Arbitration Law, the agreement shall be effective. Pursuant to the agreement, the Chinese courts have no jurisdiction over this case.

Please instruct which opinion is more appropriate.