Sri Trang International Pte Ltd v. Sanjiao Tire Group

 

 

Cite as: Sri Trang International Pte Ltd v. Sanjiao Tire Group, The Supreme People’s Court (22 March 2013), in Fan Yang, Foreign-related Arbitration in China: Commentary and Cases, Part IV

Case identification

  • Date of Decision: 22 March 2013 

  • Court:

    • The Supreme People’s Court

    • The Higher People's Court of Shandong Province

  • Arbitral Institution/Tribunal:

    • N/A

  • Case number / Docket number:

    • No. 12 of the Fourth Civil Tribunal of the Supreme People’s Court [2013]

    • No. 2 of the Higher People’s Court of Shandong Province [2012]

Classification of issues present

  • Application of the New York Convention: No

  • Key PRC law provision(s) at issue: Articles 4 and 48 of <The Arbitration Law of the People’s Republic of China”>; Article 258 of the <Civil Procedure Law of the People’s Republic of China> (2007 amendment).

Descriptors: Arbitration agreement; Existence of arbitration agreement; Formation of arbitration agreement; Written form of arbitration agreement; Evidence; Photocopies of contract; No original contract was provided; Scope of arbitration clause; Arbitration procedures; Party’s jurisdictional challenge; Tribunal’s ruling on party’s jurisdictional challenge; Parties did not sign on the minutes of the arbitration proceedings; Non-enforcement of foreign-related arbitral award

 

 

Sri Trang International Pte Ltd v. Sanjiao Tire Group    

A CIETAC (Beijing) foreign-related arbitral award was not enforced on the ground that there was no arbitration agreement between the parties. In its Report to the Supreme People’s Court, the Higher People's Court of Shandong was of the view that the arbitral award should not be enforced on three grounds: (1) based on the evidence, Sri Trang failed to prove that there was a valid and written arbitration agreement between the parties and the arbitral tribunal’s finding on the contrary was erroneous; (2) the arbitration was not conducted in accordance with the arbitration rules in that the arbitral tribunal failed to make a ruling on Sanjiao’s jurisdictional challenge; and (3) in any event, the arbitral award exceeded the scope of the arbitration agreement concerned. In its Reply, the Supreme People’s Court agreed that the arbitral award should not be enforced because Sri Trang failed to prove that a valid and written arbitration agreement existed between the parties.

Case text (English translation)

(22 March 2013 No. 12 of the Fourth Civil Tribunal of the Supreme People’s Court [2013])

 

The Higher People’s Court of Shandong:

Your court’s Request for Instructions on an Application for the Non-enforcement of an Arbitral Award Involving Foreign Elements Between Sri Trang International Pte Ltd and Sanjiao Tire Group (No. 2 of the Higher People’s Court of Shandong [2012]) submission has been received. Upon deliberation, our reply is as follows:

This case concerns an application for the non-enforcement of a foreign-related arbitral award rendered by a Chinese arbitration institution. Pursuant to article 7 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law to the Cases That Are Pending When the Civil Procedure Law, as Amended, Takes Effect, this case shall be adjudicated pursuant to article 258 of the Civil Procedure Law of the People’s Republic of China (2007 amendment).

According to the facts contained in the Request for Instructions submitted by your court, Sri Trang International Pte Ltd (hereafter “Sri Trang”) merely submitted a photocopy of the contract containing an arbitration clause. Sanjiao Tire Group (hereafter “Sanjiao”) disputed the authenticity of the said photocopy of the contract and denied that a valid arbitration agreement existed between the parties. Sri Trang was unable to submit other supporting evidence. Thus, it failed to prove that it had reached a valid arbitration agreement with Sanjiao. Even recognizing the authenticity of the photocopy of the contract, as seen from the formation of the contract, upon receiving Sanjiao’s offer sent by fax, Sri Trang substantially altered the subject matter, quantity of goods and price of Sanjiao’s offer. [This] constituted a new offer. Sri Trang was unable to submit other evidence proving that Sanjiao had accepted the new offer. Thus, the contract between the parties was not formed. To say the least, even assuming the formation of a valid contract by the parties’ actual performance of the contract, owing to the requirement for written agreements and the independence of arbitration agreements from the laws of the People’s Republic of China, this assumption does not necessarily lead to the conclusion that the parties had reached an arbitration agreement as to dispute resolution. Furthermore, according to the facts found by the court of first instance, the contract actually performed by the parties was not the contract containing the arbitration clause submitted by Sri Trang, but another Spot Transaction Agreement not involved in this dispute. The said sale and purchase agreement does not contain arbitration clauses. Therefore, no valid written arbitration agreements exist between Sri Trang and Sanjiao.

Summarizing the above, the arbitral award in question constitutes the situation under paragraph 1(1), article 258 of the Civil Procedure Law of the People’s Republic of China. The people’s court shall not enforce the [said arbitral award]. [Our court] agrees with the opinions of the collegial tribunal of your court.

It is so replied.

 

Enclosed:

Request for Instructions on an Application for the Non-enforcement of an Arbitral Award Involving Foreign Elements Between Sri Trang International Pte Ltd and Sanjiao Tire Group

(5 January 2013 No. 2 of the Higher People’s Court of Shandong Province [2012])

 

The Supreme People’s Court:

Sri Trang International Pte Ltd (hereafter “Sri Trang”) made an application to the Intermediate People’s Court of Weihai (hereafter the “Weihai Intermediate Court”) for the enforcement of Arbitral Award No. 0281 of the China International Economic and Trade Arbitration Commission (“CIETAC”) (2010) (foreign-related arbitration). During the enforcement proceedings, Sanjiao Tire Group (hereafter “Sanjiao”), the party which enforcement was sought [against], submitted an application for the non-enforcement of the said arbitral award. Pursuant to article 3 of the Circular of the Supreme People’s Court on Several Issues Concerning the Trial and Enforcement of Civil and Commercial Cases Involving Foreign Elements, the Weihai Intermediate Court reported the said matter for our court’s consideration. Upon discussion by our court’s collegiate panel, we concur with the Weihai Intermediate Court’s opinions. [Our court] hereby reports the relevant circumstances of the case:

 

I. The parties

Enforcement applicant (arbitration applicant): Sri Trang International Pte Ltd. Domicile: #28-03, Overseas Union Bank Centre, One Raffles Place, Singapore.

Legal representative: Paul Sumade Lee, Chairman.

The party subject to enforcement (arbitration respondent): Sanjiao Tire Group. Domicile: 56 Qingdao Zhong Lu, Weihai, Shandong.

Legal representative: Ding Yuhua, Chairman.

 

II. The rulings of the arbitration

On 19 June 2009, Sri Trang submitted an arbitration application to the CIETAC claiming that it had concluded five international sales of goods contracts with Sanjiao during September and October 2008. Sanjiao had breached the said contracts due to its failure to fully perform the contractual obligations. Sri Trang submitted the following arbitration requests: (1) Damages arising from breach of contract amounting to USD$12,584,409.34 plus interests; (2) Payment of lawyer’s fees totaling RMB¥600,000.00; (3) Compensation of traveling expenses and arbitration costs.

Sanjiao submitted a “Dispute on Jurisdiction” within the period stipulated by the law, and submitted in defence that the contract in question was fabricated by Sri Trang for the purpose of committing fraud in the arbitration. Sanjiao denied [the existence of the said contract]. Although the parties had conducted a number of transactions and refunds during the abovementioned period, the said transactions were related to the performance of spot commodity trading contracts which contained no arbitration clauses. The price for the goods had been settled; in addition, the disputes relating to the refunds had been resolved by the “Minutes of Meeting” signed between the parties on 6 November 2008. The said Minutes represented the parties’ new agreement to resolve all disputes arising from their prior transaction and did not contain arbitration clauses. [Therefore, Sanjiao] requested the arbitral tribunal not to accept this case.

Upon hearing, the arbitral tribunal of the CIETAC rendered Arbitral Award No. 0281 of the CIETAC (2010), ruling that (1) Sanjiao shall be responsible for damages, Sri Trang’s storages costs incurred and interest totaling USD$4,627,428.93; (2) Sanjiao shall be responsible for lawyer’s fees incurred totaling RMB¥500,000.00 and the arbitration costs totaling USD$70,568.40.

 

III. Grounds supporting the application for non-enforcement of the arbitral award and defences submitted

(i) Grounds supporting the application for non-enforcement of the arbitral award submitted by the party [against] which enforcement is sought

1. The enforcement applicant did not exist. Sri Trang International Pte Ltd was the arbitration applicant and the enforcement applicant of this case. Its domicile was #28-03, Overseas Union Bank Centre, One Raffles Place, Singapore. From searches, the parties’ business correspondence and the effective legal documents between the parties, it was identified that the company with the Chinese name “诗董橡胶股份有限公司” is a company registered in Thailand named “Sri Trang Agro-Industry Public Co. Ltd” (hereafter the “Thai Company); the company named “Sri Trang International Pte Ltd” is a company registered in Singapore, with the Chinese name “诗董国际橡胶贸易有限公司” (hereafter the “Singaporean Company). The applicant’s piecing of the Chinese name of the Thai Company, “诗董橡胶股份有限公司,”with the Chinese name of the Singaporean Company, Sri Trang International Pte Ltd” in its arbitration application was aimed to cater the subject matter of the contract in question [and] to facilitate its fraudulent acts [during the arbitration]. Sanjiao had disputed Sri Trang’s capacity [as arbitration applicant] several times, yet the arbitral tribunal did not examine the said dispute.

2. No arbitration agreements existed between the parties. The contract in question submitted by Sri Trang was a duplicate, which may not be used to support the jurisdiction of the arbitral tribunal and the award rendered. Even according to the arbitral tribunal’s finding that Sanjiao sent the offer (the Contract) to a specified third party (the Thai Company), Sri Trang had made modifications on the name of the subject matter, address and other conditions of trade contained in the offer and returned it to Sanjiao. However, Sri Trang failed to prove that it had returned the said offer, while Sanjiao denied that Sri Trang had done so. In other words, since Sri Trang’s intention to make a new offer was incomplete, a valid offer had not been formed. The assumption that the contract in question had been formed did not exist. Even if Sri Trang was able to prove that it had returned the new offer, no written agreements had been made by Sanjiao. Since the parties had not reached an arbitration clause in writing, the parties’ contract in question contained no arbitration clauses and thus the arbitration tribunal had no jurisdiction over it. Although there were actual performance and one refund transaction, the abovementioned transactions were resulting from the parties’ performance of the spot commodity trading contracts instead of the contract in question. In addition, the contracts not related to this case contained no arbitration clauses. Therefore, the arbitral tribunal had no jurisdiction over the parties’ disputes on the returned goods.

3. The Minutes of Meeting was a new agreement reflecting the parties’ true intention to resolve the disputes arising from the transactions between Sanjiao, Sri Trang and its subsidiaries. The Minutes of Meeting had been performed and the disputes were resolved. Since the said Minutes contained no arbitration clauses, the arbitral tribunal had no jurisdiction over it. Sri Trang had not submitted any arbitration requests demanding Sanjiao’s compensation pursuant to the said Minutes of Meeting. Therefore, the arbitral tribunal’s ruling that Sanjiao was in breach of contract and shall compensate Sri Trang for USD$1,677,312.00 pursuant to the Minutes of Meeting was erroneous. Apart from that, Sri Trang claimed damages calculated at the price difference between the contract price and the price quote for March obtained in the Singapore Commodity Exchange (USD$1,325.00 / ton), but the arbitral tribunal made a ruling pursuant to the price quote obtained in February (USD$1,297.70 / ton). The arbitral tribunal’s ruling that Sanjiao shall be responsible for compensation which exceeded Sri Trang’s request of USD$27.30 / ton constituted a decision exceeding the scope of the arbitration. The arbitral tribunal had no jurisdiction to decide on matters exceeding Sri Trang’s requests.

4. The arbitration procedures were inconsistent with the arbitration rules. Sanjiao submitted a “Dispute on Jurisdiction” to the arbitration commission within the specified period. The arbitral tribunal rendered an award on substantive issues without making a decision on jurisdiction in violation of the arbitration rules, depriving Sanjiao’s relevant rights to be heard. In order to connect the contract in question with the relevant refund invoices, Sri Trang forged the key evidence including the bank refund invoices and the packing lists. Sanjiao had made an application to authenticate [the said evidence], yet the arbitral tribunal ignored the said application and rendered the award by relying on the said evidence. Sri Trang’s port bureau declaration form submitted for the purpose of proving Sri Trang’s losses incurred from re-selling the goods was illegally forged. Sanjiao had made an application to the arbitral tribunal requesting it to collect and to preserve the said evidence from  customs, yet the arbitral tribunal again ignored the said application and rendered the award by relying on the said evidence in violation of the arbitration rules. In view of the photocopies, adjudicating the four independent contracts between Sanjiao and Sri Trang containing different parties, subject-matter, quantity, price, shipping and the time of delivery concurrently violated the arbitration rules. Although the contract in question clearly stipulated that the Laws of the People’s Republic of China shall be applicable and the proceedings shall be conducted in Chinese, the arbitral tribunal applied international usages and the Convention, in violation of the principle of party autonomy regarding the choice of the applicable law and the principle of fairness provided in the arbitration rules. Therefore, based on the abovementioned circumstances beyond Sanjiao’s control, Sanjiao was unable to present its case.

 

(ii) The enforcement applicant’s defences submitted

The issue of the name of the arbitration applicant is irrelevant to this enforcement proceeding and it is a matter concerning the Chinese translation [of the name of the applicant]. The court may only adjudicate [the said issue] in form. The contract in question was valid due to actual performance. It contained arbitration clauses. Since the arbitral tribunal had rendered a decision, the courts have no jurisdiction over the substantive issues regarding the award. [Sri Trang] denied the arguments regarding the spot commodity trading contracts since they were irrelevant [to this dispute] and belonged to substantive issues which the court shall not examine. The arbitral tribunal retained the discretion to conduct investigations and authentications; the [arbitration] procedures were legitimate and [the said award] shall be enforced.

 

IV. Facts identified by the Weihai Intermediate Court

Regarding Sanjiao’s (the party [against] which enforcement was sought) grounds supporting its non-enforcement application and the enforcement applicant’s, Sri Trang’s, defences submitted, the Intermediate People’s Court of Weihai conducted a hearing in accordance with the law, collected and examined the arbitral award and other relevant documents together with other evidence. [The said court] found that:

 

(i) Whether the parties had agreed on an arbitration clause in their Contract or had subsequently reached a written arbitration agreement

1. Facts regarding whether an arbitration agreement had been concluded. The arbitral award stated that: The contract in question was formed upon modifying the name of the subject matter, address and other conditions of trade contained in Sanjiao’s offer (the contract) sent to a specified third party (the Thai Company), Sri Trang returned the said amended contract to Sanjiao (see p. 38-40 of the arbitral award). Sanjiao disputed the arbitral tribunal’s rulings regarding the formation of the contract in question, arguing that it had sent an offer to the Thai Company, a third party, but the Thai Company had not agreed on the said offer. No other parties had agreed on the said offer or made another offer. [Sanjiao] demanded Sri Trang’s submission of the original copies [of the offer] yet it could only provide a photocopy. It was unable to submit the originals of the offer duly signed or sealed. Sanjiao did not accept the photocopies and the receipt [of the said offer] determined during the arbitration procedures and hearings. During the hearings in the arbitration, Sri Trang was unable to provide evidence that the said offer had been returned to Sanjiao. Sri Trang also failed to submit evidence proving that Sanjiao had made a written agreement regarding the new offer and the conclusion of the arbitration agreement.

2. Facts regarding the performance of the contract. Considering that the arbitral tribunal ruled that the contract in question was valid due to the parties’ actual performance, the key dispute between the parties was whether the parties’ business correspondence and refunds represented performance of the contract in question or the spot commodity trading contracts. To identify the abovementioned issue, the court shall verify the contract number and relevant information stipulated in the invoices between the parties. Therefore, the Weihai Intermediate Court investigated the parties’ invoices for the goods delivered and the refunds invoices.

 

(1) Regarding the invoices of the contracts actually performed

① To prove its performance of Contract No. 080906A, Sri Trang submitted invoice No. 0694A, the packing lists, the bill of lading and the bank receipts. Upon investigation, the words “STP-RS/08-0694-A” (the contract number for the spot commodity trading contract) were stipulated in the “OUR CONTRACT NO” column under the said invoice (see p. 106, Volume III). The “YOUR REF. NO.” column was left blank. Contract No. 080906A only appeared in the remarks; meanwhile, the number “STP-RS/08-0694-A” was stipulated in the shipping mark for the description of goods under the bill of lading for the said invoices (see p. 109, Volume III). The information contained in the said set of bank receipts was in conformity with the spot commodity trading contract “STP-RS/08-0694-A” submitted by Sanjiao.

② To prove its performance of Contract No. 080906B, Sri Trang submitted invoice No. 0685 B/C/D, the packing lists, the bill of lading and the bank receipts. Upon investigation, the words “STP-RS/08-0865-B, STP-RS/08-0865-C, STP-RS/08-0865-D” (the contract numbers for the spot commodity trading contracts) had been stipulated in the “OUR CONTRACT NO” column under the said invoice (see p. 122, Volume III). The “YOUR REF. NO.” column was left blank. All information contained in the said set of invoices was in conformity with the spot commodity trading contracts submitted by Sanjiao.

③ To prove its partial performance of Contract No. 0930, Sri Trang submitted invoice No. 0731 E/F, the packing lists, the bill of lading and the bank receipts. Upon investigation, the words “STP-RS/08-0731-E, STP-RS/08-0731-F” and “STS REF NO 427” (the contract numbers for the spot commodity trading contracts) had been printed in the “OUR CONTRACT NO” column and the “YOUR REF. NO.” column, respectively. All information contained in the said set of invoices was in conformity with the spot commodity trading contracts submitted by Sanjiao.

Sanjiao submitted the originals of the spot commodity trading contracts numbered STP-RS/08-0694-A (see p. 40, Volume III), STP-RS/08-0865-B (see p. 34, Volume III), STP-RS/08-0865-C (see p. 35, Volume III) and STP-RS/08-0865-D (see p. 36, Volume III). In addition, it had submitted the originals of the insurance invoices for the corresponding batch of goods handled by Sri Trang (see p. 138, Volume III). The “CONTRACT NO” contained in the shipping mark of the said insurance invoices clearly stipulated the contract numbers for the spot commodity trading contracts.

Summarizing the above, by comparing the originals and the photocopies of the same set of invoices submitted by the parties and by only considering the stipulations regarding Contract No. 080906A in question contained in invoice 0694A, the said invoice contained the contract number for the spot commodity trading contract “STP-RS/08-0694-A” issued by Sri Trang; the number at the “CONTRACT NO.” column of invoice 0694, receipt 0685 B/C/D, 0731 E/F, the bill of lading and the insurance invoice submitted by Sri Trang recorded the contract number of the spot commodity trading contracts but not the contract in question. It was also found that the “CONTRACT NO.” column in the shipping mark for goods description contained in the original insurance invoices for the corresponding batch of goods handled by Sri Trang clearly recorded the contract number of the spot commodity trading contracts. All other information contained in the three set of invoices were in conformity with the spot commodity trading contracts submitted by Sanjiao. Therefore, the Weihai Intermediate Court held that the parties had actually performed the spot commodity trading contracts not related to the case instead of the contract in question. The court also found that the said spot commodity trading contracts contained no arbitration clauses.

 

(2) Regarding the relationship between the refund invoices and the Contract in question

The arbitral tribunal relied on six invoices to rule that Sanjiao was in breach of contract and shall be responsible for compensation for the refunds. The said invoices include bill of lading No.SSLOKTAOCA4859, PLMTA0080000114, HASL80NRDA8 B251, HLCUBLW081050823, SSLPLTAOCA4928 and 0908001144096 submitted by Sri Trang. In particular, since in three invoices Sri Trang had made a refund itself but not through the bank, Sanjiao did not accept the said three invoices. For invoices no. SSLOKTAOCA4859, PLMTA0080000114 and 0908001144096, refunds were made through the Weihai branch, the Bank of China. Regarding this, Sanjiao submitted the originals of refund invoices no. SSLOKTAOCA4859 and PLMTA0080000114 kept by the third party, the Weihai branch of the Bank of China (which it had submitted to the arbitral tribunal) and the correspondent invoices submitted by Sri Trang to the tribunal. Upon making a comparison, it was found that:

Sri Trang submitted the following receipts: (1) contract number “STP-RS/08-0686-A and STP-RS/08-0687-A” were stipulated in the “OUR CONTRACT NO” column contained in the invoices (see p. 52 of Volume III) and the packing list (see p. 94 of Volume III); (2) although the numbers “TRI-SRI080906B and TRI-SRI080906B” provided in the “YOUR REF. NO.” column was the number of the contract in question, the writings, font and font size were different from other parts of the said receipt; (3) the number of the contract not relating to this case, “STP-RS-0686-A and STP-RS/08-0687-A” were stipulated in the “CONTRACT NO” column of the bill of lading (see p. 54 of Volume III) and the insurance invoice (see p. 55 and p. 93 of Volume III) submitted by a third party freight carrier or the insurance company appointed by Sri Trang.

The “YOUR REF. NO.” column was left blank in the original refund receipts no. SSLOKTAOCA4859 and PLMTA0080000114 kept by the Weihai branch of the Bank of China. Other information [contained in the said receipts] was in conformity with Sri Trang’s abovementioned submitted receipts.

Sanjiao had also submitted the originals of the spot commodity trading contracts no. STP-RS/08-0686-A (see p. 85 of Volume III), STP-RS/08-0687-A (see p. 99 of Volume III), which contained no arbitration clauses.

Summarizing the above, the “YOUR REF. NO.” column in the original refund receipts no. SSLOKTAOCA4859 and PLMTA0080000114 kept by the Weihai branch were left blank, while the same receipts submitted by Sri Trang contained the contract number of the contract in question. However, the font, size and color of the texts added [in Sri Trang’s receipts submitted] were clearly different from the others; meanwhile, the Weihai Intermediate Court found that the contract number, subject-matter, quantity and price of Sri Trang’s refund invoices submitted were consistent with that of the said spot commodity trading contract, and were also consistent with the “CONTRACT NO.” stipulated in the bill of lading issued by the carrier and the insurance invoice issued by the insurer. Therefore, it was held that the refund invoices represented the performance of the spot commodity trading contract instead of the contract in question. The Weihai Intermediate Court also found that the said spot commodity trading contracts contained no arbitration clauses.

 

(ii) Regarding the arbitral tribunal’s adjudication and rulings rendered on the Minutes of Meeting

The arbitral tribunal ruled that Sanjiao shall compensate Sri Trang for USD$1,677,312.00 pursuant to the “Minutes of Meeting” (see p. 143, Volume III). The arbitral tribunal held that the “Minutes of Meeting” was a document made to resolve the parties’ disputes over the quantity, price and date of delivery provided in the original contract (see p. 47 of the arbitral award). Thus, its scope shall cover contracts containing no arbitration clauses (for instance, contract No. 004), the spot commodity trading contracts and all other transactions. The “Minutes of Meeting” contained no arbitration clause. It was also found that during the arbitration, Sri Trang did not claim damages according to the said “Minutes of Meeting.” The arbitral tribunal held that since contract No. 004 contained no arbitration clauses, it had no jurisdiction over contract No. 004. Therefore, the Weihai Intermediate Court held that the arbitral tribunal’s rulings regarding the “Minutes of Meeting” were contradictory with its rulings regarding contract No. 004.

It was also found that Sri Trang claimed damages arising from the difference in price, calculated at the price quote obtained in the Singapore Commodity Exchange in March (see P. 156-158, Volume III), but the arbitral tribunal granted damages calculated at the price quote obtained in February (see p. 59 of the arbitral award). Since the price quote obtained in March was USD$27.30 / ton higher than that obtained in February, [the rulings] exceeded Sri Trang’s claims by USD$27.30 per ton.

 

(iii) Regarding the issues related to arbitration procedures

1. Regarding the arbitral tribunal’s decision on the subject matter of Sri Trang. During the arbitration proceedings and the Weihai Intermediate Court’s adjudication, Sanjiao disputed Sri Trang’s subject-matter (see p. 6, Volume III and p. 15, Volume IV). Therefore, the Weihai Intermediate Court investigated the subject matter of Sri Trang. It was found that: the registered name of Sri Trang was “Sri Trang International Pte Ltd, while its Chinese name properly translated and commonly used in China would be “诗董国际橡胶贸易有限公司”, instead of “诗董橡胶股份有限公司.” The abovementioned finding was proved by Sri Trang’s letter of authorization (see p. 16, Volume IV) duly signed by its legal representative in the tribunal on the first day of the arbitration hearing. Meanwhile, Civil Ruling No. 8 of the Intermediate People’s Court of Qingdao (1999) (see p. 3, Volume IV) currently in force collected by the Weihai Intermediate Court showed that the corresponding Chinese name for the company named “Sri Trang International Pte Ltd” shall be “新加坡诗董国际橡胶有限公司,” instead of “诗董橡胶股份有限公司.”

2. Arbitral tribunal’s decision on the dispute on jurisdiction. Sanjiao submitted a “Dispute on Jurisdiction” (see p. 28, Volume IV) within the period stipulated by the law. By means of a notice (see p. 31, Volume IV) sent to the arbitral tribunal, the arbitration commission authorized the arbitral tribunal to render the decision on jurisdiction subsequent to its decision over the substantive issues. However, no decisions on jurisdiction had been rendered by the said arbitration tribunal. In the award, the relevant rulings on this matter were (see p. 40 of the arbitral award): Since the arbitral tribunal has jurisdiction over the disputes arising from the actual performance of the abovementioned contract, Sanjiao’s disputes over the [tribunal’s] jurisdiction over the four contracts are not supported. (sic)

3. Adjudication on the application to investigate and to collect evidence. On 14 January 2010, Sanjiao submitted an Application for the Investigation and Collection of Evidence in writing (see p. 17, Volume IV) to the arbitral tribunal submitting that “The ‘Bill of Lading Number’ contained in Sri Trang’s 10 Archival Filing Lists of the Customs of the People's Republic of China for Goods Imported into Bonded Areas numbered 421020081107829179, 421020081107828947, 421020081107828948, 421020081107828950, 421020081107828738, 107829247, 421020081107829039, 421020081107829237 and 421020081107828951 submitted were all written by hand.” [These invoices were] suspected to be forged. During the period of submission of evidence for the arbitration, Sanjiao investigated the authenticity of the said ten Archival Filing Lists in the Huangdao Customs, Qingdao. Customs expressly replied that since [the Lists] were electronic generated, it would be impossible for handwritten contents to appear in the said set of Archival Filing Lists. However, Customs refused to entertain investigation from a party unilaterally. For the purpose mentioned above, Sanjiao submitted an application requesting the arbitral tribunal’s collection of the relevant Lists involved. No proceedings had been made by the said tribunal. From the abovementioned original ten sets of Archival Filing Lists collected by the Weihai Intermediate Court from the Huangdao Customs, Qingdao (see p. 5-14, Volume IV), it was discovered that the column under the heading “Bill of Lading” was left blank. No handwritten numbers of the bills of lading can be found; the said sets of Archival Filing Lists submitted by Sri Trang (see p. 19-27, Volume IV) contained the handwritten numbers of the bills of lading.

4. Adjudication on the authentication application. Sanjiao submitted an Authentication Application to the arbitral tribunal on 18 December 2009 (see p. 32, Volume IV) submitting that: the invoices and packing lists submitted by Sri Trang were forged. The column “YOUR REF. No.” under the said invoices was originally left blank and was irrelevant with the contract in question. The number of the contract in question, fonts and the font size added by Sri Trang in the abovementioned invoices were clearly different from the original texts printed in the said invoices. To verify the truth of the case, [Sanjiao] made an application to conduct a verification of written documents. No response had been given by the arbitral tribunal regarding this application. During the [court’s] hearing, Sanjiao again made a verification application and the said application was dismissed by the Weihai Intermediate Court since it ruled that issues relating to verification of evidence belonged to the substantive issues of the dispute. However, upon the Weihai Intermediate Court’s comparison, the front, size and color [of that evidence] were clearly different from the others.

5. Adjudication regarding other issues related to the arbitration procedures. Upon the Weihai Intermediate Court’s collection of the records of the arbitration hearings, it was found that the two records of the arbitration hearings had not been duly signed by the participants of the hearing. The relevant evidence had been altered. Sanjiao doubted the [authenticity] of the said record and evidence.

 

V. The opinions of the Weihai Intermediate Court

(i) No written arbitration agreements existed between the parties

Article 4 of the Arbitration Law of the People’s Republic of China provides that “The parties’ submission to arbitration to resolve their dispute shall be on the basis of both parties’ free will and an arbitration agreement reached between them. If a party applies for arbitration in the absence of an arbitration agreement, the arbitration commission shall not accept the case.” According to article 5 of the China International Economic and Trade Arbitration Commission Arbitration Ruleseffective from 1 January 2005 (hereafter the “Arbitration Rules”), “An arbitration agreement means an arbitration clause in a contract concluded between the parties or any other form of written agreement providing for the settlement of disputes by arbitration. The arbitration agreement shall be in writing. An arbitration agreement is in writing if it is contained in a tangible form of a document such as a contract, letter, telegram, telex, facsimile, EDI, or Email.” Considering the abovementioned provisions, the key issue determining whether the disputes shall be resolved by litigation or arbitration shall be whether an arbitration agreement had been concluded between the parties. The arbitration clause or arbitration agreement shall be made in writing. Assumptions of the parties’ common intention to arbitrate shall not be made based on the parties’ actual performance or silence, or otherwise the voluntariness principle would be violated. The arbitration agreement shall be independent from the main contract, while confirmed written agreements between the parties or the parties’ agreement concluded subsequently must exist.

(1) During the arbitration proceedings and [the court’s] adjudication, Sri Trang failed to submit the originals of the amended contract duly signed or sealed returned to Sanjiao. The photocopy it submitted was not approved by Sanjiao. In the absence of other evidence, [the said photocopy] may not be used as evidence indicating the arbitral tribunal’s jurisdiction; (2) Sanjiao denied the fact that the said new offer had been returned, while Sri Trang failed to prove so. Sri Trang shall bear the consequences of its failure to discharge its burden of proof. Therefore, it is held that Sri Trang’s offer was not established due to the lack of several formal elements; (3) Since Sanjiao had not signed or affixed its seal on the new offer, it had not made a written agreement. Thus, the written arbitration clause or arbitration agreement had not been formed; (4) Even if the new offer had been actually performed by the parties, considering that arbitration agreement shall be made in writing and that the parties’ conduct is an element constituting valid arbitration agreements, given the lack of Sanjiao’s signature or seal affixed on the new offer, it cannot be determined that an arbitration agreement in writing had been reached between the parties; (5) The parties’ actual performance and returns were related to the performance of spot commodity trading contracts which contained no arbitration clauses, instead of the contract in question. Therefore, the arbitral tribunal’s assumption that the contract had been established due to part performance and ruling that an arbitration agreement had been concluded between the parties was erroneous; and (6) The “Minutes of Meeting” was a new agreement signed between the parties to resolve [disputes] arising from their business transactions. Since the said “Minutes of Meeting” contained no arbitration clauses, the arbitral tribunal had no jurisdiction over the said “Minutes of Meeting.”

Summarizing the above, the photocopies of the contract submitted by Sri Trang may not establish the arbitral tribunal’s jurisdiction. Even according to the formation of the said contract determined by the arbitral tribunal, it cannot be determined that an arbitration agreement existed between the parties. The parties did not reach an arbitration agreement in writing subsequently, while Sanjiao disputed the arbitral tribunal’s jurisdiction from the start of the arbitration procedures. [These circumstances] were in conformity with paragraph 1, article 258 of the Civil Procedure Law of the People’s Republic of China that [the people’s court] shall not to allow enforcement if the parties have not had an arbitration clause in the contract or have not subsequently reached a written arbitration agreement.

 

(ii) Due to other circumstances beyond Sanjiao’s responsibility, Sanjiao was unable to present its case

Based on the Weihai Intermediate Court’s review over the arbitration procedures and the rulings of the arbitral tribunal and combining the facts identified from Sanjiao’s application for the collection of evidence and verification of evidence, the Weihai Intermediate Court held that significant doubts existed in the evidence submitted by Sri Trang. Under the circumstance where Sanjiao had submitted evidence proving the contrary and its application for collection and verification of evidence, the arbitral tribunal’s ignorance of Sanjiao’s said applications were inappropriate, causing Sanjiao’s failure to submit relevant evidence to support its facts claimed and hence its inability to prove its claims and fully present its case. Therefore, this constituted the situation encompassed in paragraph 1(2), article 258 of the Civil Procedure Law of the People’s Republic of China.

 

(iii) The arbitration procedures were inconsistent with the Arbitration Rules

1. The arbitral tribunal’s failure to render a ruling in writing as to its decision on jurisdiction violated the Arbitration Rules. Pursuant to article 6(1) of the Arbitration Rules, “The CIETAC shall have the power to determine the existence and validity of an arbitration agreement and its jurisdiction over an arbitration case. The CIETAC may, if necessary, delegate such power to the arbitral tribunal.” Although the arbitration commission authorized the arbitral tribunal to render a ruling regarding its jurisdiction, the tribunal’s failure to do so violated the abovementioned Arbitration Rules.

2. The arbitral tribunal’s concurrent trial on the four contracts in question violated the Arbitration Rules. Since the parties, subject matter, quantity, price, method of delivery and the time of delivery for the abovementioned four contracts in question were different, the arbitral tribunal’s concurrent trial on this matter without the parties’ consent was in violation of the arbitration rules.

3. The records of the arbitration hearings were not duly signed by the parties or their representatives and were in violation of the Arbitration Rules. Pursuant to article 35(1) of the Arbitration Rules, “During the oral hearing, the arbitral tribunal may arrange a stenographic and/or audio-visual record. The arbitral tribunal may, when it considers it necessary, take minutes stating the main points of the oral hearing and request the parties and/or their representatives, witnesses and/or other persons involved to sign and/or affix their seals to the minutes.” Nevertheless, by collecting and examining the records of the arbitration hearings, it had come to Weihai Intermediate Court’s knowledge that the said records were not duly signed or sealed by the parties or their representatives. In addition, the parties were doubtful of the contents recorded. The abovementioned [records] clearly were made in violation of the Arbitration Rules.

 

(iv) The arbitral tribunal had no jurisdiction over several matters decided in the Arbitral Award; the rulings exceeded the scope of the arbitration agreement

The arbitral tribunal may only adjudicate and rule on the parties’ arbitration requests. It has no jurisdiction over matters exceeding the applicant’s arbitration requests. Sri Trang’s arbitration application was not based on the Minutes of Meeting. The arbitral tribunal lacked jurisdiction on its rulings rendered on the said Minutes of Meeting, contrary to the parties’ intention, and the said rulings also exceeded the scope of the arbitration agreement. Meanwhile, the arbitral tribunal lacked jurisdiction in the rulings regarding the losses arising from price difference in excess of Sri Trang’s claim by USD$27.30 / ton. Clearly, the arbitral award in question is one encompassed in paragraph 1(4), article 258 of the Civil Procedure Law of the People’s Republic of China.

Apart from that, the People’s Republic of China was constructing a credible society according to the principle of good faith and moral standards, and aims to protect public interests through anti-counterfeiting and anti-fraud measures. Here, the enforcement applicant attempted fraud on a Chinese legal entity by forging the contract and was affirmed and supported by the arbitral award. Only by non-enforcement of the said arbitral award can the occurrence of the abovementioned fraud and false case be stopped to avoid further damaging our country’s public interest [in preventing] fraudulent activity.

Summarizing the above, the Weihai Intermediate Court held that since the arbitral award in question fell within paragraph 1(1), (2), (3), (4) and paragraph 2, article 258 of the Civil Procedure Law of the People’s Republic of China effective from 1 April 2008, Arbitral Award No. 0281 of the China International Economic and Trade Arbitration Commission (2010) shall not be enforced.

 

V. The opinions of our court

Our court ruled that Arbitral Award No. 0281 of the China International Economic and Trade Arbitration Commission (2010) shall not be enforced. The reasons are as follows:

 

(i) No valid contracts and written arbitration agreements existed between the parties

During the arbitration proceedings and the Weihai Intermediate Court’s adjudication, Sri Trang failed to submit the originals of the amended contract returned to Sanjiao for its signature or affixing of its company seal. The photocopy it submitted was not approved by Sanjiao. No other supporting evidence had been submitted. Even if Sri Trang had evidence regarding the return of the new offer, it failed to submit evidence proving Sanjiao’s making of an agreement in writing on the said new offer. Apart from that, considering facts found by the Weihai Intermediate Court, the parties’ actual performance and returns were related to the performance of spot commodity trading contracts which contained no arbitration clauses, instead of the contract in question. Therefore, the arbitral tribunal’s assumption that the contract had been established due to part performance and its ruling that an arbitration agreement had been concluded between the parties was erroneous.

 

(ii) The arbitration procedures were inconsistent with the Arbitration Rules

Before the first arbitration hearing, Sanjiao had submitted an application to the CIETAC to dispute the arbitral tribunal’s jurisdiction. The said commission authorized, in writing, that the arbitral tribunal shall render a decision on jurisdiction, yet it failed to do so pursuant to the rules. During the first hearing, Sanjiao submitted another jurisdiction dispute declaring that it had not waived its rights to submit a dispute, yet no decisions had been made by the arbitral tribunal. The arbitral tribunal’s adjudication and rendering of the said arbitral award was in violation of article 20 of the Arbitration Law of the People’s Republic of China and article 6(1) of the Arbitration Rules. Apart from that, the parties’ and their representatives’ failure to sign or affix their seal on the records of the arbitration hearings was in violation of article 48 of the Arbitration Law of the People’s Republic of China and article 35(1) of the Arbitration Rules.

 

(iii) Several matters decided in the Arbitral Award do not belong to the scope of the arbitration agreement

The Minutes of Meeting was a new agreement signed between the parties to resolve all disputes arising from their prior business transactions, which modified the quantity and price agreed between the parties on the parties’ contracts concluded. The said Minutes of Meeting contained no arbitration clauses, while the parties had not reached an arbitration agreement in writing subsequently. More importantly, Sri Trang did not submit its arbitration application by relying on the said Minutes of Meeting. The arbitral tribunal’s ruling that Sanjiao shall compensate Sri Trang for USD$ 1,677,312.00 pursuant to the Minutes of Meeting exceeded the scope of the arbitration agreement. Apart from that, the arbitral tribunal’s rulings regarding the losses arising from difference price in excess of Sri Trang’s claim by USD$27.30 / ton also exceeded the scope of the parties’ requests.

Summarizing the above, upon our court’s collegial panel’s discussion, Arbitral Award No. 0281 of the China International Economic and Trade Arbitration Commission (2010) encompasses the situation referred to in paragraph 1(1), (2), (3) and (4), article 258 of the Civil Procedure Law of the People’s Republic of China effective from 1 April 2008 and therefore shall not be enforced.

Pursuant to article 3 of the Circular of the Supreme People’s Court on Several Issues Concerning the Trial and Enforcement of Civil and Commercial Cases Involving Foreign Elements, [our court] hereby reports the said case for your court’s consideration.