Trade Licence in China
This is a case held by Mr. Justice DAVID STEEL, the author of letters of credits. The case is relating to arbitration law 1996. in contract, the parties agreed as follows:
13. ARBITRATION
any dispute arising under or in connection with this contract, the parties shall attempt in the first instance to resolve such dispute through friendly consultations. If the dispute is not resolved in this manner within forty-five (45) days after the commencement of discussion, then the dispute shall be referred to arbitration in accordance with the rules as per GAFTA CONTRACT No.125 and with arbitration to be held in Hong Kong.
16. GOVERNING LAW
This contract will be governed by English laws.
In late April 1998 the buyers sought to open a letter of credit in respect of the first shipment. The issuing bank appears to have taken the point that, since GROUPCO did not have an appropriate import licence, it was not entitled to apply for a letter of credit. The "buyers" accordingly requested that the July Contract and Addendum I should be cancelled and a new contract in the name of FTC be entered into.
This initial shipment was duly performed. The second and third shipments had been cancelled by virtue of the terms of Addendum I. However, the buyers did not open a letter of credit at the contractually stipulated time in respect of the fourth, fifth and sixth shipments. In the result CEL notified FTC in September 1998 that the buyers were in default and invoiced FTC for damages, the market price now having fallen to about $150 per mt.
In November 1998 CEL instituted arbitration proceedings against FTC and then later, in February 1999, against GROUPCO. On the 9th November 2000 award No.12550A was produced by the first instance tribunal in respect of the claim brought by CEL against GROUPCO. The tribunal found that by reason of the April agreement FTC were substituted for GROUPCO and that GROUPCO were thereafter no longer a party to any agreement with CEL. CEL appealed and, as noted earlier, by Appeal Award No.3923 dated 9th May 2002, the first instance tribunal's award was upheld.
On the 27th November 2000 award No. 2550 was produced by the GAFTA first tier tribunal which found FTC to be in breach of contract and liable in the sum of $9.5 million. That award was also upheld on appeal (see Award No.3926). This latter award is still the subject of enforcement proceedings in the Shandong High Peoples' Court. Those proceedings were commenced as long ago as October 2002. FTC challenges both recognition and enforcement of the award. The basis of that challenge is somewhat obscure. One documentary source suggests that FTC are relying on the existence and content of the present proceedings as justifying the Chinese court re-examining the contractual position. Another source asserts that FTC are complaining that the GAFTA tribunal failed to act fairly and impartially by refusing to order CEL to call a particular witness and in refusing to make an order for further disclosure.
The judge discussed the china laws carefully. Now, the china company law have been amended in Oct. 27, 2005 and taken effect in Jan. 1, 2006, which is different with the time the judge gave his judgments. I omit the fact and the reason given by the judge, but you can read the judgments in there.
