Western Bulk Pte. Ltd. v. Beijing CSGC Tiantie Iron & Steel Trade Co., Ltd.

 

Cite as: Western Bulk Pte. Ltd. v. Beijing CSGC Tiantie Iron & Steel Trade Co., Ltd., The Supreme People’s Court (21 May 2012), in Fan Yang, Foreign-related Arbitration in China: Commentary and Cases, Part IV

Case identification

  • Date of Decision: 21 May 2012 

  • Court:

    • The Supreme People’s Court

    • The Higher People's Court of Tianjin

  • Arbitral Tribunal:

    • Michael Baker-Harber;

  • Case number / Docket number:

    • No. 4 of the Fourth Civil Tribunal of the Supreme People’s Court [2012]

    • No. 30 of the Higher People’s Court of Fujian Province [2011]

Classification of issues present

  • Application of the New York Convention: Yes

  • Key New York Convention provision(s) at issue: Articles V.1.(d) and V.2.(b)

 

Descriptors: Arbitration agreement; Arbitration agreement in writing; Denial of existence of arbitration agreement; Arbitral award; Arbitration procedures; Arbitral tribunal; Truncated tribunal; Composition of the arbitral tribunal was not in accordance with the agreement of the parties; Composition of the arbitral tribunal was not in accordance with the law of the country where the arbitration took place; Service of arbitration notice and documents; Public policy to be defined and interpreted narrowly; Public order; Public interest   

 

 

Western Bulk Pte. Ltd. v. Beijing CSGC Tiantie Iron & Steel Trade Co., Ltd. 

A London ad hoc arbitral award was denied recognition and enforcement on the ground that the composition of the arbitral tribunal was not in accordance with the law of the country where the arbitration took place (Article V.1.(d) of the New York Convention). In its Report to the Supreme People’s Court, the Higher People's Court of Tianjin was of the view that recognition and enforcement of the arbitral award should be refused because: (1) there was no written arbitration agreement between the parties; (2) the composition of the arbitral tribunal was not in accordance with the English Arbitration Act (1996); (3) the service of arbitration documents was not in accordance with the Arbitration Act and was therefore ineffective; (4) the arbitration procedure was in violation of the Arbitration Act and the London Maritime Arbitration Association Rules; (5) the outcome of the arbitral award was manifestly unfair and was in violation of the fundamental public interests of China. In its Reply, the Supreme People's Court found that the arbitration award should be denied recognition and enforcement on the only ground that the composition of the arbitral tribunal was not in accordance with the English Arbitration Act. In particular, the Supreme People’s Court held that “public policy” should be defined and interpreted narrowly; and recognition or enforcement of an foreign commercial arbitral award would be contrary to the public policy of China, if and only if it would jeopardize the fundamental public interests of the PRC, such as leading to violations of the basic legal principles of the country, infringing national sovereignty, jeopardizing national and public safety and violating good customs in the society.

Case text (English translation)

(21 May 2012 No. 12 of the Fourth Civil Tribunal of the Supreme People’s Court [2012])

 

The Higher People's Court of Tianjin:

Your court’s <Request on Instructions on Western Bulk Pte. Ltd.’s application for the recognition and enforcement of an English Arbitral Award> No. 4 of the Fourth Tribunal of the Higher People’s Court of Tianjin [2011] submission has been received. Upon deliberation, our reply is as follows:

1. Regarding the validity of the arbitration clause. As determined by the Request on Instructions submitted by your court, the <Contract of Affreightment> dated 1 August 2008 submitted by the applicant, Western Bulk Pte. Ltd. was only signed and sealed by the applicant. The contract was not signed or sealed by the respondent, Beijing CSGC Tiantie Iron & Steel Trade Co., Ltd. Nevertheless, a notice had been sent from the liquidation committee of the respondent to the applicant on 13 March 2009, the liquidation committee had approved the fact that the contract had been concluded and the scheduled voyages for 2008 had been duly performed. In addition, Chen Bo was appointed as the arbitrator. The respondent disputed the authenticity of the contract, although sufficient evidence in support of this had not been submitted. The court confirms the authenticity of the contract, and so the arbitration clause contained in the contract shall be binding to the parties. Your court’s decision that there was insufficient evidence to establish that the parties had formed a common intention to arbitrate and had concluded an arbitration clause in writing, lacked sufficient factual grounds.

2. Regarding the composition of the arbitration tribunal. Clause 39 of the <Contract of Affreightment> stipulates that disputes shall be resolved by a sole arbitrator unanimously appointed by the parties. Otherwise, if a party fails to reply to the other party’s notice concerning its choice of arbitrator, the arbitrator shall be the sole arbitrator for the dispute. If the parties failed to reach an agreement as to the appointment of a sole arbitrator in 14 days, the dispute shall be settled by two arbitrators. Each party shall appoint an arbitrator. If the two arbitrators fail to reach a consensus as to any problems arising, a third arbitrator shall be appointed. In this case, subsequent to the applicant’s notification of the appointment of Michael Baker-Harber as the arbitrator, the respondent did not consent the appointment of Michael Baker-Harber as the sole arbitrator. Instead, the respondent had appointed Chen Bo as another arbitrator. Therefore, the conditions supporting arbitration by a sole arbitrator stipulated by the arbitration clause in question had not been met. The arbitral tribunal governing the dispute in question was formed by two arbitrators. Subsequently, due to the resignation of Chen Bo, the relevant issue here became how the vacancy should be filled. Pursuant to sub-sections (2) and (3), section 27, 16(7) and 18(2) of the <Arbitration Act 1996>, the applicant shall apply to the court to exercise its powers as to the appointment of the arbitral tribunal upon notifying the respondent. The applicant in this case failed to make an application to the court. Instead, an arbitrator appointed by the applicant conducted the arbitration proceedings solely. The composition of the arbitral tribunal did not conform to the provisions under the arbitration clause in question and the regulations from the <Arbitration Act 1996>. Pursuant to Article 5(1)(d) of the <Convention on the Recognition and Enforcement of Foreign Arbitral Awards> (“New York Convention”), “the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place”. Therefore, the arbitral award shall not be recognized and enforced.

3. Regarding the issues concerning the service of arbitration documents and the arbitration procedure, Clause 49, the declaration clause of the <Contract of Affreightment> in question stipulated the methods, language and correspondence addresses for notifications between the parties during the performance of the contract. Before the cancellation of the respondent’s business registration, the parties communicated pursuant to the agreed means. Your court’s finding that the parties had made no agreement on the service of arbitration documents because Clause 49 is silent on whether it applies to the service of arbitration documents lacked sufficient factual support. On 21 April 2009, after the cancellation of the respondent’s business registration, the applicant and the arbitrator’s service of the relevant arbitration documents by means of fax, e-mail, priority mail and personal delivery to the respondent, the respondent’s shareholders, members of the liquidation committee and the legal advisors of the liquidation committee was not in violation of the relevant laws. Your court’s decision that the arbitral award shall not be recognized and enforced on the grounds that the service of arbitration documents was illegal and ineffective and that the arbitration procedures were illegal lacked factual and legal support.

4. Regarding the “Public Policy” principle. Pursuant to Article 5(2)(b) of the <New York Convention>, recognition and enforcement of an arbitral award may be refused if the competent authority in the country where recognition and enforcement is sought finds that the recognition or enforcement of the award would be contrary to the public policy of that country. However, strict interpretation and application shall be made as to the definition of “public policy” contained under the provision. If and only if the recognition or enforcement of the foreign commercial arbitral award would jeopardize the fundamental public interests of the People’s Republic of China, such as leading to violations of the basic legal principles of the country, infringing national sovereignty, jeopardizing national and public safety and violating good customs in the society, refusal of recognition and enforcement the award shall be made pursuant to public policy grounds. Your court’s decision that the arbitral award shall not be recognized and enforced on the grounds that the outcome of the arbitral award was manifestly unfair and was in violation of the fundamental public interests of the society was incorrect.

Summarizing the above, our court agrees with your court’s decision refusing recognition and enforcement of the arbitral award in question on the grounds that the composition of the arbitral tribunal was not in accordance with the law of the country where the arbitration took place.

It is so replied.

 

Enclosed:

Request on instructions on Western Bulk Pte. Ltd.’s application for the recognition and enforcement of an English Arbitral Award

(19 March 2012 No. 4 of the Fourth Tribunal of the Higher People’s Court of Tianjin [2011])

 

The Supreme People’s Court:

 

Regarding the case concerning the applicant Western Bulk Pte. Ltd.’s application for the recognition and enforcement of an English Arbitral Award (with reference to the <Contract of Affreightment> dated 1 August 2008), upon review, it is in our court’s opinion that pursuant to the regulations from the <Notice of the Supreme People's Court on Implementing the “Convention on the Recognition and Enforcement of Foreign Arbitral Awards” Acceded to by China> No. 5 of the Supreme People's Court [1987] issued by the Supreme People’s Court on 10 April 1987, our court decided to refuse recognition and enforcement of the English Arbitral Award.

Pursuant to the regulations from <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], our court hereby reports the facts of the  case, the arbitration conducted by the arbitral tribunal and the opinions of our court for your consideration.

 

I. The Parties

Applicant: Western Bulk Pte. Ltd. Domicile: 6 Battery Road, #38-O1A, Singapore

Legal Representative: Egil Husby, General Manager.

Respondent: Beijing CSGC Tiantie Iron & Steel Trade Co., Ltd.

 

II. Facts

On 1 August 2008, a 5-year <Contract of Affreightment> was concluded between the ship owner, the applicant, and the charterer, the respondent. It was agreed that 32 voyages were to be completed. The parties had completed the two scheduled voyages in 2008. In the beginning of 2009, owing to the financial crisis, fluctuations in the price of iron ores and the freight rate, the applicant and the respondent negotiated matters including adjusting the freight rate, yet no consensus had been reached. On 6 March 2009, a meeting was convened by the respondent with all of it shareholders, reaching a resolution to dissolve the company and the formation of a liquidation committee. On 12 March 2009, the liquidator of the respondent made a recordation application to the Beijing Administration for Industry and Commerce. On 13 March 2009, the liquidation committee sent an e-mail to the legal representative of the applicant, notifying that as the respondent was undergoing liquidation process, its performance of any business dealings between the parties shall cease.

On 13 March 2009, the applicant sent an arbitration notice to the liquidation committee of the respondent, declaring that it had appointed Michael Baker-Harber as the arbitrator for the <Contract of Affreightment> dated 1 August 2008. Also, the notice demanded that the respondent shall make an appointment as to the arbitrator in 14 days. The respondent appointed Chen Bo as an arbitrator and sent a notice regarding the appointment to the applicant on 27 March. On 20 April, the attorney of the liquidation committee of the respondent sent an e-mail to Chen Bo stating that the liquidation of the company was completed and the liquidation process would end within a short period of time. An inquiry as to Chen Bo’s resignation was then made.

On 21 April, the Beijing Administration for Industry and Commerce approved the respondent’s cancellation application. On the same day, the liquidation committee of the respondent sent an e-mail to the legal representative of the applicant and the two arbitrators declaring that the liquidation of the respondent was completed and the company had been terminated. The telephone number, fax and e-mail address of the company shall cease to be valid and the litigation eligibility status of the company no longer exists. The agent of the applicant claimed that it sent an e-mail to the head of the liquidation committee of the respondent on 21 April (London time) demanding the respondent’s defence submissions in 28 days, and had attached the applicant’s statement of complaint.

On 28 April, Chen Bo sent an e-mail to the agent of the applicant stating that the respondent terminated his authorization to adjudicate over the arbitration regarding the contract in question and that he was looking forward to cooperate with Michael Baker-Harber again in other cases. On the same day, the agent of the applicant made a reply to Chen Bo that pursuant to the <Arbitration Act 1996>, an arbitrator will not be removed due to a party’s unilateral termination of authorization, and so Chen Bo should remain to be the arbitrator of the case. On 1 May, the agent of the applicant sent an e-mail to Michael Baker-Harber and Chen Bo (CC the respondent), stating that considering Chen Bo’s failure to reply to the previous mail and the contents of Chen’s mail dated 28 April, Chen Bo is deemed to resign from the two arbitrator posts. Pursuant to s.27 of the <Arbitration Act 1996>, regarding filling of the vacancy of arbitrator, the respondent should appoint another arbitrator in 14 days. On 5 May Chen Bo replied that he agreed to resign.

On 25 January 2010, the Beijing Administration for Industry and Commerce issued Administrative Penalty Decision (No. 1 of the Beijing Administration for Industry and Commerce [2010]) against the respondent on the grounds that the liquidation committee of the company concealed the fact that the respondent was undergoing arbitration proceedings with the applicant during its submission of materials proving the company’s “Credits and Debts have been completely settled”. Thus the cancellation registration of the respondent was obtained illegally. Therefore, the Beijing Administration for Industry and Commerce decided to set aside the cancellation registration of the respondent.

On 11 February 2011, the applicant submitted that its agent had sent an arbitration notice by means of fax, e-mail, priority mail and personal delivery to the respondent, all shareholders of the respondent, members of the liquidation committee and the two legal advisors of the liquidation committee (hereafter: “Persons to be served”), demanding the respondent’s appointment of another arbitrator in 14 days regarding the <Contract of Affreightment> dated 1 August 2008. No reply was received by the applicant within the stipulated time. On 4 March 2010, the agent of the applicant sent a letter to the respondent through the abovementioned means declaring that since the respondent failed to appoint an arbitrator within the 14 days, Michael Baker-Harber shall be the sole arbitrator of the dispute. On 25 March 2010, the applicant sent an amended arbitration application to the Persons to be served, demanding the respondents serve its defence in 28 days. Yet no defence was served on the applicant within the stipulated time. On 30 March 2010, Michael Baker-Harber sent mail to the Persons to be served ordering submission of defence before the close of business on 23 April (London time). Subsequently, since no defence had been received, Michael Baker-Harber sent another mail on 27 April 2010 stating that “I hereby order, in a final and mandatory manner, that defence (together with all supplementary documents) shall be submitted before the close of business on 10 May (London time). If you fail to comply… I shall make a decision freely pursuant to the documents and materials submitted by the plaintiff (not including any other documents).”

On 2 June 2010, Michael Baker-Harber, being the sole arbitrator of the case, rendered an arbitral award regarding the disputes between the parties under the <Contract of Affreightment> dated 1 August 2008 in favour of the applicant, claims amounted to USD$ 37,327,533.00.

On 9 March 2010, the shareholders of the respondent filed an administrative lawsuit at the People’s Court of Haidian, Beijing in against of decision No. 1 of the Beijing Administration for Industry and Commerce [2010], requesting the court to set aside the Administrative Penalty Decision. The People’s Court of Haidian, Beijing made a decision to the Administrative Penalty Decision on the grounds that the Beijing Administration for Industry and Commerce had violated procedural requirements. The parties subsequently filed an appeal to the First Intermediate People’s Court of Beijing. The court of second instance rendered a judgment on 20 October 2010, dismissing the appeal and upholding the original decision.

 

III. The Applicant’s Application for Recognition and Enforcement and the Respondent’s Defence

On 27 September 2010, the applicant made an application to the Tianjin Maritime Court for recognition and enforcement of the arbitral award in question.

The respondent submitted that the arbitral award should not be recognized and enforced, for the following reasons:

1. The arbitral award lacked factual and legal support, since no arbitration agreement or arbitration clause existed regarding the arbitral award rendered by the arbitral tribunal regarding the <Contract of Affreightment> dated 1 August 2008. The applicant and the respondent had not concluded the <Contract of Affreightment> dated 1 August 2008. The <Contract of Affreightment> dated 1 August 2008 submitted by the applicant was sufficient to prove that the contract had not been duly signed by any authorized representatives of the respondent or duly affixed with the respondent’s company seal. The contract was not valid, and so the arbitration clause contained in it was not binding on the respondent. Pursuant to Article V(1)(d), the <New York Convention>, the arbitral award falls under the ambit of refusal of recognition and enforcement by the signatories of the <New York Convention>.

2. Even following the arbitration agreement submitted by the applicant, the composition of the arbitral tribunal by the applicant in London, United Kingdom regarding the <Contract of Affreightment> dated 1 August 2008 did not conform to the stipulations in the arbitration clause and the provisions of the English arbitration law.

3. The applicant’s arbitration procedure in London, United Kingdom was illegal. (1) The applicant’s initiation of arbitration procedures against the respondent, a legally terminated enterprise was in contravention of s.8(1) of the English <Arbitration Act 1996>; (2) The arbitration procedures violated Article 12, 13 and 15 of the <London Maritime Arbitration Association Rules>; (3) The applicant’s service of arbitration documents to third parties without authorization for representation in the arbitration violated Article 27 of the <London Maritime Arbitration Association Rules>; (4) The applicant’s failure to apply to the court for an order “For service in such manner as the court may direct” or “Dispensing with service of the document” violated Section 77(1), (2)(a),(b) of the <Arbitration Act 1996>; (5) The applicant’s service of arbitration documents to third parties without authorization for representation in the  arbitration outside the territory of the United Kingdom without leave of the court was in violation of the <Arbitration Act 1996> and regulations from international conventions; (6) The involvement of expert opinion in the arbitration procedure was in violation of s.37 of the <Arbitration Act 1996>; (7) The failure to provide reasons for the decision made in the arbitral award was in violation of Article 22(a) of the <London Maritime Arbitration Association rules>; (8) The applicant or the arbitral tribunal’s treatment of the original shareholders of the respondent being a party to arbitration lacked legal support, and so the arbitration procedure was illegal; and (9) The condition precedent for the application of s.41(7) of the <Arbitration Act 1996> did not exist, and so the arbitration procedure of the arbitral award was illegal.

 

IV. The opinions of the Tianjin Maritime Court

Upon review, it is in the Tianjin Maritime Court’s opinion that the arbitral award dated 2 June 2010 and the respondent’s disputes arising from the <Contract of Affreightment> dated 1 August 2008 with the applicant, rendered by arbitrator Michael Baker shall not be recognized and enforced pursuant to Article 5(1)(b) and (d) of the <Convention on the Recognition and Enforcement of Foreign Arbitral Awards> (the “New York Convention”), on the grounds that the composition of the arbitral tribunal did not conform with the provisions of the arbitration clause and regulations from the <Arbitration Act 1996>, giving rise to the situation that a party was “otherwise unable to present his case”.

 

V. The opinions of the Higher People’s Court of Tianjin

Upon our court’s review, China and the United Kingdom are both signatories of the <New York Convention>. Therefore, the determination of whether the arbitral award in question should be recognized and enforced shall be made pursuant to the stipulations of the <New York Convention>. It is in our court’s opinion that the arbitral tribunal in question’s investigation procedures gave rise to the situation of non-recognition and enforcement provided in Article V of the <New York Convention>. Therefore, the arbitral award rendered by the arbitral tribunal shall not be recognized and enforced. The main reasons are as follows:

(1) There is no evidence supporting the existence of a common intention to arbitrate between the applicant and the respondent or any conclusion of an arbitration clause in writing through exchange of letters can be found. Thus the requirements governing the “agreement in writing” for arbitration agreements stipulated in Article II(1), (2) of the <New York Convention> had not been met.

The <Contract of Affreightment> submitted by the applicant merely contained the company’s signature, but not the signature and seal of the respondent.  As the respondent submitted that no arbitration agreement existed between the parties, the disputes between the parties shall not be resolved by arbitration. No other evidence was submitted by the applicant supporting the submission that the parties reached a common intention to arbitrate.

Article II(1) of the <New York Convention> stipulates that arbitration clauses shall be reached by an agreement in writing. The “agreement in writing” is defined in Article II(2), which shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams. Therefore, the <New York Convention> does not accept implied arbitration agreements. There is no evidence supporting the existence of common intention to arbitrate between the applicant or the respondent or conclusion of an arbitration clause in writing through exchange of letters can be found. Therefore the arbitration agreement was not in conformity with the requirements governing the “agreement in writing” for arbitration agreements stipulated in Article II(1), (2) of the <New York Convention>, and so the people’s court shall not recognize and enforce the arbitral award.

 

(2) Even if arbitration is adopted to resolve the dispute in question between the parties, here the following problems that exist as to the composition of the arbitral tribunal and the arbitration procedures:

1. The composition of the arbitral tribunal in question did not conform with the stipulations under the arbitration clause and regulations from the English <Arbitration Act 1996>, giving rise to the situation described under Article V(1)(d) of the <New York Convention>.

Concerning the formation of the arbitral tribunal, arbitration clause A contained in the <Contract of Affreightment> between the applicant and the respondent provided that “disputes shall be resolved by a sole arbitrator unanimously appointed by the parties. Otherwise, if a party fails to reply to the other party’s notice concerning its choice of arbitrator, the aforesaid arbitrator shall be the sole arbitrator for the abovementioned dispute. If the parties failed to reach an agreement as to the appointment of a sole arbitrator in 14 days, the dispute shall be settled by two arbitrators. Each party shall appoint an arbitrator. If the two arbitrators fail to reach a consensus as to any problems arising, a third arbitrator shall be appointed.” Here, the applicant sent a notice of appointment of arbitrator and appointed Michael Baker-Harber as an arbitrator. The respondent did not consent that the arbitrator shall be the sole arbitrator. Instead, it appointed another arbitrator. The respondent had represented its intention refusing sole arbitration by the arbitrator appointed by the applicant. Pursuant to the agreed arbitration procedure, “the dispute shall be settled” by an arbitral tribunal formed by two arbitrators and a third arbitrator potentially being appointed. Pursuant to section 25 of the <Arbitration Act 1996>, the resignation of arbitrator is not prohibited by the law. After Chen Bo’s resignation, the issue in question became the filling of the vacancy of the arbitral tribunal.

Concerning the issue of filling of the vacancy of the arbitral tribunal subsequent to the resignation of the arbitrator appointed by the respondent, pursuant to s.27(2), (3) of the <Arbitration Act 1996>, “(2) if or to the extent that there is no such agreement, the following provisions apply. (3) The provisions of sections 16 (procedure for appointment of arbitrators) and 18 (failure of appointment procedure) apply in relation to the filling of the vacancy as in relation to an original appointment.” No provision as to this situation had been made in the arbitration clause in question. Therefore, sections 16 and 18 shall be applicable. Section 16(7) provides that “in any other case, section 18 applies as in the case of a failure of the agreed appointment procedure.” Therefore, section 18 of the <Arbitration Act 1996> shall be applicable to this case. Section 18 provides that “any party to the arbitration agreement may (upon notice to the other parties) apply to the court to exercise its powers under this section. Those powers are (a) to give directions as to the making of any necessary appointments; (b) to direct that the tribunal shall be constituted by such appointments (or any one or more of them) as have been made; (c) to revoke any appointments already made; and (d) to make any necessary appointments itself.

According to this, under the situation where the no provisions were made as to the measures to be taken in case of the appointment procedure failing, the applicant shall apply to the court for an order requiring the formation of arbitral tribunal upon notifying the respondent. Here, no applications to the court had been made. The applicant instead proceeded with the arbitration by a sole arbitrator it had appointed. Therefore, the composition of the arbitral tribunal shall be held to be not in conformity with the stipulations of the arbitration clause and the regulations from the <Arbitration Act 1996>, giving rise to the situation that “the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place” under Article V(1)(d) of the <New York Convention>. Therefore, the arbitral award shall not be recognized and enforced.

 

2. The service of arbitration documents was not in conformity with the Arbitration Act and was therefore ineffective, which gave rise to the situation described under Article V(1)(b) of the <New York Convention>.

Clause 39 of the <Contract of Affreightment> in question was an arbitration clause. The corresponding declaration clause stipulated the methods, language and correspondence addresses for notifications between the parties during the performance of the <Contract of Affreightment>. Yet the clause was not applicable to arbitration procedures. Upon termination of the contract, the arbitration clause contained under the contract was independent of the contract. No stipulations as to the applicable arbitration procedures had been made in clause 49, while no provisions had been made between the party as to the means of communication and addresses to be used during the arbitration proceedings in the arbitration clause.

Under the circumstance that no provisions as to the delivery address for arbitration documents between the parties, pursuant to s.76(4)(b) of the <Arbitration Act 1996>, the documents shall be delivered to the respondent’s registered or principal office. Here, the corporate entity of the respondent was terminated on 21 April 2009. Upon termination, the original premises for business operation were no longer used, corporate personnel were dismissed. The telephone address, fax and e-mail address of the company ceased operation. Between 25 January 2010 and 20 October 2019, the respondent did not obtain the <Business Operation License for Legal Entities> and resume its operations. Therefore, this belonged to the situation described under s.77(1) of the <Arbitration Act 1996>, that “this section applies where service of a document in accordance with provisions of section 79 (sic) is not reasonably practicable.” Under this situation, pursuant to s.77 of the Arbitration Act, the applicant shall apply to the court to make an order for service in such manner as the court may direct or dispensing with service of the document.

Apart from that, the contents and relevant procedures of evidence of the materials delivered to the place of business of the respondent submitted by the applicant were not notarized, and so they fail to prove that the content of the mail were relevant to the arbitration. No other evidence existed to prove respondent’s receipt of the relevant arbitration materials. The applicant submitted that it had effected its service via e-mail, yet it failed to prove that the respondent had replied or confirmed receipt of the e-mail. No other evidence can be found supporting the submission that the respondent had received the e-mail or fax. Other recipients, such as the shareholders of the respondent’s, members of the liquidation committee and the two legal advisors of the liquidation committee were not parties of the contract or the attorneys for the arbitration case. Also, they were not respondents or persons bearing responsibilities arising from the arbitral award. The delivery to the recipients did not carry any legal effects.

Summarizing from the above, the service of the arbitration documents in the arbitration procedure in question was illegal and therefore ineffective. The respondent denied receipt of the arbitration documents. Pursuant to Article V(1)(b) of the <New York Convention> that “the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case”, the arbitral award shall not be recognized and enforced.

 

3. Under the condition that no effective service of notifications had been made to the respondent, the arbitration procedures of the arbitral tribunal had violated regulations from the <Arbitration Act 1996> and the <London Maritime Arbitration Association Rules>, falling under the situation described in Article V(1)(d) of the <New York Convention>.

Here, no provisions were made in the arbitration clause between the parties as to the arbitration procedure. The sole arbitrator of the arbitral tribunal in question rendered the arbitral award merely pursuant to the arbitration application and materials submitted by the applicant in a written trial. Pursuant to s.41(4) of the <Arbitration Act 1996>, only under the precondition that “a party fails to attend or be represented at an oral hearing of which due notice was given, or … fails after due notice to submit written evidence or make written submissions”, the tribunal “may continue the proceedings in the absence of that party or, as the case may be, without any written evidence or submissions on his behalf, and may make an award on the basis of the evidence before it”. Apart from that, pursuant to Article 13(c) of the <London Maritime Arbitration Association Rules>, “following completion of the steps covered by the Second Schedule, if it has been agreed by the parties or is determined by the tribunal that the case is to be dealt with on documents alone…the tribunal… will so proceed” and Article 1 of the Second Schedule of the <London Maritime Arbitration Association Rules> that “the normal procedure requires service of submissions by each party”, the precondition determining trial on documents alone is the delivery of documents. Here, as the respondent did not receive effective notification while the parties did not make a consensus as to the forms of trial, the arbitral tribunal lacked authority to render an arbitral award by means of trial on documents alone and relying merely on materials submitted by a party.

Therefore, the arbitration procedure of the arbitral tribunal was in violation of the <Arbitration Act 1996> and the <London Maritime Arbitration Association Rules>. Pursuant to the stipulations in Article V(1)(d) of the <New York Convention>, that “… the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place…”, the arbitral award shall not be recognized and enforced.

 

4. The outcome of the arbitral award was manifestly unfair and was in violation of the fundamental public interests of China, falling under the situation described in Article V(2)(b) of the <New York Convention>.

There were no provisions as to the responsibilities and losses arising from breach of contract, under the <Contract of Affreightment>. In addition, the respondent had settled all freight charges actually incurred. Under this circumstance, the arbitral tribunal in question’s decision treating the applicant’s all expected profits as it losses under the assumption that the calculation of freight charges and expected costs should be made with the presumption that that the vessels are fully loaded, as well as demanding the respondent compensate the losses that had not actually incurred lacked factual and legal basis and was manifestly unfair, jeopardizing the Chinese party’s interest and was in violation of the public interests of China. Therefore, the decision fell under the situation described in Article V(2)(b) of the <New York Convention> and shall not be recognized and enforced.

Summarizing the above, we rule that the English Arbitral Award shall not be recognized and enforced.

Please reply whether the above opinions are correct.